UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934
(Fee Required)
For the fiscal year ended December 31, 1994
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities Act of
1934 (No Fee Required)
For the transition period from to
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Commission File Number 33-16122
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ILX INCORPORATED
ARIZONA 86-0564171
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2777 East Camelback Road, Phoenix, AZ 85016
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Registrant's telephone number, including area code (602)957-2777
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Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Class on which registered
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Common Stock, without par value Over the Counter
Preferred Stock, $10 par value
Securities registered pursuant to Section 12 (g) of the Act: None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
stock, as of the latest practicable date.
Class Outstanding at February 28, 1995
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Common Stock, without par value 12,406,215 shares
Preferred Stock, $10 par value 420,728 shares
At February 28, 1995, the aggregate market value of Registrant's common shares
held by non-affiliates, based upon the closing bid price at which such stock was
sold as reported by the National Association of Securities Dealers, was
approximately $4.8 million.
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on June 26, 1995 are incorporated in Parts II and III as
set forth in said Parts.
<PAGE>
ILX INCORPORATED
1994 Form 10-K Annual Report
Table of Contents
Part I
Page
----
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II
Item 5. Market for the Registrant's Common Equity and 7
Related Stockholder Matters
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on 11
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial 11
Owners and Management
Item 13. Certain Relationships and Related Transactions 11
Part IV
Item 14. Exhibits, Financial Statement Schedules and 12
Reports on Form 8-K
PART I
Item 1. Business
ILX Incorporated ("ILX" or the "Company") is engaged primarily in developing,
operating, marketing and financing ownership interests in resort properties.
During 1994, ILX expanded its operations to include marketing of skin and hair
care products.
Resorts. ILX currently operates two resort properties, Los Abrigados,
in Sedona, Arizona and the Golden Eagle Resort in Estes Park, Colorado. ILX
sells interval ownership interests in each of the resorts. Customers purchase a
deed and title to a floating or fixed week's use of a unit as well as a week's
use of all common areas at the resort. Approximately 4,158 weeks in Los
Abrigados and 702 weeks in the Golden Eagle Resort were available for sale at
December 31, 1994. At December 31, 1994, options to purchase approximately 344
of the available Los Abrigados intervals had been extended to purchasers of
Golden Eagle intervals. The options expire one to two years from the date of
issue and provide the holder with the right to purchase a Los Abrigados interval
at the selling price and terms in effect on the date of issue.
ILX also owns and holds for sale at December 31, 1994, approximately
115 intervals in the Costa Vida Resort in Puerto Vallarta, Mexico and 22
intervals in the Ventura Resort in Boca Raton, Florida. In addition, ILX owns
approximately 85 weeks in various resorts located primarily in the United
States, Mexico and the Caribbean, which it has accepted in trade from customers.
ILX holds these various interests for resale.
During late 1994, ILX, through its wholly owned subsidiary Varsity
Clubs of America ("VCA"), commenced construction of its first Varsity Clubs of
America in Mishawaka, Indiana, near the University of Notre Dame. ILX is
pre-selling ownership interests in the property, which is expected to be
complete in June 1995. Customers purchase deed and title to a floating number of
night's use of a unit and unlimited use of the common areas of the resort.
Purchasers may also receive the right to utilize the facility on specified
dates, such as dates of home football games, for which they pay a premium. The
company intends to operate the resort as a commercial lodging facility to the
extent of unsold intervals. At December 31, 1994, contracts to purchase
approximately 274 nights had been accepted by VCA.
VCA intends to develop additional lodging accommodations near other
university campuses and to market the facilities, including interval ownership
interests, to alumni, sports enthusiasts, sponsors of major universities and
parents of students. VCA's current plans anticipate acquisition of two or three
additional sites and commencement of construction on each during 1995 and early
1996.
ILX extends financing, not to exceed 90% of the purchase price of the
ownership interval, to qualified purchasers of timeshare interests in the
Company's various resorts. ILX sells with recourse a portion of the consumer
obligations, borrows against a portion, and carries the balance. On occasion,
ILX reacquires an interval from a customer who defaults on his obligation. Such
reacquired ownership interests are held for resale.
ILX's interval ownership plans compete both with other interval
ownership plans as well as hotels, motels, condominium developments and second
homes. ILX considers its competitive environment to include not only the areas
surrounding its properties but also other vacation destination alternatives.
ILX's competitive posture is based on the distinction of its products, the
desirability of the locations of its properties, the quality of the amenities
ancillary to the interval ownership weeks, the value received for the price and
the availability of a variety of destination locations. ILX plans to continue
exploring options for the development and marketing of new resort facilities.
Red Rock Collection. In July 1994, ILX, through its wholly owned
subsidiary, Red Rock Collection Incorporated ("RRC"), commenced sales of an
exclusive line of skin and hair care products. The products are produced by
outside laboratories according to RRC's specifications and raw materials are
readily available. RRC is marketing its products through network and direct
marketing to consumers. RRC products are used as in-room amenities in ILX's
resort hotels and, commencing in 1995, are being offered as marketing premiums
to generate potential interval ownership customers. In addition, RRC intends to
enter the salon market in the second quarter of 1995. RRC is also exploring
opportunities to offer RRC formulated amenities to outside resorts and hotels.
Genesis. ILX, through its wholly owned subsidiary Genesis Investment
Group, Inc. ("Genesis"), holds for the purpose of liquidation ownership
interests in real estate, (both fee and lien), most of which is unimproved.
Other. Depending on seasonality requirements, ILX employs between 450
and 475 people.
Item 2. Properties
Los Abrigados Resort
Los Abrigados resort is located in Sedona, Arizona, approximately 110 miles
northwest of Phoenix. The resort consists of a main building which houses the
lobby and registration area, executive offices, meeting space, a health spa and
athletic club, food and beverage facilities and support areas. The hotel
contains 174 suites in 22 one and two story free-standing structures. In
addition, a two bedroom historic homesite which has been renovated to include a
spa and other luxury features is also located on the property and has been
marketed by the Company. The resort has an outdoor swimming pool, tennis courts
and other recreational amenities and is situated on approximately 19 acres of
land.
The Company offers membership interests to customers in the form of deed and
title which provide the right to occupy the resort for a designated amount of
time each year in perpetuity. A total of 9,100 interval ownership memberships
may be sold, of which approximately 4,158 were available for sale at December
31, 1994. One to two year options to purchase approximately 344 of these
available memberships have been extended to potential buyers on terms
substantially the same as those offered to current purchasers.
The property is encumbered by a first deed of trust securing loans in the
principal amount of $1,660,000, and by two subordinate deeds of trust of equal
priority securing repurchase obligations relating to borrowings against consumer
notes receivable of approximately $424,000 and sales of consumer notes
receivable with recourse in the amount of approximately $14.3 million at
December 31, 1994.
Golden Eagle Resort
The Golden Eagle Resort, located within the corporate limits of the Town of
Estes Park, Colorado and within three miles of the Rocky Mountain National Park,
contains a resort lodge which overlooks the Estes Valley and is bounded
generally by undeveloped forested mountainside land. Approximately four acres of
land are owned along with a four-story wood-frame main lodge that was
constructed in 1914. The lodge property contains 27 guest rooms, a restaurant,
bar, library and outdoor swimming pool, as well as two other free standing
buildings containing six guest rooms and support facilities. Space is available
to construct eleven to fifteen additional suites in the lodge and adjacent
buildings and the Company also owns a residence in a duplex adjacent to the
property which may be marketed.
The Company offers deed and title interests which provide the right to occupy a
specific unit for a specific week each year in perpetuity and plans to offer a
minimum of approximately 1,785 such interval ownership weeks, exclusive of the
adjacent condominium. Approximately 702 interests in completed suites are
available for sale at December 31, 1994. The Company offers certain purchasers
of Golden Eagle interests the option to convert their ownership to other ILX
owned properties at a designated time for a pre-determined amount. Golden Eagle
interests received from converting owners are offered for resale.
The resort is encumbered by a first deed of trust securing a loan in the
principal amount of $639,916 and by a second deed of trust securing repurchase
obligations relating to borrowings against consumer notes receivable in the
principal amount of $626,265 and sales of consumer notes receivable sold with
recourse in the approximate amount of $943,000 at December 31, 1994.
Interval Ownership Interests in Costa Vida and Ventura Resorts
At December 31, 1994, the Company owned and held for sale 22 interval ownership
interests in the Ventura Resort in Boca Raton, Florida, 115 interval ownership
interests in the Costa Vida Resort in Puerto Vallarta, Mexico, and 85 interval
ownership interests in other resort properties worldwide. These intervals are
owned free and clear by the Company at December 31, 1994.
Varsity Clubs of America - Notre Dame
Varsity Clubs of America - Notre Dame is under construction in Mishawaka,
Indiana at December 31, 1994. The resort is situated on approximately four acres
of land and will consist of a three story main building which houses 60 one and
two-bedroom suites, the lobby, gift shop, meeting space, member lounge, health
club, and food and beverage facilities and a separate one story building which
contains a three bedroom suite and a one bedroom suite.
The Company offers membership interests to customers in the form of deed and
title which provide the right to occupy the resort for a designated amount of
time each year in perpetuity. Memberships are offered in one day intervals.
Approximately 22,568 one day intervals will be offered for sale. Sales contracts
have been accepted in advance of completion for approximately 274 one day
intervals at December 31, 1994.
The property is encumbered by a first mortgage securing construction financing
in the amount of $400,784 at December 31, 1994.
Red Rock Collection Building
The Company owns an 8400 square foot building in Phoenix, Arizona which houses
the Red Rock Collection office and warehouse facilities. The building is
encumbered by a deed of trust in the amount of $225,000 at December 31, 1994.
Land
The Company owns various parcels of unimproved real estate in Arizona through
its wholly owned subsidiary Genesis and is presently marketing these properties.
At December 31, 1994, the real estate held for sale less encumbrances was
recorded at $1,673,168. It is the Company's intention to liquidate this land in
the next twelve to twenty four months.
Company Headquarters
The Company leases its corporate headquarters in Phoenix, Arizona under a five
year lease through April 30, 1998. The terms of the lease provide the Company
with the option to extend the lease for three additional one year periods and
with a right of first refusal to purchase the building. The landlord has the
right to cancel the lease upon one year notice and payment of a $20,000
cancellation fee in the event the building is sold. Such cancellation may not
occur prior to May 1, 1997.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded over-the-counter under the National
Association of Securities Dealers (NASD) trading symbol ILEX. The following
table sets forth the high and low bid and ask prices for the stock for each full
quarterly period during 1994 and 1993. The following over-the-counter market
quotations reflect inter-dealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.
Bid Ask
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Quarter Ended High Low High Low
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December 31, 1994 .................. 1.63 1.13 1.75 1.31
September 30, 1994 ................. 1.75 1.50 1.94 1.56
June 30, 1994 ...................... 2.00 1.13 2.13 1.31
March 31, 1994 ..................... 1.75 1.19 2.00 1.25
December 31, 1993 .................. 2.00 1.50 2.13 1.56
September 30, 1993 ................. 1.88 1.06 2.13 1.25
June 30, 1993 ...................... 1.50 .63 1.63 .81
March 31, 1993 ..................... 1.25 .50 1.38 .66
On February 28, 1995, the number of holders of the Company's common stock was
approximately 1300. No dividends have been declared by the Company since
inception and dividends are not anticipated in the foreseeable future.
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
Year ended December 31,
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1994 1993 (1) 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
Revenue ................................ $ 29,950,669 $ 20,459,379 $ 18,856,660 $ 6,095,859 $ 2,352,734
Net income (loss) ...................... 2,366,770 2,076,231 1,325,874 (307,051) (1,602,093)
Net income (loss) per
common and equivalent share ............ .19 .18 .12 (.04) (.28)
Total assets ........................... 28,621,887 24,906,969 15,748,315 15,026,975 5,528,943
Notes payable .......................... 6,882,445 5,408,898 4,865,107 5,577,229 2,550,758
Total shareholders'
equity ............................... 13,175,612 10,541,495 6,477,838 5,095,895 1,562,096
(1) The 1993 data includes the effects of the acquisition of Genesis effective November 1, 1993.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The increases in sales of timeshare interests between years reflect improved
closing rates in the Sedona Sales Office and, in the 3rd quarter of 1994, the
expansion of the Sedona Sales Office to accommodate a greater number of tours.
In addition, sales from the Phoenix Sales Office increased following the
Company's assumption of this operation, as discussed below. Included in 1994 and
1992 sales of timeshare interests is $428,100 and $971,900 in revenue,
respectively, from a bulk sale of 667 weekly intervals in Los Abrigados resort
which occurred in 1992. The 1994 revenue had been deferred pending collection of
the $900,000 note receivable arising from the sale which was collected in March
1994.
Effective January 31, 1994, the Company acquired the assets of the organization
which had performed the sales and marketing for the Phoenix Sales Office and the
Company assumed those sales and marketing operations. Prior to that date, the
Company paid a flat percentage of sales to the outside organization which
operated in facilities it leased from the Company and that percentage of sales
was included in cost of timeshare interests sold . After the acquisition, the
Company began recording the costs of generating tours to and operations of the
Phoenix Sales Office as advertising and promotion expenses. Commissions and
other compensation paid to sales staff are recorded as costs of timeshare
interests sold. The effect has been an increase in advertising and promotion
expense and a corresponding decrease in cost of timeshare interests sold as a
percentage of sales of timeshare interests in 1994. Costs of timeshare interests
sold as a percentage of sales of timeshare interests have also decreased in 1993
and 1994 because of improved closing rates at the Sedona Sales Office.
The increases in resort operating revenue between years reflect the increases in
total resort occupancy and in average daily rate from resort guests, and
increased utilization of food and beverage outlets. The improvements in resort
occupancy are a result of the increasing usage of the resort by prospective
timeshare purchasers and timeshare owners, net of the decreasing availability of
rooms for resort guests. Accordingly, the cost of resort operations as a
percentage of resort operating revenue has increased in 1994 because prospective
purchasers and timeshare owners pay substantially reduced rates for their room
usage and because the variable cost of providing food and beverage is greater as
a percentage of corresponding revenue than the variable cost as a percentage of
revenue of providing rooms to resort guests. Total occupancy is expected to
continue to increase consistent with sales to timeshare purchasers. Demand for
food, beverage, spa and other services is anticipated to increase
correspondingly. The Company has been modifying and expanding its food and
beverage outlets and further changes will be complete in the second quarter of
1995 to capitalize on the revenue opportunities available from owners, tours and
resort guests.
Sales of land and the associated cost of land sold reflect sales of unimproved
real property acquired in the 1993 Genesis acquisition.
Sales of consumers products and the related cost of consumer products reflect
the commencement of Red Rock Collection sales in the third quarter of 1994.
Amortization of approximately $565,000 in deferred Red Rock Collection costs is
included in general and administrative expense in 1994. The balance of the
deferred costs of $364,138 at December 31, 1994 will be amortized through June
1997.
The provision for doubtful accounts is provided primarily for sales of timeshare
interests. The decrease in the 1994 provision as a percentage of sales of
timeshare interests reflects collection experience more favorable than
expectations.
The increases in interest income between years reflect increases in consumer
paper retained by the Company.
In 1993 and 1992, tax benefits resulted from decreases in the valuation
allowance which had been established to reflect the uncertainty of the
utilization of deferred tax assets. In 1993, an additional deferred tax asset
was recorded to reflect the future tax benefit of the Genesis net operating loss
carryforwards and a valuation allowance was recorded to offset the full amount
of the asset. This valuation allowance was reduced in 1994 due to the
profitability of Genesis and the development of tax strategies which are
intended to improve the likelihood that the net operating loss carryforwards
will be utilized.
The increase in minority interests between years reflects the increased
profitability of Los Abrigados Limited Partnership ("LAP"), the partnership
which owns the Los Abrigados resort, net of a decrease in the minority interest
ownership of LAP effective July 1, 1994, of 7.5%. In addition, 1994 minority
interests include approximately $236,000 in partnerships in which the Company's
Genesis subsidiary is a partner.
During the third quarter of 1994, the Company opened a sales office adjacent to
the site of its first Varsity Clubs of America near the University of Notre Dame
in Indiana. Construction commenced in the fourth quarter of 1994 and completion
is expected in June 1995. Sales and marketing expenses of approximately $283,000
for promoting sales of Varsity Clubs of America - Notre Dame have been expensed
during 1994 and are included in advertising and promotion. Revenue generated by
these marketing efforts, however, has been deferred pending substantial
completion of the facility. Deferred revenue of $513,000, net of associated
costs of sales of $148,000, is included in deferred revenue at December 31,
1994. The Notre Dame Sales Office also offers timeshare interests in the
Company's other resorts. Sales of intervals in other resorts of approximately
$319,000 are included in 1994 sales of timeshare interests.
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 $18 million in lines of credit issued by financing companies under which
conforming notes from sales of interval interests in Los Abrigados and the
Golden Eagle Resort can be sold to lenders on a recourse basis. At December 31,
1994, approximately $12 million is available under the lines. 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 December 31, 1994.
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.
This commitment was unused at December 31, 1994.
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, both available for working capital. At
December 31, 1994, $150,000 was available on the lines.
In October 1994, the Company entered into financing arrangements to borrow $2
million from the first deed of trust holder on the Los Abrigados resort and
simultaneously repay the then outstanding $1,079,000 principal on the first deed
of trust. The net additional financing of $921,000 was utilized for expansion of
food and beverage facilities at Los Abrigados and to purchase the Class A
partners' minority interest in LAP held by non-affiliates. In conjunction with
the refinancing, the deed of trust holder had an MAI appraisal performed of the
property which valued the resort at $18,800,000 at July 31, 1994. From the
appraisal date through December 31, 1994, 664 timeshare intervals were sold.
During 1994, the Company acquired the land for Varsity Clubs of America - Notre
Dame for approximately $691,000 cash and secured $5 million in construction
financing to build and furnish the facility. Approximately $401,000 has been
drawn on the construction commitment at December 31, 1994. The Company believes
the $5 million in construction financing will be sufficient to complete the
facility.
The Company optioned additional Varsity Clubs of America sites during 1994 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.
In July 1994, the Company acquired for $10,000 an option through October 1, 1994
to purchase 15.37 acres of undeveloped property in Sedona, Arizona for $4.5
million. The option may be extended through July 1, 1995, for monthly payments
totaling $260,000, all of which may be applied to the purchase price. In
September 1994, the Company entered into a 50/50 joint venture agreement for the
project with a development company and assigned the option agreement to the
joint venture. During the option period, the joint venture intends to
investigate the feasibility of developing a resort and retail complex on the
site. The joint venture is currently negotiating a reduction in the monthly
option payment. The Company's investment in the joint venture at December 31,
1994, is approximately $40,000.
