SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-2
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended June 30, 1995 Commission File Number 33-16122
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ILX INCORPORATED
(Exact name of registrant as specified in its charter)
ARIZONA 86-0564171
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2777 East Camelback Road, Phoenix, AZ 85016
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(Address of principal executive offices)
Registrant's telephone number, including area code 602-957-2777
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---------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
Class Outstanding at June 30, 1995
- ------------------------------- ----------------------------
Common Stock, without par value 12,535,698 shares
Preferred Stock, $10 par value 413,056 shares
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1995 1994
---- ----
(Unaudited)
Assets
Cash and cash equivalents $ 1,833,461 $ 3,635,587
Restricted cash 782,907 --
Notes receivable, net 8,695,068 6,750,896
Resort property held for
timeshare sales 10,846,263 9,407,733
Resort property under development 5,993,060 1,735,592
Land held for sale 1,672,168 1,673,168
Deferred assets 864,856 749,999
Property and equipment, net 1,369,259 1,437,227
Deferred income taxes 966,864 1,283,179
Other assets 1,950,172 1,730,023
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$34,974,078 $28,403,404
=========== ===========
Liabilities and Shareholders' Equity
Accounts payable $ 1,648,127 $ 1,581,659
Accrued and other liabilities 2,140,267 1,488,816
Genesis funds certificates 1,445,094 1,612,457
Due to affiliates 442,676 984,534
Deferred income 104,195 365,195
Notes payable 10,554,438 4,881,861
Notes payable to affiliates 1,633,736 2,000,584
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17,968,533 12,915,106
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Minority interests 2,877,803 2,531,169
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Shareholders' Equity
Preferred stock, $10 par value;
10,000,000 shares authorized;
413,056 and 430,313 shares issued
and outstanding; liquidation
preference of $4,130,560
and $4,303,130, respectively 1,525,152 1,648,755
Common stock, no par value;
40,000,000 shares authorized;
12,535,698 issued and 12,515,698
outstanding at June 30, 1995, and
12,405,325 issued and outstanding at
December 31, 1994 9,247,426 8,972,969
Treasury stock, at
cost, 20,000 shares (25,032) --
Additional paid in capital 30,000 30,000
Retained earnings 3,350,196 2,305,405
----------- -----------
14,127,742 12,957,129
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$34,974,078 $28,403,404
=========== ===========
See notes to consolidated financial statements
<PAGE>
<TABLE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenues
Sales of timeshare interests $ 5,636,952 $ 3,901,160 $ 10,617,504 $ 8,265,572
Resort operating revenue 2,332,582 2,197,394 4,037,125 4,036,730
Sales of land -- 1,927,428 -- 2,058,678
Sales of consumer products 126,936 -- 278,638 --
------------- ------------- ------------- --------------
8,096,470 8,025,982 14,933,267 14,360,980
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Cost of sales and operating expenses
Cost of timeshare interests sold 2,179,843 1,349,605 3,802,359 2,785,762
Cost of resort operations 2,132,389 1,911,850 3,840,150 3,641,826
Cost of land sold -- 1,519,212 -- 1,634,957
Cost of consumer products 64,600 -- 172,370 --
Advertising and promotion 1,444,889 1,301,058 3,015,426 2,370,866
General and administrative 746,880 364,473 1,486,406 938,952
Provision for doubtful accounts 334,256 231,915 603,319 466,801
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6,902,857 6,678,113 12,920,030 11,839,164
------------- ------------- ------------- --------------
Operating income 1,193,613 1,347,869 2,013,237 2,521,816
Other income (expense)
Interest expense (246,669) (129,350) (456,239) (299,811)
Interest income 170,900 71,713 284,949 142,071
------------- ------------- ------------- --------------
Income before minority interests 1,117,844 1,290,232 1,841,947 2,364,076
and income taxes
Minority interests (168,473) (485,550) (346,634) (838,211)
Income taxes (304,750) -- (448,126) -- .
------------- ------------- ------------- --------------
Net income $ 644,621 $ 804,682 $ 1,047,187 $ 1,525,865
============= ============= ============= ==============
Net income per common and
equivalent share $ 0.05 $ 0.06 $ 0.08 $ 0.12
============= ============= ============= ==============
Number of common and equivalent
shares 12,571,562 12,487,742 12,546,142 12,441,320
============= ============= ============= ==============
Net income per share assuming
full dilution $ 0.05 $ 0.06 $ 0.08 $ 0.12
============= ============= ============= ==============
Number of fully diluted shares 13,056,997 12,996,782 13,036,712 12,950,490
============= ============= ============= ==============
See notes to consolidated financial statements
</TABLE>
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
-----------------
1995 1994
---- ----
Cash flows from operating activities:
Net income $ 1,047,187 $ 1,525,865
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Undistributed minority interest 346,634 201,080
Increase in restricted cash (782,907) --
Additions to notes receivable (6,095,913) (2,730,391)
Proceeds from sale of notes receivable 3,548,422 3,907,208
Provision for doubtful accounts 603,319 466,801
Depreciation and amortization 307,482 206,801
Deferred income taxes 316,315 (306,050)
Amortization of guarantee fees 49,400 59,850
Change in assets and liabilities:
(Increase) decrease in resort property held
for timeshare sales (83,068) 108,605
Increase in resort property under
development (4,257,468) (55,825)
Decrease in land held for sale 1,000 1,332,852
Increase in other assets (222,449) (238,340)
Increase (decrease) in accounts payable 66,468 (353,688)
Increase in accrued and other liabilities 546,621 153,720
Decrease in Genesis funds certificates (167,363) (429,847)
Decrease in due to affiliates (541,858) (81,633)
Decrease in deferred income (261,000) (456,899)
------------ ------------
Net cash provided by (used in) operating activities (5,579,178) 3,310,109
------------ ------------
Cash flows from investing activities:
Increase in deferred assets (164,258) (1,159,589)
Purchases of plant and equipment (55,675) (418,347)
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Net cash used in investing activities (219,933) (1,577,936)
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Cash flows from financing activities:
Proceeds from notes payable 6,002,966 329,141
Principal payments on notes payable (1,627,389) (2,350,163)
Principal payments on notes payable
to affiliates (366,848) (420,646)
Proceeds from issuance of common stock 13,672 93,535
Acquisition of treasury stock (25,032) --
Redemption of preferred stock (185) (2,320)
Redemption of common stock (185) (1,141)
Preferred stock dividend payments (14) --
------------ ------------
Net cash provided by (used in)
financing activities 3,996,985 (2,351,594)
------------ ------------
Net decrease in cash and
cash equivalents (1,802,126) (619,421)
Cash and cash equivalents
at beginning of period 3,635,587 2,060,107
------------ ------------
Cash and cash equivalents
at end of period $ 1,833,461 $ 1,440,686
============ ============
See notes to consolidated financial statements
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation and Business Activities
The Company's significant business activities include developing, operating,
marketing and financing ownership interests in resort properties and, effective
in the third quarter of 1994, marketing of skin and hair care products.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10- 01 of
Registration S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of a normal recurring nature. Operating results for
the three and six month periods ended June 30, 1995, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1995. The accompanying financial statements should be read in conjunction with
the Company's most recent audited financial statements.
The consolidated financial statements include the accounts of ILX Incorporated
and its wholly-owned and majority-owned subsidiaries ("ILX" or the "Company").
All significant intercompany transactions and balances have been eliminated in
consolidation.
Revenue Recognition
Revenue from sales of timeshare interests is recognized in accordance with
Statement of Financial Accounting Standard No. 66, Accounting for Sales of Real
Estate ("SFAS No. 66"). No sales are recognized until such time as a minimum of
10% of the purchase price has been received in cash, the buyer is committed to
continued payments of the remaining purchase price and, except for sales of
timeshare interests in Varsity Clubs of America-Notre Dame, the Company has been
released of all future obligations for the timeshare interest. Revenue from
sales of timeshare interests in Varsity Clubs of America - Notre Dame is being
recognized by the percentage of completion method as development and
construction proceeds and as the costs of development and profit can be
reasonably estimated. Resort operating revenue represents daily room rentals and
revenues from food and other resort services. Such revenues are recorded as the
rooms are rented or the services are performed.
Statements of Cash Flows
Cash equivalents are highly liquid investments with an original maturity of
three months or less. During the three and six month periods ended June 30, 1995
and 1994, the Company paid interest and income taxes and capitalized interest to
resort property held for sale as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------------------- ------------------
Interest $303,732 $101,949 $582,658 $237,456
Income taxes $125,500 $306,050 $133,500 $306,050
Interest Capitalized $107,580 $ 11,547 $126,803 $ 11,547
Restricted Cash
Cash from customer payments towards purchases of timeshare interests in Varsity
Clubs of America-Notre Dame have been classified as restricted cash because the
Company does not have access to the cash until the facility is complete and
deeds are issued.
Reclassifications
The financial statements for prior periods have been reclassified to be
consistent with the 1995 financial statement presentation.
Note 2 - Income Taxes
The deferred tax asset valuation allowance decreased by $75,000 and $150,000 for
the three and six month periods ending June 30, 1995 and $322,000 and $610,000
for the three and six month periods ending June 30, 1994 to reflect management's
estimate of the future benefit to be provided from the utilization of Genesis's
net operating loss carryovers in 1995 and Los Abrigados tax benefits in 1994.
The valuation allowance is periodically reduced as management develops new tax
planning strategies to ensure that the Company will benefit from the loss
carryovers and other tax benefits. The decrease in the valuation allowance
reflects management's estimate that the loss carryovers and tax benefits will
more likely than not be utilized.
Note 3 - Notes Payable
In March 1995, the first deed of trust holder on the Golden Eagle Resort loaned
an additional $1,010,075 against its interest in the property and its assignment
of the Company's general partnership interest in LAP and extended the maturity
date through 1998.
During the first six months of 1995, the Company borrowed $3,575,795 on its $5
million construction financing commitment for the Varsity Clubs of America -
Notre Dame facility, bringing the balance outstanding on the loan to $3,976,579
at June 30, 1995.
During the second quarter of 1995, the Company borrowed $1,067,079 against
consumer notes receivable.
Note 4 - Shareholders' Equity
During the first six months of 1995, holders of 6,735 shares of Series C
Preferred Stock exchanged their shares for 11,225 shares of common stock. The
exchanges were recorded as a reduction in preferred stock and an increase in
common stock of $18,588. Shares of stock valued at $2,382 and cash of $14 were
issued in the first six months of 1995 for the Dividend Arrearage due to the
holders of Series C Preferred Stock who converted their shares in the last
quarter of 1994 and first six months of 1995.
During the second quarter of 1995, the Company acquired 20,000 shares of its
common stock for $25,032. The acquired shares have been recorded as treasury
stock.
During the second quarter of 1995, the Company granted 17,500 shares of
restricted common stock, valued at $13,672, to employees in exchange for
services provided.
Note 5 - Kohl's Ranch Lodge
In June 1995, the Company acquired the Kohl's Ranch Lodge, a 10 acre rustic
resort near Payson, Arizona for a purchase price of $1,590,000, consisting of a
$50,000 cash down payment, assumption of an existing deed of trust of
approximately $932,250, issuance of a $367,750 second deed of trust to the
seller and the issuance of 120,000 shares of ILX restricted common stock valued
at $2 per share. The Company intends to offer timeshare intervals in the
property, commencing in the third quarter 1995. The assumed first mortgage bears
interest at prime plus 1 1/4%, with $3,000 principal plus accrued interest
payable monthly through December 1, when the remaining balance will begin being
amortized over 36 equal monthly installments of principal and interest through
December 1998. Release fees of $750 per interval sold are applied to principal.
The note payable to the seller bears interest at 8%, with the first year's
interest to be added to principal on June 1, 1996. Principal of $7,500 plus
accrued interest is payable monthly thereafter through June 2000. Release fees
of $300 per interval sold are applied to principal.
Note 6 - Other
In July 1995, the Company acquired a two acre site in Tucson, Arizona, near the
University of Arizona, to be the site of its second Varsity Clubs of America.
The land was acquired for $1,002,000, consisting of a $300,600 down payment and
a note payable to the seller of $701,400.
In June 1995, the Company signed a letter of intent to offer to the public
$10,000,000 in convertible secured bonds through Brookstreet Securities
Corporation ("Brookstreet"). The bonds have a five year maturity, bear interest
at 10%, and are convertible to common stock at prices tied to market rates, with
a minimum price of $3.00 per share for the first two years following the
offering and $2.50 per share thereafter. The letter of intent is a firm
commitment by Brookstreet to sell a minimum of $10,000,000 face value of the
bonds and gives Brookstreet the option to sell an additional $1,500,000 face
value. The offering is scheduled for September 1995. The Company intends to use
the proceeds from the bond offering to finance land and/or construction costs of
additional Varsity Clubs of America sites and for working capital.
ILX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The increases in sales of timeshare interests for both the second quarter and
six months ended June 30, 1995, from the same periods in 1994, reflect the
recognition, based on percentage of completion, of sales in Varsity Clubs of
America Notre Dame, increased sales from the Sedona Sales Office, net of a
decrease in sales from the Phoenix Sales Office. In addition, sales of timeshare
interests for the first six months of 1994 include the recognition of $428,100
in deferred revenue from a 1992 bulk sale. Sales of timeshare interests for the
first six months of 1995 include revenue of approximately $525,000 from sales of
upgraded units at Los Abrigados to existing owners who were invited to exchange
their ownership interests for interests in the newly renovated units, for an
additional payment.
In the first half of 1995, the Company recognized approximately $2,941,000 in
Varsity Clubs of America-Notre Dame sales, which represents 95.5% of Varsity
Clubs of America-Notre Dame sales from inception through June 30, 1995. The
95.5% reflects the percentage of completion of the facility at June 30, 1995.
Second quarter 1995 sales of $2,073,000 reflect 95.5% of second quarter Varsity
Clubs of America-Notre Dame sales plus the additional 39.5% (95.5% les 56%) of
Varsity Clubs of America sales through March 31, 1995. (First quarter sales were
recorded at 56%, which represents the percentage of completion of the facility
at March 31, 1995).
The increased sales generated by the Sedona Sales Office in the second quarter
of 1995 and the six month period ended June 30, 1995, reflect higher closing
rates (number of timeshare sales divided by the number of timeshare tours) and
higher average prices.
On April 1, 1995, the Company closed the Phoenix Sales Office, which had sold
primarily interests in the Los Abrigados resort, in favor of directing all
Phoenix area potential customers to the Sedona Sales Office. The Sedona Sales
Office has had consistently higher closing rates than the Phoenix Sales Office.
The Phoenix Sales Office generated approximately $2.49 million in timeshare
sales in the first six months of 1994, and approximately $771,000 during the
first half of 1995, prior to closure of the office.
The increase in cost of timeshare interests sold between years reflects
improvements to Los Abrigados and sales of interests in Varsity Clubs of
America-Notre Dame which have a higher product cost as a percentage of revenue
than interests in Los Abrigados.
The increase in cost of resort operations as a percentage of resort operating
revenue reflects the increasing usage of the Los Abrigados resort by timeshare
owners and tour guests and the decreasing availability of rooms for traditional
resort guests. Owners and tour guests pay substantially less for their usage
than traditional resort guests.
The 1994 sales of land reflect sales of parcels held by Genesis.
The 1995 sales of consumer products and the related cost of sales reflect sales
of Red Rock Collection products.
Advertising and promotion expenses relate primarily to sales of timeshare
interests. Advertising and promotion as a percentage of sales of timeshare
interests is comparable between years for the six month periods ending June 30,
1995 and 1994. Advertising and promotion is smaller as a percentage of timeshare
sales in the second quarter of 1995 than for the same period in 1994 because
advertising and promotion expenses related to Varsity Clubs of America-Notre
Dame are expensed in their entirety as they are incurred, while revenue
recognition is deferred and recognized based on percentage of completion.
Accordingly, during the fourth quarter of 1994 and first quarter of 1995 a
disproportionate amount of advertising and promotion expense was recognized
relative to sales recognition.
The increases in general and administrative expenses from 1994 to 1995 reflect
the expansion of timeshare operations in 1995 and the recognition of Red Rock
operating expenses. Red Rock Collection expenses were deferred during the first
six months of 1994, pending commencement of operations in the third quarter of
1994.
The increases in interest expense between years reflect increased borrowings
against consumer paper, interest on notes payable arising from the acquisition
of the Los Abrigados Partners Limited Partnership ("LAP") Class A limited
partnership interests in the third quarter of 1994, and borrowings for
improvements to resort property held for sale. The increases in interest income
from 1994 to 1995 are a result of the increased consumer paper retained by the
Company.
The decreases in minority interests from 1994 to 1995 reflect the acquisition of
the LAP Class A limited partnership interests, the decrease in LAP net income in
1995 and the minority interests in the income generated from second quarter 1994
Genesis land sales. The decrease in LAP net income between years is a result of
closure of the Phoenix Sales Office and reduced tours and closing rates prior to
the closure, and reduced profitability from Los Abrigados hotel operations due
to decreased availability of rooms for resort guests.
Income tax expense increased between 1994 and 1995 because in 1994 a reduction
in the valuation allowance (which had been established to reflect the
uncertainty of the utilization of the deferred tax assets) offset the tax
provision in full as a result of the profitability of Los Abrigados. In the
first and second quarters of 1995, income tax expense has been recorded based on
the estimated effective annual tax rate for fiscal 1995, including an estimated
reduction in the Genesis deferred tax benefit valuation allowance, due to tax
planning strategies which management believes will more likely than not
partially utilize Genesis NOL carryforwards.
Liquidity and Capital Resources
The Company's liquidity needs principally arise from the necessity of financing
notes received from sales of timeshare interests. In that regard, the Company
has $13 million in lines of credit issued by a financing company under which
conforming notes from sales of interval interests in Los Abrigados and the
Golden Eagle Resort can be sold on a recourse basis through September 1996. In
addition, the Company has an open ended arrangement with a finance company which
is expected to provide financing of at least $5 million through 1996. At June
30, 1995, approximately $9 million is available under the fixed committment
lines and approximately $4 million is expected to be available on the open ended
line. In addition, the Company has a financing commitment whereby the Company
may borrow up to $2.5 million against non-conforming notes through September
1998. Approximately $1.3 million was available under this commitment at June 30,
1995.
The Company also has a $10 million financing commitment whereby the Company may
sell eligible notes received from sales of timeshare interests in Varsity Clubs
of America - Notre Dame on a recourse basis through February 1996. The
commitment may be extended for an additional eighteen month period and an
additional $10 million at the option of the financing company. Approximately $9
million was available under this commitment at June 30, 1995.
The Company will continue to retain certain non-conforming notes which have one
to two year terms or which do not otherwise meet existing financing criteria,
and finance these notes either through internal funds or through borrowings from
affiliates secured by the non-conforming notes. The Company will pursue
additional credit facilities to finance conforming and non-conforming notes as
the need for such financing arises.
The Company has a $500,000 line of credit from one financial institution and a
$400,000 line of credit from another. $550,000 was available on the lines for
working capital at June 30, 1995.
The Company has a $5 million construction loan for the construction and
furnishing of Varsity Clubs of America-Notre Dame. The loan provides for
principal repayment via release payments as timeshare interests are sold.
Approximately $1 million is available at June 30, 1995, which is expected to be
sufficient to complete the facility.
In July 1995, the Company acquired land near the University of Arizona to be the
site of its second Varsity Clubs of America. The Company made a down payment of
$300,600 and the seller is carrying the balance of $701,400. The Company has a
commitment for construction financing for the facility in the amount of $6
million, which is expected to be sufficient to build and furnish the property.
In addition, the Company has received a verbal commitment for up to $20 million
in financing for eligible notes received from sales of timeshare interests in
Varsity Clubs of America-Arizona. The company is presently completing the
documentation of the written commitments for both the construction and notes
receivable financing.
The Company has optioned property near various college campuses for possible
future Varsity Clubs of America sites and expects to finance such land
acquisitions through seller financing or through financial institutions, secured
by the land acquired. The Company may seek equity and/or debt financing for the
construction of facilities and future sites.
Cash provided by operating activities of $3,310,109 in 1994 decreased to cash
used in operating activities in 1995 of $5,579,178 due to greater additions to
resort property under development for the construction of Varsity Clubs of
America - Notre Dame in 1995, because 1994 included the collection of $750,000
on a note receivable which arose from a 1992 bulk sale and the collection of
$1,000,000 on a Genesis mortgage receivable and because in 1995 more notes
receivable from timeshare sales were retained and used as security for
borrowing, rather than sold. In addition, 1994 cash flows from operating
activities included Genesis land sales of $2,048,678.
Cash used in investing activities decreased from 1994 to 1995 because 1994
includes investments in Red Rock Collection deferred assets.
The change from cash used in financing activities in 1994 to cash provided by
financing activities in 1995 reflects increased borrowings in 1995 for
construction of Varsity Clubs of America-Notre Dame and for improvements to the
Los Abrigados resort, and borrowings against Varsity Clubs of America consumer
paper.
In March 1995, the Company borrowed an additional $1,010,000 from The Steele
Foundation, Inc., the first mortgage holder on the Golden Eagle Resort. The
Company has used these funds for further expansion of food and beverage
facilities, refurbishment of suites and the construction of additional
administrative facilities at Los Abrigados resort.
In June 1995, the Company acquired the Kohl's Ranch Lodge, a ten acre rustic
resort near Payson, Arizona for $1,590,000, consisting of a $50,000 cash down
payment, assumption of the existing deed of trust of $932,250, seller financing
of $367,750, and the issuance of 120,000 shares of ILX restricted common stock
valued at $2 per share. The Company intends to finance the cost of the initial
improvements and renovations to the resort from working capital. Construction of
additional units and future improvements may be financed through the existing
deed of trust holder, other financing sources, or from working capital.
In June 1995, the Company signed a letter of intent to offer to the public
$10,000,000 in convertible secured bonds through Brookstreet Securities
Corporation ("Brookstreet"). The bonds have a five year maturity, bear interest
at 10%, and are convertible to common stock at prices tied to market rates, with
a minimum price of $3.00 per share for the first two years following the
offering and $2.50 per share thereafter. The letter of intent is a firm
commitment by Brookstreet to sell a minimum of $10,000,000 face value of the
bonds and gives Brookstreet the option to sell an additional $1,500,000 face
value. The offering is scheduled for September 1995. The Company intends to use
the proceeds from the bond offering to finance land and/or construction costs of
additional Varsity Clubs of America sites and for working capital.
The Company believes that its capital resources are adequate to meet current and
foreseeable future needs.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits
--------
The Exhibit Index attached to this report is hereby incorporated
------------------------------------------------------------------
by reference.
-------------
b) Reports on Form 8-K
-------------------
None
----
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ILX INCORPORATED
(Registrant)
/s/ Joseph P. Martori
---------------------
Joseph P. Martori
Chief Executive Officer
/s/ Nancy J. Stone
---------------------
Nancy J. Stone
Executive Vice President/
Chief Financial Officer
/s/ Denise L. Janda
---------------------
Denise L. Janda
Vice President/Controller
Date: As of July 21, 1995
Exhibits
to
Form 10-Q/A-2
For the Quarter Ended June 30, 1995
10-1 Agreement for Purchase and Sale of Kohl's Ranch between Kohl's Ranch
Associates and ILX Incorporated, dated March 10, 1995 (Kohl's Ranch)
10-2 Promissory Note ($367,750) to Kohl's Ranch Associates by ILX
Incorporated, dated June 1, 1995 (Kohl's Ranch)
10-3 Junior Deed of Trust, Assignment of Rents, and Security Agreement to
Kohl's Ranch Associates by ILX Incorporated, dated June 1, 1995 (Kohl's
Ranch)
10-4 Fourth Modification Agreement and Assumption Agreement between Bank
One, Arizona, NA and ILX Incorporated dated June 1, 1995 (Kohl's Ranch)
10-5 Letter of Commitment between Tammac Financial Corp. and ILX
Incorporated, dated June 19, 1995 (Kohl's Ranch)
10-6 Contract for Sale between city of Tucson and ILX Incorporated, dated
June 16, 1995
10-7 Assignment of Contract for Sale from ILX Incorporated to VCA Tucson
Incorporated, dated July 17, 1995
AGREEMENT FOR PURCHASE AND SALE
-------------------------------
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made as of the 10th day of
March 1995, by and between KOHL'S RANCH ASSOCIATES, an Arizona general
partnership ("Seller"), and ILX INCORPORATED, an Arizona corporation, or its
nominee ("Buyer ).
R E C I T A L S: .
---------------
A. Seller is the owner of certain real property located in Gila County,
Arizona comprised of a resort hotel known as Kohl's Ranch Lodge and certain
related personal property and rights, tangible and intangible, as more
particularly described below (the real and personal property and rights may be
sometimes referred to herein as the"Resort", as such term is more fully defined
below).
B. Seller also owns or controls the Water Company (as defined below).
C. Seller has agreed to sell, and Buyer has agreed to purchase, the
Resort and the Water Company pursuant to the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the sufficiency of such consideration being acknowledged, the
parties hereby agree as follows:
A G R E E M E N T
-----------------
Section 1. Sale of Resort and Water Company.
1.01. Seller shall sell to Buyer, and Buyer shall purchase from Seller,
at the price and upon the terms and conditions set forth in this Agreement:
(a) All that real property located in the County of Gila, State
of Arizona, described on Exhibit "A" attached hereto and incorporated
herein, together with all rights, privileges, easements and
appurtenances thereto, including, without limitation, all of Seller's
right, title and interest in and to any appurtenant water rights, and
any appurtenant land lying within the right-of-way of any street, road
or alley, whether completed or proposed (the "Property");
(b) All existing and proposed buildings, parking facilities,
structures, signs, improvements, tenements, fixtures and appurtenances
located on, under or about the Property at the time of Closing,
including without limitation the stable facilities constructed pursuant
to the U. S. Forest Service Special Use Permit, and all facilities
owned by the Water Company (the "Improvements");
(c) All of the Resort, Water Company, restaurant, lounge, common
area and other furniture, furnishings, equipment, fixtures,
improvements, inventory, supplies and other items of personal property
and any vehicles customarily located on the Property or used primarily
in connection with the Resort, including those items set forth on
Exhibit A-1 attached hereto and incorporated herein (the "Personal
Property").
(d) All customer lists, rental and booking information owned by
Seller (the "Ledgers") and used in conjunction with the operation of
the Resort;
(e) All of Seller's right, title and interest in and to any
leases affecting the Property, Personal Property or Improvements (the
"Leases") and any management, service, concession, maintenance, utility
and other contracts and agreements with respect to the operation of the
Resort and maintenance of the Property, Personal Property and
Improvements (the "Service Contracts");
(f) All of Seller's right, title and interest in and to all
architectural drawings, plans and specifications, shop drawings and
other standard industry design or construction documents relating to
the present or future development of the Property and construction of
the Improvements (the "Plans and Specifications");
(g) All of Seller's right, title and interest in and to all water
and water rights, and all ditches and ditch rights, springs, water
wells and well rights (including without limitation any Type II
rights), well registration statements and well permits, spring water
rights, permits and registrations,reservoirs and reservoir rights which
are, have been, or may be used in connection with the Resort, and
including, without limitation, all water well and spring improvements,
pump casings, lines, fixtures and equipment together with the water
right, priority and any other attendant property interest in the right
to use water produced from any such well or spring located on or off
the Property and further including, without limitation, all of Seller's
right, title and interest in any water stock or Water Company stock or
interests evidencing any of the above matters (the "Water Rights");
(h) All of Seller's right, title and interest in and to any and
all of the following to the extent they arise out of, are related to
the construction or development of, or are, or have at any time been,
used in connection with the Resort: (i) warranties, guarantees and
indemnities in favor of Seller and claims of Seller against third
parties with respect thereto, (ii) licenses, permits, certificates of
occupancy or similar documents, contract rights, and other agreements,
whether oral or in writing, incident to the operation of the Resort,
(iii) the goodwill associated with the Resort; (iv) all designs,
surveys, site plans, plats, operating materials, engineering reports
and other technical descriptions, (v) transferrable licenses and
permits necessary to operate the Resort as it is presently being
operated, and (vi) all other contracts, assets, and rights owned by
Seller, relating to the business, maintenance, construction, and/or
operation of the Resort (collectively the "Contract Rights and
Intangible Assets").
(i) All of Seller's right, title and interest in and to any
transferable alcoholic beverage licenses used in the operation of the
Resort, and all other personal property or rights, tangible or
intangible, located at and used in the operation of the Resort,
(j) All of Seller's right, title and interest in Resort telephone
numbers and marketing materials used in marketing the Resort, whether
located at the Property or elsewhere, including existing videotapes,
photographs, brochures, film, copy and anything relating thereto; and
(k) The Water Company and the Related Water Assets, all as
defined in, and subject to, the provisions of Section 10.
All of the items described in subparagraphs (a) through (k) above shall be
referred to in this Agreement collectively as the "Resort".
1.02. Seller shall convey and Buyer shall accept title to the Property
and Improvements in accordance with the terms of this Agreement by special
warranty deed (Exhibit "I"), warranting title as against the acts of Seller only
and subject all matters of public record, current taxes and assessments, the
matters approved or deemed approved by Buyer pursuant to Section 3.06 hereof as
shown on Exhibit "B" attached hereto, and any matter which would be shown on an
accurate A.L.T.A. survey of the Property (collectively the "Permitted
Exceptions"). The Personal Property shall be conveyed to Buyer by Bill of Sale
(Exhibit "J") to be executed and delivered by Seller at Closing, free and clear
of liens and encumbrances. The Leases, Service Contracts, Ledgers, Plans and
Specifications and Contract Rights and Intangible Assets shall be conveyed by
Seller pursuant to an Assignment of Leases, Contract Rights and Intangible
Assets (Exhibit "K"), to be executed by Seller and Buyer at Closing.
1.03. Seller shall license the use of the "Kohl's Ranch" logo and the
use of the tradenames, "Kohl's Ranch," and other logos, trademarks and
tradenames used in connection with the Resort for such time as no default exists
and remains uncured under the Note, Deed of Trust and Security instruments given
pursuant to paragraph 2.01(c) of this Agreement, which license shall
automatically convey the logo and tradenames to Buyer upon payment in full of
the Purchase Price.
Section 2. Purchase Price, Apportionments, Escrow Agent.
---------------------------------------------
2.01. The purchase price ("Purchase Price") to be paid by Buyer to
Seller for the Resort shall be ONE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS
($1,650,000.00), plus any additional sum for inventories existing as of Closing,
payable as follows:
(a) Fifty Thousand Dollars ($50,000.00) in cash at Closing (the
"Down Payment"), plus any additional sum representing the cost of any
Resort inventory of liquor, food, beverages and the gift shop (the
"Inventory"), to be valued as agreed by the parties at a joint
inventory conducted prior to Closing.
(b) $950,000.00 (adjusted to the actual balance of principal and
interest at Closing)by, at Buyer's option, either (i) assumption at
Closing of Seller's existing obligations on the existing promissory
note, deed of trust and other loan and security documents by Seller in
favor of Bank One Arizona, N.A., attached hereto as Exhibit "T" (the
"Loan Documents"), in which case it shall be a condition to Seller's
obligation to close this transaction that Bank One simultaneously
release Seller from further liability on such obligations or (ii)
paying the loan evidenced by the Loan Documents in full at Closing.
(c) $350,000.00 (adjusted for any difference from the figures
shown in subparagraph (b) above, and for any adjustments described in
Paragraphs 2.03 and 10.05 below). The adjusted sum shall be evidenced
by a promissory note executed by Buyer at Closing, payable to Seller
and otherwise embodying the terms and conditions set forth in the form
of promissory note appearing at Exhibit "G" hereto (the "Note"). The
Note shall be secured by a Deed of Trust and Assignment of Rents and
Security Agreement encumbering the Property, executed by Buyer as
Trustor, conveying the Property in trust to Escrow Agent or its
affiliated trustee, as Trustee for the benefit of Seller as
Beneficiary, and otherwise embodying the terms and conditions set forth
in the deed of trust appearing at Exhibit "H" hereto (the "Deed of
Trust"). The Note shall be further secured by financing statements
covering the Personal Property and such other instruments as may
reasonably be required by Seller and Buyer on or before the Closing
Date (the "Security Instruments").
(d) $300,000.00 by issuance at Closing of one hundred fifty
thousand (150,000) shares of ILX Incorporated Common Stock (the
"Shares"), valued for purposes of this Agreement at Two Dollars ($2.00)
per share. Such stock will be restricted stock and be subject to all
applicable federal and state securities laws including without
limitation Securities Exchange Commission Rule 144. Seller agrees to
execute at Closing an appropriate restricted stock letter in the form
attached hereto as Exhibit "S".
2.02. Except as set forth in paragraph 2.03, Seller shall retain all
the rights and all the obligations with respect to all accounts payable,
salaries and wages payable and payroll taxes associated therewith, unbooked
accounts payable, accounts and notes receivable, cash, cash equivalents,
security deposits, utility deposits, bank deposits, bank and operating accounts,
for the Resort existing as of the Closing Date, as well as for its prorata share
of real property taxes and assessments as of the Closing Date. Seller's prorata
share of real property taxes and assessments shall be paid to Buyer in cash on
the Adjustment Date as defined in paragraph 2.03 hereof if not known and
prorated at Closing. Buyer, its wholly owned subsidiary, or through a management
company mutually acceptable to the parties, as Buyer may employ, shall receive
payments paid on all accounts receivable existing as of the Closing Date as
Seller's agent and shall remit all amounts received to Seller within ten (10)
business days of receipt. Such collections of accounts receivable shall be
undertaken in the usual and ordinary course of the Resort business and Buyer
shall not be required to undertake any solicitations or extraordinary efforts or
legal action to collect. Collection of these accounts receivable as set forth
above shall be without cost to Seller. Adjustment for cash security deposits,
prepaid or accrued expenses shall be made as provided in Section 2.03 below.
2.03. Buyer and Seller agree that a prorated net adjustment (the "Net
Adjustment") shall be computed as of the Closing Date by detertmining any
amounts paid or to be paid by one party, but chargeable to the other party under
this Agreement. The computations of the Net Adjustment will be made as of the
Closing Date and exlude the cash payment described in Section 2.01(a) above.
Buyer and Seller agree to use their best efforts to ensure that a full
accounting of the net adjustments be provided no later than the Closing Date to
the extent practicable (the "Adjustment Date"). If Seller owes the Net
Adjustment to Buyer, then Seller shall deduct such amount from the principal
amount of the Note as of the Closing Date. If Buyer owes the Net Adjustment to
Seller, such amount shall be added to the principal amount of the Note, as of
the Closing Date. All adjustments reached and agreed to by the Adjustment Date,
or such later date as the parties may agree, and, with respect to subsequently
received information, the Supplemental Adjustment Date (defined below), shall be
final and no further adjustments shall be made. The parties acknowledge that
some items subject to adjustment may not be received prior to the Adjustment
Date. Accordingly, there shall be a supplemental adjustment determined thirty
(30) days after the Closing Date or such other date as the parties may agree if
all information has not been received (the "Supplemental Adjustment Date") for
such items, with such adjustment to be added to or deducted from the Note, as
appropriate, as of the Closing Date. Buyer and Seller agree that adjustments
will include, but not necessarily be limited to, the following:
(a) Sales Tax. Any sales tax collected prior to the Closing Date
---------
and not paid to the Arizona Department of Revenue on or before the
Adjustment Date, shall be an adjustment in favor of Buyer on the
Adjustment Date. Seller shall, upon presentation of a copy of the sales
tax return, with an allocation of Seller's responsibility therefor,
verify such allocation and reimburse Buyer for such amount within ten
(10) business days.
(b) Insurance. If Buyer continues any insurance that Seller has
---------
previously obtained with respect to the Resort, Buyer agrees to
reimburse Seller for the proportionate share of insurance costs prepaid
by Seller for any coverage continued by Buyer after Closing, prorated
as of the Closing Date.
(c) Lease Payments. All lease payments will be prorated to the
---------------
Closing Date.
(d) Customer Deposits and Prepayments. All customer deposits and
---------------------------------
prepayments for services to be performed or goods to be delivered after
Closing, shall be prorated in favor of Buyer as of the Closing Date.
(e) Utility and Equipment Lease Deposits. All telephone numbers,
------------------------------------
and all utility and equipment lease deposits shall be assigned to Buyer
at Closing and shall be an adjustment in favor of Seller on the
Adjustment Date.
(f) License Fees. Any prepaid license fees shall be prorated to
------------
the Closing Date, and shall be an adjustment in favor of Seller on the
Adjustment Date.
(g) Payroll Related Expenses. Any Workmens Compensation deposits
------------------------
shall be prorated to the Closing Date, and shall be an adjustment in
favor of Seller on the Adjustment Date. Vacation and sick leave accrued
as of the Closing Date shall be an adjustment in favor of Buyer on the
Adjustment Date. For purposes of the foregoing, paid vacation and sick
leave shall be deemed paid on a first accrued-first paid basis.
(h) Guest Ledger. All amounts receivable for lodging provided
------------
prior to the Closing Date, as shown on the Guest Ledger, shall be
receivables to be received by Buyer on behalf of Seller as set forth
above. All amounts receivable for lodging provided during an
uninterrupted period beginning before the Closing Date and extending
until after the Closing Date shall be prorated to the Closing Date, and
shall be an adjustment in favor of Seller on the Adjustment Date.
2.04. The items below shall be paid as follows:
(a) Seller and Buyer shall each pay one-half (1/2) of the
standard escrow charges in connection with this Agreement.
(b) The cost of the owner's title policy provided for in
Paragraph 7.01 shall be paid on the Closing Date as follows:
(i) Seller shall be charged an amount equal to the premium for
standard coverage; and
(ii) Buyer shall pay the additional premium for extended
coverage, and the cost of any special endorsements as may be desired by
Buyer.
(c) The cost of any extended lender's title insurance policy
shall be paid in full by Buyer.
(d) The charge of a collection agent ("Collection Agent") for
payments on the Note shall be paid one-half (1/2) by Seller and
one-half (1/2) by Buyer.
(e) Buyer shall pay the cost of a customary property tax advisory
service (for the benefit of Seller) until the Note is paid in full.
2.05. Seller and Buyer hereby acknowledge and agree that the Purchase
Price, for all purposes relating to this Agreement, shall be allocated
among the various assets comprising the Resort as the parties shall
mutually agree in writing prior to the end of the Feasibility Period
and attach hereto as Exhibit "U".
2.06. First American Title Insurance Company (and its Gila County
affiliate) shall act as the escrow agent ("Escrow Agent") hereunder and shall,
among other things, on the Closing Date, assume responsibility for recording
and/or filing all necessary documents resulting herefrom and shall cause the
issuance of the Policies of title insurance required under Section 7, together
with proper issuance of any reinsurance agreements pertaining to such title
insurance policies, and otherwise accomplish the provisions of this Agreement.
Escrow Agent has acknowledged its agreement to these provisions by signing in
the place indicated on the signature page of this Agreement. Escrow Agent, or
its collection affiliate, shall also act as Collection Agent (including
custodian of the Beneficiary Releases described in the Deed of Trust attached
hereto as Exhibit "H"). The parties agree, if required by Escrow Agent, to
execute and enter into Escrow Agent's standard form of escrow instructions, and
to execute collection instructions, all with such modifications as the parties
shall reasonably request.
Section 3. Feasibility and Investigation.
------------------------------
3.01. In consideration of Buyer entering into the mutual covenants in
this Agreement, at any time on or prior to the sixtieth (60th) day after the
date of this Agreement (the "Feasibility Period"), Buyer may cancel this
Agreement and all agreements relating thereto (except for its indemnity relating
to disturbance of the Resort as described below in this Section) for any reason
whatsoever in Buyer's sole and absolute discretion, by providing to Seller and
Escrow Agent written notice of such cancellation. In the event Buyer timely
gives notice of cancellation in accordance with the provisions hereof, this
Agreement shall become null and void and of no further force or effect
whatsoever and neither party shall have any further rights or obligations to the
other hereunder or by reason hereof except for those which by the provisions
hereof are expressly stated to survive the termination of this Agreement. If,
however, Buyer shall fail to give notice of Buyer's election to cancel at the
time and in the manner as above provided, then Buyer conclusively shall be
deemed to have waived its right to do so and Buyer shall continue to be bound by
the remaining provisions of this Agreement.
3.02. Buyer shall have the right to enter and examine the Resort and
all other items being sold pursuant to this Agreement at any time after the
execution of this Agreement, and also have the Resort and such items examined
and copied by any persons whom it shall designate, including without limitation,
accountants, attorneys, contractors, engineers,and environmental and soil/water
testing personnel. Seller shall permit access to the Resort by Buyer and any
persons it designates, and shall fully cooperate and afford them the opportunity
to inspect such items and perform any tests upon the Resort that Buyer deems
necessary or appropriate. Buyer may utilize the office equipment and office
facilities at the Resort without charge (except for any long distance telephone
service). Buyer will not unreasonably interfere with the business of the Resort.
3.03. As to any physical disturbance of the Property or Improvements or
physical injury to person caused by Buyer or its agents, upon completion of such
studies and investigations, if Buyer cancels the Agreement or thereafter does
not close, Buyer agrees to restore any physical damage to the Property or
Improvements caused by Buyer or its agents to the condition it was in prior to
such damage, and further, without regard to whether or not Buyer shall cancel or
close, to defend, indemnify and hold Seller harmless from and against all
physical injury to persons arising from such activities by Buyer. These
covenants shall survive cancellation of this Agreement.
3.04 Buyer shall pay the cost of any studies and examinations of the
Resort conducted by agents of Buyer, including a "Phase I" environmental report
and any testing in connection therewith, testing of the water at wells on the
Property or related to the Water Company's source and service of water.
Notwithstanding the foregoing, as soon as reasonably practicable after execution
of this agreement Seller, at its expense, shall provide Buyer with an ALTA Urban
Class Survey of the Resort including such Table A items as specified by Buyer,
by an Arizona licensed surveyor in good standing, certified to Buyer, the title
insurer and any lender connected herewith, with such certification containing
such other matters as Buyer shall reasonably request. If Buyer cancels this
transaction or otherwise fails to close, Buyer shall provide Seller with the
results and reports of all such matters which have been furnished to Buyer by
such agents. As soon as practicable after execution hereof, Seller shall provide
Buyer with copies of all existing surveys, relevant water reports, environmental
reports and other studies and reports relating to the Resort in Seller's
possession or under its reasonable control.
3.05 Prior to the Closing, and under such reasonable terms and
conditions as seller may impose, employees and agents of Buyer may stay at the
Resort without charge for lodging, except for incidentals consumed, such as long
distance telephone, food and beverages, provided such stay is primarily for the
purpose of conducting feasibility examinations and investigations or otherwise
working on matters related to this transaction.
3.06 Title Report.
-------------
(a). As soon as practicable after execution hereof, Seller will,
at Seller's sole cost and expense, deliver to Buyer a preliminary title
report or a commitment for title insurance relating to the Property
prepared by Escrow Agent and leading to the issuance of an extended
owners policy, together with complete and legible copies of all
recorded documents referred to therein (the "Title Report") and, in the
event that the same are subsequently prepared, agrees to undertake
reasonable efforts to cause Escrow Agent to deliver to Buyer any
updates and supplements thereto or amendments thereof, in each case
together with complete and legible copies of all matters referred to
therein ("Amendments"). Buyer shall have until the later of the end of
the Feasibility Period or (five (5) business days after the date of
delivery of any Amendment (which, at Buyer's option, shall extend the
Closing Date accordingly), to notify Seller and Escrow Agent in writing
of Buyer's objection to any matter(s) indicated therein (but only, in
the case of Amendments, with respect to matters not appearing on the
Title Report or any previously delivered Amendment. Notwithstanding the
foregoing, Buyer shall not be entitled to object to any exception
contained in the Title Report (or any Amendment thereof) which is
caused by Buyer's activities under Section 3 hereof (excluding those
resulting from Buyer's discovery of any existing defect or condition).
(b) If Buyer fails to timely object to any title exception matter
disclosed in accordance with the above precedure, Buyer conclusively
shall be deemed to have approved the condition of title to the
Property. If Buyer objects to any exception as above provided, Seller
shall have until five (5) business days after receipt of Buyer's
objections to advise Escrow Agent and Buyer in writing with respect to
each specified objection of Seller's election either to (i) take no
action in connection therewith, or (ii) attempt to cause any such
matter(s) to be cured or eliminated at or prior to Close of Escrow.
Insuring over any such item may be done only with Buyer's written
consent in its sole discretion. Seller's failure to give notice within
such five (5) business day period with respect to any of Buyer's
objections conclusively shall be deemed to constitute Seller's election
to take no action in connection therewith.
(c) In the event Seller elects or is deemed to have elected to
take no action with respect to any specified objection, Buyer shall
have until the later of the end of the Feasibility Period or five (5)
business days thereafter to advise Escrow Agent and Seller in writing
of its election either to (a) waive such previously specified
objection(s) and close the transaction contemplated hereby in
accordance with the remaining provisions of this Agreement and without
any abatement or reduction of the Purchase Price, or (b) cancel and
terminate the Agreement. Buyer's failure to give written notice within
such period shall conclusively be deemed to constitute Buyer's election
to waive its previously specified objections with respect to those
matters as to which Seller has notified or is deemed to have notified
Buyer that Seller will take no action.
(d) With respect to those matters which Seller has notified Buyer
that Seller will attempt to cause to be cured, eliminated (or insured
over with Buyer's consent), Seller shall have until five (5) business
days prior to Close of Escrow (which shall be extended in accordance
with the time periods herein) within which to accomplish the same;
provided, however, that if seller fails to do so within said period, or
if Seller shall be unable (other than due to its voluntary act after
execution hereof causing such disability) to convey title to the
Property subject to and in acordance with the provisions of this
Agreement at Close of Escrow, then Buyer, as its sole and exclusive
remedies, may elect either to (i) waive such previously specified
objection(s) and close the transaction contemplated hereby in
accordance with the remaining provisions of this Agreement and without
any abatement or reduction of the Purchase Price on account thereof, or
(ii) cancel this Agreement and the Escrow; said election of remedies to
be evidenced by Buyer's giving written notice thereof to each of Seller
and Escrow Agent at or prior to Close of Escrow. Buyer's failure to
give written notice as required by the preceding sentence conclusively
shall be deemed to constitute Buyer's election to waive its previously
specified objection(s). If Buyer elects to cancel, this Agreement shall
become null and void and of no further force or effect and neither
party shall have any further rights or obligations to the other
hereunder or by reason hereof, except for those which by the provisions
hereof are expressly stated to survive the termination of the
Agreement.
(e) Buyer specifically agrees that nothing herein contained shall
be deemed to impose on Seller any obligation to bring any action or
proceedings, expend any sums or take any other steps of whatever kind
or nature in order to insure over, remove or cure matters affecting
title or to fulfill any condition or expend any monies therefor unless
Seller voluntarily impairs title to the Property or otherwise
voluntarily causes such matter after execution hereof. The acceptance
of the Deed by Buyer shall be deemed to be full performance and
discharge of every pre-closing condition on the part of Seller to be
performed pursuant to the provisions of this Agreement., but shall not
diminish Sellers warranties or any continuing obligation herein.
Section 4. Operations Prior to Closing.
----------------------------
Seller covenants and agrees that between the date hereof and the
Closing, Seller will:
4.01. Continue to operate the Resort as heretofore operated in the
normal course of business and in accordance with its customary business
practices.
4.02. Perform required maintenance and replacements in accordance with
its customary business practices.
4.03. Afford Buyer and its representatives full access to the Resort
and to Seller's books, records and files relating to the Resort, and make same
available to Buyer whether they are located on or off the Property,at reasonable
times, and without undue delay, up to and including the date of the Closing.
4.04. Pay, in the normal course of business, and, in any event, prior
to Closing, sums due for work, materials or services furnished or otherwise
incurred in the ownership and operation of the Resort up to the Closing, except
as otherwise specifically treated in the adjustment provisions of this
Agreement. Not prepay any material item after the date of the Agreement without
the prior written consent of Buyer.
4.05. Except for room rental agreements in the ordinary couse of
business, not enter into any new agreement, nor amend, modify or terminate any
existing agreement relating to the Resort without having obtained the prior
written consent of Buyer in each such instance, which will not be unreasonably
withheld or delayed.
4.06. Not grant or transfer or permit the grant or transfer of any
interest in the Resort or any item being sold pursuant to this Agreement, or
grant any executory rights in connection therewith, except for any items being
replaced with comparable items of equal or greater value in the ordinary course
of business.
4.07. Not discontinue any customary compliance with governmental
requirements applicable to the Resort.
4.08. Promptly advise Buyer of any threatened or actual litigation or
governmental proceeding affecting the Resort. It shall be a condition precedent
to Buyer's obligation to close that there shall be no such threatened or actual
litigation or proceeding pending at Closing having a potential adverse effect
upon the Resort or Seller's ability to convey the Resort to purchaser, except
for the existing condemnation action in the Gila County, Arizona, Superior
Court, Cause Number CV-89-270, relating to Tract "J" of the Property west of
State Highway 260, and the water tanks and piping formerly connected therewith
(the "Condemnation Action").
4.09. Not permit any material alteration, structural modification or
additions to the Resort, except in the nature of ordinary maintenance.
4.10. Except for room rental agreements in the ordinary course of
business, not create (or agree to create) any grant, option, lease, covenant,
restriction, easement, encumbrance or lien on or affecting the Resort, nor do
anything negatively affecting title thereto, without the prior written consent
of Buyer.
4.11. As a condition precedent to Buyer's obligation to Close, Seller
shall have duly performed all covenants and other obligations to be performed by
it under this Section 4.
Section 5. The Closing.