Cash provided by operating activities increased between 1992 and 1994 because of
increased profitability and because of decreases in the amount of non-financed
consumer notes receivable. Both the income portion of a bulk sale and the
deferred income portion were included in net cash provided by operating
activities in 1992.
Cash used in investing activities increased from 1992 through 1994 due to
greater additions and improvements to resort property held for timeshare sales
in 1993 and 1994, due to greater investment in plant and equipment in 1993 and
1994, including leasehold improvements to the corporate headquarters building in
1993 and acquisition of the Red Rock Collection building and improvements
thereto in 1994, and due to the investment in 1993 in deferred Red Rock
Collection costs and the investment in 1994 in Varsity Clubs of America resort
property under development.
The decrease in cash used in financing activities between 1992 and 1993 is due
to greater proceeds from notes payable and the issuance of minority interests in
Red Rock Collection. The increase in cash used in financing activities in 1994
reflects greater principal payments on notes payable, net of increased
borrowings.
In March 1995, the Company borrowed an additional $1,010,000 from the first
mortgage holder on the Golden Eagle Resort. The Company intends to use 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 March 1995, the Company entered into an agreement, subject to a sixty day
right of cancellation, to acquire the Kohl's Ranch, a ten acre rustic resort
near Payson, Arizona for $1,650,000. The purchase price will consist of a
$50,000 cash down payment, assumption of the existing deed of trust of
approximately $950,000, seller financing of approximately $350,000, and the
issuance of 150,000 shares of ILX restricted common stock valued at $2 per
share. The Company intends to secure additional financing from the first deed of
trust holder for a portion of the cost of improvements and renovation and
intends to finance the balance of approximately $400,000 either through other
financing sources or from working capital. The Company plans to offer interval
ownership interests in the property.
The Company believes that its capital resources are adequate to meet current and
foreseeable future needs.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data required by Item 8
are set forth in Part IV, Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 11. Executive Compensation
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in response to this Item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
Item 13. Certain Relationships and Related Transactions
Information in response to this item is incorporated herein by reference from
the Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A
within 120 days after the end of the most recent fiscal year covered by this
Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Consolidated Financial Statements Page or Method of Filing
--------------------------------- ------------------------
(i) Consolidated Financial Statements and Pages 14 through 32
Notes to Consolidated Statements of
the Registrant, including Consolidated
Balance Sheets as of December 31,
1994 and 1993 and Consolidated
Statements of Operations, Shareholders'
Equity and Cash Flows for each of the
three years ended December 31,
1994, 1993 and 1992.
(ii) Report of Deloitte & Touche LLP Page 13
(a) (2) Consolidated Financial Statement
--------------------------------
Schedules
---------
Reserve for possible credit losses Page 34
Schedules other than those mentioned above are omitted because
the conditions requiring their filing do not exist or because
the required information is given in the financial statements,
including the notes thereto.
(a) (3) Exhibits
The Exhibit Index attached to this report is hereby
incorporated by reference.
(b) Reports on Form 8-K
None
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
ILX Incorporated:
We have audited the accompanying consolidated balance sheets of ILX Incorporated
and subsidiaries (the "Company") as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1994
and 1993, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 10, 1995
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
1994 1993
----------- -----------
Assets
Cash and cash equivalents ..................... $ 3,635,587 $ 2,060,107
Notes receivable, net (Notes 2, 10, 11 and 14). 6,750,896 6,671,626
Resort property held for timeshare sales
(Notes 3 and 10) ......................... 9,407,733 9,749,018
Resort property under development (Note 6)..... 1,735,592 --
Land held for sale (Note 4) ................... 1,673,168 3,113,933
Deferred assets (Notes 5, 6 and 7) ........... 1,114,137 1,465,769
Property and equipment , net (Note 8) ......... 1,437,227 692,387
Deferred income taxes (Note 9) ................ 1,137,524 397,771
Other assets .................................. 1,730,023 756,358
----------- -----------
$28,621,887 $24,906,969
Liabilities and Shareholders' Equity =========== ===========
Accounts payable .............................. $ 1,581,659 $ 1,800,194
Accrued and other liabilities ................. 1,488,816 944,779
Genesis funds certificates (Note 4) ........... 1,612,457 2,181,016
Due to affiliates (Notes 7, 12, and 16) ....... 984,534 728,876
Deferred income (Notes 2 and 6) ............... 365,195 456,899
Notes payable (Note 10) ....................... 4,881,861 4,356,990
Notes payable to affiliates (Note 11) ......... 2,000,584 1,051,908
----------- -----------
12,915,106 11,520,662
----------- -----------
Minority Interests (Note 12) ................... 2,531,169 2,844,812
----------- -----------
Commitments (Note 13)
Shareholders' Equity (Notes 14 and 15)
Preferred stock, $10 par value;
10,000,000 shares authorized;
430,313 and 438,175 shares issued and
outstanding; liquidation preference of
$4,303,130 and $4,381,750, respectively ..... 1,648,755 1,673,028
Common stock, no par value;
40,000,000 shares authorized; 12,405,325
and 12,083,618 shares issued and outstanding. 8,972,969 8,681,349
Additional paid in capital .................... 30,000 30,000
Retained earnings ............................. 2,523,888 157,118
----------- -----------
13,175,612 10,541,495
----------- -----------
$28,621,887 $24,906,969
=========== ===========
See notes to consolidated financial statements
<PAGE>
<TABLE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Sales of timeshare interests ................................ $ 18,713,970 $ 12,263,619 $ 11,136,950
Resort operating revenue .................................... 8,764,558 8,072,260 7,719,710
Sales of land ............................................... 2,237,166 123,500 --
Sales of consumer products .................................. 234,975 -- --
----------- ------------ ------------
29,950,669 20,459,379 18,856,660
----------- ------------ ------------
Cost of sales and operating expenses:
Cost of timeshare interests sold............................. 6,592,684 5,007,131 4,911,976
Cost of resort opertions .................................... 7,807,857 6,962,849 6,787,831
Cost of land sold ........................................... 1,796,974 113,618 --
Cost of consumer products .................................. 158,657 -- --
Advertising and promotion ................................... 5,941,761 3,168,562 2,900,258
General and administrative .................................. 2,834,466 1,510,448 1,339,962
Provision for doubtful accounts ............................. 764,065 666,690 629,510
----------- ------------ ------------
25,896,464 17,429,298 16,569,537
----------- ------------ ------------
Operating income ................................................. 4,054,205 3,030,081 2,287,123
Other income (expense):
Interest expense (Note 11) .................................. (666,141) (599,238) (643,023)
Interest income ............................................. 402,596 359,908 169,600
----------- ------------ ------------
(263,545) (239,330) (473,423)
----------- ------------ ------------
Income before income taxes ....................................... 3,790,660 2,790,751 1,813,700
Income tax benefit ............................................... 16,144 100,000 100,000
----------- ------------ ------------
Income before minority interests ................................. 3,806,804 2,890,751 1,913,700
Minority interests ............................................... (1,440,034) (814,520) (587,826)
----------- ------------ ------------
Net income ....................................................... $ 2,366,770 $ 2,076,231 $ 1,325,874
============ ============ ============
Net income per common and
equivalent share ............................................... $ 0.19 $ 0.18 $ 0.12
============ ============ ============
Number of common and equivalent shares ........................... 12,463,246 11,791,786 11,229,991
============ ============ ============
Net income per share assuming
full dilution .................................................. $ 0.18 $ 0.17 $ 0.12
============ ============ ============
Number of fully diluted shares ................................... 12,971,235 12,301,206 11,229,991
============ ============ ============
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Retained
Common Stock Additional Preferred Stock Earnings/
------------------------- Paid In ---------------------- Accumulated
Shares Amount Capital Shares Amount Deficit Total
---------- --------- ------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1991 10,973,414 $7,240,482 - 357,540 $1,100,400 ($3,244,987) $5,095,895
Net income - - - - - 1,325,874 1,325,874
Issuance of common stock 294,684 142,039 - - - - 142,039
Purchase of Series B
preferred stock - - 30,000 (220,000) (220,000) - (190,000)
Exchange of preferred stock
for lodging certificates - - - (4,597) (45,970) - (45,970)
Collection of note receivable
for exercise of warrants - 150,000 - - - - 150,000
---------- --------- ------ -------- ---------- ---------- ----------
Balances, December 31, 1992 11,268,098 7,532,521 30,000 132,943 834,430 (1,919,113) 6,477,838
Net income - - - - - 2,076,231 2,076,231
Issuance of common stock 815,520 1,148,828 - - - - 1,148,828
Issuance of preferred stock - - - 305,652 842,798 - 842,798
Exchange of preferred stock
for lodging certificates - - - (420) (4,200) - (4,200)
---------- --------- ------ -------- ---------- ---------- ----------
Balances, December 31, 1993 12,083,618 8,681,349 30,000 438,175 1,673,028 157,118 10,541,495
Net Income - - - - - 2,366,770 $2,366,770
Issuance of common stock 147,616 152,232 - - - - 152,232
Exchange of preferred stock
for common stock 12,100 20,038 - (7,260) (20,038) - -
Exercise of options 162,586 121,135 - - - - 121,135
Exchange of preferred stock
for lodging certificates - - - (245) (2,450) - (2,450)
Exercise of cash options (595) (1,785) - (357) (1,785) - (3,570)
---------- --------- ------ -------- ---------- ---------- ----------
Balances, December 31, 1994 12,405,325 $8,972,969 $30,000 430,313 $1,648,755 $2,523,888 $13,175,612
========== ========== ======== ======== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS DECEMBER 31, 1994, 1993, 1992
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................................ $ 2,366,770 $ 2,076,231 $1,325,874
Adjustments to reconcile net income to
net cash provided by operating activities:
Undistributed minority interest ....................................... 760,306 651,205 310,736
Deferred income taxes ................................................. (739,753) (297,771) (100,000)
Additions to notes receivable - net ................................... 332,906 (1,225,849) (2,494,220)
Provision for doubtful accounts ....................................... 764,065 666,690 629,510
Depreciation and amortization ......................................... 1,061,654 352,877 271,327
Cost of timeshare interests sold ...................................... 2,393,298 1,457,360 2,093,264
Cost of land sold ..................................................... 1,440,765 -- --
Amortization of guarantee fees ........................................ 140,550 132,054 47,496
Change in assets and liabilities, net of the
effects from purchase of subsidiary:
(Increase) decrease in other assets ............................... (862,965) 226,307 189,500
Increase (decrease) in accounts payable ........................... (218,535) 241,931 (119,253)
Decrease in Genesis funds certificates ............................ (568,559) -- --
Increase in accrued and other liabilities ......................... 569,187 187,762 82,064
Increase in due to affiliates ..................................... 255,658 39,251 42,155
Increase (decrease) in deferred income ............................ (91,704) 28,799 428,100
----------- ----------- ----------
Net cash provided by operating activities .............................. 7,603,643 4,536,847 2,706,553
----------- ----------- ----------
Cash flows from investing activities:
(Increase) decrease in deferred assets ................................ (353,251) (904,173) 106,439
Purchases of plant and equipment ...................................... (581,435) (741,323) (28,529)
Net cash acquired from purchase of subsidiary ......................... -- 343,510 1,135
Net cash paid for Class A minority interest ........................... (371,250) -- --
Additions to resort property held for timeshare sales ................. (1,522,440) (1,678,861) (983,099)
Additions to resort property under development ........................ (1,735,592) -- --
----------- ----------- ----------
Net cash used in investing activities .................................. (4,563,968) (2,980,847) (904,054)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from notes payable ........................................... 4,989,755 1,579,056 --
Proceeds from notes payable to affiliates ............................. -- 300,000 --
Principal payments on notes payable ................................... (6,006,073) (1,567,486) (1,127,717)
Principal payments on notes payable to affiliates ..................... (567,074) (820,265) (529,405)
Payments in lieu of issuance of common stock .......................... -- (1,560) --
Payments in lieu of issuance of preferred stock ....................... -- (1,560) --
Proceeds from issuance of common stock ................................ 122,767 -- 207,664
Proceeds from issuance of minority interest in subsidiary ............. -- 300,000 --
Redemption of preferred stock ......................................... (1,785) -- --
Redemption of common stock ............................................ (1,785) -- --
----------- ----------- ----------
Net cash used in financing activites ................................... (1,464,195) (211,815) (1,449,458)
----------- ----------- ----------
Net increase in cash and cash equivalents .............................. 1,575,480 1,344,185 353,041
Cash and cash equivalents at beginning of year ......................... 2,060,107 715,922 362,881
----------- ----------- ----------
Cash and cash equivalents at end of year ............................... $ 3,635,587 $ 2,060,107 $ 715,922
=========== =========== ===========
See notes to consolidated financial statements and supplemental schedules of noncash investing and financing activities
</TABLE>
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities for the year
ended December 31, 1994:
Acquisition of Class A interest:
Increase in notes payable ............................... $ 1,215,750
Reduction in minority interest .......................... (773,949)
Increase in resort property held for timeshare sales .... (813,051)
-----------
Net cash paid for Class A minority interest ............. $ 371,250
===========
Purchases of plant and equipment
Increase in notes payable ............................... $ 364,948
Increase in plant and equipment ......................... (364,948)
-----------
$ 0
===========
Purchase of minority interest in subsidiary
Increase in other assets ................................ ($ 123,000)
Increase in notes payable ............................... 300,000
Issuance of common stock ................................ 123,000
Reduction in minority interest .......................... (300,000)
-----------
$ 0
===========
Exchange of Series C Preferred Stock for common stock:
Issuance of common stock ................................ $ 20,038
Reduction in Series C Preferred Stock ................... (20,038)
-----------
$ 0
===========
Redemption of Series A Preferred Stock:
Issuance of certificates for room nights ................ $ 2,450
Reduction in series A Preferred Stock ................... (2,450)
-----------
$ 0
===========
Tax benefit on exercise of stock options
Increase in common stock ................................ $ 27,600
Reduction in taxes payable .............................. (27,600)
-----------
$ 0
===========
See notes to consolidated financial statements
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental schedule of noncash investing and financing activities for the year
ended December 31, 1993:
Purchase of subsidiary:
Acquisition of notes receivable ....................... ($2,644,310)
Acquisition of land held for sale ..................... (2,345,902)
Acquisition of other assets ........................... (261,568)
Assumption of accounts payable ........................ 838,354
Assumption of Genesis funds certificates .............. 2,162,943
Assumption of notes payable ........................... 502,486
Assumption of minority interest ....................... 402,791
Issuance of preferred stock ........................... 844,358
Issuance of common stock .............................. 844,358
-----------
Net cash acquired from
purchase of subsidiary ......................... $ 343,510
===========
Exchange of note for land:
Increase in land held for sale ........................ ($ 768,031)
Decrease in notes receivable .......................... 768,031
-----------
$ 0
===========
Issuance of common stock for reduction of
Class A Priority return:
Issuance of common stock .............................. $ 204,000
Reduction in minority interest ........................ (204,000)
-----------
$ 0
===========
Redemption of common stock to reduce
amounts due to affiliates:
Issuance of common stock .............................. $ 102,000
Reduction in due to affiliates ........................ (102,000)
-----------
$ 0
===========
Redemption of Series A Preferred Stock:
Issuance of certificates for room nights .............. $ 4,200
Reduction in series A Preferred Stock ................. (4,200)
-----------
$ 0
===========
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 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.
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.
Net Income per Share
Net income per common share and common equivalent share is based on the weighted
average number of common shares outstanding, including common stock equivalents
which have a dilutive effect. Common stock equivalents consist of Series B
Convertible Preferred Stock, warrants and shares issuable under the stock option
plan (Notes 14 and 15). Net income per common share and common equivalent share
is based on net income adjusted for undeclared dividends on Series C Preferred
Stock. Net income per share assuming full dilution is based on the weighted
average number of common shares outstanding, including common stock equivalents,
and after giving effect to the conversion of Series C Preferred Stock.
Resort Property Held for Timeshare Sales
Resort property held for timeshare sales is recorded at the lower of historical
cost less amounts charged to cost of sales for timeshare sales and depreciation
provided for on the basis of daily rental occupancy, or market. As timeshare
interests are sold, the Company amortizes to cost of sales the average carrying
value of the property plus estimated future additional costs related to
remodeling and construction.
Land Held for Sale
Land held for sale is recorded at the lower of cost or estimated realizable
value, consistent with the Company's intention to liquidate these properties
(Note 4).
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 the Company has been
released of all future obligations for the timeshare interest. 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.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes ("SFAS No.
109"), which requires an asset and liability approach for financial accounting
and reporting for income taxes. In the first quarter of 1992, the Company
adopted SFAS No. 109, which had no material effect on the consolidated financial
statements.
Statements of Cash Flows
Cash equivalents are highly liquid investments with an original maturity of
three months or less. During the years ended December 31, 1994, 1993 and 1992,
the Company paid interest of approximately $716,000, $503,000, and $517,000 and
income taxes of approximately $723,000, $193,000 and $6,000 respectively.
Reclassifications
The financial statements for prior periods have been reclassified to be
consistent with the 1994 financial statement presentation.
Note 2 - Notes Receivable
Notes receivable consist of the following:
December 31,
------------------------------
1994 1993
------------ ------------
Timeshare receivables ...................... $ 5,243,443 $ 4,954,678
Holdbacks by financial institutions ........ 1,993,965 1,106,716
Genesis mortgage receivables (Note 4) ...... 776,776 1,426,058
Allowance for possible credit losses ....... (1,263,288) (815,826)
------------ ------------
$ 6,750,896 $ 6,671,626
============ ============
Notes generated from the sale of timeshare interests bear interest at annual
rates ranging from 9% to 16% and have terms of five to ten years. In addition,
the Company offers 0% interest and below market interest, and one and two year
financing, to purchasers who pay 50% of the purchase price at the time of sale.
These notes are discounted to yield a consumer market rate. The notes are
collateralized by deeds of trust on the timeshare interests sold. Included in
notes receivable at December 31, 1993, was a note for $900,000 from a California
limited partnership which acquired in December 1992, 667 timeshare interests at
Los Abrigados resort for $500,000 cash and a $900,000 promissory note. Annual
principal payments were not required under the terms of the note receivable and,
therefore, the gross profit of $428,100 on the $900,000 was deferred until
collection in 1994 (Note 14).
The Company has agreements with financial institutions under which the Company
may sell certain of its notes receivable. These agreements provide for sales on
a recourse basis with a percentage of the amount sold held back by the financial
institution as additional collateral. At December 31, 1994 and 1993, the Company
had approximately $15 million and $11 million in outstanding notes receivable
sold on a recourse basis. Portions of the notes receivable are secured by second
deeds of trust on the Los Abrigados resort and the Golden Eagle Resort. Notes
may be sold at discounts to yield the consumer market rate as defined by the
financial institution.