------------
5.01. The consumation of this transaction by recording the Special
Warranty Deed ("Closing") shall take place ten (10) days (or as such time may be
extended in accordance with the specific terms of this Agreement) after the date
of expiration of the Feasibility Period or sooner at any time if desired by
Buyer upon two (2) days written notice by Buyer (the "Closing Date"). At the
Closing, the parties hereto agree to take the following acts and make the
following deliveries, all of which will be deemed taken and delivered
simultaneously and no one of which will be deemed completed or delivered until
all have been completed or delivered:
(a) Seller shall execute, acknowledge (as appropriate) and
deliver to Buyer and/or Escrow Agent the following documents:
(1) A Special Warranty Deed in the form attached as Exhibit
"I";
(2) An appropriate affidavit of real property value;
(3) A Bill of Sale in the form attached as Exhibit "J",
assigning and transferring to Buyer all of Seller's
right, title and interest in and to the Personal
Property, Ledgers, and the Plans and Specifications,
including without limitation those items shown on
Exhibit "A-1", free and clear of all liens, security
interests, encumbrances and other charges, except any
lien arising under the Deed of Trust and Security
Instruments;
(4) An Assignment of Leases, Contract Rights and Intangible
Assets in the form attached as Exhibit "K";
(5) Assignments of Seller's interest in all automobiles and
equipment leases and appropriate title transfer
documentation properly executed by Seller for all
vehicles and equipment owned by Seller and used for the
Resort;
(6) Notice of change in well ownership advising the Arizona
Department of Water Resources of the sale;
(7) License of Tradenames in the form attached hereto as
Exhibit "L";
(8) Any documents necessary to complete the sale and
transfer of the Water Company;
(9) Certificate of Non-Foreign Status in the form attached
hereto as Exhibit "M";
(10) Any Assignment (Conveyance of Water Right) form
advising the Arizona Department of Water Resources of
the transfer to Buyer of all water rights as necessary
to properly complete any chain of title as reflected in
the records of the Arizona Department of Water
Resources;
(11) Any Assignment of any Statement of Claimant in any
pending adjudication in the Superior Court, in and for
the County of Maricopa or Gila, State of Arizona,
pertaining to the Salt River or other relevant
Watershed; and
(12) Such other documents as may reasonably be required by
Buyer, its counsel, or Escrow Agent in order to
consummate the transactions which are the subject
matter of this Agreement.
(b) At Closing, Buyer shall pay, execute, acknowledge (as
appropriate) and deliver to Seller and/or Escrow Agent the following:
(1) The Down Payment, in cash or other immediately
available funds;
(2) An appropriate affidavit of real property value;
(3) The Note, Deed of Trust and Security Instruments;
(4) Any assumption of the Loan Documents
(5) Such other documents as may be reasonably required by
Seller, its counsel, or Escrow Agent, to consummate the
transactions which are the subject matter of this
Agreement.
(c) At Closing the Escrow Agent shall record and deliver the
foregoing documents as appropriate in connection with this Agreement.
Section 6. Covenants, Representations and Warranties of Seller.
----------------------------------------------------
Seller represents covenants and warrants to Buyer as follows, as of the
date hereof and as of the Closing:
6.01. Seller is a general partnership, duly organized and validly
existing under the laws of the State of Arizona.
6.02. Seller has the full right and authority to enter into and fully
perform its obligations under this Agreement.
6.03. The persons signing this Agreement on behalf of Seller are
authorized to do so, to bind Seller to the terms hereof, and are all the
partners of Seller.
6.04. Seller is the sole owner of the Resort subject to the limitations
stated in Section 1.01 and 1.02 hereof and in the Water Agreement.
6.05. The schedule of Leases set forth in Exhibit "D" attached hereto
("Schedule of Leases") is accurate as of the date hereof, and there are no
Leases or other tenancies in or related to the Resort other than those set forth
therein and room rentals in the ordinary course of business. Copies of all
Leases have been made available to Buyer and all original Leases shall be
delivered to Buyer at Closing. Except as otherwise set forth in the Schedule of
Leases or elsewhere in this Agreement, all of the Leases are in full force and
effect, and none of them has been modified, amended or extended. Moreover,
Seller has no knowledge of any material breach or default, claim of material
breach or default thereunder, or any event which with the passage of time will
become a breach or default, and has received no written notice of any of the
foregoing thereunder.
6.06. A schedule of the Service Contracts is attached hereto as Exhibit
"E" ("Schedule of Service Contracts"). Except as otherwise set forth in the
Schedule of Service Contracts or elsewhere in this Agreement, the Service
Contracts are in full force and effect, and have not been modified, amended or
extended. Moreover, Seller has no knowledge of any material breach or default,
claim of material breach or default thereunder, or any event which with the
passage of time will become a breach or default. The originals shall be
delivered to Buyer at Closing.
6.07. A Permanent Certificate(s) of Occupancy for the improvements has
been issued by the appropriate governmental authorities and has not been amended
or revoked and a copy will be delivered to Buyer during the Feasibility Period.
The Resort is not located within the boundaries of any city or town, and its
zoning is regulated by Gila County.
6.08. Except as set forth in Exhibit "O" attached hereto, the Property
and Improvements are, to the best of Seller's knowledge, in substantial
compliance with the zoning and use requirements of Gila County and the State of
Arizona, Seller has received no correspondence or formal notice from any
governmental authority of any .existing violation, which has not been cured as
of the Closing Date, or of any circumstances that with the passage of time or
failure to act, or both, would constitute a violation of any zoning or use
requirement of Gila County or the State of Arizona.
6.09. To the best of Seller's knowledge, except for the condemnation
action, there is no pending or contemplated condemnation of the Property or
Improvements, or any portion thereof, by any governmental authority, nor is
there any existing or proposed plan to widen, modify or realign any street or
roadway adjoining the Property which would affect access to the Property, except
as set forth in Exhibit "P" attached hereto.
6.10. To the best of Seller's knowledge, and except as qualified by
Exhibit "Q" hereto, and related documents provided to Buyer prior to closing as
set forth on Exhibit "R" hereto, the water quality and water rights, sewage and
waste disposal septic systems and utility services now serving the Property and
the Improvements are adequate for the present operation of the Resort.
6.11. Except as set forth in Exhibit "Q" attached hereto and in related
documents provided to Buyer prior to Closing as set forth on Exhibit "R" hereto,
Seller has not received notice of any uncured violations or infringements of any
laws, rules, regulations, ordinances, fire or safety codes, life safety
requirements, insurance requirements, covenants, conditions, restrictions,
trademark, service mark or tradename registrations, agreements or rights
applicable to the Resort, and, to the best of Seller's knowledge, the Resort as
customarily, and presently, operated is in substantial compliance with all
applicable laws, rules and regulations.
6.12. Except as set forth in Exhibit "Q" attached hereto and in related
documents provided to Buyer prior to Closing as set forth on Exhibit "R" hereto,
to the best of Seller's knowledge:
(a) There are not presently, and have been no, above or
underground storage tanks, dry wells, injection wells, or similar
facilities, PCB transformers, asbestos or Hazardous Material located on
the Resort.
(b) No notice pursuant to any Environmental Law has been received
from, given to, or is presently due to, any governmental authority
pursuant to such Environmental Law.
(c) There are not presently, and have been no, violations on or
by the Resort of any Environmental Law.
(d) The Resort is not presently, and has not been, used for the
manufacture, collection, storage, handling, treatment or processing of
any Hazardous Material, nor as a sanitary landfill or open dump, except
for normal quantities of customary products used in the operation of
the business.
(e) There is not presently, and has not been, any spill, leakage
or release of any Hazardous Material on or into the soil, water or air,
on or at the Resort or at any real property within one mile of the
boundaries of the Resort.
(f) Tonto Creek running through and adjacent to the Resort is not
contaminated by any Hazardous Material.
(g) Substances, including without limitation those introduced
into the septic tanks and leech fields on the Property, have not
contaminated Tonto Creek, the water from the well on the Property or
the water from the spring utilized by the Water Company so that it is
deemed unsafe (for drinking in the case of the well and spring, and for
wading or bathing in the case of Tonto Creek) pursuant to any
Environmental Law.
(h) The Resort is not a state or federal "superfund" site or
study site pursuant to Environmental Law.
(i) Seller agrees to defend, indemnify and hold Buyer harmless
from all loss, cost, damage and expense arising out of any alleged or
actual violation of, or liability under, any Environmental Law, for
events and conditions occurring on or to the Resort Property by act or
omission to act of Seller or any person on the Resort property during
the period Seller has owned the Resort. This indemnity does not limit
any statutory or other legal rights available to Buyer.
(j) "Environmental Law" means, in relation to the Resort and its
------------------
operations, any applicable federal, state, county, municipal or other
political subdivision or district, statute, law, rule, regulaton, code,
ordinance or decree relating to health, environment, air, water
(including without limitation surface, ground, springs, streams and
creeks), soil, improvements and facilities, the protection of same, and
the contanimation and cleanup thereof.
(k) "Hazardous Material" means any hazardous waste, materials,
-------------------
gases, liquids, substances, improvements or other items defined in any
Environmental Law and regulated thereunder or by any applicable
governmental authority pursuant thereto, including any notification
requirements thereunder to governmental authorities.
6.13. To the best of Seller's knowledge, and except as set forth on
Exhibit "N" attached hereto, no actions, suits, proceedings or investigations
are pending or threatened against or relating to the Resort in any court or
before any federal, state, municipal or other governmental department, agency,
commission, board or bureau.
6.14. Except as set forth as a Permitted Exception on Exhibit "B"
attached hereto, and further except for current property taxes and assessments,
not delinquent, Seller has no knowledge of any tax, assessment, or other
obligation affecting the Premises which is, or may become, a lien on the
Premises.
6.15. Seller has delivered to Buyer statements of income and expense
dated January 1, 1989 through November 30, 1994 (the "Operating Statements") for
the operation of the Resort (excluding the Water Company) prepared by Seller. To
the best of Seller's knowledge the Operating Statements are true, correct, and
complete as of the date thereof and fairly present the financial operations of
the Resort for the period. Seller makes no representation as to the future
financial performance of the Resort or the financial viability of any other use
of the Resort, including, but not limited to, use of the Resort as a timeshare
resort.
6.16. A full and complete schedule of liabilities related to the Resort
which are to be assumed by Buyer pursuant to this Agreement is attached hereto
as Exhibit "F" ("Existing Liabilities"). The Existing Liabilities to the best of
Seller's knowledge are true and correct as to nature and amount. Seller hereby
agrees to indemnify and hold Buyer harmless from any sums owing on liabilities
existing as of the Closing Date not set forth as an Existing Liability on
Exhibit "F" and not properly taken into account in the adjustments described in
Section 2.03 hereof.
6.17. Seller is not prohibited from consummating the transacton
contemplated by this Agreement or from conveying the Property by any law,
regulation, agreement, instrument, restriction, order or judgment. No
permission, approval or consent by any third party or governmental authority, or
any individual or entity connected with Seller is required in order for Seller
to convey this Property or to consummate the transaction contemplated by this
Agreement.
6.18. Seller has paid in full for all labor performed at, professional
services performed in respect to, and materials, machinery, fixtures and tools
delivered to, furnished to or incorporated into the Resort or which would
otherwise give rise to a lien or a right to lien the Resort.
6.19. The Loan Documents are not in default, nor is there any existing
condition which would cause a default with the mere passage of time. The
principal balance due on the Loan Documents does not exceed Nine Hundred Forty
Thousand Dollars ($940,000.00), no additional principal has been advanced or
accepted pursuant to the Loan Documents.
6.20. All employees of and at the Resort, including without limitation
its managers, are employees-at-will and may be discharged without cause.
6.21 Seller's knowledge of damage to the Resort from past flooding is
described in Exhibit Q.
6.22 There is no default or breach under the U. S. Forest Service
Special Use Permit issued to Seller for the stables adjacent to the Resort nor
the concurrent Outfitter/Guide Permit issued in conjunction therewith, nor any
circumstance in connection with either that with the passage of time or failure
to act, or both, would constitute a default or breach, and the sublease to the
stable operator has been approved by the U. S. Forest Service in writing in
accordance with the permit. All such permits and the sublease are currently in
full force and effect, and Seller has no knowledge of any circumstance
indicating the U. S. Forest Service will refuse to transfer the Special Use
Permit to Buyer.
6.23 Seller holds, in good standing, a current Series 6 alcoholic
beverage license(s) from the State of Arizona Liquor Department in connection
with the operation of the Resort.
6.24 Up to the Closing Date, the Water Company's equipment and
facilities have been adequate to serve its current customers during peak demand
periods.
6.25 To the best of Seller's knowledge, except for the U.S. Forest
Service, the metered customers of the Water Company and as identified on Exhibit
"C" attached hereto, there are no other persons or real property with a right to
use the water from Indian Garden Spring (the "Spring") between the Spring and
the Property.
6.26 There is no default or breach under the Special Use permit from
the U.S. Forest Service to the Water Company for a springhouse for, and
pipelines from, the Spring, it is currently in full force and effect, and there
is not any circumstance that with the passage of time or failure to act, or
both, would constitute a default or breach thereunder, and Seller has no
knowledge of any circumstance indicating that the U. S. Forest Service at any
future annual renewal date (i) will not renew such permit, or (ii) that it will
increase the fees therefor.
6.27. Seller agrees to inform Buyer in writing immediately upon
obtaining actual knowledge that any of Seller's representations or warranties
herein are inaccurate.
6.28. It shall be a condition precedent to Buyer's obligation to close
this transaction that Seller's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing.
6.29. "To the best of Seller's knowledge" or references to "Seller's
---------------------------------- --------
knowledge" in this Section 6 means any written notice received by Seller
- ---------
relating to a representation and warranty matter herein, and the personal
knowledge of Thomas L. Griffith and Michael Bergen, without independent inquiry
into the facts, the law or the public record.
6.30. In the Condemnation Action, Seller agrees to use its best good
faith efforts to procure the agreement of the State of Arizona that it will
issue to the Resort a sign permit to place on the condemned portion of Tract "J"
described in Section 4.08 above, a sign of substantially the same dimensions,
location (insofar as possible) and visibility to southbound travellers on State
Highway 260 as existed prior to the Condemnation Action. Seller agrees that if
necessary, Seller will reduce, up to Ten Thousand Dollars ($10,000.00), the
compensation it would otherwise receive from the condemning authority, by
settlement or otherwise, in order to acquire said permit. Except for the effect
of the foregoing, the parties agree that the conduct of, and all awards in, the
Condemnation Action are the Seller's, and Buyer has no interest therein. If
Seller fails to acquire said permit as described above, the Note amount will be
reduced by Ten Thousand Dollars ($10,000.00), with the principal and interest to
be treated in the manner described for a reduction in Section 10.05.
6.31. Seller agrees to defend, indemnify and hold Buyer harmless from
all loss, cost, damage and expense arising from any breach of, or inaccuracy in,
the covenants, representations and warranties of Seller in this Agreement.
Further, except for liability expressly assumed by Buyer pursuant to the terms
hereof, Seller shall defend, indemnify and hold Buyer harmless from any and all
loss, cost, damage, expense and liability to third parties arising out of acts
or omissions by Seller with respect to the Resort prior to the Closing Date.
Section 7. No Further Warranties By Seller.
--------------------------------
Buyer hereby acknowledges and agrees that:
(a) Neither Seller nor any person acting on behalf of Seller has
made warranties or representations of any nature, express or implied,
oral or written, concerning the Resort, this Agreement, or any matter
related thereto other than as expressly set forth herein;
(b) Neither Seller nor any person acting on behalf of Seller has
made any representations as to the physical condition, income, expense,
operation of the Resort or any other matter or thing affecting or
relating to the Resort other than as expressly stated herein; and
Section 8. Covenants, Representations and Warranties of Buyer.
---------------------------------------------------
Buyer covenants, represents and warrants to Seller as follows:
8.01. Buyer is a corporation duly organized and in good standing under
the laws of the State of Arizona.
8.02. Buyer has the full right and authority to enter into and fully
perform its obligations under this Agreement.
8.03. The persons signing this Agreement on behalf of Buyer are
authorized to do so, and to bind Buyer to the terms hereof.
8.04. Buyer shall assume all of the Existing Liabilities, as outlined
on Exhibit "F" hereto, and shall pay when due all items appearing thereon.
8.05. Buyer shall indemnify and hold Seller harmless from any and all
liability to third parties arising out of, connected to or resulting from any
act, transaction, or omission of Buyer occurring after the Closing Date with
respect to the Resort or the operation thereof, provided however, that such
indemnification shall not (except asmay be otherwise herein specifically
provided) extend to any cost, expense or liability arising out of any omission
or act of Seller prior to Buyer's taking possession of the Resort.
8.06. As of the Closing Date Buyer has inspected the Resort and the
books and records of the Resort and has made all other inquiries which it deems
necessary to satisfy itself as to the condition and the operation of the Resort,
and agrees to accept possession of the Resort in its "as is" condition, subject
to the express covenants, representations and warranties of Seller contained in
this Agreement. Buyer further acknowledges that, except as specifically set
forth in this Agreement, Seller has made no representations regarding the
structural, mechanical or design characteristics of the Resort, the condition of
any incinerator, boiler, other burning equipment, air conditioning equipment,
ventilation systems and equipment, maintenance equipment, mechanical systems,
plumbing, electrical wiring and fixtures, fixtures, sprinkler and fire safety
systems, lighting systems and fixtures, recreational fixtures and facilities,
walks and foundations, roofs, and any other such structural and mechanical
items.
8.07. Buyer accepts Seller's assignment to it of all Leases, Service
Contracts, and all warranties, guarantees, bonds, licenses, permits and Contract
Rights related to the Premises and assumes all obligations of Seller thereunder
arising, from and after the Closing Date.
8.08. If Buyer assigns its interest in this Agreement to a nominee,
Buyer shall guarantee the prompt payment and full performance of the nominee in
form approved by Seller.
8.09. Buyer agrees to inform Seller in writing immediately upon
obtaining actual knowledge that any of Buyer's representations or warranties
herein are inaccurate.
8.10. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate any provision of, or
result in the breach of, any of the terms, provisions, or conditions of, or
constitute a default under or conflict with respect to, any other agreement by
which Buyer is bound.
8.11. As of September 30, 1994 ILX Incorporated had issued and
outstanding 12,368,609 shares of voting, no par value, common stock, and 437,573
shares of non-voting, $10 par value, preferred stock. All outstanding shares are
validly issued, fully paid and non-assessable. There are outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating the company to issue or transfer from
treasury any additional shares of its capital stock of any class. The 150,000
shares of common stock described in paragraph 2.01(d) above is authorized but
unissued stock of Buyer, and on closing Buyer will deliver or issue to Seller
the Shares free and clear of all liens, encumbrances, security agreements,
options, claims, charges and restrictions (except as may be imposed by Rule 144
or other state or federal securities laws).
8.12. The financial statements delivered to Seller have been prepared in
accordance with generally accepted accounting principles, and fairly present the
financial position of Buyer as of the respective dates thereof, and the results
of its operations for the period(s) indicated.
8.13. To the best of Buyer's knowledge, there is no suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending against or affecting Buyer which if resolved adversely to
Buyer would have a material adverse affect on Buyer or its business, assets, or
financial condition.
8.14 Substantially all of the proceeds of the loan underlying the First
Lien (defined in Section 9.02 below) will be used for the refurbishment of and
construction of improvements to the Resort, which will include "soft costs" such
as but not limited to, architect's, engineer's, designer's, attorney's and
accountant's fees, and administrative overhead related directly to all the
foregoing activities at the Resort, together with a contingency fund not
exceeding $75,000.00. The loan underlying the First Lien will have an interest
rate not exceeding three (3) percentage points added to the prime rate as
announced by the lender from time to time, and a due date of not less than two
(2) years from the date of the loan. The documents underlying the First Lien
will contain a consent to the Seller's Deed of Trust (which will be junior to
the First Lien and subordinate to it).
8.15. It shall be a condition precedent to Seller's obligation to close
this transaction that Buyer's covenants, representations and warranties in this
Agreement be fully performed and true and accurate as of the Closing.
Section 9. Title Insurance.
----------------
9.01. Seller agrees to undertake reasonable efforts to cause Escrow
Agent to deliver to Buyer, at Close of Escrow, an ALTA extended coverage owner's
title insurance (Form 1970-B if available) policy or a binding commitment to
issue the same as soon after Close of Escrow as is customary (the "Owners Title
Policy") insuring Buyer's title to the Property in the full amount of the
Purchase Price subject only to those matters which Buyer approves or is deemed
to have approved pursuant to Section 3.06 hereof and the printed exclusions and
conditions and customary exceptions set forth in Escrow Agent's usual form of
ALTA extended coverage owner's title insurance policy. If Buyer shall desire any
additional endorsements, the cost and responsibility for the acquisition thereof
shall be the responsibility of Buyer.
9.02. Buyer agrees to undertake reasonable efforts to cause Escrow Agent
to deliver to Seller, at Close of Escrow, an ALTA extended coverage Lender's
Policy of Title Insurance Form (1970-B if available) or a binding commitment to
issue the same as soon after Close of Escrow as is customary ("Lender's Title
Policy") in an amount equal to the original principal amount of the Note,
insuring that the Deed of Trust is an absolute, valid and enforceable lien in
favor of Seller against title to the Property subject only to the same
exceptions (other than those arising from Buyer's activities under Section 3
above) as are set forth in the above-described Owner's Title Policy (provided,
however, the exclusions shall not include monetary liens or encumbrances which
did not exist when the Property was conveyed by Seller to Buyer, except as may
be specifically approved in writing by Seller, and except for a lien (or liens)
senior to the Deed of Trust in an aggregate amount of not more than Two Million
Fifty Thousand Dollars ($2,050,000.00) (the "First Lien").
Section 10. Water Company
-------------
10.01. Included in this transaction is the sale (subject to the
contingency described below) of (i) the Kohl's Ranch Water Company which
supplies water to the Resort and other customers (the "Water Company"), and
(ii) the "Related Water Assets", which consist of (a) an approximately ninety
feet by forty five feet (90' x 45') piece of land on the west side of State
Highway 260 not taken in the Condemnation action and any tanks, equipment and
piping related thereto, (b) a "sleeved" culvert under State Highway 260 (to
the extent not owned by the State of Arizona), (c) a two hundred thousand
gallon water tank and the equipment, land and any easements related thereto, a
pumphouse and the equipment, land and any easements related thereto and (d) a
filtration and chlorination system and the equipment, land and any easements
related thereto. The land and easements referred to above in connection with
the Related Water Assets are described in Exhibit "P-1" attached hereto. The
equipment and any improvements connected therewith which comprise the
remainder of the Related Water Assets are described in Exhibit "P-2" attached
hereto.
10.02. All the outstanding stock of the Water Company and the Related
Water Assets are wholly owned or controlled by Seller and will be transferred to
Buyer at Closing (or later as described below)for no additional consideration,
pursuant to the sale agreement attached hereto as Exhibit "P" (the "Water
Company Agreement").
10.03. The parties agree that Seller will employ the counsel described
below in connection with the following:
(a) An application to the Arizona Corporation Commission (the
"Commission") to approve the transfer of the assets and Certificate of
Convenience and Necessity from the former Kohl's Ranch Water Company,
the charter of which expired, to the Water Company (the "Asset Transfer
Application"), for which O'Conner, Cavanaugh, et. al. (Phoenix,
Arizona) will be employed.
(b) An application to the Commission to approve a rate increase
for the Water Company (the "Rate Application"), for which Fennemore,
Craig, P.C. (Phoenix, Arizona) will be employed.
10.04. The foregong applications will be prosecuted diligently to
conclusion, and simultaneously insofar as practicable, as soon as reasonably
possible. Seller will pay the entire cost of the Asset Transfer Application and
the Rate Application whether or not Buyer acquires the Water Company
10.05. Buyer shall be under no obligation to acquire the Water Company
pursuant to the Water Agreement and the Related Water Assets on the Closing Date
or at all; however, Buyer shall have the exclusive right and option to do so
until fifteen (15) days after written notification to Buyer from Seller of the
final order of the Commission (with no further rights concerning appeal or
adjudication) on the last of the applications described above to be so decided.
If Buyer fails to close on the Water Agreement and the Related Water Assets
within such time limits, or notifies Seller in writing prior to such time that
it will not exercise the option to purchase, the principal balance of the Note
shall be reduced by Fifty Thousand Dollars ($50,000.00) and any Note interest
paid which is applicable to such principal, as of the date of such written
notification, or expiration of the option, which ever comes first.
(a) Buyer may not acquire the Related Water Assets unless it also
acquires the Water Company and vice-versa. The terms of this Agreement
shall apply to the acquisition of the Related Water Assets including
without limitation the forms of transfer and security documents and
covenants, representations and warranties.
(b) If Buyer does not acquire the Water Company and the Related
Water Assets, Seller will execute and record covenants, conditions and
restrictions, running with the real property and easements described in
Exhibit "P-1" attached hereto, which in general will restrict the use
of such real property and the improvements thereon to like-kind uses
related to water production, storage and distribution for the Water
Company, require that improvements thereon be maintained in good
condition and repair unless removed, and if such real property
interests are proposed to be transferred to a transferee that does not
also control the Water Company, Buyer will have a first right of
refusal (first opportunity to purchase), all in accordance with the
terms of Exhibit "P-3" attached hereto. 10.06. Seller agrees that Buyer
and its attorneys, Brown & Bain, P.A.,shall have full access to the
proposed applications and information relating to the applications
within reasonable time prior to their filing may discuss such matters
with Sellers attorneys at any time and shall have the opportunity to
fully participate and express its desires in all major business
decisions concerning such applications, and Seller hereby directs and
authorizes its attorneys to act in a manner consistent with the above,
the parties acknowledging that the final decision and control of such
applications are Seller's. Brown & Bain will be representing Buyer only
at Buyer's expense. The other attorneys named above will be
representing Seller only at Seller's expense.
Section 11. Broker.
-------
Seller and Buyer hereby covenant and agree that each shall indemnify and
defend the other against any costs, claims or expenses, including attorneys'
fees, arising out of any real estate brokerage contract executed by, or similar
activities engaged in by, the indemnifying party. The obligations under this
paragraph shall survive the Closing or, if the Closing does not occur, the
termination of this Agreement.
Section 12. Notices.
--------
All notices under this Agreement shall be in writing and shall be
effective when delivered personally, or received at the telefacsimile number
shown on Exhibit "C", or three (3) days after deposit in the United States mail,
postage prepaid, registered or certified mail, addressed as set forth in Exhibit
"C", or to such other address or facsimile number of which Seller, Buyer or
Escrow Agent shall have given notice.
Section 13. Survival of Representations, Warranties Covenants, and Obligations.
-------------------------------------------------------------------
Except as otherwise provided in this Agreement, all representations, warranties,
covenants, indemnities, or other obligations of both parties set forth in this
Agreement shall not be merged into the deed to Buyer or into any other document
relating to the transaction contemplated by this Agreement, but shall survive
the Closing for thirty (30) months from the Closing Date and thereafter
terminate upon the expiration of such period, except the matters in Paragraph
6.12 (environmental) and its subparagraphs shall not be limited as to time and
shall survive the Closing indefinitely.
Section 14. Uniform Commercial Code - Bulk Transfer.
----------------------------------------
14.01. The parties believe that this sale is exempt from the
application of the Arizona bulk sale law under A.R.S. Section 47-6103(A) (1) as
it does not involve a seller whose principal business is the sale of inventory
from stock, but involves a resort hotel the business of which is principally the
sale of services.
14.02. To the extent such provisions may apply, Buyer and Seller agree
to waive compliance, as between themselves, with the Bulk Sale Provisions of the
Uniform Commercial Code as in force in the State of Arizona.
Section 15. Risk of Loss.
-------------
15.01. In the event of any damage or loss to all or any substantial
portion of the Property due to casualty or the occurrence of a suit for a taking
of any portion thereof by governmental or quasi-governmental authority after the
date hereof and prior to the Closing Date (not including the Condemnation Action
as described in Section 6.30), Buyer may, as its sole and exclusive remedy, by
written notice given to each of Seller and Escrow Agent on or prior to the
Closing Date, elect either to (i) cancel and terminate this Agreement and the
Escrow, or (ii) receive, by assignment from Seller, all insurance proceeds
and/or condemnation awards, if any, received and/or to be received by Seller as
a result of such casualty or taking (in which case the parties shall proceed to
consummate the transaction without any resulting adjustment of the Purchase
Price).
Section 16. Cancellation and Termination; Remedies for Failure to Close.
------------------------------------------------------------
16.01 Wherever this Agreement provides that upon the occurrence of a
condition other than breach or default, one of the parties hereto may elect, or
has the right, to "cancel and terminate" the Agreement, that phrase shall mean
that, unless otherwise herein provided, written notice thereof shall be given to
both Escrow Agent and the other party, and then this Agreement shall immediately
become null and void and of no further force or effect and neither party shall
have any further rights or obligations to the other hereunder or by reason
hereof except for those which by the provisions hereof are expressly stated to
survive any termination of this Agreement. If the notice is one of default or
breach and the matter stated in said notice is not cured, corrected or removed
within three (3) days after the date of receipt of the aforesaid written notice
(Seller and Buyer hereby waiving the "13 day" provision contained in any printed
form escrow instructions), then, unless a different time period and result is
specifically stated in this Agreement, the notice may state cancellation shall
then occur and this Agreement shall automatically become null and void and of no
further force or effect and neither party shall have any further rights or
obligations to the other hereunder or by reason hereof except for those which by
the provisions hereof are expressly stated to survive any termination of this
Agreement.
16.02. If Buyer shall breach or fail to perform or fulfill any of its
pre-closing obligations hereunder, then, provided that Seller is not then in
default hereunder, Seller may elect to cancel this Agreement by notice as
provided above, or Seller may exercise any and all other remedies then available
to it at law or in equity (including, without limitation, bringing suit for
damages, specific performance or any other relief to which it may be entitled).
16.03. If Seller shall breach or fail to perform or fulfill any of its
pre-closing obligations hereunder, then, provided that Buyer is not then in
default hereunder, Buyer may elect to cancel this Agreement by notice as
provided above, or Buyer may exercise any and all other remedies available to it
at law or in equity (including without limitation bringing suit for damages,
specific performance or any other relief to which it may be entitled).
Section 17. Miscellaneous Provisions.
-------------------------
17.01. This Agreement and the various other documents required hereby
embody and constitute the entire understanding between the parties with respect
to the transaction contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
17.02. This Agreement shall be governed by, and construed in accordance
with, the law of the State of Arizona.
17.03. The section and paragraph headings in this Agreement are
inserted for convenience of reference only and in no way define, describe,
limit, expand or modify the text, scope or intent of this Agreement or any of
the provisions hereof.
17.04. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs or successors and
permitted assigns.
17.05. This Agreement shall not be binding or effective until properly
executed by both Seller and Buyer.
17.06. As used in this Agreement, the masculine shall include the
feminine and neuter, the singular shall include the plural and the plural shall
include the singular, or vice-versa, all as the context may require.
17.07. Nothing in this Agreement, express or implied, is intended to
confer any rights or remedies whatsoever upon any person, other than the parties
hereto and their respective successors, assigns and transferees.
17.08. Unless provided to the contrary in any particular provision, all
time periods shall refer to calendar days and shall expire at 5:00 p.m.,
Phoenix, Arizona time, on the last of such days; provided, however, that if the
time for the performance of any obligation expires on a day other than a
business day (any day other than a Saturday, Sunday or state or federal paid
legal holiday), the time for performance shall be extended to the next
succeeding day which is a business day. Subject to the foregoing, time is of the
essence of this Agreement and of every term and provision hereof.
17.09. Seller and Buyer hereby acknowledge that this Agreement is the
result of continual and ongoing negotiation between the parties. All parties
have arrived at this Agreement through the exercise of equal bargaining power
and any ambiguities herein should be construed against neither party, but should
be given a fair and reasonable interpretation.
l7.10. If either Seller or Buyer shall bring any legal action or suit
for any relief against the other, declaratory or otherwise, arising out of this
Agreement, the losing party shall pay the successful party a reasonable sum for
its attorneys' fees, expenses,discovery costs and court costs as the court
sitting without a jury shall determine. Maricopa County shall be the venue for
any action, unless required by law in Gila County, Arizona.
17.11. Buyer agrees that neither this Agreement nor any memorandum or
notice thereof shall be recorded or tendered for recording in any land record
office having jurisdiction over the Property. Any violation of such covenant by
Buyer shall entitle Seller to cancel and terminate this Agreement, execute,
deliver, acknowledge and file on Buyer's behalf a termination notice or
memorandum and, for such purpose, Buyer hereby appoints Seller as its
attorney-in-fact, coupled with an interest, for Seller to so act in Buyer's
name, place and stead.
17.12. Buyer and Seller shall each provide the other at closing with
appropriate resolutions in form and substance authorizing the respective
entities by and through their agents or officers to enter into and execute this
Agreement and the collateral documents associated herewith.
17.13. Set forth in Exhibit "C" is a list of any and all schedules and
riders which are attached hereto but which are not listed in the Table of
Contents. All exhibits, schedules, or riders attached to this Agreement are a
part of and are incorporated by reference into this Agreement with the same
effect as if they were recited at length in the body of this Agreement. The
parties will use their best good faith, reasonable efforts to agree upon the
form of the exhibits to this Agreement as soon as reasonably practicable, and in
no event later than three (3) days prior to the end of the feasibility period,
failing which, after the end of the Feasibility Period, either party may cancel
this agreement prior to the occurrence of such agreement.
17.14. This Agreement may be executed in counterparts and all signature
(and notary) pages may be attached to a single document. A telefacsimile
signature shall be valid as an original signature and it shall be the
responsibility of the party (or its agent) telefaxing same to preserve the page
containing the original signature for inspection until the receiving party is
subsequently supplied with an identical page containing an original signature,
which shall occur within seven (7) days after the date of such telefacsimile.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PURCHASER: ILX INCORPORATED, an Arizona
corporation
By: /s/ Joseph P. Martori
--------------------------
Joseph P. Martori
Chairman
SELLER: KOHL'S RANCH ASSOCIATES, an
Arizona general partnership
/s/ Thomas L. Griffith By: /s/ Thomas L. Griffith
- ------------------------- --------------------------
Thomas L. Griffith Thomas L. Griffith,
as shareholder in Water Company partner
/s/ Daiane M. Griffith By: /s/ Diane M. Griffith
- ------------------------- --------------------------
Diane M. Griffith Diane M. Griffith,
as shareholder in Water Company his spouse, partner
Escrow Agent hereby acknowledges its receipt of a fully executed copy of
this Agreement and agrees to perform the functions assigned to Escrow Agent
hereunder. Escrow Agent, as the party responsible for closing the transaction
contemplated hereby within the meaning of Section 6045(e)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), further agrees to file all
necessary information reports, returns and statements regarding the transaction
required by the Code of such closing agent, including, but not limted to, the
reports required pursuant to Section 6045 of the Code.
ESCROW AGENT: FIRST AMERICAN TITLE INSURANCE
COMPANY
By /s/Donald M. Miltz
----------------------------
Its Escrow Officer
----------------------------
PROMISSORY NOTE
Kohl's Ranch Associates Phoenix, Arizona
$367,750.00 June 1, 1995
FOR VALUE RECEIVED, the undersigned ILX INCORPORATED, an Arizona
corporation ("Maker"), whose mailing address is 2777 East Camelback Road,
Phoenix, Arizona 85016, promises to pay to KOHL'S RANCH ASSOCIATES, an Arizona
general partnership, whose mailing address is 300 East Cherry Street,
Cottonwood, Arizona 86326, or its successors or assigns, or its order, or to
such other person as the holder hereof ("Holder") may from time to time
designate in writing, the principal sum of THREE HUNDRED SIXTY-SEVEN THOUSAND
SEVEN HUNDRED FIFTY AND NO/100 DOLLARS ($367,750.00), together with interest on
the outstanding principal balance from time to time remaining unpaid from the
date hereof. Principal and interest are payable in lawful money of the United
States of America at the office of the Account Servicing Agent set forth below,
or at such other address as the Holder hereof may from time to time designate in
writing, as follows:
Interest (prior to maturity and so long as no uncured event of default
exists) shall accrue on the unpaid principal balance of the Indebtedness (as
hereinafter defined) at an annual interest rate of eight percent (8%) per annum,
and shall be computed on the basis of a 360 day year of 30 day months, payable
monthly in arrears.
For the period prior to the "First Anniversary Date" (the first (1st)
day of the thirteenth (13th) full calendar month following the date of this
Note) which is June 1, 1996, the amount of interest accrued for the one-year
period prior to the First Anniversary Date shall be added to the outstanding
principal balance under this promissory note ("the Note") on the First
Anniversary Date (and will thereafter be principal and not accrued interest),
and each subsequent calculation of accrued interest will take into account the
increased principal due to interest payment in this manner.
Payments of principal plus all accrued interest shall be due and
payable in monthly installments commencing on the First Anniversary Date of this
Note and continuing on the first (1st) day of each succeeding month thereafter
("Monthly Due Date"). Such monthly principal payments shall be not less than
Seventy Five Hundred Dollars ($7500.00) per month, subject to prepayment as
described below. Interest on any principal payment made on the Monthly Due Date
shall cease to accrue at the end of the day prior to the Monthly Due Date.
Interest paid on a Monthly Due Date shall be paid for interest accrued or due
for the period ended at the end of the day prior to the Monthly Due Date. The
remaining principal balance of the Indebtedness shall be due and payable in full
on the "Fifth Anniversary Date" (the first day of the sixty-first (61st) full
calendar month following the date of this Note) which is June 1, 2000.
All references in this Note to the "Indebtedness" shall mean the stated
principal sum of this Note, late charges, interest and all other amounts
provided for herein.
Maker shall have the right to prepay (including without limitation in
the form of Release Prices described in the Deed of Trust defined below) all or
any portion of the principal balance due hereunder at any time and from time to
time; provided, however, Maker shall not have the right to prepay the entire
principal balance due hereunder prior to January 1, 1996, without the prior
written consent of the Holder. Interest on the amount of a Release Price
prepayment shall cease to accrue at the end of the day prior to the date of
prepayment, and such accrued interest shall be paid on the Monthly Due Date next
following such principal prepayment. Notwithstanding the foregoing, accrued
interest on any Release Price paid prior to the First Anniversary Date shall be
calculated as described in the preceding sentence, but shall accompany the
Release Price. Any full prepayment of the principal balance of this Note shall
be accompanied by all accrued interest to the time of prepayment. All principal
payments, whether scheduled payments or prepayments, shall apply and be credited
to Release Prices. Release Prices pursuant to the Deed of Trust and any and all
principal payments or prepayments shall be applied and credited to the principal
balance of the Note in order of payment maturity. Notwithstanding the foregoing,
upon the occurrence of an event of default, Holder may direct the Account
Servicing Agent to apply payments and permitted prepayments in any order that
Holder shall in its absolute discretion determine.
If any payment required to be made hereunder shall be due on a
Saturday, Sunday or legal holiday in the State of Arizona, then such payment may
be made on the next day which is not a Saturday, Sunday or legal holiday (a
"business" day).
If any amount required to be paid hereunder or under the Deed of Trust
is not paid on or before the tenth (10th) calendar day after the date when the
same first became due, and Holder does not exercise its option to accelerate the
Indebtedness, then at the option of Holder, Maker shall pay, immediately upon
demand, and irrespective of whether or not such failure to pay constitutes a
default or Event of Default hereunder, a late charge equal to five percent (5%)
of the required payment, as liquidated and agreed damages for the additional
expenses which Holder will incur in administering the collection of the
Indebtedness, for loss of use of the money due and for Holder's consequent
inability to meet its other commitments. Maker acknowledges the extreme
difficulty and impracticality of presently determining Holder's actual damages
resulting from a future late payment and, accordingly, agrees that this late
charge is a reasonable estimate thereof and not a penalty.
This Note may only be assumed by permitted transferees of the Trust
Property pursuant to the Deed of Trust (defined below). Otherwise, Maker shall
procure the prior written consent of Holder, which shall not be unreasonably
withheld or delayed.
If (a) Maker fails to pay any installment of principal or interest due
hereunder or any other monetary payment under the Deed of Trust, or other
instruments securing this Note, within ten (10) days after Maker's receipt of
written notice of non-payment from Holder, or (b) fails to comply with any of
the other non-monetary terms and conditions of this Note or the Deed of Trust,
or other instruments securing this Note within thirty (30) days of written
notice from Holder demanding compliance (the "Demand") (or, in the event full
compliance is not reasonably possible within thirty (30) days of the Demand;
then the period for completion may be extended sixty (60) additional days
provided Maker is diligently pursuing performance or cure)or if Maker shall be
liquidated, terminated or dissolved, or shall admit in writing its inability to
pay its debts generally as the same become due, or shall make an assignment for
the benefit of its creditors, or shall be adjudicated a bankrupt or insolvent,
or shall commence or have commenced against it (and fail to have discharged
within fifteen (15) days after filing) any bankruptcy, insolvency or similar
proceeding for the relief of debtors, or shall seek or fail to prevent the
appointment of any trustee-in-bankruptcy, receiver, custodian, liquidator or
similar official for itself or for its property; or shall fail to have
discharged, or have otherwise acted to fully protect Holder from any loss or
liability from the lien or encumbrance within 45 days from the commencement of
any action or proceeding to foreclose or enforce any encumbrance or lien on or
with respect to the property which is the subject of the Deed of Trust or any
other instrument securing this Note, whether or not superior or inferior; or any
material damage or destruction of the property subject to the lien(s) securing
this Note shall occur and not be covered by appropriate insurance and Trustor
shall not immediately make satisfactory arrangements with Holder for the repair
or replacement thereof (collectively, "Events of Default"), then the
Indebtedness shall, at the option of Holder, become immediately due and payable
without further notice or demand of any kind or nature whatsoever. Maker
understands that the foregoing acceleration remedy is in addition to all other
rights, powers and remedies provided for herein or under the Deed of Trust and
other security agreements, or otherwise available to Holder at law or in equity,
and that neither the exercise thereof, nor the accrual or collection of interest
at the "Default Rate" (hereinafter defined), nor the accrual or collection of
late charges, shall, in and of itself, constitute a cure of or an election of
remedies with respect to Maker's default, or prejudice any other rights, powers
or remedies of Holder hereunder or under the Deed of Trust or other security
agreements or at law or in equity.
Maker agrees to an effective rate of interest which is the rate stated
herein plus any additional rate of interest resulting from any other payments
provided for herein or in the Deed of Trust and other security agreements
securing this Note, or incident to the transaction of which this Note forms a
part, to the extent that such charges may be deemed includable in interest for
any purpose or are deemed to be interest under applicable Arizona law.
Notwithstanding anything contained to the contrary in this Note or in
any instrument which may secure repayment of the Indebtedness, no provision
hereof and no other aspect of the transaction of which this Note is a part is
intended to or shall require or permit Holder to contract for, charge or
receive, or obligate Maker to pay, interest in excess of the maximum rate
permitted by applicable law. Should, however, any interest or other sum or
charge paid or payable hereunder result, or be adjudicated to result, in the
computation or earning of interest in excess of the allowable maximum legal
rate, then the same shall be deemed the result of a mistake and Maker shall not
be obligated to pay such excess and Holder hereby waives its right to demand or
collect the same; but if any excessive amount has been paid, then the same
automatically shall be applied in reduction of the unpaid principal balance
hereof and not to the payment of interest or any other sum or charge payable
hereunder, and, to the extent that the principal sum has been paid in full by
reason of such application or otherwise, any balance remaining from such excess
shall be remitted to Maker.
Whenever but only for so long as Maker is in default hereunder or under
the Deed of Trust or security agreements securing this Note, and whether or not
Holder has elected to accelerate the maturity of the Note as provided above, at
the option of Holder, all amounts then due and in default hereunder or under the
Deed of Trust and security agreements (including, without limitation, unpaid
interest and other sums and charges) shall bear interest at the rate of fifteen
percent (15%) per annum (the "Default Rate") from their respective due dates
until the same have been paid in full; provided, however, that unless the
Account Servicing Agent has received written notice from Holder of the
occurrence of a default (other than a failure to pay principal, interest or late
charges) prior to its receipt of any payment, the Account Servicing Agent shall
be excused from its obligation to collect interest at the Default Rate. Holder's
failure to so notify the Account Servicing Agent, however, shall not relieve
Maker from its obligation to pay interest at the Default Rate under and during
the continuance of the circumstances set forth in this paragraph.
Unless limited by the terms of the specific instrument, all of Holder's
rights, powers and remedies hereunder or under the Deed of Trust and other
security agreements or at law or in equity shall be cumulative and
non-exclusive, and each may be exercised singularly, consecutively or
concurrently with any other(s), at the sole discretion of Holder, and as often
as occasion therefor shall arise. No act or omission of Holder (including,
without limitation, any failure to exercise or delay in exercising any right,
power or remedy) shall constitute a waiver thereof or of any other right, power
or remedy or of the act or omission entitling Holder to exercise such right,
power or remedy; and no single or partial exercise of any right, power or remedy
shall preclude other or further exercise thereof or the exercise of any other
right, power or remedy. No release of any security or any person or entity
liable under this Note or the Security Agreement shall operate to release any
other security or any other person or entity liable hereunder or thereunder. No
provision hereof may be waived, amended or terminated except by a written
instrument signed and dated by the party against whom enforcement of such
waiver, amendment or termination is sought. A waiver in one or more instances of
any provision hereof or breach thereof shall apply to the particular instance
only. No course of dealings between the parties shall operate as a waiver.
Should suit be brought to enforce this Note and Holder be the
prevailing party, then Maker shall pay, on demand, all costs (including, but not
limited to, reasonable attorneys' fees, court costs and other expenses) incurred
by Holder in connection with collection, enforcement, foreclosure, insolvency,
bankruptcy, protection of security or other proceedings.
Maker and all endorsers, guarantors and other parties now or hereafter
liable on this Note: (i) agree to any and all extensions of time for payment and
other modifications, indulgences or waivers of any of the terms hereof, and to
any and all realizations, compromises, releases, exchanges or substitutions of
any security (or portions thereof) given to secure the repayment of the
Indebtedness, in each case at any time or from time to time, without notice;
(ii) agree that no such extension, modification, waiver, realization,
compromise, exchange, release or substitution, and no other indulgence given by
Holder, shall impair, release, discharge or otherwise modify or affect in any
respect the liability of Maker hereunder or preclude Holder from realizing upon
any security (or portion thereof) or from obtaining any other relief provided
for herein or otherwise available to Holder at law or in equity; (iii) agree to
offsets of any sums or property owed to it by Holder at any time; (iv) waive, to
the fullest extent permitted by law, any and all applicable, exemption,
redemption, marshalling, moratorium, valuation and appraisal rights; (v) waive
any right to require Holder to proceed against, protect, insure, preserve or
exhaust any security held by Holder or to pursue any other remedy or action, and
expressly agree that Holder may without limitation to any other remedies it may
have, waive any security and bring action directly upon this Note; (vi) except
for the notice herein specifically required with respect to an Event of Default,
waive diligence, presentment and demand for payment, protest and notice of
protest, demand and dishonor, notice of dishonor, notice of non-payment, notice
of maturity and all other notices which it lawfully may waive; (vii) waive, to
the fullest extent permitted by law, the right to demand a trial by jury and/or
to assert the statute or limitations as a defense in any action brought upon
this Note by Holder and agree that all issues in any such proceeding shall, at
the option of Holder, be decided and determined by the judge of the court in
which such proceeding is pending; and (viii) consent to, and acknowledges that
it is and shall remain subject to, the in personam, in rem and subject matter
jurisdiction of the courts of the State of Arizona for all purposes pertaining
to this Note and to all documents and instruments executed in connection
herewith securing the same or in any way pertaining hereto.
If any provision (or portion thereof) contained herein shall be held to
be invalid, illegal or unenforceable in any respect, the remaining provisions
(and remaining portions of the affected provision) shall not be affected
thereby. If any provision is capable of two constructions, one of which would
render the provision void and the other of which would render the provision
valid, then the provision shall have the meaning which renders it valid.
The interpretation, construction and enforcement of this Note shall be
governed by the laws of the State of Arizona applicable to instruments made and
to be performed entirely therein, except where such law is preempted by the laws
and regulations of the United States of America.
This Note is secured by, inter alia, a Deed of Trust between the named
Maker and Holder (the "Deed of Trust") and a Security Agreement, which encumber
certain real and personal property located in Gila County, Arizona known as
Kohl's Ranch Lodge (the "Trust Property"), and a Pledge Agreement.
Maker shall make all payments required hereunder to the trustee under
the Deed of Trust, as the "Account Servicing Agent," at First American Title,
111 West Monroe, Phoenix, Arizona 85003 (or at such other address as Holder may
direct), accompanied by all amounts necessary to pay Maker's share (i.e.,
one-half) of the Account Servicing Agent's fees and expenses. Said Account
Servicing Agent is hereby directed and authorized to apply such payments first
to its fees and expenses, and the balance shall be remitted promptly to Holder
or as Holder otherwise may direct.
All notices or other communications relating to this Note shall be in
writing, addressed to the intended recipient thereof at its address set forth on
the first page hereof (or, in the case of the Account Servicing Agent, at its
address set forth immediately above) and, if given either by personal delivery
or certified U.S. mail, return receipt requested, postage prepaid, conclusively
shall be deemed to have been given and received seventy-two (72) hours after
such notice has been deposited in the United States mail or, if personally
delivered, on the date of actual delivery. Refusal to accept delivery or to sign
a receipt, or any inability to obtain a receipt because of a changed address of
which the intended recipient, by like method, did not previously advise the
sender, shall constitute actual receipt.
The provisions of this Note shall be binding upon, and inure to the
benefit of, the heirs, personal representatives, successors and assigns of the
Maker and Holder.
Time is of the essence of this Note and each and every term and
provision hereof.
IN WITNESS WHEREOF, Maker by its duly authorized officer has executed
and delivered this Note on the day and year first above written.
MAKER:
ILX INCORPORATED, an Arizona
corporation,
By /s/ Nancy J. Stone
-----------------------
Nancy J. Stone
Executive Vice President
JUNIOR
------
DEED OF TRUST, ASSIGNMENT OF RENTS,
-----------------------------------
AND SECURITY AGREEMENT
----------------------
THIS JUNIOR DEED OF TRUST, ASSIGNMENT OF RENTS, AND SECURITY AGREEMENT
(hereinafter called "Deed of Trust") is made this _____ day of ______________,
1995, by and among ILX INCORPORATED, an Arizona corporation, whose mailing
address is 2777 East Camelback Road, Phoenix, Arizona 85016, (hereinafter called
"Trustor"), First American Title Insurance Company, a California corporation,
whose mailing address is 111 West Monroe Street, Phoenix, Arizona 85003,
(hereinafter called "Trustee"), and KOHL'S RANCH ASSOCIATES, an Arizona general
partnership, whose mailing address is 300 East Cherry Street, Cottonwood,
Arizona 85326, (hereinafter called "Beneficiary").
A. Creation of Trust
-----------------
Trustor hereby irrevocably grants, conveys, transfers, and assigns to
Trustee, in trust, with power of sale, all of Trustor's present and future
estate, right, title, and interest in and to that real property and all
buildings and other improvements now thereon or hereafter constructed thereon
(the "Property"), located in the County of Gila, State of Arizona, and more
particularly described on Exhibit "A" attached hereto and by this reference
incorporated herein; all of the following and the Property (except where the
context otherwise requires) are hereinafter collectively called the "Trust
Property":
(a) All appurtenances, easements, reversions, and remainders pertaining
to the Property;
(b) All water and water rights, ditches, and ditch rights, reservoir
and reservoir rights, stock or interests in irrigation or ditch companies,
minerals, oil, and gas rights, royalties, lease or leasehold interests owned by
Trustor, now or hereafter used or useful in connection with, appurtenant to, or
related to the Property.