At December 31, 1994, the Company had $13,000,000 in financing commitments
through September 1996, and an additional $5,000,000 through March 1995, to sell
consumer notes receivable generated from sales of timeshare interests at the Los
Abrigados resort and the Golden Eagle Resort. At December 31, 1994,
approximately $ 11 million remained available on the commitments expiring in
September 1996, and approximately $771,000 on the commitment expiring in March
1995. Subsequent to December 31, 1994, an additional $5 million was committed
through September 1996, to replace the $5 million commitment expiring in March
1995. The Company also has financing commitments whereby it may borrow up to
$2.5 million against notes receivable generated from sales of timeshare
interests at the Golden Eagle Resort through September 1998. Approximately $1.3
million remained available on this commitment at December 31, 1994.
In January 1992, the Company sold consumer notes receivable to affiliates of the
Company for proceeds of $368,000, consisting of $156,000 cash and the assignment
of Los Abrigados Limited Partners ("LAP") Class A priority returns, LAP Class B
limited partners interest payments and loan guarantee fees totaling $212,000.
The notes were sold with recourse and the Company recognized a loss of
approximately $60,000 on the sale. At December 31, 1994 and 1993, the Company
had approximately $304,000 and $357,000, respectively, in outstanding notes
receivable sold on a recourse basis related to this sale.
During 1993, the Company borrowed $550,000 from affiliates of the Company,
collateralized by notes receivable with principal balances of approximately
$760,000 at the date of the borrowings. Balances outstanding on the borrowings
totaled $332,724 and $521,105 at December 31, 1994 and 1993, respectively (Note
11).
In May 1994, the Company sold its interest in certain land held for sale for
$825,000 cash and a $950,000 note receivable. The Company then sold the note,
with recourse, at face value. Principal of $750,000 on the note remains
outstanding at December 31, 1994, and is secured by the underlying real estate.
At December 31, 1994, notes receivable in the amount of approximately $240,000
have been contributed to the Company's Series A Preferred Stock sinking fund and
therefore their use is restricted (Note 14).
The reserve for possible credit losses of approximately $1,263,000 and $816,000
at December 31, 1994 and 1993, reflect reserves for both notes sold with
recourse and notes retained.
Note 3 - Resort Property Held for Timeshare Sales
Resort property held for timeshare sales consists of the following projects:
December 31,
-----------------------------
1994 1993
---------- ----------
Los Abrigados Resort ................... $6,846,715 $6,773,148
Golden Eagle Resort .................... 2,443,818 2,829,670
Costa Vida Resort ...................... 68,200 88,200
Ventura Resort ......................... 49,000 58,000
---------- ----------
$9,407,733 $9,749,018
========== ==========
Resort properties are stated net of accumulated depreciation of $878,000 and
$599,000 at December 31, 1994 and 1993, respectively.
In September 1994, the Company acquired an option to purchase 667 previously
sold timeshare interests in the Los Abrigados resort. The terms of the option
agreement provide that the seller may sell to the Company up to 25 intervals per
month and, in addition, up to one half of the remainder of the 667 intervals per
year, for $2100 per interval. The seller must provide the Company with written
notice of its intent to sell 30 days in advance of a monthly sale and 180 days
in advance of an annual sale. The seller has neither provided notice of its
intent to sell nor sold any intervals to the Company through December 31, 1994.
Commencing July 1, 1995, the Company has the option to purchase from the seller
from time to time for a price of $2100 per interval, groups of 25 or more
intervals. The option was acquired from an affiliate.
Note 4 - Genesis Investment Group, Inc.
In March 1993, the Company reached agreement to acquire Genesis Investment
Group, Inc. ("Genesis"), a reorganized company resulting from the restructuring
of the investments originally made by hundreds of individuals and pension plans
and secured by interests in real property located principally in Arizona. As a
result of the reorganization, Genesis became a public company in 1988 holding
ownership interests in real estate (both fee and liens), most of which are
unimproved. On November 1, 1993, a wholly owned subsidiary of ILX consummated
its merger with and into Genesis and, as a result, Genesis, the surviving
corporation, became a wholly owned subsidiary of ILX. Under the terms of the
merger agreement, the Company issued a unit consisting of five shares of ILX
common stock and three shares of Series C Convertible Preferred Stock, with a
par value of $10 per share, for each ten shares of Genesis common stock. Each
three shares of Series C Preferred Stock are convertible after one year, at the
option of the holder, into five shares of ILX common stock. The merger agreement
also provides that Genesis shareholders who would otherwise receive fractional
units in exchange for all or a portion of their Genesis shares shall receive $3
per Genesis share for the fractional portion. Genesis shareholders who hold
fewer than 100 Genesis shares have the option under the merger agreement to
select cash of $3 per Genesis share in lieu of ILX units.
On November 1, 1993, the date of the merger, ILX issued 101,988 units, the
maximum number of whole units that Genesis shareholders are entitled to under
the terms of the merger agreement, consisting of 305,964 shares of Series C
Preferred Stock recorded at $844,358 and 509,940 shares of ILX common stock
recorded at $844,358, and recorded a liability in the amount of $17,262 for
fractional units. As Genesis shareholders who own fewer than 100 shares elect
cash in lieu of units, the ILX Series C Preferred Stock and common stock are
reduced. During 1994, Genesis shareholders elected to receive $3,570 in cash,
and, accordingly, Series C Preferred Stock and common stock were each reduced by
$1,785 (Note 14).
The acquisition has been accounted for as a purchase with the cost allocated to
preferred and common shares based on the assumption that all preferred shares
are converted to common shares.
The balance sheet of Genesis at November 1, 1993, was as follows:
(Unaudited)
----------
Assets
Cash and cash equivalents .............................. $ 343,510
Notes receivable, net .................................. 2,644,310
Land held for sale ..................................... 2,345,902
Other assets ........................................... 261,568
----------
$5,595,290
==========
Liabilities and Shareholder Equity
Accounts payable ....................................... $ 838,354
Genesis funds certificates ............................. 2,162,943
Notes payable .......................................... 502,486
Minority interests ..................................... 402,791
----------
3,906,574
----------
Stockholder equity ..................................... 1,688,716
----------
$5,595,290
==========
The Genesis funds certificates arise from the reorganization of Genesis and
represent non-recourse liabilities. The holders are entitled to receive 50% of
the net proceeds from the sale of certain Genesis properties. Such amounts have
been recorded based upon the estimated realizable values of the related
properties.
If the Company and Genesis had been combined as of January 1, 1992, the proforma
results of the combined entity would be as follows:
December 31,
----------------------------
1993 1992
(Unaudited) (Unaudited)
------------ -----------
Total revenues ............................... $ 21,137,079 $19,125,010
------------ -----------
Net income ................................... $ 1,898,500 $1,982,904
------------ -----------
Net income per common and
equivalent share .......................... $ 0.16 $ 0.17
------------ -----------
Net income per share assuming full dilution .. $ 0.15 $ 0.16
------------ -----------
Note 5 - Red Rock Collection
In February 1993, the Company acquired, through a stock subscription offering,
71.4% of the issued and outstanding stock of Red Rock Collection Incorporated,
an Arizona Corporation ("RRC" or "Red Rock Collection"), in exchange for
$700,000 in goods and services to be provided to RRC at Los Abrigados resort. In
February 1994, the Company acquired the $300,000 minority interest in RRC, which
was held by affiliates, in exchange for 123,000 shares of restricted ILX common
stock valued at $1 per share and $300,000 in promissory notes (Notes 11 and 14).
Goodwill of $123,000 was recorded and is included, net of amortization of
$12,300, in other assets at December 31, 1994.
RRC was formed to market an exclusive line of skin and hair care products. Costs
were deferred until July 1994, the date at which sales commenced. Deferred costs
of approximately $565,000 were expensed in 1994. Unamortized deferred costs of
$364,138 at December 31, 1994, are being amortized through June 1997 (Note 7).
Note 6 - Resort Property Under Development
Varsity Clubs of America Incorporated ("VCA") a wholly owned subsidiary of ILX,
intends to develop lodging accomodations in areas located near major university
campuses, and to market those lodging accommodations, including interval
ownership interests, to alumni and other sport enthusiasts. During 1994 VCA
acquired its first site near the University of Notre Dame for $690,655 and
commenced construction. Acquisition and construction costs totalling $1,735,592
are included in resort property under development at December 31, 1994. Revenues
of $513,400, net of related selling costs of $148,205, have been deferred at
December 31, 1994, until construction is substantially complete.
The Company has a construction financing commitment for $5 million to complete
the Notre Dame facility, of which $400,784 has been drawn at December 31, 1994
(Note 10).
<TABLE>
Note 7 - Deferred Assets
<CAPTION>
December 31,
1994 1993
------------- ----------
<S> <C> <C>
Deferred assets consist of the following:
Red Rock Collection development costs (Note 5) $ 364,138 $567,589
Varsity Clubs of America loan fees and land deposits 204,383 221,336
Guarantee fees 459,900 600,450
California Department of Real Estate registration costs 85,716 76,394
------------- -----------
$1,114,137 $1,465,769
============= ===========
</TABLE>
As part of the acquisition of Los Abrigados resort, certain affiliates of the
Company guaranteed the underlying mortgage on the resort. As partial
consideration for their guarantee, the affiliates earned a $780,000 fee. The fee
is amortized to expense and is payable to the affiliates at the rate of $100 per
Los Abrigados timeshare interest sold. The unpaid balance of the fee is due on
December 31, 1996. The amount payable on the guarantee fee included in due to
affiliates at December 31, 1994 and 1993, was $536,501 and $604,771.
As additional consideration for the guarantee, the affiliates are entitled to
receive a percentage of certain amounts held back on the sale of notes
receivable by a financial institution as collateral. The amount is to be paid as
the amounts held back are collected from the financial institution. At December
31, 1994 and 1993, notes receivable are shown net of $122,000 and $138,000,
respectively, related to this amount.
The Company has incurred costs to register the Los Abrigados resort for
timeshare sales in the state of California. The costs will be amortized over
their estimated useful life.
Note 8 - Property and Equipment
Property and equipment consists of the following:
December 31,
1994 1993
----------- -----------
Buildings and improvements ............. $ 640,933 $ 19,280
Leasehold improvements ................. 464,141 443,729
Furniture and fixtures ................. 317,573 206,967
Office equipment ....................... 243,960 190,436
Computer equipment ..................... 140,188 --
----------- -----------
1,806,795 860,412
Accumulated depreciation ............... (369,568) (168,025)
----------- -----------
$ 1,437,227 $ 692,387
=========== ===========
Note 9 - Income Taxes
<TABLE>
Deferred income tax assets (liabilities) included in the consolidated balance
sheet consist of the following:
<CAPTION>
December 31,
-----------------------------
1994 1993
----------- ----------
<S> <C> <C>
Nondeductible accruals for uncollectible receivables $588,000 $ 278,000
Inventory costs capitalized for tax purposes 36,000 36,000
Tax basis in excess of book on resort property held for
timeshare sales 787,000 980,000
Book recognition of startup costs in excess of tax 208,000 -
Intangible assets capitalized for tax purposes 28,000 31,000
Tax amortization of loan fees in excess of book (80,000) (74,000)
Installment receivable gross profit deferred for tax purposes (1,018,000) (356,000)
Minority interest allocation in excess of tax 219,000 -
Alternative minimum tax credit 74,000 186,000
Net operating loss carryforwards 1,052,000 1,140,000
Other 4,000 (107,000)
Valuation allowance (760,000) (1,716,000)
----------- ----------
Deferred tax asset $1,138,000 $ 398,000
========== ==========
</TABLE>
<TABLE>
A reconciliation of the income tax benefit and the amount that would be computed
using statutory federal and state income tax rates for the years ended December
31, is as follows:
<CAPTION>
1994 1993 1992
------------- ---------------- -----------
<S> <C> <C> <C>
Federal, computed on income before minority
interest and income taxes $1,289,000 $ 949,000 $617,000
Minority interest (490,000) (277,000) (200,000)
State, computed on income after minority interest
and before income taxes 141,000 118,000 74,000
Decrease in valuation allowance (956,000) (890,000) (591,000)
------------ ---------- ----------
Income tax benefit $ (16,000) $(100,000) $(100,000)
============ ========== ==========
</TABLE>
Tax benefits in 1993 and 1992 resulted from decreases in the valuation
allowance, which related primarily to the recoverability of net operating loss
carryforwards. In 1993, a deferred tax asset was recorded to reflect the future
tax benefit of the Genesis net operating loss carryforwards and a valuation
allowance was recorded to offset the full amount of the asset. Due to the
profitability of Genesis in 1994 and the development of tax strategies which are
intended to improve the likelihood that the net operating loss carryforwards
will be utilized, the valuation allowance was reduced in 1994.
<TABLE>
Note 10 - Notes Payable
Notes payable consist of the following:
<CAPTION>
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
Note payable, collateralized by deed of trust on Los Abrigados resort, interest
at prime plus 1.25% (9.75% at
December 31, 1994), guaranteed by affiliates, due through 1996 .............................. $1,660,000 $2,370,000
Note payable, collateralized by deed of trust on Golden Eagle Resort, notes
receivable, and an assignment of the Company's
general partnership interest in LAP, interest at 12%, due through 1998 ...................... 639,916 921,311
Note payable, collateralized by notes receivable and deed of trust on Golden
Eagle Resort, interest at prime plus 4%
(12.5% at December 31, 1994), due through 1998 .............................................. 626,265 --
Note payable, collateralized by notes receivable and deed of trust on Los
Abrigados resort, interest at prime plus 4%
(12.5% at December 31, 1994), due through 1998 .............................................. 423,700 --
$500,000 revolving line of credit, unsecured, interest at
prime plus 1.5% (10% at December 31, 1994), due 1995 ........................................ 400,000 --
Construction note payable, collateralized by deed of trust on Varsity Clubs
of America - Notre Dame, interest at 13%, due through 1998 .................................. 400,784 --
$400,000 revolving line of credit, unsecured, interest
at prime plus 2% (10.5% at December 31, 1994), due 1995 ..................................... 350,000 --
Note payable, collateralized by RRC building, interest
at 8%, due through 1999 ..................................................................... 225,000 --
Note payable, collateralized by deed of trust, interest
at 6.625%, due through 2001 ................................................................. 72,272 --
Note payable, collateralized by a second position on
notes receivable, interest at 12%, due through 1995 ......................................... 45,448 153,201
Other .......................................................................................... 38,476 47,802
Notes payable repaid during 1994 ............................................................... -- 864,676
---------- ----------
$4,881,861 $4,356,990
========== ==========
</TABLE>
Future maturities of notes payable are as follows:
Year ending
December 31,
-------------
1995 $2,642,508
1996 1,225,814
1997 364,741
1998 573,827
1999 57,686
Thereafter 17,285
----------
$4,881,861
==========
Scheduled future maturities may be prepaid to the extent that payments made of
$1,000 per Los Abrigados timeshare interest sold exceed the scheduled payments
on the loan. Any prepaid amounts will be applied to the scheduled payments in
chronological order of maturity.
<TABLE>
Note 11 - Notes Payable to Affiliates
Notes payable to affiliates consist of the following:
<CAPTION>
December 31,
------------
1994 1993
---------- ----------
<S> <C> <C>
Notes payable, collateralized by LAP partnership
interest, interest at 8%, due through 1998 ...................................... $1,100,000 $ --
Note payable, collateralized by notes receivable,
interest at 14%, due through 1997 ................................................ 332,724 521,105
Notes payable, collateralized by RRC common stock,
interest at 10%, due through 1997 ................................................ 225,426 --
Note payable, collateralized by notes receivable,
interest at 16%, due through 1997 ................................................ 104,719 135,231
Notes payable, collateralized by LAP partnership
interest, interest at 12%, due through 1996 ...................................... 115,750 --
Note payable, unsecured, interest at 10%,
due through 1995 ................................................................. 94,000 94,000
Note payable, collateralized by furniture and equipment,
interest at 16%, due through 1995 ................................................ 27,965 77,973
Notes payable repaid during 1994 ..................................................... -- 223,599
---------- ----------
$2,000,584 $1,051,908
========== ==========
</TABLE>
Future maturities of notes payable to affiliates are as follows:
Year ending
December 31,
------------
1995 $594,934
1996 419,925
1997 143,682
1998 842,043
-----------
$2,000,584
===========
Total interest expense on notes payable to affiliates for the years ended
December 31, 1994, 1993 and 1992 was approximately $141,000, $153,000, and
$170,000.
Note 12 - Minority Interests
Minority interests at December 31, 1994, include interests in LAP, the Arizona
limited partnership which owns and operates the Los Abrigados resort, and
Genesis of $2,440,249 and $90,920, respectively (Note 4).
LAP minority interests consist of LAP's limited partners' capital contributions,
the limited partners' interests in the results of operations and cash
distributions to the limited partners. The Company held a 71% interest in LAP
until July 1, 1994, when it acquired the 7.5% Class A minority interest for
$1,587,000, and as a result, at December 31, 1994, holds a 78.5% interest.
Certain of the Class A partners are affiliates of the Company. Non-affiliates
received $365,250 in cash for their partnership interests and affiliates
received $6,000 cash and $1,215,750 in notes (Note 11). The 21.5% remaining
minority interest at December 31, 1994, is held by the Class B limited partners
whose capital contributions of $500,000 bear interest at 13.5%, payable
quarterly.
Income from LAP is allocated; first, to the Class A limited partners until the
cumulative net profits allocated are equal to the cumulative Class A priority
return; then, 76.76% to ILX and 23.24% to the Class B limited partners until the
amounts allocated to the Class B limited partners equal their capital
contributions and; finally, to the partners pro rata in proportion to their
interests in the partnership. Effective July 1, 1994, 21.5% of income is
allocated to the Class B limited partners and 78.5% to ILX.
During 1992, the Company issued to an affiliate, as agent for certain Class A
and B limited partners, a $770,000 promissory note collateralized by $810,630 in
notes receivable. The promissory note was issued to reduce Class A limited
partners' capital contributions by $500,000, Class A priority returns by
$149,954, Class B accrued interest by $73,772 and loan guarantee fees by
$46,274.
Included in due to affiliates at December 31, 1994 and 1993, is approximately
$17,000 and $95,000 in Class A distributions and Class B interest.
A reconciliation of LAP minority interests from 1992 to 1994 is as follows:
Balance December 31, 1992 .................................. $ 1,694,816
Income allocated to Class A ............................. 814,520
and B Partners
Distributions paid or accrued ........................... (168,998)
Issuance of common stock (Note 14) ...................... (204,000)
-----------
Balance December 31, 1993 .................................. 2,136,338
Income allocated to Class A
and B Partners ........................................ 1,204,263
Distributions paid or accrued ........................... (126,403)
Acquisition of Class A Partner interests ................ (773,949)
-----------
Balance December 31, 1994 .................................. $ 2,440,249
===========
Note 13 - Commitments
Future minimum lease payments on noncancelable operating leases are as follows:
Year ending
December 31,
------------
1995 $283,000
1996 144,000
1997 86,000
1998 38,000
1999 18,000
-----------
$ 569,000
===========
Total rent expense for the years ended December 31, 1994, 1993 and 1992, was
approximately $449,000, $316,000 and $139,000.