(c) All right, title, and interest of Trustor now owned or hereafter
acquired in and to all streets, roads, alleys, and public places, and all
easements and rights or way, public or private, now or hereafter used in
connection with the property;
(d) All machinery, equipment, fixtures, appliances, materials, and
other personal property now or at any time attached to the Property together
with all processing, manufacturing, and service equipment and other personal
property now or at any time hereafter located on or appurtenant to the Property
and used in connection with the management and operation thereof;
EXHIBIT "H"
JUNIOR DEED OF TRUST, ASSIGNMENT OF RENTS,
AND SECURITY AGREEMENT
(e) Any licenses, contracts, permits, approvals, and agreements
required by or used in connection with the ownership, operation, or maintenance
of the property or in connection with the construction or alteration of any
improvements on the Property including but not limited to any contracts with
builders, material suppliers, or architects, and the right to the use of any
tradename, trademark, or service mark now or hereafter associated with the
operation of any business conducted on the Property;
(f) Any and all awards, including interest, previously and hereafter
made to Trustor for taking by eminent domain of the whole or any part of the
Property or any easements therein;
(g) Subject to the rights of Trustor under Section D hereof, all
existing and future leases, subleases, licenses, and other agreements for the
use and occupancy of all or any portion of the Property and all income,
receipts, revenues, rents, issues, and profits arising from the use or enjoyment
of all or any portion of the Property;
(h) All construction materials, supplies, lumber, and all other
materials or equipment delivered to the Property for incorporation or use in any
construction at any time being conducted thereon;
(i) Any and all policies of insurance and all proceeds, loss payable
clauses and premium refunds pertaining to any portion of the Property and all
claims relating thereto; and
(j) All of Trustor's interest in any raw materials, work in process,
finished goods, inventory, trade stock, or other personal property available for
sale on the Property in the ordinary course of business, and all accounts
receivables, cash on hand, checking accounts, saving accounts, or other matters
of any nature used in or arising from the operation of any trade or business on
the property.
AS OF THE DATE HEREOF THIS DEED OF TRUST IS SUBJECT AND SUBORDINATE TO
THE TERMS OF A SENIOR DEED OF TRUST (AND RELATED SECURITY DOCUMENTS) ON THE
TRUST PROPERTY, DATED DECEMBER 2, 1983, RECORDED IN DOCKET 602, PAGE 676 (THE
"EXISTING FIRST LIEN").
B. Purpose of Trust
----------------
This Junior Deed of Trust is given by Trustor for the purpose of
securing, in such order of priority as Beneficiary may elect:
B(1). Payment of the sum of Three Hundred Sixty-seven Thousand Seven
Hundred Fifty and No/100 ($367,750.00) with interest thereon, and other monetary
amounts due thereunder, according to the terms of that certain promissory note
(the "Note"), of even date herewith, made by Trustor, payable to the order of
Beneficiary, and all extensions, modifications, renewals, or replacements
thereof;
B(2). Performance, and observance by Trustor of each agreement, term,
provision, and condition contained herein and payment of all moneys expended or
advanced by Beneficiary pursuant to the terms hereof;
B(3). Performance, and observance by Trustor of each agreement, term,
provision, and condition contained in any other document or instrument related
to or securing the Indebtedness (as defined below) and payment of all moneys
expended or advanced by Beneficiary pursuant to the terms thereof or to preserve
any right of Beneficiary thereunder; and
B(4). Payment of any and all additional loans and advances made by
Beneficiary to Trustor and/or to the then record owner or owners of the Trust
Property with interest thereon, and other monetary amounts due thereunder,
according to the terms of the promissory note(s) and/or credit agreements
evidencing such advances and all extension, modifications, renewals, or
replacements.
All of the indebtedness and obligations secured by this Deed of Trust
are herein collectively called the "Indebtedness."
C. Trustor's Covenants
-------------------
Trustor covenants, warrants, and agrees:
C(1). Maintenance of Trust Property. Trustor shall neither commit, nor
-----------------------------
permit to occur, any waste upon the Trust Property, and shall at all times make
or cause to be made all repairs, maintenance, renewals, and replacements as may
be necessary to maintain the Trust Property in good condition and repair.
Trustor shall keep the Trust Property free of rubbish and other unsightly or
unhealthful conditions.
C(2). Construction on the Property. Trustor shall promptly complete any
----------------------------
improvements that may be commenced, in good and workmanlike manner and in
conformity with plans and specifications, and shall repair and restore any
portions of the Trust Property that may be damaged or destroyed. Trustor shall
pay when due all claims for work performed and materials furnished on or in
connection with the Trust Property or any part thereof and shall pay, discharge,
or cause to be removed, all mechanic's, artisan's, laborer's, or materialman's
charges, liens, claims of liens, or encumbrances upon the Trust Property.
Notwithstanding anything herein to the contrary, Trustor may contest any claims
or liens which Trustor, in good faith, believes are invalid, provided Trustor
immediately records and serves a surety bond pursuant to Arizona Revised
Statutes 33-1044 or otherwise fully protects Beneficiary from any loss or
liability arising therefrom.
C(3). Insurance.
----------
(a) Policies Required. Trustor shall provide and maintain public
------------------
liability insurance in amounts not less than $1,000,000 combined single limit
naming Beneficiary as an additional insured. Trustor shall provide and maintain
policies of fire and hazard insurance on any structures or improvements on the
Trust Property from time to time, containing endorsements naming Beneficiary as
its interest may appear. All such policies shall be written by reputable
carriers qualified to write insurance in the state where the Trust Property is
located. All insurance policies shall provide that Beneficiary is to receive
thirty (30) days' written notice from the insurer prior to cancellation. With
respect to all insurance required hereunder, original policies of insurance or
certificates of insurance shall be delivered to Beneficiary; renewal policies or
certificates of insurance shall be delivered to Beneficiary thirty (30) days
before expiration thereof with satisfactory proof that the premiums for renewal
have been paid.
C(4). Taxes and Assessments.
----------------------
(a) If Imposed on Trust Property. Trustor shall pay or cause to
----------------------------------
be paid all taxes and assessments of every kind, nature, and description levied
or assessed on or against the Trust Property at least five (5) days before they
become delinquent and shall pay when due all dues and charges for water and
water delivery, electricity, gas, sewers, waste removal, bills for repairs, and
any and all other claims, encumbrances, and expenses incident to the ownership
of the Trust Property, for the purpose of preventing the creation of any lien
upon the Trust Property.
(b) If Imposed on This Lien. Trustor shall pay any taxes or
---------------------------
assessments, and shall protect Beneficiary against any and all loss from any
taxation that may be imposed upon this Deed of Trust or the lien of this Deed of
Trust on the Trust Property by any law, rule, regulation, or levy of the federal
government, any state government, or any political subdivision thereof.
(c) Disputed Tax or Assessment. Provided Trustor fully protects
---------------------------
Beneficiary from any loss therefrom, Trustor may contest in good faith the
validity or amount of any tax, assessment, governmental charge, or other charge,
lien, or claim of lien, by appropriate proceedings provided by law, including
payment thereof under protest, if required, provided that upon a final
determination with respect to any such contested tax, assessment, or
governmental charge, Trustor shall promptly pay any sums found to be due
thereon.
C(5). Impound Account. Upon the occurrence of an Event of Default
-----------------
hereunder and while such default is continuing, in order to insure the payment
of taxes and assessments which thereafter may be a lien upon the Trust Property,
and to insure the payment of all premiums on policies of insurance required
herein, Trustor shall, upon receipt of written notice from Beneficiary, pay to
Beneficiary each month, in addition to any other payments required hereunder, an
amount equal to the taxes and special assessments levied or to be levied against
the Trust Property and the premium or premiums that will become due and payable
to maintain the insurance on the Trust Property, all as reasonably estimated by
Beneficiary (giving due consideration to the previous year's taxes, assessments,
and premiums), less all deposits therefore already made, divided by the number
of months remaining before one month prior to the date when the taxes,
assessments, and premiums become delinquent. If amounts paid to Beneficiary
under the terms of this paragraph are insufficient to pay all taxes,
assessments, and premiums as they become due, Trustor shall pay to Beneficiary
upon demand all additional sums necessary to fully pay and discharge these
items. All moneys paid to Beneficiary under the terms of this paragraph may be
either held by Beneficiary to pay the taxes, assessments, and premiums before
the same become delinquent or applied to the Indebtedness upon payment by
Beneficiary from its own funds of the taxes, assessments, and premiums. To the
extent provision is not made for payment pursuant to this paragraph, Trustor
shall remain obligated to pay all taxes, assessments, and premiums as they
become due and payable.
C(6). Expenses Advanced by Beneficiary. If, as described in this Deed
---------------------------------
of Trust, Trustor shall fail to pay any taxes, assessments, expenses, or
charges, to keep all of the Trust Property free from liens and claims of liens,
to maintain and repair the Trust Property, to procure and maintain insurance
thereon, or to perform otherwise as required herein, Beneficiary, at its option,
but without any obligation to do so, after giving Trustor written notice as
described elsewhere herein, may advance the moneys necessary to pay the same, to
accomplish such maintenance and repairs, to procure and maintain such insurance
or to so perform.
Beneficiary is hereby authorized to enter upon the Trust Property for such
purposes.
C(7). Performance of other Liens. Trustor shall fully and promptly
-----------------------------
perform all of Trustor's obligations under any deeds of trust, mortgages, or
other liens having a priority over or being subordinate to this Deed of Trust.
Trustor shall immediately instruct the trustees and beneficiaries under any such
prior liens to send copies to Beneficiary of all notices to Trustor of default
and Trustor shall forward to Beneficiary all such notices received by it.
Beneficiary shall have the right but not the obligation to cure on Trustor's
behalf any default under any prior lien and all costs incurred by Beneficiary in
so doing shall be treated as amounts advanced by Beneficiary.
C(8). Actions Affecting Priority. Upon written request by Beneficiary,
---------------------------
Trustor shall appear in and prosecute or defend any action or proceeding by any
third party that may affect the lien or the priority of the lien of this Deed of
Trust or the rights of Beneficiary hereunder and shall pay all costs, expenses
(including the cost of searching title) and attorneys' fees incurred in such
action or proceeding. Beneficiary may, at its option, appear in and defend any
action or proceeding purporting to affect the lien or the priority of the lien
of this Deed of Trust or the rights of Beneficiary.
C(9). Compensation for Condemnation or injury to Trust Property.
----------------------------------------------------------------
Trustor hereby assigns, transfers and conveys to Beneficiary all compensation in
each and every award of damages in connection with any condemnation for public
or private use of, or injury to, the Trust Property or any part thereof, to be
applied to, and to the extent of, the Indebtedness then remaining unpaid, unless
Trustor applies said proceeds to the replacement of the Trust Property or the
improvement of the remaining Trust Property
C(10). Transfer of Trust Property.
--------------------------
(a) Except for transfers to "affiliates" (a person or entity
who, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, Trustor or Trustor's affiliates,
as defined and interpreted by federal securities laws), and except as
hereinafter specifically provided in subparagraph C(10)(b) below, Trustor shall
not, without obtaining Beneficiary's prior written consent (which consent may be
given or withheld in Beneficiary's absolute discretion, grant, convey, sell,
encumber, exchange, assign, lease, option, grant a right of first refusal,
contribute to a partnership, joint venture, corporation or other legal entity or
otherwise transfer or dispose of (whether directly or indirectly and whether
voluntarily, involuntarily or by operation of law) the Trust Property or any
part thereof or any interest therein, or enter into any agreement or make any
arrangement to do any of the foregoing (individually or collectively, a
"transfer"). Any transfer attempted or undertaken in violation of the provisions
of this Section shall, at Beneficiary's option, be null and void and of no force
and effect whatsoever, and the same also shall constitute a default hereunder
(and notwithstanding any other provision hereof, without any requirement of
notice or opportunity to cure) entitling Beneficiary, at its option, to avail
itself of any and all rights, powers and remedies provided therefor in this Deed
of Trust, or under the Note or under any other instrument relating thereto, or
at law or in equity. Consent to any particular transfer shall not be deemed to
be consent under any other instrument relating thereto, or at law or in equity.
Consent to any particular transfer shall not be deemed to be consent to any
further or other transfer. Whether or not Beneficiary has consented to any
transfer, Beneficiary may deal with Trustor's successor-in-interest (without
respect to this Deed of Trust and the indebtedness) in the same manner as with
the Trustor herein named without in any way vitiating or discharging Trustor's
liability hereunder or for the indebtedness. All transfers consented to
hereunder shall be evidenced by a written instrument, duly and properly executed
and acknowledged by each of the parties thereto and, if requested by
Beneficiary, in form suitable for recording. No transfer, whether or not
undertaken in violation of this Section shall release Trustor from any of its
obligations under this Deed of Trust or the Note or any Security Document or
reduce or diminish the same in any way. The provisions of this Section shall
apply to each and every such transfer, regardless of whether or not Beneficiary
has consented to any such previous or other transfer.
(b) Notwithstanding anything herein to the contrary, it is
expressly agreed that Trustor may: (i) develop the Trust Property and sell
Timeshare intervals as provided in Section C(11) below; (ii) sell any personal
property or equipment in accordance with a separate Security Agreement between
Trustor and Beneficiary; (iii) impose upon the Trust Property a lien, or liens,
superior to the lien of this instrument, the Security Agreement and other
security instruments related to this transaction, securing a principal
indebtedness not to exceed the principal sum of $2,050,000.00 (including the
remaining principal amount of the Existing First Lien), which indebtedness must
be a regulary amortized indebtedness and may not be a revolving line of credit,
for refurbishing and construction of improvements on the Trust Property and
development of the timeshare program, which senior liens, whether entered into
and/or recorded before or after this Junior Deed of Trust will be senior in
priority to this Junior Deed of Trust without further action by Beneficiary, and
(iv) impose upon the Trust Property a lien or liens junior to the lien of this
instrument, the Security Agreement and other security instruments related to
this transaction for the purpose of securing obligations to lenders of Trustor
resulting from timeshare sales of the Trust Property. At Trustors reasonable
request, Beneficiary will execute any documents resonably intended to evidence
subordination to such senior deed(s) of trust. Beneficiary shall be provided
with true and complete copies of the documentation evidencing the senior deed(s)
of trust (including any loan agreement and promissory note), and provided at
least ten (10) days prior notice of the closing of such transaction(s) so
Beneficiary may have an opportunity to negotiate with the holder of such senior
deed(s) of trust for a right to notice and cure. The outcome of any such
negotiation shall have no effect whatsoever upon the effectiveness of any
provision of this Deed of Trust (including without limitation the right of
Trustor to place senior liens as described above).
C(11). Development and Establishment of Timeshare. Notwithstanding any
-------------------------------------------
provision of this Deed of Trust to the contrary, without the necessity of
consent of the Trustee or Beneficiary, Trustor may develop the Trust Property,
to include granting easements, dedicating roadways, imposing covenants,
conditions and restrictions, building structures and other improvements thereon
and doing every other thing incidental to or convenient for such development,
all by Trustor's signature execution alone which will fully bind the Property.
In that connection, Trustor may establish a timeshare club membership plan at
the Property ("Timeshare") and record or file against the Trust Property any
documents necessary or convenient to accomplish same.
(a) Without limitation, the Timeshare may include a membership
plan forming the Timeshare and any and all articles, bylaws, organizational
documents, easements, management agreements, rules and regulations, and other
documents or agreements relating to formation and operation of the Timeshare;
(b) Trustor shall comply with all applicable local, state and
federal laws, rules and regulations governing the development of the Trust
Property and establishment and sale of club memberships and/or Timeshares;
(c) In connection with the Timeshare, Trustor intends to
divide each residential unit located on the Trust Property into salable one-week
(or less) intervals (each such interval hereafter called a "Membership
Interval");
(d) The Trustor shall create no fewer than the number of
"every year" Membership Intervals, as described in Sections G(14) and G(15)
below, which are necessary to pay the debt secured hereby in the manner
described below in this paragraph, unless Trustor elects to also create "every
other year" Membership Intervals, in which case Trustor may reduce the number of
"every year" Membership Intervals by replacing each such Membership Interval
with two "every other year" Membership Intervals, it being the intention of the
parties that the release prices multiplied by the number of available Membership
Intervals shall be adequate to amortize and pay the debt secured hereby;
(e) Trustor shall be entitled to a release and reconveyance
from this Deed of Trust of a fractional interest in the Trust Property
corresponding to a Membership Interval all as described in Sections G(14) and
G(15) below. D. Leases, Assignment of Rents and Leases
D(1). Rents and Leases Assigned. To facilitate payment and performance
--------------------------
of the Indebtedness, Trustor hereby transfers and assigns to Beneficiary all
right, title, and interest of Trustor in and to (i) all existing and future
unreleased Membership Intervals, leases, subleases, licenses, and other
agreements for the use and occupancy of all or any portion of the Trust
Property, whether written or oral and whether for a definite term or month to
month, together with any and all guarantees of the lessee's or member's
obligations thereunder and together with any and all extensions, modifications,
and renewals thereof (hereinafter called the "Leases"), and (ii) all income,
payments, receipts, revenues, security deposits, rents, issues, and profits now
or hereafter arising from or out of the Leases or from or out of the Trust
Property or any part thereof (hereinafter called the "Rents").
D(2). Payment of rent to Beneficiary. Conditioned upon notice of
---------------------------------
Trustor's default, in writing from Beneficiary, Trustor hereby authorizes and
directs the members, lessees and tenants under the Leases and any managing agent
that, upon such written notice from Beneficiary, all Rents shall be paid
directly to Beneficiary as they become due. Trustor hereby relieves the members,
lessees and tenants from any liability to Trustor by reason of the Rents being
paid to Beneficiary after such notice. Nevertheless, Trustor shall be entitled
to collect the Rents, subject to the restrictions contained in paragraph D(3)
below, until Beneficiary notifies the members, lessees and tenants in writing to
pay the Rents to Beneficiary. Beneficiary is hereby authorized to give such
notification upon the occurrence of an Event of Default. All Rents collected by
Beneficiary may be applied in any manner or priority Beneficiary deems advisable
to payment of amounts due and owing to Beneficiary under the terms of any
obligations secured hereby.
D(3). Leases in Effect. Beneficiary does not assume and shall not be
-----------------
liable for any obligation of the lessor under any of the Leases, and Beneficiary
shall not be liable for the failure or inability to collect any Rents.
E. Security Agreement
------------------
E(1). Security Interest Created. This Deed of Trust shall cover, and
---------------------------
the Trust Property shall include, all personal property, tangible or intangible,
and fixtures, which are both (i) now owned or subsequently acquired by Debtor,
and (ii) now or subsequently installed, affixed, attached, kept or situated on,
to or at the Trust Property or used in the operation thereof. To the extent any
of the Trust Property consists of rights in action or personal property covered
by the Uniform Commercial Code, this Deed of Trust shall also constitute a
security agreement, and Trustor hereby grants to Beneficiary, as secured party,
a security interest in such property, including all proceeds and products
thereof, for the purpose of securing the Indebtedness.
E(2). Additional Documents Evidencing Security Agreement. The security
---------------------------------------------------
interests granted herein shall be self-operative with respect to such property,
but Trustor agrees to execute and deliver on demand such additional security
agreements, financing statements, certificates of title, and other instruments
as may be reasonably requested in order to impose the lien and security interest
hereof more specifically upon such property. Should the lien and/or security
interest of this Deed of Trust on any property be subject to a prior security
agreement covering such property, then, upon the occurrence of an Event of
Default, all the right, title, and interest of Trustor in and to any and all
deposits made in connection with the transaction whereby such prior security
agreement was made are hereby assigned to Beneficiary, together with the benefit
of any payments now or hereafter made in connection with such transactions.
E(3). Replacement of Personal Property. Trustor shall promptly replace
--------------------------------
any personal property that is consumed or worn out in ordinary usage.
E(4). Change in Location of Property or Trustor's Office. Trustor shall
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immediately notify Beneficiary of any change in the location of Trustor's
address as set forth in the beginning of the Deed of Trust, and any change in
location of the personal property encumbered hereby except that which is
replaced with property of equal value.
E(5). Property Subject to Security Interest. All covenants of Trustor
--------------------------------------
contained in this Deed of Trust shall apply to the personal property encumbered
hereby whether or not expressly referred to in this Section E. The covenants and
warranties of Trustor contained in this Section E are in addition to, and not in
limitation of, those contained in the other provisions of this Deed of Trust.
E(6). Filing. Upon its recording in the real property records, this
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Deed of Trust is intended to be effective as a financing statement filed as a
fixture filing. In addition, a reproduced copy of this Deed of Trust and/or any
financing statement relating hereto is intended to be sufficient for filing
and/or recording as a financing statement.
F. Defaults; Remedies
------------------
F(1). Default Defined. The occurrence of any of the following events or
----------------
conditions shall constitute an "Event of Default" by Trustor under this Deed of
Trust:
(a) Any failure on the part of Trustor to comply with and perform
any term, provision, or condition contained in this Deed of Trust, or any other
document evidencing or securing the Indebtedness, or the failure of any material
warranty or representation of Trustor made in connection with the Indebtedness
to be true; provided, however, that Trustor shall not be in default under this
paragraph if payment of any monetary obligation is made within ten (10) days
after Trustor's receipt of written notice of non-payment from Beneficiary, and
performance of any non-monetary obligation is completed within thirty (30) days
after written notice demanding performance. If performance of a non-monetary
obligation cannot reasonably be completed within thirty (30) days after notice
as provided herein, then the period for completion of performance for purposes
of this paragraph may be extended sixty (60) additional days, provided Trustor
is diligently pursuing performance or cure.
(b) The voluntary or involuntary commencement of bankruptcy or
insolvency proceedings or the filing for an arrangement or composition of
creditors against Trustor, any partner in Trustor, Trustor's general
contractors, or any guarantor of the Indebtedness, or upon the filing of any
suit or legal action materially affecting the Trust property or Trustor;
provided, however, that if an action or proceeding is commenced by someone other
than Trustor, any partner in Trustor, or Trustor's contractors, Trustor shall
not be in default if said action or proceeding is dismissed by a court of
competent jurisdiction within forty-five (45) days after commencement of the
action or proceeding.
(c) The commencement of any action or proceeding to foreclose, or
enforce any claim, encumbrance, or lien, on or with respect to the Trust
Property, whether or not superior or inferior to the lien created by this Deed
of Trust or any other document evidencing or securing the Indebtedness unless
Trustor shall, within fifteen (15) days after service of such action or
proceeding, record and serve a surety bond pursuant to Arizona Revised Statutes
Section 33-1004 or otherwise fully protect Beneficiary from any loss or
liability arising therefrom;
(d) The material damage or destruction of the Trust property by
any casualty not covered by appropriate insurance; provided, however, that, in
the case of material damage or destruction of the Trust Property by a casualty
not covered by appropriate insurance, Trustor shall not be deemed to be in
default if Trustor makes arrangements reasonably satisfactory to Beneficiary for
the repair of the Trust Property.
F(2). Remedies. Upon the occurrence of any Event of Default,
---------
Beneficiary may do one or more of the following:
(a) Acceleration. Declare the entire Indebtedness to be
-------------
immediately due and payable, and the same, with all costs and charges, shall be
collectible thereupon by action at law.
(b) Trustee's Sale. Give such notice of default and of election
----------------
to cause the Trust Property to be sold as may be required by law or as may be
necessary to cause Trustee to exercise the power of sale granted herein. Trustee
shall then record and give such notice of trustee's sale as is then required by
law and, after the expiration of such time as may be required by law, may sell
the Trust Property at the time and place specified in the notice of sale, but as
a whole only, at public auction to the highest bidder for cash in lawful money
of the United States, payable at time of sale, all in accordance with applicable
law. Trustee, from time to time, may postpone or continue the sale of all or any
portion of the Trust Property by public declaration at the time and place last
appointed for the sale. No other notice of the postponed sale shall be required.
Upon any sale, Trustee shall deliver its deed conveying the property sold,
without any covenant or warranty, express or implied, to the purchaser or
purchasers at the sale. The recitals in such deed of any matters or facts shall
be conclusive as to the accuracy thereof. Any person, including Trustor,
Trustee, or Beneficiary, may purchase at the sale.
(c) Foreclosure. Commence proceedings for foreclosure of this
------------
Deed of Trust in the manner provided by law for the foreclosure of a real
property mortgage.
(d) Uniform Commercial Code Remedies, Sale as a Unit. Exercise
---------------------------------------------------
any or all of the remedies of a secured party under the Uniform Commercial Code
with respect to any personal property covered hereby. If Beneficiary should
proceed to dispose of any personal property in accordance with the provisions of
the Uniform Commercial Code, fifteen (15) days' notice by Beneficiary to Trustor
shall be deemed to be commercially reasonable notice under any provision of the
Uniform Commercial Code requiring notice. All property of every nature and
description, whether real or personal, covered by this Deed of Trust, together
with all personal property used on or in connection with the Trust Property or
any business conducted thereon by the Trustor and covered by separate security
agreement are encumbered as one unit, and this Deed of Trust and such security
interests shall be sold as such in one unit as a going business.
(e) Collection of Rents. Send notifications to any and all
----------------------
members, lessees and tenants under the Leases that all Rents shall be paid to
Beneficiary. Thereafter, Beneficiary shall be entitled to collect the Rents and
may apply the Rents collected to the payment of the Indebtedness.
F(3). Appointment of Receiver. At any time after the recording by
------------------------
Trustee of notice of trustee's sale, or after the institution of foreclosure
proceedings, upon application of Beneficiary, a receiver may be appointed by any
court of competent jurisdiction to take charge of all the Trust Property, to
manage, operate and carry on any business then being conducted or that could be
conducted on the Property, to carry on, protect, preserve, replace and repair
the Trust property, and receive and collect all Rents and to apply the same in
the manner provided in paragraph D(2) herein. Upon appointment of said receiver,
Trustor shall immediately deliver possession of all of the Trust property to
such receiver.
F(4). Legal Fees and Costs. In the event that it becomes necessary for
---------------------
Beneficiary to take legal action to enforce payment or performance of the
Indebtedness, to enforce any provision hereof, or to protect any of
Beneficiary's rights hereunder, Trustor shall pay to Beneficiary all taxable
costs of any legal proceeding or action and all reasonable attorneys' fees
actually incurred. In the event a court action shall be commenced, fees shall be
fixed by the Judge of the court.
F(5). No Waiver. No failure on the part of Beneficiary to exercise any
----------
of its rights hereunder arising upon any Event of Default shall be construed to
prejudice its rights upon the occurrence of any other or subsequent Event of
Default. No delay on the part of Beneficiary in exercising any such rights shall
be construed to preclude it from the exercise thereof at any time during the
continuance of that Event of Default. Beneficiary may enforce any one or more
remedies or rights hereunder successively or concurrently.
G. General Provisions
------------------
G(1). No Waiver, Additional Security. The acceptance of this Deed of
---------------------------------
Trust by Beneficiary shall not be considered a waiver of or in any way to affect
or impair any other security that Beneficiary may have, acquire simultaneously
herewith, or hereafter acquire for the payment or performance of the
Indebtedness, nor shall the taking by Beneficiary at any time of any such
additional security be construed as a waiver of, or in any way to affect or
impair the security of this Deed of Trust; Beneficiary may resort, for the
payment or performance of the Indebtedness, to its several securities therefor
in such order and manner as it may determine.
G(2). Modification of Obligations. Without notice or demand, without
----------------------------
affecting the obligations of Trustor hereunder or the personal liability of any
person for payment or performance of the Indebtedness and without affecting the
lien or the priority of the lien of this Deed of Trust, Beneficiary, from time
to time, may: (i) extend the time for payment of all or any part of the
Indebtedness, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Indebtedness; (ii) take and hold other security
for payment or performance of the Indebtedness and enforce exchange, substitute,
subordinate, waive or release any such security; (iii) join in any extension or
subordination agreement; or (iv) release or direct Trustee to release any part
of the Trust Property from this Deed of Trust. Any such action by Beneficiary,
or Trustee at Beneficiary's direction, may be taken without the consent of any
junior lienholder and shall not affect the priority of this Deed of Trust over
any junior lien.
G(3). Waiver of Formalities and priority of Remedies. Trustor waives
------------------------------------------------
and agrees not to assert: (i) any right to require Beneficiary to proceed
against any guarantor, to proceed against or exhaust any other security for the
Indebtedness, to pursue any other remedy available to Beneficiary, or to pursue
any remedy in any particular order or manner, and (ii) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment, relating to the indebtedness.
G(4). Alternative Remedies. In addition, if, under the terms hereof,
---------------------
Beneficiary is given two or more alternative courses of action, Beneficiary may
elect any alternative or combination of zero or more alternatives, at its
option.
G(5). Advances Secured Hereby. All monies advanced by Beneficiary under
------------------------
the terms hereof and all amounts paid, suffered or incurred by Beneficiary in
exercising any authority granted herein, including reasonable attorneys' fees,
shall be added to the Indebtedness, shall be secured by this Deed of Trust,
shall bear interest at the highest default interest rate specified in the
note(s) described in paragraph B(1) hereof until paid, and shall be due and
payable by Trustor to Beneficiary immediately without demand.
G(6). Full Release of Trust Property. Upon written request of
-----------------------------------
Beneficiary stating that all of the Indebtedness has been paid, and upon
surrender of this Deed of Trust and any promissory note or notes secured hereby
to Trustee for cancellation and retention, the then Trustee (and Beneficiary if
necessary to clear title), upon payment of Trustee's fees, shall release and
reconvey, without warranty, the Trust Property. The recitals in such
reconveyance of any matters or facts shall be conclusive as to the accuracy
thereof. The grantee in such reconveyance may be described as "the person or
persons legally entitled thereto." Five years after issuance of such full
reconveyance, Trustee may destroy said promissory note or notes and this Deed of
Trust unless prior thereto trustee has been directed to retain them or deliver
them to the person or persons to whom the Property was reconveyed.
Beneficiary may also execute a release and reconveyance as provided by Arizona
law.
G(7). Inspection of Trust Property. Beneficiary or Trustee, or both,
-----------------------------
shall have the right to inspect the Trust Property at all reasonable times.
G(8). Joint Liability, Time, Gender, Number, Future Owners. Time is of
------------------------------------------------------
the essence hereof. If more than one Trustor is named herein, the word "Trustor"
shall mean all and any one or more of them, severally and collectively. All
liability hereunder shall be joint and several. This Deed of Trust applies to,
inures to the benefit of, and binds all parties hereto, their heirs personal
representatives, successors and assigns. The term "Beneficiary" shall include
not only the original Beneficiary hereunder but also any future owner and
holder, including pledgees, of any note or notes evidencing the Indebtedness.
The provisions hereof shall apply to the parties according to the context
thereof and without regard to the number or gender of words or expressions used.
G(9). Recordation of This Deed of Trust. The acceptance by Trustee of
----------------------------------
this trust shall be evidenced when this Deed of Trust, duly executed and
acknowledged, is made a public record as provided by law by Trustee or its
affiliate. The trust created hereby is irrevocable by Trustor.
G(10). Written Modification. This Deed of Trust cannot be changed
----------------------
except by agreement, in writing, signed by Trustor and Beneficiary.
G(11). Additional Acts. Trustor, upon request of Beneficiary, and vice
----------------
- - versa, shall promptly cooperate in the correction of any technical defect,
error or omission that may be discovered in the content of this Deed of Trust or
in the execution or acknowledgment hereof. Beneficiary, upon request of Trustor,
shall cooperate in effecting any Timeshare as required by the Arizona Department
of Real Estate and which does not materially adversely affect the enforceability
of its lien as described herein.
G(12). Severability. Should any term, provision, covenant or condition
-------------
of this Deed of Trust be held to be void or invalid, the same shall not affect
any other term, provision, covenant or condition of this Deed of Trust, but the
remainder hereof shall be effective as though such term, provision, covenant or
condition had not been contained herein. In addition, should this instrument be
or become ineffective as a deed of trust, then these presents shall be construed
and enforced as a realty mortgage with the Trustor being the mortgagor and
Beneficiary being the mortgagee.
G(13). Notice. All notices required or permitted to be given hereunder
-------
shall be in writing, and shall become effective immediately upon hand delivery
or seventy-two (72) hours after such notices are deposited with the United State
Postal Service, certified or registered, postage prepaid, addressed as shown
above, or to such other address as such party may, from time to time, designate
in writing.
G(14). Partial Releases of Trust Property by Beneficiary. In the event
--------------------------------------------------
a conversion to Timeshare (see Section C(11) above) has occurred, and provided
that Beneficiary has not given written notice to the Trustor of an existing
Event of Default, Trustor shall be entitled to the issuance by Beneficiary
(pursuant to Arizona Revised Statues, Section 33-707) of a partial release and
reconveyance of a fractional interest in the Trust Property, in the form
substantially as attached hereto as Exhibit "B" (the "Release"), which
corresponds to the Membership Interval requested for release, subject to the
following conditions:
(a) The principal payment to Beneficiary, or any collection agent
appointed by the Trustor and Beneficiary ("Collection Agent"), for credit to the
principal of the Note as of the date of such payment, of a release price (the
"Release Price") of:
(i) Three Hundred Dollars ($300.00) for an "every year"
Membership Interval; or
(ii) One Hundred Fifty Dollars ($150.00) for an "every other
year" Membership Interval;
(b) Upon payment of the Release Price, Beneficiary or Collection
Agent, as the case may be, shall immediately deliver a separate executed Release
to Trustor for each Membership Interval released in exchange for such payment,
including without limitation the scheduled principal payments on the Note. The
fractional release of the Trust Property for an "every year" or "every other
year" Membership Interval shall be the applicable fraction as set forth in the
Timeshare plan of public record, as it may be amended from time to time.
(c) The signature on the Release of only one partner of
Beneficiary shall fully bind Beneficiary on such Release.
(d) Beneficiary shall execute and deposit in advance with the
Collection Agent, if appointed, a sufficient number of separate Releases for
each month as reasonably projected by Trustor, but not less than fifty (50) each
month in any event. The Collection Agent is authorized to fill in the
appropriate fractional release on the Release, and the "Purchaser's" name
thereon shall be left blank to be filled in by Trustor after delivery to Trustor
as described above.
G(15). Partial Releases of Trust Property by Trustee. In the event that
a conversion to Timeshare has occurred, and provided that Trustee has received
no written notice from Beneficiary of an existing Event of Default, Trustor
shall be entitled, without further action or request by Beneficiary, to the
issuance by Trustee of a partial release and reconveyance of a fractional
interest in the Trust Property, in the form substantially as attached hereto as
Exhibit "C" (the "Trustee Release"), which corresponds to the Membership
Interval requested for release, subject to the following conditions:
(a) The written request for release and the principal payment to
Trustee, for credit to the principal of the Note as of the date of such payment,
of a release price (the "Release Price") of:
(i) Three Hundred Dollars ($300.00) for an "every year"
Membership Interval; or
(ii) One Hundred Fifty Dollars ($150.00) for an "every other
year" Membership Interval;
plus the Trustee's fees applicable to such release and reconveyance.
(b) Upon the submission by the Trustor to the Trustee of the
release request and Release Price, Trustee shall, as soon as practicable,
deliver or send a separate executed Trustee Release to Trustor for each
Membership Interval released in exchange for such payment (which payment shall
be transmitted to Beneficiary). The fractional release of the Trust Property for
an "every year" or "every other year" Membership Interval shall be as set forth
in the Timeshare plan of public record, as it may be amended from time to time.
(c) The Trustee is authorized to fill in the appropriate
fractional release on the Release, and the "Purchaser's" name thereon shall be
left blank to be filled in by Trustor after delivery to Trustor as described
above.
G(16). All Principal Applies to Releases. All payments of principal on
the Note, scheduled payments, prepayments, or otherwise, shall apply and be
credited to partial release and reconveyance of the Trust Property as described
above.
IN WITNESS WHEREOF, these presents have been executed by the parties
below.
BENEFICIARY: TRUSTOR:
KOHL'S RANCH ASSOCIATES ILX INCORPORATED,
an Arizona general partnership an Arizona corporation,
By: /s/ Thomas L. Griffith By: /s/ Joseph P. Martori
------------------------- --------------------------
Thomas L. Griffith Joseph P. Martori
Partner Chairman
By: /s/ Diane M. Griffith
-------------------------
Diane M. Griffith
Partner
<PAGE>
ACCEPTED:
TRUSTEE:
First American Title Insurance Company
of Arizona, an Arizona corporation
By: Donald M. Miltz
-----------------------
Its Senior Escrow Officer
-----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 1st day of
June, 1995, by Joseph P. Martori, the Chairman of ILX, INCORPORATED, an
Arizona corporation, for and on behalf of the corporation.
/s/ Michelle Lemiux
------------------------------
Notary Public
My Commission Expires:
April 11, 1997
- ---------------------
STATE OF ARIZONA )
) ss.
County of Gila )
The foregoing instrument was acknowledged before me this 1st day of
June, 1995, by Thomas L. Griffith, Partner of KOHL'S RANCH ASSOCIATES,
an Arizona general partnership, for and on behalf of the general partnership.
/s/ Brenda Williams
------------------------------
Notary Public
My Commission Expires:
October 15, 1998
- -----------------------
<PAGE>
STATE OF ARIZONA )
) ss.
County of Gila )
The foregoing instrument was acknowledged before me this 1st day of
June, 1995, by Diane M. Griffith, Partner of KOHL'S RANCH ASSOCIATES,
an Arizona general partnership, for and on behalf of the general partnership.
/s/Brenda Williams
------------------------------
Notary Public
My Commission Expires:
October 15, 1998
- ----------------------
FOURTH MODIFICATION AGREEMENT AND ASSUMPTION AGREEMENT
DATE: June 1, 1995
PARTIES: Original Borrower: KOHL'S RANCH ASSOCIATES, an Arizona
general partnership
Transferee: ILX INCORPORATED, an Arizona
corporation
Bank: BANK ONE, ARIZONA, NA, a national
banking association
RECITALS:
- --------
A. Bank extended to Suburban Developers, Inc., an Arizona corporation
("Suburban"), credit in the original principal sum of $2,500,000.00 (the
"Loan"), pursuant to a Loan Agreement dated December 21, 1983 (the "Loan
Agreement") and as evidenced by that certain Promissory Note dated December 20,
1983, made by Suburban and payable to the order of Bank (the "Note").
B. Bank, Borrower and Suburban entered into that certain Extension and
Assumption Agreement Without Release (the "Assumption Agreement"), dated as of
January 20, 1989, whereby Original Borrower agreed to assume all of Suburban's
obligations under the Loan thereafter arising, without releasing Suburban from
its obligations thereunder, recorded on January 20, 1989, in the Official
Records of Gila County, Arizona in Docket 757, Page 98 through 136. The unpaid
principal balance of the Loan as of the date hereof is Nine Hundred Thirty-Two
Thousand Two Hundred Fifty and No/100 Dollars ($932,250.00).
C. The Loan is secured by that certain Deed of Trust, dated December
21, 1983 ("Deed of Trust"), wherein Suburban is trustor and Bank is beneficiary,
recorded on December 22, 1983, in the Official Records of Gila County, Arizona
in Docket 602, Page 676 through 682. The Bank's security interest is perfected
by (i) UCC- 1 Financing Statement dated April 7, 1993 and recorded on August 17,
1993, in the Official Records of Gila County, Arizona at Instrument No.
93-635662, and (ii) UCC-1 Financing Statement dated April 7, 1993 and filed on
May 24, 1993, in the Office of the Arizona Secretary of State, File No. 745298
(the "Financing Statements"). The Deed of Trust and the Financing Statements are
referred to individually and collectively herein as the "Security Documents."
D. Bank and Original Borrower have executed and delivered previously
the following agreements ("Modifications") modifying the terms of the Loan, the
Note, and/or the Security Documents: Revision and Extension Agreement (With
Consent and Agreement of Guarantors), dated January 20, 1991, Modification
Agreement, dated April 7, 1993, and the Modification Agreement, dated June 8,
1993.
The Loan Agreement, the Note and the Security Documents, are sometimes referred
to individually and collectively herein as the "Loan Documents."
E. In connection herewith, Original Borrower wishes to convey,
transfer, and assign all of the real property encumbered by the Deed of Trust to
Transferee.
F. In connection herewith, Transferee is willing to assume all
obligations of Original Borrower under the Loan Documents, including, without
limitation, the rights and obligations of Original Borrower under the Deed of
Trust, together with the debt evidenced by the Note.
G. Original Borrower and Transferee have requested that Bank modify the
Loan and the Loan Documents for purposes of, among other things, evidencing
Transferee's assumption of the Loan as provided herein. Bank is willing to so
modify the Loan and the Loan Documents and accept Transferee as the principal
obligor under the Note and other Loan Documents, provided Transferee's
assumption of all obligations of Original Borrower under the Loan Documents
shall be subject to the terms and conditions contained herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Original Borrower, Transferee and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Original Borrower and Transferee acknowledge the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 Commencing on July 1, 1995 and on the first day of each
successive month thereafter through and including December 1, 1995, principal
and interest of the Loan and the Note shall be due and payable in consecutive
monthly installments each in the sum of (i) Three Thousand and No/100 Dollars
($3,000.00) of principal and (ii) all accrued and unpaid interest. From and
after December 1, 1995, principal and interest of the Loan and the Note shall
thereafter become due and payable in consecutive monthly installments of
principal and interest based on a thirty-six (36) month amortization schedule as
applied against the then outstanding principal balance of the Loan and the Note,
commencing on January 1, 1996, and continuing on the first day of each
successive month thereafter until the maturity date.
2.1.2 The maturity date of the Loan and the Note is hereby
changed from May 1, 1995 to December 1, 1998. On the maturity date, Transferee
shall pay to Bank the unpaid principal, accrued and unpaid interest, and all
other amounts payable by Transferee under the Loan Documents as modified herein.
2.1.3 Notwithstanding anything in the Loan Documents to the
contrary, from and after the date of recordation of that certain Memorandum of
Fourth Modification Agreement and Assumption Agreement of even date herewith,
interest shall accrue on the unpaid principal of the Loan and the NoTe at the
rate per annum equal to the sum of (i) one and one-quarter percent (1.25%) per
annum, and (ii) the rate per annum most recently publicly announced by Bank, or
its successors, in Phoenix, Arizona, as its "prime rate," as in effect from time
to time. The rate per annum will change on each day that such "prime rate"
changes.
2.1.4 Transferee agrees to provide Bank with the following
financial information during the term of the Loan:
(a) As soon as available, but in no event later than thirty
(30) days after the end of each calendar month, an operating statement
relating to operation of the Kohl's Ranch Lodge property and its
timeshare project prepared by Transferee; and
(b) As soon as available, but in no event later than sixty
(60) days after the end of each of the first three (3) calendar
quarters of each calendar year, financial statements relating to
Transferee, as prepared by Transferee. As soon as available, but in no
event later than one hundred twenty (120) days following December 31 of
each calendar year, financial statements relating to Transferee and
audited by a certified public accountant shall be provided to Bank.
2.1.5 Unless Bank otherwise consents in writing, the property
encumbered by the Deed of Trust or any part thereof shall not be released until
all indebtedness and obligations of Transferee under the Loan Documents have
been paid and performed in full.
2.1.6 Notwithstanding Section 2.1.5 above, to the extent that
the Transferee intends to sell Timeshare Intervals (as defined herein) in the
property otherwise encumbered by the Deed of Trust, then at the written request
of Transferee, Bank shall provide partial releases ("Releases") from the Deed of
Trust with respect to a sale of the Timeshare Interval(s) (as defined herein) in
a form to be approved by Bank, in Bank's sole and absolute discretion, following
review and approval of the Timeshare Documents (as defined herein). Following
Bank's approval of the Timeshare Documents, then at the written request of
Transferee, Bank shall provide Releases, provided that each of the following
conditions precedent have in each instance been fully satisfied:
(a) No event of default under the Loan Documents, or event
that with the giving of notice of the lapse of time (or both) would
constitute an event of default under the Loan Documents, shall have
occurred and be continuing;
(b) Not more than once each week on or before the first
business day of such week, Transferee shall submit to Bank a written
request setting forth the number of Timeshare Intervals for which
Releases are being requested. Bank shall have five (5) business days
after the receipt of each such request and the payment of the required
Release Price (as defined herein), in immediately available funds, for
application to principal owing under the Note in the order of maturity
by Transferee, to send to Transferee a Release of the number of
Timeshare Intervals requested by Transferee (Bank shall have no
obligation of performance or payment with respect to the recording of
such Releases);
(c) Each written request for Releases pursuant to this
subsection 2.1.6 shall constitute a reaffirmation by Transferee of the
representations and warranties set forth herein and a representation
and warranty by Transferee that no event of default under the Loan
Documents or event which with notice or lapse of time or both would
become an event of default has occurred and is continuing. Each written
request for Releases shall further be accompanied by a check in favor
of Bank in the amount required in Subsection 2.1.6(b), and such written
requests shall contain the following:
(i) a statement of the dollar amount being provided
to Bank for the subject Release(s),
(ii) a statement of the dollar amount being retained
by Transferee for
(a) its internal management fees, which
shall in no event exceed Two Hundred Fifty and No/100
Dollars ($250.00) for each Release ("Management
Fee"), as limited by the terms of the Management Fee
Cap (as defined below), and
(b) a statement of the dollar amount of
Transferee's payment to First American Title
Insurance Company, which will be subsequently applied
to existing carry back financing in favor of Original
Borrower and the corresponding releases required
under the Original Borrower's junior deed of trust,
which release amount shall in no event exceed Three
Hundred and No/100 Dollars ($300.00) for each Release
(the "Other Lender Payments"), and
(iii) a statement of the current total
amount (inclusive of the amounts to be received under
the subject release(s) being requested) of
Transferee's internal management fees that have been
retained from all such Releases in the subject
calendar year;
(d) The Timeshare Interval(s) in question shall constitute a
legally recognizable interest in real property, and the Release of such
Timeshare Interval(s) will not violate any requirement oil any document
of record covering the property encumbered by the Deed of Trust or any
applicable law relating to the management, use and ownership of
timeshare interests or memberships; and
(e) All approvals from any governmental authority necessary to
sell the subject Timeshare interval(s), including, without limitation,
the Arizona Department of Real Estate, shall have been obtained and be
in full force and effect and evidence of such approval shall have been
submitted in advance to Bank.
2.1.7 For all purposes under the Loan Documents, the term
"Release Price" shall mean Seven Hundred Fifty and No/100 Dollars ($750.00),
provided that Transferee has not reached its annual management fee cap of One
Hundred Fifty Thousand and No/100 ($150,000.00) (the "Management Fee Cap").
(a) In any calendar year prior to collection of the Management
Fee Cap for such year, all cash proceeds from the Timeshare Interval
sale giving rise to a Release shall be distributed in the following
priority: (i) Seven Hundred Fifty and No/100 Dollars to Bank, (ii)
Three Hundred and No/100 Dollars for Other Lender Fees, and (iii) all
remaining proceeds to Transferee.
(b) In any calendar year, if Transferee reaches its Management
Fee Cap from approved Releases, all cash proceeds from a non-financed
cash Timeshare Interval sale giving rise to each subsequent Release in
that calendar year shall be paid directly to Bank as its required
Release Price, except for (i) Other Lender Payments, and (ii)
reasonable marketing and sales expenses not to exceed fifty percent
(50%) of all cash proceeds.
(c) In any calendar year, if Transferee has reached its
Management Fee Cap from approved Releases, all cash proceeds from each
subsequent financed Timeshare Interval sale giving rise to each
subsequent Release in that calendar year shall be distributed in the
following priority: (i) Seven Hundred Fifty and No/100 Dollars to Bank,
at which point Transferee shall be supplied with the Bank's executed
Release document,
(ii) Three Hundred and No/100 Dollars for Other Lender Payments, (iii)
reasonable marketing and sales expenses not to exceed fifty percent
(50%) of all cash proceeds, and (iv) all remaining proceeds to Bank,
which shall be paid to the Bank on a regularly scheduled payment date
under the Loan, not to exceed 45 days following receipt by Transferee.
(d) The term "Timeshare Interval" shall mean a timeshare share
membership in the Kohl's Ranch Lodge or the property otherwise secured
by the Deed of Trust, subject to the rights, privileges, and
obligations to be set forth in the Timeshare Documents (as defined
herein).
2.1.8 Each reference in the Loan Documents to the Collateral,
the Security Documents or related documents or instruments securing the
indebtedness evidenced by the Note shall hereafter be a reference to such
documents or instruments as modified herein.
2.1.9 On or before the maturity date of the Loan (or sooner if
required by law or Bank policy or Bank regulators), Bank reserves the right, in
its sole and absolute discretion, to request an updated appraisal of the
property secured by the Deed of Trust at Transferee's sole cost and expense.
2.1.10 Notwithstanding Section 2.1.5 above, and subject to
Bank's prior written approval as to form and substance, which approval will not
unreasonably withheld, as part of its overall financing program, Transferee may
place junior liens on the Trust Property with its hypothecation Lenders as
beneficiaries, which lenders hypothecate Transferee's purchase money promissory
notes for Timeshare Intervals at the Property.
2.2 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Transferee and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Transferee in the Loan Documents.
4. ASSUMPTION.
----------
4.1 Transferee is willing to and does hereby assume the obligation for
payment of the indebtedness evidenced by the Note, and for the performance of
all covenants, agreements and obligations of Original Borrower under the Deed of
Trust and the Loan Documents, such assumption having been agreed to by and
between Original Borrower and Transferee.
4.2 Original Borrower shall and does hereby assign to Transferee, its
successors and assigns, all of its right, title, and interest in and to any
reserve or impound account which may have been established with Bank for the
payment of taxes, assessments, insurance, rents, or other charges, and Bank is
hereby released from any further responsibility to Original Borrower in
connection with such account.
4.3 Transferee hereby covenants, promises, and agrees (a) to pay such
Note at the times, in the manner, and in all other respects as therein provided
or as it may be modified in writing between the obligor and holder; (b) to
perform each and all covenants, agreements, and obligations of Original Borrower
in the Deed of Trust, as the trustor therein, and the Loan Documents, all at the
time, in the manner, and in all other respects as provided in said documents;
and (c) to be bound by each and every term and provision in the Note, the Deed
of Trust, the other Loan Documents, and such other documents and instruments
executed by either Original Borrower and/or Transferee in connection with the
Loan obligations as though all such documents and instruments had originally
been made, executed and delivered by Transferee.