Note 14 - Shareholders' Equity
Preferred Stock
At December 31, 1994 and 1993, preferred stock includes 77,278 and 77,523 shares
of the Company's Series A Preferred Stock. The Series A Preferred Stock has a
par value and liquidation preference of $10 per share and, commencing July 1,
1996, will be entitled to annual dividend payments of $.80 per share. Commencing
January 1, 1993, on a quarterly basis, the Company must contribute $100 per
timeshare interest sold in the Los Abrigados resort to a mandatory dividend
sinking fund. At December 31, 1994, notes receivable in the amount of
approximately $240,000 have been designated for the sinking fund. Dividends on
the Company's common stock are subordinated to the Series A dividends and to the
contributions required by the sinking fund.
At December 31, 1994 and 1993, preferred stock includes 55,000 shares of the
Company's Series B Convertible Preferred Stock. The Series B Convertible
Preferred Stock has a $10 par value and a liquidation preference of $10 per
share, which is subordinate to the Series A liquidation preference. The Series B
Convertible Preferred Stock is not entitled to dividends. Commencing July 1,
1996, the Series B Convertible Preferred Stock may be converted into common
stock on the basis of two shares of common for one share of preferred stock.
In May 1992, the Company repurchased 220,000 shares of its Series B Convertible
Preferred Stock from an affiliate in exchange for a $175,000 note payable from
the Company and the opportunity to utilize up to a maximum of 500 room nights at
the Los Abrigados resort over a five-year period subject to certain
restrictions. The cost of providing the room nights was valued at $15,000. The
effect of this transaction was to reduce the Series B liquidation preference by
$2,200,000. Principal and interest payments totaling $35,000 were made on the
note payable in August 1992. In conjunction with the payments, the affiliate
purchased ten timeshare interests in the Los Abrigados resort for $35,000 plus
250 of the 500 room nights it had acquired above.
Both the Series A and Series B preferred stock may, at the holder's election, be
exchanged under certain conditions for lodging certificates or, after payment of
$2,100 each, for Los Abrigados timeshare interests. The Company estimates that
the future cash obligations in respect to these in kind redemptions is less than
$170,000.
At December 31, 1994 and 1993, preferred stock includes 298,035 and 305,652
shares of the Company's Series C Convertible Preferred Stock (Note 4). The
Series C Convertible Preferred Stock has a $10 par value and is entitled to
dividends at the rate of $.60 per share per annum when declared by the Board of
Directors. If dividends are not declared in any year prior to the fifth
anniversary of the merger date (November 1, 1993), such undeclared dividends
("Dividend Arrearage") may be converted to "Cumulation Shares" at the rate of $6
of Dividend Arrearage per Cumulation Share. The Series C Preferred Stock and the
Cumulation Shares have a liquidation preference of $10 per share and $6 per
share, respectively, and are subordinate to the liquidation preferences of the
Series A and Series B stock. Commencing November 1, 1994 through October 31,
2004, the Series C Preferred Stock may be converted to ILX common stock on the
basis of five shares of common stock for three shares of Series C Preferred
Stock and one share of ILX common stock for each $6 in Dividend Arrearages.
During 1994, 7,260 Series C convertible shares were exchanged for 12,100 common
shares. In addition, at December 31, 1994, 800 common shares are issuable to
such exchanging shareholders for their dividend arrearage. ILX may redeem the
Series C Preferred Stock commencing November 1, 1996, at $10 per share plus
payment of all declared but unpaid dividends.
Common Stock
In March 1992, the Company acquired a 50% interest in Varsity Clubs of America
joint venture ("Varsity") in exchange for 150,000 shares of the Company's common
stock valued at $84,375, the assumption of $16,746 of Varsity payables and six
timeshare interests in the Los Abrigados resort valued at $6,720. As a result of
the transaction, the Company, through VCA, owns 100% of Varsity (Note 6).
In March 1992, 4,537,507 shares of common stock, which had been previously
issued as part of the plan of reorganization of BIS-ILE Associates, the
predecessor in interest to the Los Abrigados resort, were contributed back to
the Company by affiliates and were accounted for retroactively as a reverse
stock split.
In March 1993, the Company issued 204,000 shares of restricted common stock,
valued at $1 per share, which was at a premium of $.25 over the approximate
market price at the date of issuance, to two LAP Class A minority partners in
consideration for the reduction of their Class A Priority return from 22% to
13.5%. The minority partners are affiliates of ILX.
In July 1993, the Company issued 102,000 shares of restricted common stock,
valued at $1 per share, which was at a discount of $.50 under the approximate
market price at the date of issuance, to a LAP Class B minority partner in
consideration for accrued and future guarantee fees and Class B interest. The
minority partner is an affiliate of ILX.
In July 1993, the Company issued warrants for 50,000 shares of ILX restricted
common stock exercisable at a price of $1.50 per share, the approximate market
value at date of issuance, in conjunction with the financing of refurbishment at
the Golden Eagle Resort (Note 10). The warrants are exercisable through July 1,
1998.
In February 1994, the Company issued 123,000 shares of restricted common stock,
valued at $1 per share, which was at a discount of a $.56 under the approximate
market price at the date of issuance, to the minority interest shareholders of
RRC (Note 5). The minority interest shareholders are affiliates of the Company.
In March 1994, the Company issued warrants for 100,000 shares of ILX restricted
common stock exercisable at a price of $1.625 per share, the approximate market
value at date of issuance. The warrants were issued in conjunction with the
early collection in March 1994, of a note receivable with a due date of December
31, 1997, in the amount of $900,000 (Note 2).
During 1994, 24,616 shares of restricted common stock valued at $29,232 were
issued in exchange for services provided to the Company. The stock was valued at
the approximate market price on the date of the agreement.
Note 15 - Employee Stock Option Plan
The Company has adopted 1987 and 1992 Stock Option Plans pursuant to which
options (which term as used herein includes both incentive stock options and
non-statutory stock options) may be granted to key employees, including
officers, whether or not they are directors, and non-employee directors and
consultants, who are determined by the Board of Directors to have contributed in
the past, or who may be expected to contribute materially in the future, to the
success of the Company. The exercise price of the options granted pursuant to
the Plan shall be not less than the fair market value of the shares on the date
of grant. All outstanding stock options require the holder to have been a
director or employee of the Company for at least one year before exercising the
option. Options are exercisable over a five year period from date of grant if
the optionee was a ten percent or more shareholder immediately prior to the
granting of the option and over a ten-year period if the optionee was not a ten
percent shareholder. The aggregate number of shares which may be issued under
the Plans shall not exceed 841,376 shares.
Stock option transactions are summarized as follows:
Outstanding at December 31, 1991 ............................. 205,170
Options granted .............................................. 268,750
Options exercised ............................................ (142,584)
--------
Outstanding at December 31, 1992 ............................. 331,336
Options granted .............................................. 56,250
Options canceled ............................................. (225,000)
--------
Outstanding at December 31, 1993 ............................. 162,586
Options exercised ................................... (162,586)
Options granted ..................................... 508,000
Options canceled .................................... (180,000)
--------
Outstanding at December 31, 1994 .................... 328,000
========
The exercise price on the options exercised during 1994 was $.40 per share for
62,586 shares and $.685 for 100,000 shares and on the options exercised during
1992 was $.40 per share. The exercise price for options granted in 1994 ranged
from $1.625 to $2.00 per share, for options granted in 1993 was $.875 per share
and for options granted during 1992 ranged from $.50 to $1.00 per share. The
exercise price for all options outstanding at December 31, 1994, was $1.625 per
share. Options outstanding at December 31, 1994, consist of 82,500 shares which
expire in 1999 and 245,500 shares which expire in 2004.
Note 16 - Related Party Transactions
In addition to the related party transactions described in notes 2, 3, 5, 7, 11,
12 and 14, the Company had the following related party transactions:
The Company leases from affiliates 41 timeshare interests in the Stonehouse at
Los Abrigados at the rate of $1,000 per time share unit per year, through
October 1, 1996, payable on a quarterly basis. The Company paid $41,000 per year
in lease payments to affiliates for the years ended December 31, 1994, 1993 and
1992. In addition, in 1992 and 1993 the Company made lease payments to
affiliates of $52,424 each year for use of the Stonehouse for periods prior to
1992. The affiliates pay maintenance fees to the Company on an annual basis for
their ownership intervals of $375 per interval in 1994 and $345 per interval in
1993 and 1992.
In September 1992, the Company exchanged two timeshare interests in the Los
Abrigados resort for four timeshare interests in the Golden Eagle resort and
four timeshare interests in the Ventura resort with an affiliate.
In March 1993, the Company exchanged two Stonehouse interests and twenty
one-bedroom timeshare interests in the Los Abrigados resort in satisfaction of
$70,000 in principal and accrued and future interest due on a note payable to an
affiliate. In June 1993, the Company upgraded six of the one-bedroom interests
to two-bedroom interests in exchange for an additional $6,000 principal
reduction.
In December 1994, the Company acquired a condominium adjacent to the Golden
Eagle Resort for $104,915, consisting of cash of $32,643 and the assumption of
the underlying mortgage of $72,272. The condominium is used to house the general
manager of the resort. Timeshare intervals in the property may be marketed in
the future.
Note 17 - Subsequent Events
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 pursuant to an
agreement reached in December 1994. The agreement provides for an assignment of
the Company's general partnership interest in LAP in exchange for the advance of
the additional funds and an extension of the maturity date through 1998 (Note
10).
In March 1995, the Company reached an agreement to acquire the Kohl's Ranch, a
10 acre rustic resort near Payson, Arizona for a purchase price of $1,650,000,
consisting of a $50,000 cash down payment, assumption of an existing mortgage of
approximately $950,000, issuance of a $350,000 note payable to seller and the
issuance of 150,000 shares of ILX restricted common stock valued at $2 per
share. The agreement provides for a 60 day right of cancellation by ILX. The
Company intends to offer timeshare intervals in the property.
<TABLE>
Note 18 - Quarterly Financial Data (Unaudited)
Quarterly financial information is presented in the following summary:
<CAPTION>
1994
----
Three months ended
---------------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ................................... $6,334,998 $8,025,982 $8,196,292 $7,393,397
Operating income ........................... 1,173,947 1,347,869 1,167,184 365,205
Net income ................................. 721,183 804,682 469,056 371,849
Net income per share ....................... .06 .06 .04 .03
</TABLE>
<TABLE>
<CAPTION>
1993
----
Three months ended
---------------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ................................... $4,024,809 $4,811,495 $5,598,382 $6,024,693
Operating income ........................... 414,482 786,180 781,936 1,047,483
Net income ................................. 255,824 494,690 470,932 854,785
Net income per share ....................... .02 .04 .04 .07
</TABLE>
The 1993 net income per share does not equal the summation of the quarters due
to rounding or weighting of average shares.
The reduced operating income in the fourth quarter 1994 is due to amortization
of RRC deferred costs and recognition of VCA marketing costs (Notes 5 and 6).
<PAGE>
Signatures
Pursuant to the requirements of Section 13 of 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, there unto duly authorized, on the
28th day of March, 1995.
ILX Incorporated
(Registrant)
By /s/Joseph P. Martori
-----------------------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/Joseph P. Martori
------------------------- President, and Chairman March 28, 1995
Joseph P. Martori of the Board
/s/Nancy J. Stone
------------------------- Executive Vice President, March 28, 1995
Nancy J. Stone Chief Financial Officer
and Director
/s/Denise L. Janda
------------------------- Controller March 28, 1995
Denise L. Janda
/s/Edward J. Martori
------------------------- Director March 28, 1995
Edward J. Martori
/s/Alan J. Tucker
------------------------- Director March 28, 1995
Alan J. Tucker
/s/Ronald D. Nitzberg
------------------------- Director March 28, 1995
Ronald D. Nitzberg
<PAGE>
<TABLE>
ILX INCORPORATED
SCHEDULE IX
RESERVE FOR POSSIBLE CREDIT LOSSES
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1994
<CAPTION>
Charged
Balance a Charged to to Other Balance at
Beginning Costs and Accounts- Deductions- end of
of Period Expenses Describe Describe (a) Period
----------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Reserve for possible ............ 1994 $ 816,000 764,000 28,000(b) 345,000 $1,263,000
credit losses =========== ========== ========== ============= ===========
Reserve for possible ............ 1993 $ 692,000 667,000 543,000 $ 816,000
credit losses =========== ========== ============= ===========
Reserve for possible ............ 1992 $ 895,000 630,000 833,000 $ 692,000
credit losses =========== ========== ========== ============= ===========
(a) Deductions represent the write-off of notes deemed uncollectible.
(b) Recoveries of prior year write-offs.
</TABLE>
Exhibits
to
1994 Form 10-K
ILX INCORPORATED
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description Method of Filing
---------- --------------------------------- --------------------------------------
<S> <C> <C>
3 (i)-1 Articles of Incorporation of Incorporated by reference to
International Leisure Enterprises Exhibit 3-A of S-1
Incorporated, filed October 8, 1986 No. 33-16122
3 (i)-2 Articles of Amendment to the Articles Incorporated by reference to
of Incorporation of International Leisure Exhibit 3-C of the Company's 1990
Enterprises Incorporated, filed August 31, 1987 Annual Report on Form 10-K
3 (i)-3 Articles of Amendment to the Articles
of Incorporation of International Leisure
Enterprises Incorporated, filed October 19, 1987
3 (i)-4 Articles of Amendment to the Articles
of Incorporation of International Leisure
Enterprises Incorporated, filed May 3, 1990
3 (i)-5 Articles of Amendment to the Articles Incorporated by reference to
of Incorporation of International Leisure Exhibit 3-C(a) of the Company's 1993
Enterprises Incorporated (Changed by Annual Report on Form 10-K
this Amendment to ILX Incorporated),
filed June 28, 1993
3 (ii)-1 Amended and Restated Bylaws of International Incorporated by reference to Exhibit
Leisure Enterprises Incorporated, dated 3-D of the Company's 1990 Annual
October 26, 1987 Report on Form 10-K
4-1 Certificate of Designation, Preferences, Rights, Incorporated by reference to
and Limitations of Series A Preferred Stock, Exhibit 10-81 of the Company's 1991
$10.00 par value of International Leisure Annual Report on Form 10-K
Enterprises Incorporated, filed September 5, 1991
4-2 Certificate of Designation, Preferences, Rights, Incorporated by reference to
and Limitations of Series B Preferred Stock, Exhibit 10-82 of the Company's 1991
$10.00 par value of International Leisure Annual Report on Form 10-K
Enterprises Incorporated, filed September 5, 1991
4-3 Certificate of Designation of Series C Preferred Incorporated by reference to
Stock, filed April 30, 1993 Exhibit 10-118 of the Company's
1993 Annual Report on Form 10-K
10-1 1987 Stock Option Plan Incorporated by reference to
Exhibit 10-1 of S-1
No. 33-16122
10-2 Form of Stock Option Agreement between Incorporated by reference to
International Leisure Enterprises Incorporated Exhibit 10-2 of S-1
and Option Holder No. 33-16122
10-3 1992 Stock Option Plan Incorporated by reference to
Exhibit 10-97 of the Company's 1992
Annual Report on Form 10-K
10-4 Agreement to Purchase Series B Preferred Stock Incorporated by reference to
between Wm. Robert Burns and Paige Phillips Exhibit 10-94 of the Company's 1992
Burns and International Leisure Enterprises Annual Report on Form 10-K
Incorporated, dated May 1, 1992
10-5 First Amended Certificate of Limited Partnership Incorporated by reference to
and Amended Agreement of Los Abrigados Exhibit 10-77 of the Company's 1991
Partners Limited Partnership, dated Annual Report on Form 10-K
September 9, 1991
10-6 Certificate of Amendment of Limited Partnership
for Los Abrigados Partners Limited Partnership,
dated November 11, 1993
10-7 Certificate of Amendment of Limited Partnership
for Los Abrigados Partners Limited Partnership,
dated July 1, 1994
10-8 Purchase and Sale Agreement between Edward
J. Martori, Martori Enterprises Incorporated,
Jerome M. White, Guadalupe Iniguez (as Trustee),
Wedbush Morgan Securities (IRA), and Joseph
P. Martori (as Trustee) and ILX Incorporated,
dated July 1, 1994
10-9 Installment Promissory Note ($1,000,000) to
Edward J. Martori by ILX Incorporated, dated
July 1, 1994
10-10 Installment Promissory Note ($100,000) to
Martori Enterprises Incorporated by ILX
Incorporated, dated July 1, 1994
10-11 Amendment to Purchase and Sale Agreement
between Edward J. Martori, Martori Enterprises
Incorporated, Wedbush Morgan Securities
(IRA), and Joseph P. Martori (as Trustee) and
ILX Incorporated, dated January 3, 1995
10-12 Installment Promissory Note ($57,875) to
Wedbush Morgan Securities (IRA) by ILX
Incorporated, dated January 1, 1995
10-13 Installment Promissory Note ($57,875) to
Joseph P. Martori (as Trustee) by ILX
Incorporated, dated January 1, 1995
10-14 Stock Purchase Agreement between Martori Incorporated by reference to
Enterprises Incorporated and ILX Incorporated, Exhibit 10-116 of the Company's1993
dated December 30, 1993 Annual Report on Form 10-K
(Red Rock Collection Incorporated)
10-15 Installment Promissory Note ($150,000) to Martori
Enterprises Incorporated by ILX Incorporated,
dated February 11, 1994
10-16 Stock Purchase Agreement between Alan R. Incorporated by reference to
Mishkin and Carol Mishkin, and ILX Incorporated, Exhibit 10-117 of the Company's1993
dated December 30, 1993 Annual Report on Form 10-K
(Red Rock Collection Incorporated)
10-17 Installment Promissory Note ($150,000) to Alan
R. Mishkin and Carol Mishkin by ILX Incorporated,
dated February 11, 1994
10-18 Agreement and Plan of Merger among ILE Incorporated by reference to
Acquisition Corporation, International Leisure Exhibit 10-105 of the Company's1992
Enterprises Incorporated and Genesis Investment Annual Report on Form 10-K
Group, Inc., dated March 15, 1993
10-19 First Amendment to Agreement and Plan of Incorporated by reference to
Merger between ILE Acquisition Corporation, Exhibit 10-105 (a) of the Company's
International Leisure Enterprises Incorporated 1993 Annual Report on Form 10-K
and Genesis Investment Group Inc.,
dated April 22, 1993
10-20 Agreement between BIS-ILE Associates, Arthur Incorporated by reference to
J. Martori and Alan R. Mishkin, dated Exhibit 10-72 of the Company's 1990
March 28, 1991 Annual Report on Form 10-K
10-21 Supplemental Agreement between BIS-ILE Incorporated by reference to
Associates, Arthur J. Martori and Alan R. Mishkin, Exhibit 10-72 (a) of the Company's
dated March 28, 1991 1990 Annual Report on Form 10-K
10-22 Guarantee Fee Agreement between Los Abrigados Incorporated by reference to
Partners Limited Partnership and Arthur J. Exhibit 10-79 of the Company's 1991
Martori and Alan R. Mishkin, dated Annual Report on Form 10-K
September 9, 1991
10-23 License Agreement between Los Abrigados Incorporated by reference to
Partners Limited Partnership and those certain Exhibit 10-83 of the Company's 1991
participants, dated September 1, 1991 Annual Report on Form 10-K
10-24 Financing Agreement between Martori Enterprises Incorporated by reference to
Incorporated and International Leisure Enterprises Exhibit 10-91 of the Company's 1991
Incorporated, dated January 13, 1992 Annual Report on Form 10-K
10-25 Financing Agreement between Martori Enterprises Incorporated by reference to
Incorporated and Los Abrigados Partners Limited Exhibit 10-96 of the Company's 1992
Partnership, dated August 31, 1992 Annual Report on Form 10-K
10-26 Financing and Security Agreement between Incorporated by reference to
Martori Enterprises Incorporated and International Exhibit 10-109 of the Company's1993
Leisure Enterprises Incorporated, dated Annual Report on Form 10-K
May 15, 1993
10-27 Secured Promissory Note and Security Agreement Incorporated by reference to
and Financing Statement between Martori Exhibit 10-110 of the Company's1993
Enterprises Incorporated and International Annual Report on Form 10-K
Leisure Enterprises Incorporated, dated
June 11, 1993
10-28 Real Estate Purchase Contract between Indian Incorporated by reference to
Wells Partners, Ltd., Los Abrigados Partners Exhibit 10-98 of the Company's 1992
Limited Partnership and International Leisure Annual Report on Form 10-K
Enterprises Incorporated, dated December 18, 1992
10-29 Option Agreement between Indian Wells Partners,
Ltd. and Martori Enterprises Incorporated,
dated March 31, 1994
10-30 Assignment of Option by Martori Enterprises
Incorporated to Genesis Investment Group, Inc.,
dated September 15, 1994
10-31 Lease Agreement between Indian Wells Partners, Incorporated by reference to
Ltd. and Los Abrigados Partners Limited Exhibit 10-99 of the Company's 1992
Partnership, dated December 21, 1992 Annual Report on Form 10-K
10-32 Second Amendment to Lease Agreement
between Indian Wells Partners, Ltd. and Los
Abrigados Partners Limited Partnership,
dated March 31, 1994
10-33 Warrant Agreement (50,000 Shares of Common
Stock) between Lawrence S. Held and ILX
Incorporated, dated March 31, 1994
10-34 Warrant Agreement (50,000 Shares of Common
Stock) between Jerome M. White and ILX
Incorporated, dated March 31, 1994
10-35 Loan Agreement between The Steele Foundation, Incorporated by reference to
Inc., ILX Incorporated and Los Abrigados Partners Exhibit 10-111 of the Company's1993
Limited Partnership, dated July 21, 1993 Annual Report on Form 10-K
10-36 Second Modification Agreement between ILX
Incorporated, Los Abrigados Partners Limited
Partnership, ILE Sedona Incorporated, and The
Steele Foundation, Inc., dated December 20, 1994
10-37 Assignment of Beneficial Interest under Promissory
Note, Deed of Trust and Title Policy to Daniel
Cracchiolo as Personal Representative of the Estate
of Ethel Steele by Genesis Investment Group,
Inc., dated June 17, 1994
10-38 Continuing Guaranty to Daniel Cracchiolo as Personal
Representative of the Estate of Ethel Steele by ILX
Incorporated, dated June 17, 1994
10-39 Loan Agreement ($5,000,000) between The Incorporated by reference to
Valley National Bank and Los Abrigados Exhibit 10-76 of the Company's 1991
Partners Limited Partnership, Annual Report on Form 10-K
dated September 9, 1991
10-40 Loan Agreement ($750,000) between Bank One, Incorporated by reference to
Arizona, NA and Los Abrigados Partners Limited Exhibit 10-113 of the Company's 1993
Partnership, dated October 22, 1993 Annual Report on Form 10-K
10-41 Modification Agreement ($5,000,000) between Incorporated by reference to
Bank One, Arizona, NA and Los Abrigados Exhibit 10-114 of the Company's 1993
Partners Limited Partnership, Annual Report on Form 10-K
dated October 22, 1993
10-42 Modification Agreement ($5,000,000) between
Bank One, Arizona, NA and Los Abrigados
Partners Limited Partnership,
dated June 28, 1994
10-43 Second Modification Agreement ($5,000,000)
between Bank One, Arizona, NA and Los
Abrigados Partners Limited Partnership,
dated October 4, 1994 (additional advance
including repayment of $750,000 loan)
10-44 Secured Promissory Note ($2,000,000) to Bank
One, Arizona, NA by Los Abrigados Partners
Limited Partnership, dated October 4, 1994
10-45 Repayment Guaranty ($2,000,000) to Bank One,
Arizona, NA by ILX Incorporated,
dated October 4, 1994
10-46 Loan Agreement ($500,000) between Bank One,
Arizona, NA and ILX Incorporated,
dated October 4, 1995
10-47 Promissory Note ($500,000) to Bank One,
Arizona, NA by ILX Incorporated, dated
October 4, 1994
10-48 Promissory Note to Firstar Metropolitan Bank Incorporated by reference to
and Trust from Los Abrigados Partners Limited Exhibit 10-115 of the Company's1993
Partnership, dated November 8, 1993 Annual Report on Form 10-K
10-49 Change in Terms Agreement ($400,000) between
Los Abrigados Partners Limited Partnership and
Firstar Metropolitan Bank and Trust, dated
November 8, 1994
10-50 Financing Agreement between Tammac Financial Incorporated by reference to
Corp. and Los Abrigados Partners Limited Exhibit 10-88 of the Company's 1991
Partnership, dated September 10, 1991 Annual Report on Form 10-K
10-51 Amendment to Commitment Letter, Financing Incorporated by reference to
Agreement and Reaffirmation of Various Loan Exhibit 10-88 (a) of the Company's
Documents between Tammac Financial 1993 Annual Report on Form 10-K
Corp., Los Abrigados Partners Limited
Partnership and International Leisure Enterprises
Incorporated, dated March 31, 1993
10-52 Letter of Commitment between Tammac Financial
Corp. and Los Abrigados Partners Limited
Partnership, dated July 20, 1994
10-53 Loan and Security Agreement between Tammac
Financial Corp. and Los Abrigados Partners
Limited Partnership, dated September 7, 1994
10-54 Promissory Note ($499,859.15) to Tammac Financial
Corp. by Los Abrigados Partners Limited Partnership,
dated September 7, 1994
10-55 Third Amendment to Financing Agreement between
Tammac Financial Corp. and Los Abrigados
Partners Limited Partnership, dated September 7, 1994
10-56 Amended and Restated Continuing Guaranty to
Tammac Financial Corporation by ILX Incorporated,
dated September 7, 1994
10-57 Letter of Commitment between Tammac Financial
Corp. and ILX Incorporated, dated July 20, 1994
(Golden Eagle Resort)
10-58 Loan and Security Agreement between Tammac
Financial Corp. and ILX Incorporated, dated
September 7, 1994
(Golden Eagle Resort)
10-59 Promissory Note ($2,000,000) to Tammac
Financial Corp. by ILX Incorporated, dated
September 7, 1994
(Golden Eagle Resort)
10-60 Amended and Restated Financing Agreement
between Tammac Financial Corp. and ILX
Incorporated, dated September 7, 1994
(Golden Eagle Resort)
10-61 Contract of Sale of Membership Agreements and Incorporated by reference to
Installment Purchase Agreements with Recourse Exhibit 10-112 of the Company's1993
between Resort Funding, Inc. and Los Abrigados Annual Report on Form 10-K
Partners Limited Partnership, dated
September 14, 1993
10-62 Letter of Commitment between Bennett Funding
International, Ltd. and VCA South Bend Incorporated,
dated August 18, 1994
10-63 Construction Loan Agreement between Bennett Funding
International, Ltd. and VCA South Bend Incorporated,
dated October 4, 1994
10-64 Construction Promissory Note ($5,000,000) to Bennett
Funding International, Ltd. by VCA South Bend
Incorporated, dated October 4, 1994
10-65 Guaranty and Subordination Agreement (Construction
Loan) to Bennett Funding International, Ltd. by
ILX Incorporated, dated August 18, 1994
10-66 Contract of Sale of Timeshare Receivables with
Recourse between Bennett Funding International,
Ltd. and VCA South Bend Incorporated, dated
August 18, 1994
10-67 Guaranty and Subordination Agreement (Receivables
Financing) to Bennett Funding International, Ltd. by
ILX Incorporated, dated August 18, 1994
10-68 Promissory Note ($250,000) to AzStar Insurance Incorporated by reference to
Company from International Leisure Enterprises Exhibit 10-47 of the Company's 1989
Incorporated, dated April 28, 1989 Annual Report on Form 10-K
10-69 Second Promissory Note Modification and Incorporated by reference to
Extension Agreement between International Exhibit 10-84 of the Company's 1991
Leisure Enterprises Incorporated and AzStar Annual Report on Form 10-K
Casualty Company, dated May 1, 1991
10-70 All Inclusive Purchase Money Promissory Note
Secured by All-Inclusive Purchase Money Deed
of Trust to GPH Properties, Inc. from Red Rock
Collection Incorporated, dated January 18, 1994
10-71 Option Agreement between Imperial Properties and
ILX Incorporated, dated July 25, 1994
10-72 Joint Venture Agreement between Chanen
Development Company, Inc. and ILE Sedona
Incorporated, dated September 28, 1994
10-73 Standard Form of Agreement between Owner and
Contractor between Walton Constuction Company,
Inc. and VCA South Bend Incorporated, dated
October 10, 1994
10-74 Agreement for Purchase and Sale of Kohl's Ranch
between Kohl's Ranch Associates and ILX
Incorporated, dated March 10, 1995
10-75 Management Agreement between Los Abrigados Incorporated by reference to
Partners Limited Partnership and International Exhibit 10-78 of the Company's 1991
Leisure Enterprises Incorporated, dated Annual Report on Form 10-K
September 10, 1991
10-76 Membership Plan for Sedona Vacation Club at
Los Abrigados, dated January 11, 1995
21-1 List of Subsidiaries of ILX Incorporated
27 The Registrant's 1994 Financial Data Schedule
</TABLE>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
INTERNATIONAL LEISURE ENTERPRISES INCORPORATED
Pursuant to the provisions of A.R.S. 10-061, the undersigned
corporation adopts the attached amendment to its Articles of Incorporation.
FIRST: The name of the corporation is INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED.
SECOND: The document attached hereto as Exhibit "A" sets forth the amendment to
the Articles of Incorporation which was adopted by the shareholders of
the corporation.
THIRD: The aforesaid amendment was adopted by the shareholders of the
corporation on October 14, 1987, in the manner prescribed by the
Arizona Business Corporation Act.
FOURTH: The number of shares of the corporation outstanding at the time of such
adoption and entitled to vote thereon was:
Class or Series Number of Shares
--------------- ----------------
Common 8,208,522
The number of shares of a class or series entitled to vote on the aforesaid
amendments was:
Class or Series Number of Shares
--------------- ----------------
Common 1,791,478
FIFTH: The number of shares voted for and against such amendments,
respectively, was:
For: 1,351,479
Against: 0
and the number of shares of Common Stock entitled to vote as a class or series
for and against such amendments, respectively, was:
For: 1,791,478
Against: 0
DATED: 10/19/87
---------------------- INTERNATIONAL LEISURE
ENTERPRISES INCORPORATED
By RONALD D. NITZBERG
----------------------------
Ronald D. Nitzberg,
President
By NANCY J. STONE
----------------------------
Nancy J. Stone,
Secretary
STATE OF ARIZONA
County of Maricopa
The foregoing instrument was acknowledged before me this 19th day of
October, 1987, by Ronald D. Nitzberg, President of International Leisure
Enterprises Incorporated, an Arizona corporation.
E. SUSAN SPINK
---------------
Notary Public
My Commission Expires:
January 24, 1988
---------------------
STATE OF ARIZONA
County of Maricopa
The foregoing instrument was acknowledged before me this 19th day of
October, 1987, by Nancy J. Stone, Secretary of International Leisure Enterprises
Incorporated, an Arizona corporation.
E. SUSAN SPINK
---------------
Notary Public
My Commission Expires:
January 24, 1988
---------------------
EXHIBIT A
RESOLVED, that Article 13 of the Articles of Incorporation of the Corporation is
hereby amended to read as follows:
Indemnification of Directors and Officers
Scope of Indemnification
(a) The Corporation shall indemnify directors and officers of the
Corporation to the fullest extent permitted by Arizona law, as currently in
effect, except for A.R.S. 10-005 (F), against any liability incurred in
connection with any proceeding in which the director and/or officer may be
involved as a party or otherwise, by reason of the fact that such person is or
was acting on behalf of the Corporation except where such indemnification is
expressly prohibited by applicable law.
(b) If a director or officer is entitled to indemnification with
respect to a portion, but not all, of any liabilities to which such person may
be subject, the Corporation shall indemnify such person to the maximum extent
for such portion of the liabilities.
(c) The termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the director or officer is not entitled to
indemnification.
(d) For purposes of this Article:
(1) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, attorneys' fees and disbursements); and
(2) "proceeding" means any threatened, pending or completed
action, suit, appeal or the proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the Corporation, a class of its security holders or
otherwise.
Proceedings Initiated by Officers or Directors.
Notwithstanding any other provision of this Article, the Corporation shall not
indemnify a director or officer for any liability incurred in a proceeding
initiated (which shall not be deemed to include counterclaims or affirmative
defenses) or participated in as an intervenor or amicus curiae by the person
seeking indemnification unless such initiation of or participation in the
proceeding is authorized, either before or after its commencement, by the
affirmative vote of a majority of the directors in office.
Advancing Expenses.
The Corporation shall pay the expenses (including attorneys' fees and
disbursements) incurred in good faith by an officer or director in advance of
the final disposition of a proceeding upon receipt of an undertaking by or on
behalf of the officer or director to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Corporation
pursuant to this Article. The financial ability of an officer or director to
repay an advance shall not be a prerequisite to the making of such advance.
Payment of Indemnification.
A director or officer shall be entitled to indemnification within 30 days after
a written request for indemnification has been delivered to the Secretary of the
Corporation.
Contract Rights; Amendment or Repeal.
All rights under this Article shall be deemed a contract between the Corporation
and the officer or director pursuant to which the Corporation and each officer
or director intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only as to conduct of an officer or director
occurring thereafter, and shall not affect any rights or obligations then
existing.
Scope of Article.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article shall continue as to a person who has ceased to be an officer or
director in respect of matters arising prior to such time, and shall inure to
the benefit of the heirs, executors, administrators and personal representatives
of such person.
STATE OF ARIZONA
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
INTERNATIONAL LEISURE ENTERPRISES INCORPORATED
Pursuant to the provisions of Section 10-061, Arizona Revised Statutes,
the undersigned Arizona corporation adopts the attached Amendments to its
Articles of Incorporation.
FIRST: The name of the corporation is INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED.
SECOND: The document attached hereto as Exhibit "A" sets forth the amendments
to the Articles of Incorporation which was adopted by the shareholders
of the corporation on April 18, 1990, in the manner prescribed by the
applicable Arizona Revised Statutes.
THIRD: The number of shares of the corporation outstanding at the time of such
adoption was 3,916,166; and the number of shares entitled to vote
thereon was 2,571,157.
FOURTH: The designation and number of outstanding shares of each class or
series entitled to vote thereon as a class or series were as follows:
Class or Series Number of Shares
--------------- ----------------
Common 2,571,157
FIFTH: The number of shares of each class or series entitled to vote thereon
as a class or series voted for or against such amendment, respectively,
was:
Class or Series Number of Shares For Number of Shares Against
--------------- -------------------- ------------------------
Common 2,571,157 None
SIXTH: The amendment does not provide for an exchange, reclassification or
cancellation of any issued shares.
SEVENTH: The amount of stated capital is not affected by the amendments.
DATED: 5/2/90
-----------------------
INTERNATIONAL LEISURE
ENTERPRISES INCORPORATED,
An Arizona corporation
By NANCY J. STONE
------------------------
Nancy J. Stone
President
By JUDY L. SCHMUCKER
-------------------------
Judy L. Schmucker
Secretary
STATE OF ARIZONA
County of Maricopa
The foregoing instrument was acknowledged before me this 2nd day of
May, 1990, by Nancy J. Stone, the President of International Leisure Enterprises
Incorporated, an Arizona corporation, on behalf of the corporation.
SUSAN MALONE
---------------
Notary Public
FORMERLY KNOWN AS E. SUSAN SPINK
My Commission Expires:
January 24, 1992
----------------------
STATE OF ARIZONA
County of Maricopa
The foregoing instrument was acknowledged before me this 2nd day of
May, 1990, by Judy L. Schmucker, the Assistant Secretary of International
Leisure Enterprises Incorporated, an Arizona corporation, on behalf of the
corporation.
SUSAN MALONE
-------------
Notary Public
FORMERLY KNOWN AS E. SUSAN SPINK
My Commission Expires:
January 24, 1992
----------------------
AMENDMENT TO
ARTICLES OF INCORPORATION
OF
INTERNATIONAL LEISURE ENTERPRISES INCORPORATED
Section 4
The authorized capital stock of this Corporation shall be (1) forty million
($40,000,000) shares of common stock having no par value, and (2) ten million
($10,000,000) shares of preferred stock having a par value of Ten Dollars
($10.00) per shares.