4.4 Except in instances where Bank has expressly identified specific
property to be released and executed a written instrument for purposes of
releasing such property, all of the property described in the Deed of Trust and
the other Security Documents securing the Note shall remain in all respects
subject to the lien, charge, and encumbrance thereof as valid first liens
against the property described therein. Nothing done pursuant hereto shall or be
construed to affect the lien, charge, or encumbrance of such Security Documents
or the priority thereof over other liens, charges, or encumbrances. Nothing
herein contained shall affect any Security Document or instrument held by Bank
as security for or evidence of the aforesaid indebtedness, except as
specifically provided herein.
4.5 Notices to Trustor as required under the Deed of Trust
shall be given to Transferee at the following address:
Address: 2777 East Camelback Road
Phoenix, Arizona 85016
Attention: Mr. George C. Wallach
5. ORIGINAL BORROWER COVENANTS.
---------------------------
Original Borrower covenants to Bank:
5.1 Original Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Original Borrower fully, finally, and forever releases and
discharges Bank and its successors, assigns, directors, officers, employees,
agents, and representatives from any and all actions, causes of action, claims,
debts, demands, liabilities, obligations, and suits, of whatever kind or nature,
in law or equity of Original Borrower, whether now known or unknown to Original
Borrower, (i) in respect of the Loan, the Loan Documents, or the actions or
omissions of Bank in respect of the Loan or the Loan Documents, and (ii) arising
from events occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement
and the closing of this loan modification and assumption transaction, Original
Borrower has paid to Bank all accrued and unpaid interest under the Note and all
amounts, other than future interest and the principal amount of Nine Hundred
Thirty-Two Thousand Two Hundred Fifty and No/100 Dollars ($932,250.00), due and
payable by Original Borrower under the Loan Documents as of the date of close of
escrow.
5.4 Contemporaneously with the execution and delivery of this
Agreement, all existing management agreements and any existing leases or
tenancies involving Original Borrower and any related or affiliated entity of
Original Borrower relating to the property (other than that certain Sublease and
License Agreement assigned to Transferee (as amended)) shall immediately
terminate and be of no force or effect.
6. TRANSFEREE COVENANTS.
--------------------
6.1 Transferee shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
6.2 Transferee fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Transferee, whether now known or unknown to Transferee, in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents that arise from events occurring prior to the
date of this Agreement.
6.3 Contemporaneously with the execution and delivery of this
Agreement, Transferee has paid to Bank:
6.3.1 All the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, outside attorneys, processing (not to exceed Five Hundred and No/100
Dollars ($500.00)), title, tax service contract, filing, and recording costs,
expenses, and fees).
6.4 Contemporaneously with the execution and delivery of this
Agreement, Transferee has caused to be delivered to Bank, at Transferee's sole
cost and expense, a title endorsement to the existing ALTA extended coverage
lender's policy insuring Bank that the Deed of Trust is in first-position, in
form and substance acceptable to Bank, issued by First American Title Insurance
Company ("First American").
6.5 To the extent that the Transferee intends to sell Timeshare
Intervals in the real property otherwise encumbered by the Deed of Trust,
Transferee shall obtain Bank's prior written approval, which will not be
unreasonably withheld or delayed, of (i) all timeshare related documents,
including without limitation, any transfer agreements, membership plans, and
related agreements governing the use, transfer and restrictions on timeshare
memberships, and (ii) all of the rules, regulations, bylaws and other related
agreements governing the operation, use, and ownership of a timeshare facility
(collectively, the "Timeshare Documents").
6.6 To the extent Transferee begins selling Timeshare Intervals in
accordance with the Loan Documents as modified herein, Transferee shall cause
First American to provide monthly, written statements to Bank evidencing (i) the
amount of principal reduction achieved from Other Lender Payments being applied
to the existing carry back indebtedness with the Original Borrower, and (ii) the
then existing, outstanding principal balance under the promissory note in favor
of the Original Borrower evidencing such carry back financing.
6.7 Transferee acknowledges that it anticipates purchasing all of the
stock of Kohl's Ranch Water Company. Upon completing such acquisition,
Transferee agrees to pledge all of the stock of the water company to Bank as
additional security for the Loan.
7. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
7.1 Bank shall not be bound by this Agreement until
(i) Bank has executed and delivered this Agreement;
(ii) Original Borrower has performed all of the obligations of Original
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement;
(iii) Transferee has performed all of the obligations of Transferee
under this Agreement to be performed contemporaneously with the execution and
delivery of this Agreement, including, without limitation, the payment to Bank,
in immediately available funds, of a fully earned and non-refundable assumption
fee of Thirteen Thousand Nine Hundred Eighty-Three and 75/100 Dollars
($13,983.75), together with any other closing costs or fees incurred by Bank,
the delivery of all formation documents for Transferee, a good standing
certificate issued by the Arizona Corporation Commission, and a current balance
sheet of Transferee.
(iv) Transferee and any guarantors have executed and delivered to Bank
an environmental questionnaire, and an environmental certification and indemnity
agreement.
7.2 Contemporaneously with the execution and delivery of this
Agreement, except for liabilities (if any) relating to the overall environmental
condition of the real property encumbered by the Deed of Trust, Bank will
release the guaranties of Thomas L. Griffith and Diane M. Griffith and all
obligations of Original Borrower.
7.3 To the best of Bank's knowledge, there are no existing defaults by
Original Borrower under the Loan Documents.
8. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
-----------------------------------------------------------
The Loan Documents as modified herein contain the entire understanding and
agreement of Original Borrower, Transferee and Bank in respect of the Loan and
supersede all prior representations, warranties, agreements, arrangements, and
understandings. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by Bank, Transferee and Original Borrower.
9. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Original Borrower, Transferee and Bank and their respective
successors and assigns.
10. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
11. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
12. ARBITRATION.
-----------
12.1 Binding Arbitration. Bank, Transferee and Guarantors hereby agree
that all controversies and claims arising directly or indirectly out of this
Agreement and the Loan Documents, shall at the written request of any party be
arbitrated pursuant to the applicable rules of the American Arbitration
Association. The arbitration shall occur in the State of Arizona. Judgment upon
any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The Federal Arbitration Act shall apply to the construction and
interpretation of this arbitration agreement.
12.2 Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars. When any party files a
claim in excess of this amount, the arbitration decision shall be made by the
majority vote of three arbitrators. No arbitrator shall have the power to
restrain any act of any party.
12.3 Provisional Remedies; Self Help; and Foreclosure. No provision of
Section 12.1 shall limit the right of any party to exercise self help remedies,
to foreclose against any real or personal property collateral, or to obtain any
provisional or ancillary remedies (including but not limited to injunctive
relief or the appointment of a receiver) from a court of competent jurisdiction.
At Bank's option, it may enforce its right under a mortgage by judicial
foreclosure, and under a deed of trust either by exercise of power of sale or by
judicial foreclosure. The institution and maintenance of any remedy permitted
above shall not constitute a waiver of the rights to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding.
DATED as of the date first above stated.
"ORIGINAL BORROWER"
KOHL'S RANCH ASSOCIATES, an Arizona
general partnership
By: /s/Thomas L. Griffith
---------------------------------
Thomas L. Griffith
General Partner
By: /s/ Diane M. Griffith
---------------------------------
Diane M. Griffith
General Partner
"TRANSFEREE"
ILX INCORPORATED,
an Arizona corporation
By: /s/Joseph P. Martori
---------------------------------
Name: Joseph P. Martori
Title: Chairman
"BANK"
BANK ONE, ARIZONA, NA, a national
banking association
By: /s/Gail Grace
----------------------------------
Name: Gail Grace
Title: Vice President
<PAGE>
State of ARIZONA )
) ss.
County of Gila )
The above instrument was acknowledged before me this 1st day of June,
1995, by Thomas L. Griffith, the General Partner, of KOHL'S RANCH ASSOCIATES, an
Arizona general partnership, on behalf of the corporation.
/s/ Brenda Williams
____________________________________
Notary Public
My commission expires:
October 15, 1998
<PAGE>
State of ARIZONA )
) ss.
County of Gila )
The above instrument was acknowledged before me this 1st day of June,
1995, by Diane M. Griffith, the General Partner, of KOHL'S RANCH ASSOCIATES, an
Arizona general partnership, on behalf of the corporation.
/s/ Brenda Williams
____________________________________
Notary Public
My commission expires:
October 15, 1998
State of ARIZONA )
) ss.
County of Maricopa )
The above instrument was acknowledged before me this 1st day of June,
1995, by Joseph P. Martori, the Chairman of ILX INCORPORATED, an Arizona
corporation, on behalf of the corporation.
/s/ Michelle C. Lemiux
___________________________________
Notary Public
My commission expires:
April 11, 1997
State of ARIZONA )
) ss.
County of Maricopa )
The above instrument was acknowledged before me this 1st day of June,
1995, by Gail Grace, the Vice President of BANK ONE, ARIZONA, NA, a national
banking association, on behalf of the corporation.
/s/Colleen A. Pleininger
___________________________________
Notary Public
My commission expires:
February 19, 1997
June 19, 1995
Joseph P. Martori, President
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Re: Tammac Financial Corp. ("Tammac")
to: ILX Incorporated ("ILX" or "Borrower")
Resort: Kohl's Ranch Resort
Payson, Arizona
Dear Mr. Martori:
Pursuant to our various discussions, you have requested that Tammac
make a loan to ILX in the amount of up to $10,000,000.00 (the "Loan"), which is
to be secured by Acceptable Contracts (as that phrase is hereinafter defined)
and certain other assets owned by ILX.
After reviewing ILX's request for financing as hereinabove set forth,
Tammac is pleased to confirm its proposal to make the Loan subject to the
execution and delivery of the loan documentation in form and substance as is
satisfactory to Tammac and its counsel and subject to the following terms and
conditions:
I. THE LOAN:
A. Borrower: ILX Incorporated, an Arizona
-------- Corporation.
B. Amount of Loan: Up to $10,000,000.00 (sometimes
-------------- hereinafter referred to as the
"Advance Limit").
C. Advances: Advances shall be made on the basis of eighty-
-------- five (85%) percent multiplied by the aggregate
remaining principal balance of the Acceptable
Contracts (as herein defined), or such greater
or lesser (but only as may be necessary so the
Advance request does not cause the aggregate
amount of all Advances to exceed the Advance
Limit) percentage as Tammac shall, from time
to time, establish, provided, however, that
the aggregate amount of Advances outstanding
shall not exceed $10,000,000.00 and the sums
advanced pursuant to the Loan, even if in
excess of the Advance Limit, shall be secured
by the Collateral (as hereinafter defined).
Provided no event of default under the Loan
Documents or any obligations due and owing by
Borrower to Tammac, whether presently existing
or thereafter arising, exists or is
continuing, and provided further that no
Advances will be made to Borrower if the
aggregate amount of all Advances (including
the Advance requested) exceeds or would exceed
the Advance Limit, Advances will be made
during the period commencing from the closing
date of the Loan and ending twenty-four (24)
months thereafter (the "Draw Period"). The
request for an Advance must be at least in the
amount of $50,000.00.
For purposes of this letter, an Acceptable
Contract shall be a consumer contract or
agreement and all related documents
("Contract" or "Contracts") entered into
between the Borrower as seller and/or lender
and a consumer ("Consumer") as the purchaser
and/or borrower of (or relating to) a
timeshare interest (a "Unit Week" or
"Timeshare Estate"), defined in and created by
the project documents relating to Kohl's Ranch
Resort located in Payson, Arizona (the
"Resort" or the "Project"), together with all
amendments, supplements and modifications
thereto, which satisfy the following
requirements, and which are in all other
respects acceptable to Tammac: (i) Borrower is
the seller of a Unit Week under a Contract to
a Consumer who is a United States resident;
(ii) the purchase price under the terms of the
Contract is payable in not more than 84 equal
monthly installments of principal and interest
in U.S. currency, except that up to fifteen
(15%) percent of the aggregate principal sums
advanced to Borrower under the Loan may
provide for the purchase price under the
Contracts to be payable in up to one hundred
and twenty (120) equal monthly installments of
principal and interest in U.S. currency; (iii)
no monthly installment is more than 30 days
contractually delinquent under the original
terms of the Contract, and neither the
Borrower nor the Consumer is (in the sole
discretion of Tammac) materially in default
under the terms of the Contract; (iv) all
documents relating to the Contract and Project
have been executed and delivered and copies
are readily available to Tammac in the files
of Borrower; (v) none of the Contracts are or
shall be subject to any defense, offset,
counterclaim, discount or allowance except as
otherwise consented to in writing by Tammac;
(vi) the terms of any Contract and all related
documents shall comply in all respects with
all applicable laws and regulations
promulgated thereunder, including without
limitation the provisions of the Federal
Consumer Credit Protection Act of 1968, the
Federal Consumer Leasing Act of 1976, the Real
Estate Settlement Procedures Act, Regulation
X, the Truth-in-Lending Act and Regulation Z;
(vii) a cash down payment has been received in
an amount equal to at least 10% of the
purchase price under the Contract or, if the
Consumer is upgrading his Unit Week, the 10%
requirement may be met by aggregating the cash
down payment and principal payments under the
prior and current Contracts, prior to any
discount; (viii) the rate of interest thereon
applied to the unpaid balance is at least
fourteen (14%) percent per annum, on a simple
interest basis; (ix) the Consumer has
immediate access to a Unit Week which has been
developed to the specifications provided in
the Project documents, approvals and Contract;
(x) any applicable statutory or contractual
"cooling off" or recision period has expired;
(xi) under which no single Consumer has a
balance due Borrower in excess of $15,000.00
unless specifically approved in writing by
Tammac; (xii) Borrower is the sole owner of
the Contract and has not sold, assigned,
mortgaged, pledged or hypothecated all or any
portion thereof, nor is the Contract subject
to any claim, lien or security interest of any
person or entity, including without
limitation, the United States, or any agencies
or instrumentalities thereof; (xiii) an
Acceptable Contract shall not include a
Contract where the Consumer shall have filed
for protection under any bankruptcy or
insolvency laws or shall have been the subject
of a repossession or foreclosure, and (xiv)
the Contract shall be valid, enforceable and
legally binding upon the Consumer.
D. Maturity of the Loan: Unless accelerated pursuant to the terms and
-------------------- conditions of the Loan Documents, the maturity
of the Loan shall be six (6) years from the
date of the expiration of the Draw Period, at
which time the Borrower shall pay to Tammac
the unpaid principal balance of the Loan,
together with all accrued and unpaid interest
thereon and all other unpaid fees and
expenses.
E. Interest Rate: (i) Interest shall be payable monthly on so
------------- much of the principal of the Loan as
shall have been advanced to the
Borrower and be unpaid at a floating
rate of four (4%) percentage points
above the highest prime rate as
announced, from time to time, in The
Wall Street Journal. The rate of
interest may change from time to time
without notice to the Borrower and each
such change shall be effective on the
date such change occurs. In no event,
however, shall the rate of interest
exceed the maximum allowable by law.
All computations of interest shall be
based on a calendar year having 360
days.
(ii) Upon the occurrence and during the
continuance of an Event of Default, the
rate used to calculate the interest
rate due on the Loan may, at the option
of Tammac, increase by five (5%)
percentage points per annum above the
then applicable interest rate referred
to above (the "Default Rate").
(iii) In the event Tammac receives a payment
of interest or principal more than
fifteen (15) days after the date due,
such payment shall be subject to a late
charge of five (5%) percent of such
payment (the "Late Charge"). The Late
Charge represents the cost to Tammac in
processing late payments and shall not
be deemed to constitute additional
interest.
F. Mandatory Payments: Unless accelerated pursuant to the
------------------ terms and conditions of the Loan
Documents or paid before the scheduled
maturity date, the Borrower shall pay
to Tammac ninety-six (96) consecutive
minimum monthly payments each in an
amount equal to ninety-four (94%)
percent of the scheduled monthly
payments of principal and interest due
on the Acceptable Contracts comprising
the collateral security for the Loan.
All mandatory payments as hereinabove
provided shall be applied first to the
payment of accrued and unpaid interest
and the balance shall be applied to the
payment of installments of principal
then remaining unpaid. The aforesaid
payments shall be payable in arrears on
the first day of each calendar month
commencing on the first (1st) day of
the month next following the date of
the Loan closing and shall continue
until such time as the full principal
sum, together with all amounts owing
under the Loan have been paid in full.
The aforesaid payments shall be payable
out of the monthly collections received
under the Acceptable Contracts. In the
event the monthly collections from the
Acceptable Contracts are insufficient
to pay principal and/or interest on the
Loan, the Borrower shall pay the
interest and/or principal insufficiency
on the first of each month as
aforesaid.
If, at any time during the term of the
Loan, any of the Acceptable Contracts
fail to continue to be Acceptable
Contracts and, as a result, the amount
advanced exceeds the Advance Limit, the
Borrower will be required to
immediately prepay an amount equal to
the excess borrowing. If at any time
the aggregate outstanding amount of the
Loan shall exceed the Advance Limit,
Borrower shall immediately notify
Tammac of such fact and make a
mandatory prepayment in such amount
necessary (including accrued interest)
to reduce the outstanding principal
amount of the Loan to the Advance
Limit. If a mandatory prepayment is
required as herein provided, the
Borrower shall have the right, during
the Draw Period, in lieu of payments to
eliminate all, or any part, of the
excess borrowing and thereby avoid the
obligation to make a mandatory
prepayment by: (a) promptly notifying
Lender in writing of Borrower's
intention to assign new Acceptable
Contracts of equal or greater value to
the required amount and (b) promptly
effectuating the assignment of the new
Acceptable Contracts, but in no event
later than five (5) business days after
notice of the over Advance is sent to
Borrower by Tammac. Any mandatory
prepayments made hereunder shall not
affect the due date or the amount of
any other required payments to be made
under the Loan.
G. Voluntary Prepayment: The Borrower shall have the right to
-------------------- prepay the principal of the Loan at any
time without penalty or premium.
H. Servicing of Acceptable Borrower shall, at its cost and
----------------------- expense, enter into a servicing
Contracts: agreement with a servicing entity
selected by Borrower and approved by
Tammac ("Servicing Agent"), to service
the Acceptable Contracts. The servicing
agreement must be, in all respects
satisfactory to Tammac and its counsel.
The Servicing Agent shall furnish to
Tammac such reports, documentation and
information regarding the Acceptable
Contracts as is reasonably satisfactory
to Tammac.
I. Collection of Monies Borrower and/or the Servicing Agent
-------------------- shall maintain a depository Dominion
Due Under Contracts: Account at an insured financial
------------------- institution selected by Borrower and
acceptable to Tammac into which all
payments due under the Acceptable
Contracts will be made. All proceeds of
the Acceptable Contracts shall be
deposited in the form received by the
Borrower into the aforesaid Dominion
Account. Borrower, Tammac and the
selected and approved financial
institution shall enter into an agency
or lock box agreement ("Agency
Agreement"), the terms of which
agreement shall be acceptable to Tammac
and Tammac's counsel, and which shall
provide, among other things, for the
said financial institution to apply
for, obtain and maintain in Borrower's
name a post office box to which all
payments under the Acceptable Contracts
shall be made and to deposit in the
Dominion Account all funds received in
connection with the Acceptable
Contracts and turn said funds over to
Tammac, all in accordance with the
terms and conditions of the Loan
Agreement to be entered into between
Borrower and Tammac and the Agency
Agreement. The said post office box and
Dominion Account shall be subject to
the exclusive control of Tammac in
accordance with the terms of the Loan
Agreement and Agency Agreement. The
financial institution selected and
approved as agent shall transfer the
funds deposited to the Dominion Account
by wire transfer or check as shall be
directed by Tammac.
Borrower shall instruct all of the
Consumers under the Acceptable
Contracts to direct remittances to a
post office box established by Tammac
in the name of the Borrower. All
proceeds of the Acceptable Contracts
shall be directed to such post office
box, whether in the form of cash,
checks, drafts, notes or other
remittances received by the Borrower in
payment of or on account of any of the
Acceptable Contracts. Upon receipt by
Tammac, all such proceeds shall be
applied to payment in full or in part
of the principal or interest due on the
Loan or to any other obligation of the
Borrower to Tammac in such order as
Tammac may elect.
J. Collateral: (i) A first lien on all of the Acceptable
---------- Contracts and related consumer
documents, which shall be enumerated on
schedules prepared by Borrower and
approved by Tammac.
(ii) A valid third lien on the entire real
property, structures and fixtures
located thereon at the Resort, subject,
however, to an existing first lien on
said Resort in the approximate
principal balance of no more than
$932,250.00 and a second lien in the
approximate principal sum of
$380,000.00 granted to Kohl's Ranch
Associates, an Arizona general
partnership. Provided the Borrower is
not in default under the Loan
Documents, upon the Borrower's request,
Tammac shall subordinate its third lien
position on the Resort to one or more
prior liens thereon held by one or more
financial institutions or reputable
funding sources having an aggregate
principal balance of no more than
$2,480,000, which shall include the
remaining principal balance due on the
aforesaid existing first and second
liens, if any. The form and substance
of any agreement providing for the
priority of these lien positions shall
be satisfactory in all respects to
Tammac and its counsel.
(iii) A valid perfected security interest in
all fixtures, furnishings, equipment,
machinery, apparatus, fittings,
building material and articles of
personal property of every kind and
nature whatsoever, now or hereafter
located in or upon any portion of the
Resort used or usable in connection
with any present or future operation of
the Resort and acquired by Borrower.
(iv) A collateral assignment of all leases,
rents and profits relating to the
Resort.
(v) All of the Borrower's (a) accounts and
accounts receivables relating to the
Acceptable Contracts; (b) inventory
located at the resort; (c) machinery,
equipment, furniture and fixtures
located at the Resort or in any way
relating to the Resort, which shall
include, but not be limited to, all
assets and/or rights in and to the
water company (when acquired by
borrower) servicing the Resort; (d)
contract rights relating to the
Acceptable Contracts; (e) general
intangibles relating to the Acceptable
Contracts; (f) interests in marketing
or direct mail agreements relating to
the Resort as same relate to the
Acceptable Contracts; (g) licenses,
contracts, management contracts or
agreements, permits or certificates
relating to the Resort; (h) rights as
declarant, Borrower, owner and/or
otherwise under the governing documents
or restrictive covenants affecting the
Resort; and (i) proceeds and products
of the foregoing, which the Borrower
may have or may hereafter acquire and
relating to or used in connection with
the Resort.
II. CONDITIONS PRECEDENT:
A. Preliminary The closing of the Loan shall be
----------- subject to the receipt, review and
Documentation: approval by Tammac, and Tammac's
------------- counsel, of the following:
True copies of all Consumer
Documentation relating to the Resort,
including, but not limited to, the
Public Offering Statement or similar
documentation;
(ii) The filed certificate or articles of
incorporation and by-laws, as amended
to date, for the Borrower. This
requirement may be satisfied by a
written statement that the certificate
or articles of incorporation and
by-laws of the Borrower, which are
currently in Tammac's possession, have
not been amended or modified in any
respect;
(iii) The names and titles of all officers
and directors of the Borrower. This
requirement may be satisfied by a
written statement that the aforesaid
information currently in Tammac's
possession has not been modified;
(iv) Certificates of good standing for the
Borrower, or such other documentation
as is reasonably satisfactory to
Tammac, in all jurisdictions in which
it is authorized to do Business;
(v) Corporate franchise tax searches and/or
a certificate from the Director of
Revenue, or such other documentation as
is reasonably satisfactory to Tammac,
that no taxes are due to the taxing
authorities with respect to the
Borrower;
(vi) Continuation uniform commercial code
financing searches for the borrower;
(vii) A completed and signed Environmental
Questionnaire relating to the Resort;
(viii) Federal tax lien, state tax lien, and
judgment searches for the Borrower;
(ix) Evidence of compliance with all
applicable federal, state and local
environmental laws, rules, regulations
and ordinances relating to the Resort;
(x) A listing and copy of all
certificates, permits and licenses
required in connection with the
operation of the Resort and the sale
and financing of Timeshare Estates;
(xi) Evidence that all applicable approvals
for the use and occupancy of the Resort
and the sale of Timeshare Estates
therein have been obtained and remain
valid from all governmental
authorities, agencies or public utility
companies having jurisdiction. All such
approvals and permits shall be legally
valid and shall remain in full force
and effect for so long as any
obligations remain outstanding from the
Borrower to Tammac;
(xii) Any and all agreements with local,
state or federal governmental or quasi-
governmental authorities relating, in
any way, to the use and/or operation of
the Resort;
(xiii) A true copy of any management
agreements relating to the management
of the Resort;
(xiv) If requested by Tammac, a true copy of
all leases relating to or affecting the
Resort;
(xv) A permanent certificate of occupancy or
similar approval certificate issued by
the appropriate governmental
official(s) having jurisdiction over
the Resort;
(xvi) Evidence of compliance and conformity
with all zoning and land use laws and
regulations relating to the Resort;
(xvii) Evidence of the availability of all
utilities, adequate water and sanitary
sewer facilities servicing the Resort;
(xviii)a listing and description of any
pending lawsuits involving the Borrower
in which the Borrower is a defendant or
otherwise defending any claim which is
in excess of $10,000.00;
(xix) Written authorizations and/or waivers
from any creditors authorizing the
transactions contemplated herein if so
required pursuant to said lender's loan
documents.