Section 4.1
Preferred Stock
Of the shares of capital stock hereinbefore authorized, ten million
($10,000,000) shares having a par value of Ten Dollars ($10.00) per share shall
constitute Preferred Stock. The Preferred Stock may be issued, from time to
time, in one or more series, each of such series to have such designation and
such relative voting, dividend, liquidation, conversion and other rights,
preferences and limitations as are fixed by the Board of Directors from time to
time. Authority is hereby expressly vested in and granted to the Board of
Directors of this Corporation from time to time, subject to the provisions of
this Paragraph, to adopt a resolution or resolutions dividing the shares of
Preferred Stock into one or more series and, with respect to each such series,
fixing the following:
(a) The number of shares to constitute such series and the distinctive
designation thereof;
(b) The annual dividend rate on the shares of such series and the date or dates
from which dividends shall be accumulated as herein provided;
(c) The times when and the price at which shares of such series shall be
redeemable, the limitations and restrictions with respect to such
redemptions and the amount, if any, in addition to any accumulated
dividends thereon which the holders of shares of such series shall be
entitled to receive upon the redemption thereof, which amount may vary at
different redemption dates and may differ purchase, retirement or sinking
fund from the case of shares otherwise redeemed;
(d) The amount, if any, in addition to any accumulated dividends thereon which
the holders of shares of such series shall be entitled to receive upon the
liquidation, dissolution or winding-up of this Corporation, which amount
may vary depending on whether such liquidation, dissolution or winding-up
is voluntary or involuntary and, if voluntary may vary at different dates;
(e) Whether or not the shares of such series shall be subject to the operation
of a purchase, retirement or sinking fund and , if so, the extent to the
manner in which such purchase, retirement or sinking fund shall be applied
to the purchase or redemption of the shares of such series for retirement
or for other corporate purposes and the terms and provisions relative to
the operation of said fund or funds;
(f) Whether or not the shares of such series shall be convertible into shares
of stock of any other class or classes, or of any other series of Preferred
Stock or series of other class of shares, and if so convertible, the price
or prices, the rate or rates of conversion and the method, if any, of
adjusting the same;
(g) The limitations and restrictions, if any, to be effective while any shares
of such series are outstanding upon the payment of dividends or making of
other distributions on, and upon the purchase, redemption or other
acquisition by this Corporation or any subsidiary of this Corporation, of
the common Stock or any other class or series of stock of this Corporation
ranking on a parity with or junior to the shares of such series either as
to dividends or upon liquidation;
(h) The conditions or restrictions, if any, upon the creation of indebtedness
of this Corporation or of any subsidiary, or upon the issue of any
additional stock (including additional shares of such series or of any
other series or of any other class) ranking on a parity with or prior to
the shares of such series either as to dividends or upon liquidation;
(i) The regular and/or special voting powers, if any, of such series; and
(j) Such other preferences and relative, participating, optional or other
special rights, or qualifications, limitations or restrictions, as shall
not be inconsistent with these Articles or applicable law.
The Board of Directors also have authority to change the designation of shares,
or the relative rights, preferences and limitations of the shares and further,
the Board shall have authority to increase or decrease the number of shares of
any series previously determined by it, provided, however, that the number of
shares of any series shall not be decreased to a number less than that of the
shares of that series then outstanding.
No Preemptive Rights, Stock Options and Rights.
No stockholder of this Corporation shall have any preemptive or other similar
right or option with respect to shares of capital stock proposed to be offered
or issued by this Corporation. The Board of Directors shall have the authority
to create and issue rights and options entitling the holders thereof to purchase
from this Corporation shares of its capital stock. Any such rights or options
need not be offered or issued generally to stockholders of this Corporation and
may be offered or issued to such persons (including directors, officers and/or
employees of this Corporation and/or any affiliate) as the Board of Directors
deems appropriate.
CERTIFICATE OF AMENDMENT
OF
LIMITED PARTNERSHIP
FOR
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP
Filed pursuant to A.R.S. 29-309 And 29-311(b)
I. Name. The name of the limited partnership is LOS ABRIGADOS PARTNERS
LIMITED PARTNERSHIP ("The Partnership").
II. Date of Filing. This certificate shall be filed on November 11, 1993.
III. Amendment. The First Amended Certificate of Limited Partnership and
Amended Agreement of Los Abrigados Partners Limited Partnership (the
"Certificate") is hereby amended to reflect that, as of November 11,
1993, Arthur J. Martori has transferred and assigned all of his right,
title and interest in and to his Class B Limited Partnership Interest
in the Partnership to Martori Enterprises Incorporated, an Arizona
corporation.
Dated: November 11, 1993.
ILE SEDONA INCORPORATED, an Arthur J. Martori
Arizona corporation, General
Partner
By: Arthur J. Martori
---------------------
Outgoing Class B Limited
Partner
By: Joseph P. Martori
------------------
Title: Chairman
------------------
MARTORI ENTERPRISES INCORPORATED,
an Arizona corporation, Incoming
Class B Limited Partner
By: Joseph P. Martori
------------------
Title: Chairman
------------------
CERTIFICATE OF AMENDMENT
OF LIMITED PARTNERSHIP FOR
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP
Filed pursuant to A.R.S. Section 29-309 and 29-311(b)
I. Name. The name of the limited partnership is LOS ABRIGADOS PARTNERS
LIMITED PARTNERSHIP ("The Partnership").
II. Amendment. The First Amended Certificate of Limited Partnership and
Amended Agreement of Los Abrigados Partners Limited Partnership (the
"Certificate") (as amended) is hereby further amended to reflect that,
as of July 1, 1994, Edward John Martori, Martori Enterprises
Incorporated, Jerome M. White, Guadalupe Iniguez, Trustee, Wedbush
Morgan Securities (IRA), and Joseph P. Martori, Trustee have
transferred and assigned all of their right, title and interest in and
to their Class A Limited Partnership Interests in the Partnership to
ILX Incorporated, an Arizona corporation.
Dated: July 1, 1994.
ILE SEDONA INCORPORATED, an OUTGOING CLASS A
Arizona corporation, General LIMITED PARTNERS
Partner
By: Nancy J. Stone Edward Martori
---------------------- ---------------------
Title: Vice President Edward John Martori
----------------------
ILX INCORPORATED, Martori Enterprises Incorporated
an Arizona corporation, Incoming
Class A Limited Partner
By: Joseph P. Martori
-------------------------
Its: Chairman
-------------------------
By: Nancy J. Stone Jerome M. White by Steven White
------------------------- --------------------------------
Title: Executive Vice President Jerome M. White
-------------------------
Guadalupe Iniguez
--------------------------------
Guadalupe Iniguez, Trustee
By Joseph P. Martori
--------------------------------
Wedbush Morgan Securities (IRA)
Joseph P. Martori, Trustee
--------------------------------
Joseph P. Martori, Trustee
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered into
as of the 1st day of July, 1994 ("Effective Date"), by and between Edward John
Martori, Martori Enterprises Incorporated, Jerome M. White, Guadalupe Iniguez
(as Trustee), Wedbush Morgan Securities (IRA), and Joseph P. Martori (as
Trustee) (collectively, "Assignor"), and ILX Incorporated, an Arizona
corporation ("Assignee").
WHEREAS Assignor owns all of the outstanding Class A limited
partnership interests (the "Partnership Interest") in Los Abrigados Partners
Limited Partnership, an Arizona limited partnership ("Partnership"), as further
described in the First Amended Certificate of Limited Partnership and Amended
Agreement of Los Abrigados Partners Limited Partnership dated September 9, 1991
and the Certificate of Amendment of Limited Partnership for Los Abrigados
Partners Limited Partnership dated November 11, 1993 (collectively, the
"Partnership's Governing Document");
WHEREAS Assignor has agreed to sell, assign and transfer, and Assignee
has agreed to purchase and accept, the Partnership Interest;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree,
effective as of the Effective Date, as follows:
1. Purchase and Sale. Assignor hereby sells to Assignee, and Assignee hereby
purchases from Assignor, all of Assignor's right, title and interest in and to
the Partnership Interest.
2. Purchase Price. The purchase price to be paid by Assignee to each person
constituting Assignor is as follows:
Edward John Martori $1,000,000
Martori Enterprises Incorporated 100,000
Jerome M. White 243,500
Guadalupe Iniguez (as Trustee) 121,750
Wedbush Morgan Securities (IRA) 60,875
Joseph P. Martori (as Trustee) 60,875
3. Payment of Purchase Price. The purchase price to be paid to Jerome M. White,
Guadalupe Iniguez (as Trustee), Wedbush Morgan Securities (IRA), and Joseph P.
Martori (as Trustee) shall be paid in cash on January 2, 1995. The purchase
price to be paid to Edward John Martori and Martori Enterprises Incorporated
shall be deferred and evidenced by installment promissory notes in the forms
attached hereto as Exhibit "A" and Exhibit "B," respectively. Each installment
promissory note shall be secured by, among other things, the Partnership
Interest, all in accordance with the Security Agreements attached hereto as
Exhibit "C." In addition, Assignee hereby agrees that any distributions of cash
or property otherwise to be made by the Partnership to Assignee as owner of the
Partnership Interest shall instead be made pro rata in satisfaction of said
installment promissory notes, until paid in full.
4. Assignment of Partnership Interest. Assignor hereby assigns, transfers and
conveys to Assignee, all of Assignor's right, title and interest in and to the
Partnership Interest. As of the Effective Date, Assignee shall be entitled to
receive all of Assignor's share, to which Assignor may be or would be otherwise
entitled, of capital account, profits, losses, distributions, and any other
compensation, income or allocation attributable to the Partnership Interests.
5. Acceptance of Partnership Interest. Assignee hereby accepts this Assignment,
agrees to become a substituted Class A limited partner in place of Assignor
throughout the Partnership's Governing Document and, from the Effective Date
forward, assumes, and shall indemnify Assignor from and against, all of
Assignor's obligations resulting from the Partnership Interest pursuant to the
Partnership's Governing Document and the Partnership Interest, and agrees to be
bound by the Partnership's Governing Document in the same manner as if a
signatory thereto.
6. Counterparts. This Assignment may be executed in one or more counterparts,
each of which may be executed by one or more of the parties hereto, which, when
taken together, shall have the same force and effect as though all the parties
executing such counterparts had executed the same instrument.
ASSIGNEE: ASSIGNOR:
ILX Incorporated Edward Martori
--------------------------------
Edward John Martori
By: Nancy J. Stone
------------------------
Its: Exec. Vice President Martori Enterprises Incorporated
------------------------
By: Joseph P. Martori
----------------------------
Its: Chairman
----------------------------
Jerome M. White by Steven White
--------------------------------
Jerome M. White
Guadalupe Iniguez
--------------------------------
Guadalupe Iniguez, Trustee
By Joseph P. Martori
--------------------------------
Wedbush Morgan Securities (IRA)
Joseph P. Martori, Trustee
--------------------------------
Joseph P. Martori, Trustee
EXHIBIT "A"
Installment Promissory Note
Payable to
Edward John Martori
INSTALLMENT PROMISSORY NOTE
$1,000,000
October 1, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an
Arizona corporation (the "undersigned"), promises to pay to the order of Edward
J. Martori ("Payee"), at Phoenix, Arizona, or at such other place as the holder
hereof may from time to time designate, the principal sum of One Million Dollars
($1,000,000), together with interest thereon as computed below, as follows:
Installments of principal and interest in the amount of $37,500
shall be payable quarterly on the first day of January, April, July,
and October of each year commencing January 1, 1995. The entire
unpaid principal balance, together with all accrued and unpaid
interest thereon and other costs payable hereunder, shall be paid in
full on September 30, 1998.
Interest shall be charged on the unpaid principal balance of
this Note from October 1, 1994 to the date of maturity on a daily basis for the
actual number of days any portion of the principal is outstanding, computed on
the basis of a 360-day year, at a per annum rate (the "Note Rate") equal to
eight percent (8%).
The undersigned acknowledges that the undersigned has agreed
to the rate of interest represented by the Note Rate, and any additional
charges, costs and fees arising out of or related to the transaction of which
this Note is a part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in
lawful money of the United State of America and in immediately available funds,
and when made shall be first applied to accrued costs, expenses and fees, if
any, then to accrued interest that has not yet been added to principal, and then
to the reduction of the principal amount of this Note. This Note may be prepaid,
in whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions
(including extensions beyond the original term hereof) and renewals hereof, from
time to time, without notice, and that no such extension or renewal shall
constitute or be deemed a release of any obligation of the undersigned to the
holder hereof; (ii) that any written modification, extension or renewal hereof
executed by the undersigned shall constitute a representation and warranty of
the undersigned that the unpaid balance of principal, interest and other sums
owing hereunder at the time of such modification, renewal or extension are owed
without adjustment for offset, counterclaim or other defense of any kind by the
undersigned against Payee; (iii) that the acceptance by the holder hereof of any
performance which does not comply strictly with the terms hereof shall not be
deemed to be a waiver or bar of any right of said holder, nor a release of any
obligation of the undersigned to the holder hereof; (iv) to offsets of any sums
or property owed to the undersigned by the holder hereof at any time; (v) that
this Note shall be governed by the laws of the State of Arizona applicable to
promissory notes made and to be paid in the State of Arizona; and (vi) to pay
the holder hereof upon demand any and all costs, expenses and fees (including
reasonable attorneys' fees) incurred in enforcing or attempting to recover
payment of the amounts due under this Note, including negotiating, documenting
and otherwise pursuing or consummating modifications, extensions, compositions,
renewals or other similar transactions pertaining to this Note, irrespective of
the existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth
above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By:
-------------------------------------
Its:
-------------------------------------
By:
--------------------------------
Its:
--------------------------------
EXHIBIT "B"
Installment Promissory Note
Payable to
Martori Enterprises Incorporated
INSTALLMENT PROMISSORY NOTE
$100,000
October 1, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an
Arizona corporation (the "undersigned"), promises to pay to the order of Martori
Enterprises Incorporated ("Payee"), at Phoenix, Arizona, or at such other place
as the holder hereof may from time to time designate, the principal sum of One
Hundred Thousand Dollars ($100,000), together with interest thereon as computed
below, as follows:
Installments of principal and interest in the amount of $3,750
shall be payable quarterly on the first day of January, April, July,
and October of each year commencing January 1, 1995. The entire
unpaid principal balance, together with all accrued and unpaid
interest thereon and other costs payable hereunder, shall be paid in
full on September 30, 1998.
Interest shall be charged on the unpaid principal balance of
this Note from October 1, 1994 to the date of maturity on a daily basis for the
actual number of days any portion of the principal is outstanding, computed on
the basis of a 360-day year, at a per annum rate (the "Note Rate") equal to
eight percent (8%).
The undersigned acknowledges that the undersigned has agreed
to the rate of interest represented by the Note Rate, and any additional
charges, costs and fees arising out of or related to the transaction of which
this Note is a part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in
lawful money of the United State of America and in immediately available funds,
and when made shall be first applied to accrued costs, expenses and fees, if
any, then to accrued interest that has not yet been added to principal, and then
to the reduction of the principal amount of this Note. This Note may be prepaid,
in whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions
(including extensions beyond the original term hereof) and renewals hereof, from
time to time, without notice, and that no such extension or renewal shall
constitute or be deemed a release of any obligation of the undersigned to the
holder hereof; (ii) that any written modification, extension or renewal hereof
executed by the undersigned shall constitute a representation and warranty of
the undersigned that the unpaid balance of principal, interest and other sums
owing hereunder at the time of such modification, renewal or extension are owed
without adjustment for offset, counterclaim or other defense of any kind by the
undersigned against Payee; (iii) that the acceptance by the holder hereof of any
performance which does not comply strictly with the terms hereof shall not be
deemed to be a waiver or bar of any right of said holder, nor a release of any
obligation of the undersigned to the holder hereof; (iv) to offsets of any sums
or property owed to the undersigned by the holder hereof at any time; (v) that
this Note shall be governed by the laws of the State of Arizona applicable to
promissory notes made and to be paid in the State of Arizona; and (vi) to pay
the holder hereof upon demand any and all costs, expenses and fees (including
reasonable attorneys' fees) incurred in enforcing or attempting to recover
payment of the amounts due under this Note, including negotiating, documenting
and otherwise pursuing or consummating modifications, extensions, compositions,
renewals or other similar transactions pertaining to this Note, irrespective of
the existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth
above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By:
----------------------------------
Its:
----------------------------------
By:
--------------------------------
Its:
--------------------------------
EXHIBIT "C"
Security Agreements
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is dated as of October 1, 1994, from
ILX INCORPORATED, an Arizona corporation (the "Debtor") with a mailing address
of 2777 E. Camelback Road, Phoenix, Arizona 85016, to Edward J. Martori
("Secured Party"), with a mailing address of 2737 Arizona Biltmore, #12,
Phoenix, Arizona 85016.
1. SECURITY INTEREST AND ASSIGNMENT
1.1 For valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby grants Secured Party a security interest in and does
hereby assign, convey, transfer, pledge and set over to Secured Party all of
Debtor's rights, title, interest, powers and privileges (including, without
limitation, the right to receive any monies now or hereafter due and payable to
Debtor) in and to the following property (the "Collateral"):
(a) All Debtor's interest in that Certificate of Limited Partnership
and Agreement of Los Abrigados Partners Limited Partnership, dated June 24,
1991, and filed with the Secretary of State for the State of Arizona, on June
27, 1991, at Filing No. 20010032 forming a limited partnership (the
"Partnership"), and any amendments or modifications thereto (the "Partnership
Agreement");
(b) All Debtor's rights and interest as a Class A Limited Partner in
the Partnership, and any successor thereto by operation of law or otherwise;
(c) All Debtor's interest, if any, in any partnership property of
the Partnership;
(d) All Debtor's share of any profits of the Partnership, now
existing or hereafter arising, and Debtor's right to any surplus and any other
money due or to become due to Debtor in respect of the Partnership;
(e) All rights to receive any cash proceeds, cash available for
distribution, property, units of ownership, or other distributions of any kind
or in any form which may be due and payable to Debtor, from time to time,
pursuant to the Partnership Agreement described above or applicable law;
(f) Debtor's Class A Limited Partner's interest, ownership interests
and ownership position in the
Partnership, now or hereafter acquired; and
(g) Any and all proceeds, monies, claims for monies due and to become
due, increases in ownership share, and all other payments or distributions of
whatever nature now existing or hereafter arising from the foregoing
Partnership, Partnership Agreement and collateral or from any extensions,
amendments or modifications thereof.
1.2 The grant of these security interests and assignments is made for the
purpose of securing:
(a) Payment of a Promissory Note of even date herewith in the face
amount of One Million and No/100 Dollars ($1,000,000) made by Debtor to the
order of Secured Party (said note and any and all renewals, amendments,
modifications, increases and extensions thereof being hereinafter collectively
called the "Note");
(b) The strict performance and observance of all agreements,
warranties, covenants and conditions contained in any other security agreement
and contained in any other document or instrument entered into by and between
Debtor and Secured Party (collectively, the "Documents")';
(c) The repayment of all monies expended by Secured Party under the
provisions hereof, with interest thereon at the default rate set forth in the
Note.
1.3 All matters referred to in subsections 1.2(a) through 1.2(c) above are
sometimes herein referred to as the "Obligations".
1.4 This Agreement is for security purposes only. Accordingly, Secured Party
shall have no right hereunder to enforce its rights until an Event of Default
(as defined below) has occurred hereunder or under any other Loan Document.
Notwithstanding the foregoing, Debtor hereby agrees that any distributions of
cash or property otherwise to be made by the Partnership to Debtor shall instead
be made prorata in satisfaction of the Note and the other installment Promissory
Note described in the Purchase and Sale Agreement to which Secured Party is a
party dated October 1, 1994.
2. DEBTOR'S WARRANTIES AND COVENANTS
2.1 Debtor hereby warrants and covenants as follows:
(a) The execution, delivery and performance hereof does not
contravene or violate any law or the terms of any agreement or undertaking to
which Debtor is a party or by which Debtor is bound. Debtor has full power and
authority to make the assignments and grant the security interests evidenced
hereby. This Agreement and the assignments and security interests created hereby
are valid, legal, binding and enforceable in accordance with their terms;
(b) Debtor is and, as to Collateral acquired after the date hereof
will be, the owner of the Collateral free from any adverse claim, lien, security
interest, co-ownership or encumbrance other than the security interests and
assignments granted to Secured Party hereby. Debtor shall notify Secured Party
of and shall defend the Collateral against all claims and demands of all other
persons at any time claiming any interest in the Collateral;
(c) Debtor agrees to faithfully perform and discharge each and every
obligation, covenant and agreement to be performed by Debtor under the
agreements constituting the Collateral and agrees that Debtor will not default
under any such agreement. Debtor agrees to give Secured Party prompt notice of
any notice of default or breach or termination received from or made by any
party to the agreements constituting the Collateral. Debtor shall provide
Secured Party with such information concerning the Collateral as Secured Party
may reasonable request including copies of reports or certificates delivered by
Debtor or received by Debtor pursuant to the agreements constituting the
Collateral;
(d) Debtor will not modify, amend, waive, cancel, compromise or in
any way alter the terms of any of the agreements constituting the Collateral
without the prior written consent of Secured Party. Debtor will not release or
discharge any other party from its obligations, covenants or agreements
contained in the agreements constituting the Collateral. Debtor shall take all
such actions with reference to the collection of monies due under the Collateral
as Secured Party may reasonably request;
(e) Debtor will not further assign or attempt to assign its rights
under any of the agreements constituting the Collateral nor pledge or grant any
other security interest in any of the Collateral nor permit any other lien or
encumbrance to attach thereto;
(f) Debtor warrants that all of the agreements constituting the
Collateral are valid, legal, enforceable and in full force and effect. Such
agreements have not been amended or modified in any way and are free from any
default, breach, dispute, defenses and counterclaims;
(g) Debtor shall from time to time do all acts and things and will
execute and file all instruments in a timely and proper manner as reasonably
required by Secured Party to establish, maintain, continue, guarantee and
protect the security interests and assignments contained herein, and will
promptly on demand pay all costs and expenses of filing and recording, including
costs of any search reasonably deemed necessary by Secured Party from time to
time to establish and determine the validity and the continuing priority of the
security interest and assignments of Secured Party, and also pay all other
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Collateral or Secured Party's interest therein;
(h) Debtor shall pay promptly when due all taxes and assessments upon
the Collateral or upon this Agreement or upon any agreements or notes evidencing
any of the Obligations;
(i) Debtor warrants that the assignment of its partnership interest
in the Partnership is an assignment of all of its rights and interests as a
Class A Limited Partner in the Partnership and not a mere assignment of
distributions due to Debtor and the Partnership Agreement of Partnership permits
the assignment given by Debtor to Secured Party hereunder and will allow Secured
Party to assume all partnership rights of Debtor in and to the Partnership upon
the occurrence of an Event of Default hereunder; and
(j) Debtor warrants that its interest as a Class A Limited Partner
constitutes a 7.5 percentage interest in the Partnership as a whole.
3. AUTHORITY OF SECURED PARTY TO PERFORM FOR DEBTOR
3.1 Should Debtor fail or refuse to make any payment, perform any covenant or
obligation, observe any condition or take any action which Debtor is obligated
hereunder to make, perform, observe, take or do, at the time or in the manner
herein provided, then Secured Party may, at Secured Party's sole discretion,
without notice to or demand upon Debtor (except as provided in any of the
Documents), and without releasing Debtor from any obligation, covenant or
condition hereof, make, perform, observe, take or do the same in such manner and
to such extent as Secured Party may deem necessary to protect the security of
this Agreement and the Collateral. Debtor agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party
hereunder, together with interest thereon at the default rate of interest set
forth in the Note from the date of said payment or expenditure, and any such
payments and expenses, together with interest thereon, shall be added to the
Obligations secured hereby and shall be deemed secured hereby.
3.2 Debtor hereby constitutes and appoints Secured Party as the Debtor's true
and lawful attorney-in-fact with full right of appointment and substitution, to
perform any and all acts necessary or convenient to preserve and protect Secured
Party's and Debtor's interest in and to the Collateral. Said power of attorney
shall empower Secured Party to endorse the Debtor's name on all checks and other
forms of payment, which may come into the possession of Secured Party and to
sign and endorse the Debtor's name on any other instruments or documents.
Secured Party is further empowered under such power of attorney to take any and
all action necessary to effect, protect, or preserve Debtor's rights under the
agreements constituting the Collateral including the execution of documents and
agreements substituting Secured Party as general partner and/or limited partner
of the Partnership upon an Event of Default hereunder. The powers granted
herein, being coupled with an interest, are irrevocable until all Obligations to
Secured Party have been fully paid and satisfied.
4. EVENTS OF DEFAULT
4.1 Debtor shall be in default under this agreement upon the occurrence of any
of the following events or conditions ("Events of Default"):
(a) Any breach of any covenant or condition in this Agreement and
such breach continues for a period of thirty (30) days after notice thereof from
Secured Party to Debtor; or, if such failure is not capable of being cured
within such thirty (30) day period, Debtor does not commence to cure the failure
within such thirty (30) day period and thereafter diligently and continuously
prosecutes the cure to completion (such cure must be completed to Secured
Party's reasonable satisfaction in its reasonable discretion within sixty (60)
days after Debtor has actual or constructive notice of such failure);
(b) Any breach or default by Debtor of any of its Obligations under
any agreement constituting the Collateral;
(c) Any warranty, representation or statement made in this Agreement
or the Documents by Debtor proves to have been false in any material respect
when made or furnished;
(d) Default in the payment or performance of any of the Obligations
after giving effect to any applicable grace or cure period; or the occurrence of
any Event of Default under the Note or any other Document after giving effect to
any applicable grace or cure period.
5. SECURED PARTY'S RIGHTS UPON DEFAULT
5.1 Upon the happening of any Event of Default, Secured Party may, at its
option and without further notice to Debtor, declare all of the Obligations to
be immediately due and payable and Secured Party shall have the rights, options,
duties and remedies of Secured Party and Debtor shall have the rights and duties
of a Debtor under the Uniform Commercial Code as adopted in the State of
Arizona. Without limitation thereto, Secured Party shall have the following
specific rights:
(a) To take immediate possession of all records, instruments,
documents and writings of Debtor pertaining to the Collateral without resort to
legal process and without notice and for such purpose to enter upon any premises
in which such records, instruments, documents, writings or any part thereof may
be situated and remove the same therefrom;
(b) To require Debtor to assemble all records, instruments, documents
or writings pertaining to the Collateral and make such available to Secured
Party at a place to then be designated by Secured Party;
(c) To have a public or private sale of all or any part of the
Collateral;
(d) To be substituted for Debtor as a Class A Limited Partner of
Partnership with all rights, powers and privileges of the same under the terms
of the Partnership Agreement of Partnership;
(e) To collect by legal proceedings or otherwise, endorse, receive
and receipt for all money or other property now or hereafter payable upon or on
account of the Collateral and enforce performance of all Obligations of obligors
under the Collateral; to make any compromise or settlement with respect to the
Collateral; to cause the Collateral to be transferred to Secured Party's name or
to the name of its nominee; and to exercise as to the Collateral all the rights,
powers and remedies of an owner;
(f) To bring suit for specific performance against any or all of the
persons and entities constituting Debtor;
(g) To have any other rights or remedies available by law.
6. CUMULATIVE REMEDIES
6.1 Any and all remedies herein expressly conferred upon Secured Party shall
be deemed cumulative with, and not exclusive of, any other remedy conferred
hereby or by law on Secured Party, and the exercise of any one remedy shall not
preclude the exercise of any other.
6.2 Failure of Secured Party to exercise any rights it may have upon Debtor's
breach hereof or upon Debtor's default in payment of any Obligation secured
hereby shall not release Debtor from any of its Obligations hereunder or under
any loan, unless such waiver or release be express and in writing signed by
Secured Party. In addition, the waiver by Secured Party of any breach hereof or
default in payment of any Obligation secured hereby shall not be deemed to
constitute a waiver of any succeeding breach or default. By exercising or
failing to exercise any of the options or elections contained in this Agreement,
Secured Party shall not be deemed to have waived any breach or default on the
part of Debtor.
6.3 Debtor hereby waives any right or privilege which it or its creditors
might otherwise have to require Secured Party to proceed against the assets
encumbered hereby or by any other security document or instrument securing any
loan to Partnership, in any particular order or fashion under any legal or
equitable doctrine or principle of marshaling and/or suretyship and further
agrees that upon default, Secured Party may proceed to exercise any or all
remedies with regard to any or all assets encumbered hereby or by any other
security document or instrument in such manner and order as Secured Party in its
sole discretion may determine.
7. PAYMENT TO SECURED PARTY
7.1 During the existence of any Event of Default hereunder, Debtor and Secured
Party agree that all proceeds, cash, payments or distributions of any nature
due, owing or to be paid to Debtor by reason of the Collateral, including but
not limited to earnings distributable under the Partnership Agreement, shall be
paid directly to Secured Party. All such sums received may be applied by Secured
Party to the Obligations, whether or not then due, in such order and manner as
Secured Party shall determine. Debtor agrees to promptly advise Secured Party,
before any payment or distribution is due and before Debtor receives or is
credited with payment, of the amount of any sum due and owing and the intended
medium or form of payment.
7.2 Secured Party shall not be obligated to perform or discharge any
obligation, duty or liability of Debtor under any agreement. Secured Party shall
not be obligated to assume or exercise any rights or obligations as general
partner of the Partnership.
7.3 At such time as no Event of Default exists hereunder, Debtor may exercise
all its rights as a partner in the Partnership and receive all distributions
from the Partnership without the consent of Secured Party, except as otherwise
provided herein and in the Documents.
8. LIMITATION OF LIABILITY
Subject to the provisions below, nothing contained herein shall be construed
as creating any personal liability on the part of the Class A Limited Partners
or the General Partner, the Class B Limited Partners, or the Partnership for all
obligations of Debtor under the Documents to Secured Party, all such liability
being expressly waived by Secured Party for itself, its successors and assigns,
and Secured Party agrees to look solely to Debtor and to any collateral
heretofore, now or hereafter pledged by any party to secure the Loan.
The foregoing shall in no way limit or impair the enforcement against any
security granted by the Documents of any of the Secured Party's rights and
remedies pursuant to the Documents.
9. MISCELLANEOUS
9.1 Debtor hereby agrees to indemnify and hold Secured Party harmless from and
against any and all claims, demands, liabilities, losses, lawsuits, judgments
and costs and expenses (including without limitation, reasonable attorneys'
fees) to which Secured Party may become exposed, or which Secured Party may
incur, in properly and legally exercising any of its rights under this
Agreement. In addition to the foregoing award of attorneys' fees, Secured Party
shall be entitled to its attorneys' fees incurred in any post judgment
proceedings to collect or enforce any judgment related to this Agreement. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement.
9.2 The failure of Secured party to enforce any of the terms, covenants, or
conditions herein shall not be construed or deemed to be a waiver of any rights
or remedies hereunder. Secured Party shall have the full right, power and
authority to enforce this Agreement, or any of the terms, covenants, or
conditions hereof, at any time that Secured Party shall deem proper.
9.3 This Agreement applies to and binds the parties hereto and their
respective heirs, administrators, executors, successors, and assigns. Any
provisions in any other agreement creating rights in Secured Party other than
those created herein shall be deemed incorporated herein by reference and made a
part hereof for all purposes.
9.4 Debtor shall execute such documents and take such further actions as may
be reasonably required by Secured Party to carry out the provisions hereof.
9.5 Time is the essence of this Agreement and all its provisions.
9.6 THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT ARE TO BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA.
ILX Incorporated
By:
-------------------------------------
Its:
-------------------------------------
[Debtor]
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is dated as of October 1, 1994, from
ILX INCORPORATED, an Arizona corporation (the "Debtor") with a mailing address
of 2777 E. Camelback Road, Phoenix, Arizona 85016, to Martori Enterprises
Incorporated ("Secured Party"), with a mailing address of 2777 East Camelback
Road, Phoenix, Arizona 85016.
1. SECURITY INTEREST AND ASSIGNMENT
1.1 For valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby grants Secured Party a security interest in and does
hereby assign, convey, transfer, pledge and set over to Secured Party all of
Debtor's rights, title, interest, powers and privileges (including, without
limitation, the right to receive any monies now or hereafter due and payable to
Debtor) in and to the following property (the "Collateral"):
(a) All Debtor's interest in that Certificate of Limited Partnership
and Agreement of Los Abrigados Partners Limited Partnership, dated June 24,
1991, and filed with the Secretary of State for the State of Arizona, on June
27, 1991, at Filing No. 20010032 forming a limited partnership (the
"Partnership"), and any amendments or modifications thereto (the "Partnership
Agreement");
(b) All Debtor's rights and interest as a Class A Limited Partner in
the Partnership, and any successor thereto by operation of law or otherwise;
(c) All Debtor's interest, if any, in any partnership property of the
Partnership;
(d) All Debtor's share of any profits of the Partnership, now
existing or hereafter arising, and Debtor's right to any surplus and any other
money due or to become due to Debtor in respect of the Partnership;
(e) All rights to receive any cash proceeds, cash available for
distribution, property, units of ownership, or other distributions of any kind
or in any form which may be due and payable to Debtor, from time to time,
pursuant to the Partnership Agreement described above or applicable law;
(f) Debtor's Class A Limited Partner's interest, ownership interests
and ownership position in the Partnership, now or hereafter acquired; and
(g) Any and all proceeds, monies, claims for monies due and to become
due, increases in ownership share, and all other payments or distributions of
whatever nature now existing or hereafter arising from the foregoing
Partnership, Partnership Agreement and collateral or from any extensions,
amendments or modifications thereof.
1.2 The grant of these security interests and assignments is made for the
purpose of securing:
(a) Payment of a Promissory Note of even date herewith in the face
amount of One Hundred Thousand and No/100 Dollars ($100,000) made by Debtor to
the order of Secured Party (said note and any and all renewals, amendments,
modifications, increases and extensions thereof being hereinafter collectively
called the "Note");
(b) The strict performance and observance of all agreements,
warranties, covenants and conditions contained in any other security agreement
and contained in any other document or instrument entered into by and between
Debtor and Secured Party (collectively, the "Documents");
(c) The repayment of all monies expended by Secured Party under the
provisions hereof, with interest thereon at the default rate set forth in the
Note.
1.3 All matters referred to in subsections 1.2(a) through 1.2(c) above are
sometimes herein referred to as the "Obligations".
1.4 This Agreement is for security purposes only. Accordingly, Secured Party
shall have no right hereunder to enforce its rights until an Event of Default
(as defined below) has occurred hereunder or under any other Loan Document.
Notwithstanding the foregoing, Debtor hereby agrees that any distributions of
cash or property otherwise to be made by the Partnership to Debtor shall instead
be made prorata in satisfaction of the Note and the other installment Promissory
Note described in the Purchase and Sale Agreement to which Secured Party is a
party dated October 1, 1994.
2. DEBTOR'S WARRANTIES AND COVENANTS
2.1 Debtor hereby warrants and covenants as follows:
(a) The execution, delivery and performance hereof does not
contravene or violate any law or the terms of any agreement or undertaking to
which Debtor is a party or by which Debtor is bound. Debtor has full power and
authority to make the assignments and grant the security interests evidenced
hereby. This Agreement and the assignments and security interests created hereby
are valid, legal, binding and enforceable in accordance with their terms;
(b) Debtor is and, as to Collateral acquired after the date hereof
will be, the owner of the Collateral free from any adverse claim, lien, security
interest, co-ownership or encumbrance other than the security interests and
assignments granted to Secured Party hereby. Debtor shall notify Secured Party
of and shall defend the Collateral against all claims and demands of all other
persons at any time claiming any interest in the Collateral;
(c) Debtor agrees to faithfully perform and discharge each and every
obligation, covenant and agreement to be performed by Debtor under the
agreements constituting the Collateral and agrees that Debtor will not default
under any such agreement. Debtor agrees to give Secured Party prompt notice of
any notice of default or breach or termination received from or made by any
party to the agreements constituting the Collateral. Debtor shall provide
Secured Party with such information concerning the Collateral as Secured Party
may reasonable request including copies of reports or certificates delivered by
Debtor or received by Debtor pursuant to the agreements constituting the
Collateral;
(d) Debtor will not modify, amend, waive, cancel, compromise or in
any way alter the terms of any of the agreements constituting the Collateral
without the prior written consent of Secured Party. Debtor will not release or
discharge any other party from its obligations, covenants or agreements
contained in the agreements constituting the Collateral. Debtor shall take all
such actions with reference to the collection of monies due under the Collateral
as Secured Party may reasonably request;
(e) Debtor will not further assign or attempt to assign its rights
under any of the agreements constituting the Collateral nor pledge or grant any
other security interest in any of the Collateral nor permit any other lien or
encumbrance to attach thereto;
(f) Debtor warrants that all of the agreements constituting the
Collateral are valid, legal, enforceable and in full force and effect. Such
agreements have not been amended or modified in any way and are free from any
default, breach, dispute, defenses and counterclaims;
(g) Debtor shall from time to time do all acts and things and will
execute and file all instruments in a timely and proper manner as reasonably
required by Secured Party to establish, maintain, continue, guarantee and
protect the security interests and assignments contained herein, and will
promptly on demand pay all costs and expenses of filing and recording, including
costs of any search reasonably deemed necessary by Secured Party from time to
time to establish and determine the validity and the continuing priority of the
security interest and assignments of Secured Party, and also pay all other
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Collateral or Secured Party's interest therein;
(h) Debtor shall pay promptly when due all taxes and assessments upon
the Collateral or upon this Agreement or upon any agreements or notes evidencing
any of the Obligations;
(i) Debtor warrants that the assignment of its partnership interest
in the Partnership is an assignment of all of its rights and interests as a
Class A Limited Partner in the Partnership and not a mere assignment of
distributions due to Debtor and the Partnership Agreement of Partnership permits
the assignment given by Debtor to Secured Party hereunder and will allow Secured
Party to assume all partnership rights of Debtor in and to the Partnership upon
the occurrence of an Event of Default hereunder; and
(j) Debtor warrants that its interest as a Class A Limited Partner
constitutes an 7.5 percentage interest in the Partnership as a whole.