(xx) A true copy of the deed conveying title
in and to the Resort to the Borrower;
(xxi) A true copy of all deeds of trust or
mortgages, and related documents,
encumbering the Resort;
(xxii) A true copy of the Public Report filed
with the appropriate Arizona
authorities, and evidence of its
acceptance and/or approval by said
authorities;
(xxiii) A true copy of all reports,
correspondence, memoranda and
documentation relating to the
environmental conditions of the Resort,
including, but not limited to, a "Phase
I" audit report, a written proposal,
which has been accepted by the
Borrower, from one or more licensed
engineers relating to any and all
approvals for aquifer protection
permits and the approval of the septic
system now servicing the Resort,
evidence of the water flow rate to the
Resort, correspondence and/or
documentation to or from the Borrower,
the Borrower's counsel and
representatives and the Arizona
Department of Environmental Quality,
which address or relate to the aquifer
protection permit requirements and the
approval of the septic system for the
Resort;
(xxiv) Evidence of Borrower's purchase of the
assets of the water company which
service the Resort;
(xxv) Evidence of the Resort's and the
Borrower's compliance with the
American's with Disabilities Act (42
U.S.C. 12101);
(xxvi) Information and documentation relating
to the assignment of the Borrower's
partnership interest in Los Abrigados
Partners, Limited Partnership to
Martori Enterprises, Edward J. Martori
and all subsequent assignments thereof;
(xxvii) A complete response to the outstanding
documentation requirements noted in
Tammac's counsel's letter to Samuel
Ciatu, Esq., dated March 8, 1995,
relating to prior financial
accommodations entered into by and
among Borrower and Tammac; and
(xxviii) An opinion letter from the Borrower's
counsel satisfactory to Tammac and
Tammac's counsel.
B. Title Insurance: The Borrower shall furnish Tammac with
--------------- a mortgage title insurance policy in
the amount of $2,000,000.00 covering
the Resort satisfactory to Tammac, the
premium for which shall be payable by
the Borrower insuring the interest of
Tammac to be a valid third lien on the
Resort, free and clear of all defects,
liens, encumbrances and exceptions to
title whatsoever, except for exceptions
that are approved by counsel for
Tammac.
C. Survey: The Borrower shall furnish Tammac
------ with a current boundary and location
survey of the Resort with a seal
certified to Tammac, and/or its
successors and assigns, the Borrower,
the title insurance company, the title
agency, if any, and the closing
attorney representing the Borrower. The
survey must: (i) show the Resort to be
free of encroachments, overlaps and
other survey defects; (ii) show the
courses and distances of the lot lines
for the Resort; (iii) show that all
existing improvements are located
within said lot and building lines; and
(iv) show the location of all above and
below ground easements, improvements,
appurtenances, utilities, rights-of-way
and ingress and egress by reference to
book and page numbers, as appropriate.
D. Insurance: (i) Fire and other hazard insurance
--------- covering the Resort, including, but not
limited to fire and extended coverage,
in such amounts and by such insurance
companies as Tammac shall approve,
together with a standard form insurance
endorsement in form and substance
satisfactory to Tammac showing Tammac's
interest shall be required, together
with the original policies of
insurance, if so requested by Tammac;
(ii) Business and/or rental interruption
insurance in amounts and with insurance
companies that are reasonably
satisfactory to Tammac, naming Tammac
as additional insured and loss payee,
together with a paid premium receipt
evidencing payment of the insurance
premium for a period of one year from
the date of the Loan Closing; and
(iii) Comprehensive general public liability
coverage with respect to the Borrower
against claims for bodily injury,
death, personal injury and property
liability, naming Tammac as an
additional insured, in an amount
determined by Tammac, but in no event
with limits less than: (i)
$3,000,000.00 for death or injury to
any one person; (ii) $1,000,000.00 for
any one occurrence; and (iii)
$1,000,000.00 for property damage. In
addition, a paid premium receipt
evidencing payment of said insurance
premium for a period of one (1) year
from the date of the Loan Closing.
E. Flood Insurance: If, on the date of the closing of Loan,
--------------- any substantial improvements at the
Resort are in an area that have been
identified by the Secretary of Housing
and Urban Development as having special
flood or mud slide hazards, and on
which the sale of flood insurance has
been made available under the National
Flood Insurance Act of 1968, as
amended, the Borrower will be required
to purchase a flood insurance policy
satisfactory to Tammac. In lieu of a
flood insurance policy as aforesaid, a
certificate confirming that the Resort
is not located within a "special flood
hazard area" shall be furnished to
Tammac.
F. Documentation: (i) The Loan Agreement, Promissory Note,
------------- Deed of Trust covering the Resort, and
related documents, including, but not
limited to, the security agreements,
certifications and opinion letters of
the Borrower's counsel, shall be
executed and delivered by the Borrower
and the Borrower's counsel, as the case
may be, in a form and substance as
shall be satisfactory to Tammac and
its counsel.
(ii) The necessity for, and form and
substance of each and every document
relating to the Loan and the security
therefor, or incident thereto, and any
proceedings incident thereto, title and
evidence thereof, and all questions
relating to the validity and priority
of the mortgages or deeds of trust to
be granted by the Borrower, shall be
determined by and must be satisfactory
to counsel for Tammac.
(iii) Borrower's counsel shall provide to
Tammac a legal opinion regarding the
Resort, the Loan, the Contracts and
related documents and various other
matters pertaining to the Loan, the
Acceptable Contract's compliance with
all applicable laws, regulations and
requirements, all in form and substance
satisfactory to Tammac and Tammac's
counsel.
G. Legal Compliance: (i) The Borrower shall, if requested by
---------------- Tammac provide evidence in form and
substance satisfactory to Tammac that
it has: (a) conducted its business in
conformity with all federal, state and
local laws, rules, regulations, orders
and ordinances; and (b) complied in all
respects with the applicable provisions
of the Employment Retirement Income
Security Act of 1974, 29 USC Section
1001, et seq., as amended ("ERISA") and
all regulations issued thereunder by
the United States Treasury Department,
Department of Labor and Pension Benefit
Guaranty Corporation.
(ii) The Borrower shall furnish to Tammac
such evidence as Tammac may require to
demonstrate current full compliance
with all applicable building, zoning,
health, environmental protection and
safety laws, ordinances and regulations
(including approval of board of fire
underwriters and local private or
public sewer or water utilities) from
all authorities having jurisdiction
relating to the Resort. The Borrower
shall provide such evidence as Tammac
may reasonably require to demonstrate
compliance with the Americans with
Disabilities Act, 42 U.S.C. 12101.
(iii) The Borrower shall certify or furnish
to Tammac other satisfactory evidence
at the time of closing that there is no
action or proceeding pending before any
court or administrative agency with
respect to the validity of the mortgage
loans or of any laws, ordinances or
regulations, and any certifications or
permits, issued thereunder, pertaining
to the Resort or any Collateral. The
Borrower shall certify or supply other
evidence satisfactory to Tammac that
the Borrower is not a party to any
existing or pending or threatened
litigation.
(iv) In addition to the foregoing, and
without in anyway limiting the
generality of the foregoing
requirements, if the Resort is being
used for any purpose which has not been
previously disclosed to Tammac, the
Borrower shall produce a letter issued
from the appropriate governmental
officials that the current uses of the
Resort are not in violation of any
applicable zoning requirements or
restrictions.
H. Environmental The Borrower shall provide Tammac
------------- with all representations, warranties
Compliance: and covenants required by Tammac so as
---------- to protect Tammac from the effects of
any environmental law, statute,
ordinance or regulation now or
hereafter promulgated by any federal,
state or local government or agency
thereof.
I. Exchange Group The Borrower shall maintain membership
-------------- in one or more timeshare exchange
Membership: services satisfactory to Tammac, until
---------- such time as the Loan has been paid in
full.
J. Validity of Proposal: (i) The validity of this proposal will be
-------------------- subject to the accuracy of all
information, representations, exhibits
and other materials submitted with or
in support of the Borrower's request
for the Loan, or other data, and any
change incident thereto shall, at the
option of Tammac, void all obligations
of Tammac under the provisions of said
proposal.
(ii) Tammac reserves the right to continue
its investigations as to the
creditworthiness of the Borrower
subsequent to the delivery of this
letter and in the event Tammac should
discover any information subsequent to
the issuance of this letter which, if
discovered prior to the delivery
hereof, would have resulted in
rejecting the application for the
extension of credit, then and in that
event, Tammac shall have the right to
withdraw this proposal letter.
K. Assignment: This proposal shall not be assignable,
---------- without the prior written consent of
Tammac and any attempt at such
assignment without such consent shall
be void.
III. GENERAL CONDITIONS:
The Loan and related documents are subject to satisfaction by the
Borrower of the Conditions Precedent noted above and the negotiation, execution
and delivery of the loan documentation satisfactory to all parties thereto. This
documentation shall include representations and warranties, the granting of
security interests, covenants and events of default of the kind and nature
generally utilized by Tammac for similar transactions, including without
limitation, the following:
A. Cross Default:
-------------
A default in the Loan and/or any related documents shall be a default
in any other obligations of the Borrower owing to Tammac at any time.
B. Cross-Collateralization
-----------------------
The Loan and any other obligations of the Borrower shall be deemed
collateralized by the Resort and all other Collateral hereinabove
referred to.
C. Representations and Warranties:
------------------------------
The Loan Documents shall contain such representations and warranties to
be made on behalf of the Borrower and shall be satisfactory to counsel
for Tammac and of the kind and nature generally utilized by Tammac in
loan transactions of this type.
D. No Secondary Financing:
----------------------
So long as any obligations are outstanding to Tammac, there shall be no
secondary financing secured by any of the Collateral, nor any transfer
of title of any of the Collateral, except in the ordinary course of the
Borrower's business, without the prior written approval of Tammac.
E. Financial Information:
---------------------
The Borrower will provide Tammac, within sixty (60) days of the close
of each quarter-annual fiscal period, with quarterly financial
statements certified by the Borrower's Chief Financial Officer and
within one hundred twenty (120) days of the close of each fiscal year
audited financial statements. Each such statement shall be in such form
and in such detail as shall be satisfactory to Tammac and shall be
prepared by independent certified public accountants selected by the
Borrower and satisfactory to Tammac. All such statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied.
The Borrower shall also provide to Tammac, on or before the tenth
(10th) day of each month, a detailed aging report setting forth the
amount due and owing on Acceptable Contracts as of the close of the
preceding month, together with a reconciliation report satisfactory to
Tammac showing all collections, payments and adjustments thereto on the
Borrower's books as of the close of the preceding month. Tammac shall
have the right to make test verifications of any and all Acceptable
Contracts in any manner and through any medium Tammac considers
advisable and Borrower shall render any necessary assistance to Tammac
in that regard.
IV. MISCELLANEOUS:
A. Obligations of Tammac: All obligations on the part of Tammac
--------------------- in connection with the subject
transactions, and all matters with
respect to title, covenants,
restrictions, lien searches affecting
the Collateral, as well as with respect
to the validity and priority of the
liens of Tammac, and the form and
substance of all documents necessary to
effect the consummation of the subject
transactions shall be determined by and
must be satisfactory to Tammac and its
counsel.
B. Legal Fees and Expenses: (i) The acceptance of this proposal letter
----------------------- shall constitute the Borrower's
unconditional agreement to pay all
fees, expenses and charges with respect
to the subject transactions as outlined
herein (whether or not the closing of
the transactions ever occurs),
including without limiting the
generality thereof, recording and
filing fees, insurance premiums, search
fees, the fees and expenses of counsel
for Tammac, the fees and expenses of
Tammac's inspectors or appraisers, if
any and other fees or assessments
payable in connection with the
transactions. Notwithstanding anything
contained herein to the contrary, the
Borrower's obligation to pay or
reimburse Tammac for Tammac's legal
fees shall be capped at $5,000.00.
(ii) The interest of the Borrower and Tammac
are or may be different and may
conflict. Tammac's attorneys shall
represent only Tammac and not the
Borrower. The Borrower therefore is
advised to employ an attorney (or
attorneys) of its choice to represent
its interests.
C. Applicable Law: Notwithstanding the place of acceptance
-------------- of this proposal, or the place of
execution of any of the Loan Documents,
this proposal shall be deemed made and
accepted in Wilkes-Barre, Pennsylvania,
and the Borrower agrees by the
acceptance hereof that the validity and
interpretation of this proposal and the
instruments of indebtedness and
instruments of security contemplated
herein shall be governed by the laws of
the Commonwealth of Pennsylvania,
unless such documents shall expressly
provide otherwise.
D. Changes and Amendment: No changes in the provisions of this
--------------------- proposal letter shall be valid or
binding unless acknowledged and
confirmed in writing by the undersigned
officer of Tammac.
E. Closing Date: The closing date of the Loan and all
------------ related documents must occur no later
than ninety (90) days from the date of
the Borrower's acceptance of this
proposal letter.
F. Term of Proposal: Subject to the aforementioned terms and
---------------- conditions, and there being no material
adverse change in the financial
condition of the Borrower prior to
closing, the proposal to make the Loan
shall remain in full force and effect
for a period of up to one hundred five
(105) days from the date of this
proposal letter, provided same is
accepted in full by the Borrower within
fifteen (15) days from the date of this
letter. If not so accepted, this
proposal shall be deemed to have
expired and shall be null and void and
of no effect.
I believe this proposal outlines our conversations and I look forward
to working with you on this transaction. Please indicate your acceptance of this
proposal letter by executing the enclosed copy and returning same to me,
whereupon this proposal letter shall constitute a binding agreement in
accordance with its terms.
Very truly yours,
TAMMAC FINANCIAL CORP.
BY: /s/ANDY G. ROOSA
-----------------------------------
ANDY G. ROOSA, President
The undersigned authorized representative of ILX Incorporated, an
Arizona corporation, has read the above proposal letter, and on behalf of ILX
Incorporated agrees to and accepts the terms and conditions as outlined. On
behalf of ILX Incorporated, Tammac is authorized to have its counsel commence
the necessary documentation at its earliest convenience.
ILX INCORPORATED, an Arizona Corporation
By: /s/NANCY J. STONE Dated: 7/6/95
-------------------------------- ------------------------------
NANCY J. STONE, Executive
Vice President
CONTRACT FOR SALE
THIS AGREEMENT entered into in triplicate this 16th day of JUNE, 1995 between
CITY OF TUCSON, A MUNICIPAL CORPORATION, as Seller and ILX Incorporated, an
Arizona corporation as Buyer.
W I T N E S S E T H:
That Seller, in consideration of the covenants and agreements of Buyer
hereinafter contained, agrees to sell and convey unto Buyer, and Buyer agrees to
buy, all that certain real property, together with all and singular the rights
and appurtenances thereto in anywise belonging, situate in the County of Pima,
State of Arizona, described as follows, to-wit:
FOR LEGAL DESCRIPTION SEE EXHIBIT "1" ATTACHED HERETO
AND MADE A PART HEREOF BY REFERENCE
(hereafter "the Property") for the sum of ONE MILLION TWO THOUSAND AND NO/1000
DOLLARS ($1,002,000.00) lawful money of the United States, and Buyer agrees in
consideration of the premises to pay said sum in the following manner, to-wit:
$ 50,100.00 Deposit received by the City of Tucson on or
about May 24, 1995
$250,500.00 Payable through escrow on or before close of
escrow
$701,400.00 together with interest from the date of this
contract on the unpaid principal balance at
the rate of nine and three quarter percent
(9.75%) per annum, shall be payable in three
equal annual amortized payments of
$280,802.82, the first of which installments
shall be due and payable one year after the
date of closing (1 year). Succeeding
installments shall be due and payable on the
same day of each and every calendar year
thereafter for a period of two (2) years, at
which time the entire amount of principal
and interest shall be due and payable. The
principal balance of said note may be
prepaid in whole or in part at any time or
times without penalty.
ASSIGNMENT OF THIS CONTRACT BY THE BUYER SHALL BE SUBJECT TO THE CITY OF
TUCSON'S PRIOR REVIEW AND APPROVAL, WHICH APPROVAL SHALL NOT BE UNREASONABLY
WITHHELD.
POSSESSION:
The Buyer shall be entitled to possession of the Property so long as the Buyer
shall not be in default in the performance of any of the agreements herein
contained on the part of the Buyer to be kept and performed, provided the Buyer
shall not commit or permit waste upon the Property.
TITLE AND ESCROW FEES:
Seller and Buyer, and each of them, their heirs, successors, or assigns, promise
to pay promptly all escrow agent's servicing fees and charges, and to indemnify
and hold harmless Escrow Agent against all costs, damages, attorney's fees,
expenses and liabilities which, in good faith, and without fault on its part, it
may incur or sustain in connection with this agreement and in connection with
any court action arising out of this agreement. In the event Buyer fails to pay
any servicing fees and charges as herein provided, same shall be payable by
Seller upon demand. No transfer or assignment of an rights hereunder shall be
made by any one having an interest herein unless made in such manner and
accomplished by such instruments and paying such fees as shall be required by
the escrow company.
For any balance due Seller evidenced by this document, unless otherwise
provided, Old Republic Title Agency is hereby employed and appointed to act as
Account Servicing Agent to hold the security documents, as specified herein, for
servicing, receiving, processing and remitting payments in accordance with its
Standard Account Servicing Instructions and Schedule of Account Service Fees.
Seller and Buyer will each pay one-half of Account Servicing Agent's fees for
its services in receiving, processing and remitting funds, terminating the
account and performing services, requested by or on behalf of Seller or Buyer,
as Account Servicing Agent has or may hereafter establish for the various
services to be performed.
TIME OF ESSENCE:
Time is of the essence of this agreement and of each and every term and
condition herein and full performance by the Buyer of all his obligations herein
is and shall be a condition precedent to his right to a conveyance hereunder.
The City of Tucson shall provide the account servicing agent with a Special
Warranty Deed for the conveyance of fee title to the Buyer upon the Buyer's full
performance of all its obligations herein and instruct said agent to record the
same.
TAXES AND ASSESSMENTS:
Buyer shall pay, before they become delinquent, all taxes and assessments of
every kind and nature levied or assessed against the property subsequent to the
close of escrow.
If Buyer fails to pay any such taxes, charges, assessments or fails to pay any
amount due upon or fails to perform any condition or covenant of this agreement
for sale required of Buyer, before the same shall have become delinquent, Seller
shall have the right to pay or satisfy the same, and the amount so advanced
together with necessary costs and legal fees shall be secured hereby and shall
be repaid to Seller by Buyer on demand, together with interest thereon from date
advanced by Seller until repaid. Any payment so made by Seller shall be prima
facie evidence of the necessity therefor. In the event the Buyer shall fail to
make any of the payments herein provided to be made promptly when the same
become due and payable or to make repayment on demand of any amount herein
agreed to be repaid, or in the event of the failure of the Buyer promptly to
comply with any of the terms hereof, the Seller may pursue any of its available
legal remedies including, without limitation:
(1) An action for specific performance to compel the
performance of the covenants which the Buyer has failed
to perform;
(2) Forfeiture of the Buyer's rights under this contract.
Nothing contained herein shall be construed as depriving the Seller of any legal
or equitable right or remedy which Seller may have regarding the Property and no
court of law or equity shall relieve the Buyer of full obligation to comply
strictly and literally with the terms of this agreement. The Buyer agrees to pay
all costs and expenses of any action commenced by the Seller to enforce this
agreement, including reasonable attorney's fees. In the event judgement is
rendered in favor of the Seller, reasonable attorney's fees may be fixed by the
Court.
Buyer shall pay before they become delinquent all taxes and assessments on the
Property, levied subsequent to the date of this agreement, together with all
assessments and other charges of any Water District or Association not
delinquent at the date hereof, and all other assessments and utility charges
after the date hereof; and Buyer shall keep the buildings erected and to be
erected upon the Property in good condition and shall not permit any waste or
deterioration thereof.
DEFAULT:
Should default be made in any payment when due, then the whole sum of principal
and interest to be paid hereunder shall become immediately due and payable at
the option of the Seller.
If Buyer fails to pay any monies due under this agreement when due, or breaches
any covenant, condition or stipulation hereof, then Seller may pursue any
available remedy at law or in equity.
IN WITNESS WHEREOF, the said parties have hereunto set their hands and seals the
day and year first above written.
ILX Incorporated, an Arizona
corporation
By:/s/ Joseph P. Martori
--------------------------------------
As: President
--------------------------------------
By:_______________________________________
As:_______________________________________
STATE OF ARIZONA )
)ss
COUNTY OF PIMA )
This instrument was acknowledged before me this 10th day of July, 1995, by
Joseph P. Martori as President and ____________________ as ____________________
of ILX Incorporated, an Arizona Corporation.
MY COMMISSION EXPIRES:
March 20, 1998 /s/Stephanie D. Castronova
--------------------------------------
Notary Public
ATTEST: CITY OF TUCSON, a municipal
corporation
/s/ Kathleen Detenk
- -------------------------------
City Clerk By: /s/ George Miller
--------------------------------------
(Seller) Mayor
APPROVED AS TO FORM:
/s/ Illegible
_______________________________________
Principal Assistant City Attorney
STATE OF ARIZONA )
)ss
COUNTY OF PIMA )
This instrument was acknowledged before me this 9th day of June, 1995, by George
Miller as Mayor and Kathleen S. Detrick as City Clerk of the city of Tucson, a
municipal corporation, as an act of said municipal corporation.
MY COMMISSION EXPIRES:
April 27, 1997 /s/ Inalia Acuna
--------------------------------------
Notary Public
EXHIBIT "1"
Parcel I:
All that portion of Lots 3, 4, 5, 11 and the south 60 feet of Lot 6, in Block 15
of SPEEDWAY PARK, a subdivision of Pima County, Arizona according to the plat
recorded in the Office of the Recorder of said County in Book 4 of Maps and
Plats at Page 95;
EXCEPTING THEREFROM the following properties:
Any portion lying within widened Speedway as established by Resolution
recorded in Docket 142 at Page 66 and as shown on the map recorded in
Book 4 of Road Maps at Page 80;
Those portions conveyed in Docket 3098 at Page 1;
Those portions conveyed in Final Order of Condemnation
recorded in Docket 7996 at Page 1651; and
Those portions dedicated in easement and in fee through Ordinance 7966
recorded in Docket 9457 at Pages 730 to 736.
AND RESERVING AN EASEMENT UNTO TUCSON ELECTRIC POWER COMPANY in, on, over, under
and through the north 20 feet of the east 15 feet of said Parcel I.
RP 2066
Remainder Site
Approximately 99,157 s.f.
encumbered by easement over 2,640 s.f.
JU:slg
When Recorded, Return to:
VCA Tucson Incorporated
Attn: General Counsel
2777 E. Camelback Road
Phoenix, AZ 85016
ASSIGNMENT OF CONTRACT FOR SALE
This Assignment of Contract for Sale ("Assignment") is made and entered
into as of the 17 day of July, 1995, by and between ILX Incorporated, an
Arizona corporation ("Assignor"), and VCA Tucson Incorporated, an Arizona
corporation ("Assignee").
RECITALS:
A. Assignor is Buyer under that certain Contract for Sale dated June
16, 1995, and recorded July 13, 1995, in the office of the Pima County Recorder
at Docket 10084, Page 1919 (the "Contract for Sale"), wherein the City of
Tucson, a Municipal corporation, as Seller, has agreed to sell certain real
property to Buyer upon certain terms and conditions.
B. Assignee is a wholly-owned subsidiary of Varsity Clubs of
America Incorporated, an Arizona corporation, which in turn is a
wholly-owned subsidiary of Assignor.
C. Assignor and Assignee desire that Assignee become the Buyer
under the Contract for Sale.
AGREEMENT:
Assignor hereby assigns to Assignee all of its right, title and
interest as Buyer under the Contract for Sale, and Assignee hereby assumes all
obligations of Assignor as Buyer thereunder.
ASSIGNOR: ASSIGNEE:
ILX Incorporated VCA Tucson Incorporated
By: /s/ Joseph P. Martori By: /s/ Samuel L. Ciata
--------------------- --------------------
Joseph P. Martori Samuel L. Ciata
Its: Chairman Its: Vice President
------------------- -------------------
STATE OF ARIZONA )
) ss
COUNTY OF PIMA )
This instrument was acknowledged before me this 17 th day of July, 1995, by
Joseph P. Martori as Chairman of ILX Incorporated and by Samuel L Ciata as Vice
President of VCA Tucson Incorporated.
/s/Stephanie D. Castronova
---------------------------
Notary Public
APPROVAL OF ASSIGNMENT
The foregoing Assignment of Contract for Sale is hereby approved.
City of Tucson
By: /s/ Illegible
---------------------------
Its: Real Estate Administrator
---------------------------
Attest: /s/ Illegible 7/18/95
--------------------------
Title: Negotiations Coordinator
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S SECOND QUARTER 1995 CONSOLIDATED BALANCE
SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 2,616,368
<SECURITIES> 0
<RECEIVABLES> 11,174,874
<ALLOWANCES> 2,479,806
<INVENTORY> 18,511,491
<CURRENT-ASSETS> 29,822,927
<PP&E> 1,869,388
<DEPRECIATION> 500,129
<TOTAL-ASSETS> 34,974,078
<CURRENT-LIABILITIES> 3,788,394
<BONDS> 12,188,174
<COMMON> 9,222,394
0
1,525,152
<OTHER-SE> 30,000
<TOTAL-LIABILITY-AND-EQUITY> 34,974,078
<SALES> 10,896,142
<TOTAL-REVENUES> 14,933,267
<CGS> 3,974,729
<TOTAL-COSTS> 10,830,305
<OTHER-EXPENSES> 1,486,406
<LOSS-PROVISION> 603,319
<INTEREST-EXPENSE> 456,239
<INCOME-PRETAX> 1,841,947
<INCOME-TAX> 448,126
<INCOME-CONTINUING> 1,047,187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,047,187
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