3. AUTHORITY OF SECURED PARTY TO PERFORM FOR DEBTOR
3.1 Should Debtor fail or refuse to make any payment, perform any covenant or
obligation, observe any condition or take any action which Debtor is obligated
hereunder to make, perform, observe, take or do, at the time or in the manner
herein provided, then Secured Party may, at Secured Party's sole discretion,
without notice to or demand upon Debtor (except as provided in any of the
Documents), and without releasing Debtor from any obligation, covenant or
condition hereof, make, perform, observe, take or do the same in such manner and
to such extent as Secured Party may deem necessary to protect the security of
this Agreement and the Collateral. Debtor agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party
hereunder, together with interest thereon at the default rate of interest set
forth in the Note from the date of said payment or expenditure, and any such
payments and expenses, together with interest thereon, shall be added to the
Obligations secured hereby and shall be deemed secured hereby.
3.2 Debtor hereby constitutes and appoints Secured Party as the Debtor's true
and lawful attorney-in-fact with full right of appointment and substitution, to
perform any and all acts necessary or convenient to preserve and protect Secured
Party's and Debtor's interest in and to the Collateral. Said power of attorney
shall empower Secured Party to endorse the Debtor's name on all checks and other
forms of payment, which may come into the possession of Secured Party and to
sign and endorse the Debtor's name on any other instruments or documents.
Secured Party is further empowered under such power of attorney to take any and
all action necessary to effect, protect, or preserve Debtor's rights under the
agreements constituting the Collateral including the execution of documents and
agreements substituting Secured Party as general partner and/or limited partner
of the Partnership upon an Event of Default hereunder. The powers granted
herein, being coupled with an interest, are irrevocable until all Obligations to
Secured Party have been fully paid and satisfied.
4. EVENTS OF DEFAULT
4.1 Debtor shall be in default under this agreement upon the occurrence of any
of the following events or conditions ("Events of Default"):
(a) Any breach of any covenant or condition in this Agreement and
such breach continues for a period of thirty (30) days after notice thereof from
Secured Party to Debtor; or, if such failure is not capable of being cured
within such thirty (30) day period, Debtor does not commence to cure the failure
within such thirty (30) day period and thereafter diligently and continuously
prosecutes the cure to completion (such cure must be completed to Secured
Party's reasonable satisfaction in its reasonable discretion within sixty (60)
days after Debtor has actual or constructive notice of such failure);
(b) Any breach or default by Debtor of any of its Obligations under
any agreement constituting the Collateral;
(c) Any warranty, representation or statement made in this Agreement
or the Documents by Debtor proves to have been false in any material respect
when made or furnished;
(d) Default in the payment or performance of any of the Obligations
after giving effect to any applicable grace or cure period; or the occurrence of
any Event of Default under the Note or any other Document after giving effect to
any applicable grace or cure period.
5. SECURED PARTY'S RIGHTS UPON DEFAULT
5.1 Upon the happening of any Event of Default, Secured Party may, at its
option and without further notice to Debtor, declare all of the Obligations to
be immediately due and payable and Secured Party shall have the rights, options,
duties and remedies of Secured Party and Debtor shall have the rights and duties
of a Debtor under the Uniform Commercial Code as adopted in the State of
Arizona. Without limitation thereto, Secured Party shall have the following
specific rights:
(a) To take immediate possession of all records, instruments,
documents and writings of Debtor pertaining to the Collateral without resort to
legal process and without notice and for such purpose to enter upon any premises
in which such records, instruments, documents, writings or any part thereof may
be situated and remove the same therefrom;
(b) To require Debtor to assemble all records, instruments, documents
or writings pertaining to the Collateral and make such available to Secured
Party at a place to then be designated by Secured Party;
(c) To have a public or private sale of all or any part of the
Collateral;
(d) To be substituted for Debtor as a Class A Limited Partner of
Partnership with all rights, powers and privileges of the same under the terms
of the Partnership Agreement of Partnership;
(e) To collect by legal proceedings or otherwise, endorse, receive
and receipt for all money or other property now or hereafter payable upon or on
account of the Collateral and enforce performance of all Obligations of obligors
under the Collateral; to make any compromise or settlement with respect to the
Collateral; to cause the Collateral to be transferred to Secured Party's name or
to the name of its nominee; and to exercise as to the Collateral all the rights,
powers and remedies of an owner;
(f) To bring suit for specific performance against any or all of the
persons and entities constituting Debtor;
(g) To have any other rights or remedies available by law.
6. CUMULATIVE REMEDIES
6.1 Any and all remedies herein expressly conferred upon Secured Party shall
be deemed cumulative with, and not exclusive of, any other remedy conferred
hereby or by law on Secured Party, and the exercise of any one remedy shall not
preclude the exercise of any other.
6.2 Failure of Secured Party to exercise any rights it may have upon Debtor's
breach hereof or upon Debtor's default in payment of any Obligation secured
hereby shall not release Debtor from any of its Obligations hereunder or under
any loan, unless such waiver or release be express and in writing signed by
Secured Party. In addition, the waiver by Secured Party of any breach hereof or
default in payment of any Obligation secured hereby shall not be deemed to
constitute a waiver of any succeeding breach or default. By exercising or
failing to exercise any of the options or elections contained in this Agreement,
Secured Party shall not be deemed to have waived any breach or default on the
part of Debtor.
6.3 Debtor hereby waives any right or privilege which it or its creditors
might otherwise have to require Secured Party to proceed against the assets
encumbered hereby or by any other security document or instrument securing any
loan to Partnership, in any particular order or fashion under any legal or
equitable doctrine or principle of marshaling and/or suretyship and further
agrees that upon default, Secured Party may proceed to exercise any or all
remedies with regard to any or all assets encumbered hereby or by any other
security document or instrument in such manner and order as Secured Party in its
sole discretion may determine.
7. PAYMENT TO SECURED PARTY
7.1 During the existence of any Event of Default hereunder, Debtor and Secured
Party agree that all proceeds, cash, payments or distributions of any nature
due, owing or to be paid to Debtor by reason of the Collateral, including but
not limited to earnings distributable under the Partnership Agreement, shall be
paid directly to Secured Party. All such sums received may be applied by Secured
Party to the Obligations, whether or not then due, in such order and manner as
Secured Party shall determine. Debtor agrees to promptly advise Secured Party,
before any payment or distribution is due and before Debtor receives or is
credited with payment, of the amount of any sum due and owing and the intended
medium or form of payment.
7.2 Secured Party shall not be obligated to perform or discharge any
obligation, duty or liability of Debtor under any agreement. Secured Party shall
not be obligated to assume or exercise any rights or obligations as general
partner of the Partnership.
7.3 At such time as no Event of Default exists hereunder, Debtor may exercise
all its rights as a partner in the Partnership and receive all distributions
from the Partnership without the consent of Secured Party, except as otherwise
provided herein and in the Documents.
8. LIMITATION OF LIABILITY
Subject to the provisions below, nothing contained herein shall be construed
as creating any personal liability on the part of the Class A Limited Partners
or the General Partner, the Class B Limited Partners, or the Partnership for all
obligations of Debtor under the Documents to Secured Party, all such liability
being expressly waived by Secured Party for itself, its successors and assigns,
and Secured Party agrees to look solely to Debtor and to any collateral
heretofore, now or hereafter pledged by any party to secure the Loan.
The foregoing shall in no way limit or impair the enforcement against any
security granted by the Documents of any of the Secured Party's rights and
remedies pursuant to the Documents.
9. MISCELLANEOUS
9.1 Debtor hereby agrees to indemnify and hold Secured Party harmless from and
against any and all claims, demands, liabilities, losses, lawsuits, judgments
and costs and expenses (including without limitation, reasonable attorneys'
fees) to which Secured Party may become exposed, or which Secured Party may
incur, in properly and legally exercising any of its rights under this
Agreement. In addition to the foregoing award of attorneys' fees, Secured Party
shall be entitled to its attorneys' fees incurred in any post judgment
proceedings to collect or enforce any judgment related to this Agreement. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement.
9.2 The failure of Secured party to enforce any of the terms, covenants, or
conditions herein shall not be construed or deemed to be a waiver of any rights
or remedies hereunder. Secured Party shall have the full right, power and
authority to enforce this Agreement, or any of the terms, covenants, or
conditions hereof, at any time that Secured Party shall deem proper.
9.3 This Agreement applies to and binds the parties hereto and their
respective heirs, administrators, executors, successors, and assigns. Any
provisions in any other agreement creating rights in Secured Party other than
those created herein shall be deemed incorporated herein by reference and made a
part hereof for all purposes.
9.4 Debtor shall execute such documents and take such further actions as may
be reasonably required by Secured Party to carry out the provisions hereof.
9.5 Time is the essence of this Agreement and all its provisions.
9.6 THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT ARE TO BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA.
ILX Incorporated
By:
-----------------------------------
Its:
-----------------------------------
INSTALLMENT PROMISSORY NOTE
$1,000,000 October 1, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an
Arizona corporation (the "undersigned"), promises to pay to the order of Edward
J. Martori ("Payee"), at Phoenix, Arizona, or at such other place as the holder
hereof may from time to time designate, the principal sum of One Million Dollars
($1,000,000), together with interest thereon as computed below, as follows:
Installments of principal and interest in the amount of $37,500
shall be payable quarterly on the first day of January, April, July,
and October of each year commencing January 1, 1995. The entire
unpaid principal balance, together with all accrued and unpaid
interest thereon and other costs payable hereunder, shall be paid in
full on September 30, 1998.
Interest shall be charged on the unpaid principal balance of
this Note from October 1, 1994 to the date of maturity on a daily basis for the
actual number of days any portion of the principal is outstanding, computed on
the basis of a 360-day year, at a per annum rate (the "Note Rate") equal to
eight percent (8%).
The undersigned acknowledges that the undersigned has agreed
to the rate of interest represented by the Note Rate, and any additional
charges, costs and fees arising out of or related to the transaction of which
this Note is a part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in
lawful money of the United State of America and in immediately available funds,
and when made shall be first applied to accrued costs, expenses and fees, if
any, then to accrued interest that has not yet been added to principal, and then
to the reduction of the principal amount of this Note. This Note may be prepaid,
in whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions
(including extensions beyond the original term hereof) and renewals hereof, from
time to time, without notice, and that no such extension or renewal shall
constitute or be deemed a release of any obligation of the undersigned to the
holder hereof; (ii) that any written modification, extension or renewal hereof
executed by the undersigned shall constitute a representation and warranty of
the undersigned that the unpaid balance of principal, interest and other sums
owing hereunder at the time of such modification, renewal or extension are owed
without adjustment for offset, counterclaim or other defense of any kind by the
undersigned against Payee; (iii) that the acceptance by the holder hereof of any
performance which does not comply strictly with the terms hereof shall not be
deemed to be a waiver or bar of any right of said holder, nor a release of any
obligation of the undersigned to the holder hereof; (iv) to offsets of any sums
or property owed to the undersigned by the holder hereof at any time; (v) that
this Note shall be governed by the laws of the State of Arizona applicable to
promissory notes made and to be paid in the State of Arizona; and (vi) to pay
the holder hereof upon demand any and all costs, expenses and fees (including
reasonable attorneys' fees) incurred in enforcing or attempting to recover
payment of the amounts due under this Note, including negotiating, documenting
and otherwise pursuing or consummating modifications, extensions, compositions,
renewals or other similar transactions pertaining to this Note, irrespective of
the existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth
above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By: Nancy J. Stone
-----------------------------------
Its: Exec. Vice President
-----------------------------------
By: Alan J. Tucker
------------------------------
Its: Executive Vice President
------------------------------
INSTALLMENT PROMISSORY NOTE
$100,000 October 1, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an
Arizona corporation (the "undersigned"), promises to pay to the order of Martori
Enterprises Incorporated ("Payee"), at Phoenix, Arizona, or at such other place
as the holder hereof may from time to time designate, the principal sum of One
Hundred Thousand Dollars ($100,000), together with interest thereon as computed
below, as follows:
Installments of principal and interest in the amount of $3,750 shall
be payable quarterly on the first day of January, April, July, and
October of each year commencing January 1, 1995. The entire unpaid
principal balance, together with all accrued and unpaid interest
thereon and other costs payable hereunder, shall be paid in full on
September 30, 1998.
Interest shall be charged on the unpaid principal balance of
this Note from October 1, 1994 to the date of maturity on a daily basis for the
actual number of days any portion of the principal is outstanding, computed on
the basis of a 360-day year, at a per annum rate (the "Note Rate") equal to
eight percent (8%).
The undersigned acknowledges that the undersigned has agreed
to the rate of interest represented by the Note Rate, and any additional
charges, costs and fees arising out of or related to the transaction of which
this Note is a part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in
lawful money of the United State of America and in immediately available funds,
and when made shall be first applied to accrued costs, expenses and fees, if
any, then to accrued interest that has not yet been added to principal, and then
to the reduction of the principal amount of this Note. This Note may be prepaid,
in whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions
(including extensions beyond the original term hereof) and renewals hereof, from
time to time, without notice, and that no such extension or renewal shall
constitute or be deemed a release of any obligation of the undersigned to the
holder hereof; (ii) that any written modification, extension or renewal hereof
executed by the undersigned shall constitute a representation and warranty of
the undersigned that the unpaid balance of principal, interest and other sums
owing hereunder at the time of such modification, renewal or extension are owed
without adjustment for offset, counterclaim or other defense of any kind by the
undersigned against Payee; (iii) that the acceptance by the holder hereof of any
performance which does not comply strictly with the terms hereof shall not be
deemed to be a waiver or bar of any right of said holder, nor a release of any
obligation of the undersigned to the holder hereof; (iv) to offsets of any sums
or property owed to the undersigned by the holder hereof at any time; (v) that
this Note shall be governed by the laws of the State of Arizona applicable to
promissory notes made and to be paid in the State of Arizona; and (vi) to pay
the holder hereof upon demand any and all costs, expenses and fees (including
reasonable attorneys' fees) incurred in enforcing or attempting to recover
payment of the amounts due under this Note, including negotiating, documenting
and otherwise pursuing or consummating modifications, extensions, compositions,
renewals or other similar transactions pertaining to this Note, irrespective of
the existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth
above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By: Nancy J. Stone
---------------------------------------
Its: Executive Vice President
------------------------------------
By: Alan J. Tucker
-------------------------------
Its: Executive Vice President
-------------------------------
AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment to Purchase and Sale Agreement ("Agreement") is made and
entered into as of the 3rd day of January, 1995 ("Effective Date"), by and
between Edward John Martori, Martori Enterprises Incorporated, Wedbush Morgan
Securities (IRA), and Joseph P. Martori (as Trustee) (collectively, "Assignor"),
and ILX Incorporated, an Arizona corporation ("Assignee").
WHEREAS Assignor and Assignee previously enterred into that certain
Purchase and Sale Agreement effective as of the 1st day of October, 1994 (the
"Original Agreement");
WHEREAS the parties desire to make certain modifications to the
Original Agreement regarding payment of the purchase price to Wedbush Morgan
Securities (IRA) and Joseph P. Martori (as Trustee);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree,
effective as of the Effective Date, as follows:
1. Continuation of Original Agreement. Except as specifically modified
herein, the Original Agreement shall remain in full force and effect.
Capitalized terms used herein and otherwise not defined shall have the meanings
ascribed to them in the Original Agreement.
2. Partial Satisfaction of Original Agreement.
A. Assignee warrants and represents that the purchase price to
be paid in cash under the Original Agreement to Jerome M. White and Guadalupe
Iniguez (as Trustee) on January 2, 1995 was paid when due, and except for the
indemnification provision in Section 5 of the Original Agreement, all of
Assignee's financial obligations to Jerome M. White and Guadalupe Iniguez (as
Trustee) under the Original Agreement have been satisfied.
B. Assignee, Wedbush Morgan Securities (IRA) and Joseph P.
Martori (as Trustee) acknowledge that Assignee's obligation to pay each of
Wedbush Morgan Securities (IRA) and Joseph P. Martori (as Trustee) cash in the
amount of $60,875 on January 2, 1995 was partially satisfied on January 3, 1995
by the payment to each of them of $3,000 (plus interest from October 1, 1994
through December 31, 1994).
3. Modification in Manner of Payment of Purchase Price. The remaining
balance of the purchase price to be paid to Wedbush Morgan Securities (IRA) and
Joseph P. Martori (as Trustee) in the amount of $57,875 each shall be deferred
and evidenced by installment promissory notes in the forms attached hereto as
Exhibit "A" and Exhibit "B," respectively. Each installment promissory note
shall be secured by, among other things, the Partnership Interest, all in
accordance with the Security Agreements attached hereto as Exhibit "C."
4. Modification as to Payment of Partnership Distributions. The parties
hereby agree that, with respect to any distributions of cash or property
otherwise to be made by the Partnership to Assignee as owner of the Partnership
Interest, Assignee shall instead cause such distributions to be made pro rata in
satisfaction of the installment promissory notes payable to Edward John Martori,
Martori Enterprises Incorporated, Wedbush Morgan Securities (IRA) and Joseph P.
Martori (as Trustee), until paid in full.
5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which may be executed by one or more of the parties
hereto, which, when taken together, shall have the same force and effect as
though all the parties executing such counterparts had executed the same
instrument.
ASSIGNEE: ASSIGNOR:
ILX Incorporated Edward Martori
-------------------
Edward John Martori
By: Joseph P. Martori
-------------------
Its: Chairman
------------------
Martori Enterprises Incorporated
By: Joseph P. Martori
-------------------------
Its: Chairman
---------------
By Joseph P. Martori, Self Directed
------------------------------------
Wedbush Morgan Securities (IRA)
Joseph P. Martori, Trustee
------------------------------
Joseph P. Martori, Trustee
EXHIBIT "A"
Installment Promissory Note
Payable to
Wedbush Morgan Securities (IRA)
INSTALLMENT PROMISSORY NOTE
$57,875.00 January 1, 1995
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of Wedbush Morgan
Securities (IRA) ("Payee"), at Phoenix, Arizona, or at such other place as the
holder hereof may from time to time designate, the principal sum of Fifty Seven
Thousand Eight Hundred Seventy Five Dollars ($57,875.00), together with interest
thereon as computed below, as follows:
Installments of principal and interest in the amount of $3,000 shall be
payable monthly on the first day of each month commencing February 1,
1995. The entire unpaid principal balance, together with all accrued
and unpaid interest thereon and other costs payable hereunder, shall be
paid in full on December 31, 1996.
Interest shall be charged on the unpaid principal balance of this Note
from January 1, 1995 to the date of maturity on a daily basis for the actual
number of days any portion of the principal is outstanding, computed on the
basis of a 360-day year, at a per annum rate (the "Note Rate") equal to twelve
percent (12%).
The undersigned acknowledges that the undersigned has agreed to the rate
of interest represented by the Note Rate, and any additional charges, costs and
fees arising out of or related to the transaction of which this Note is a part,
to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful money
of the United State of America and in immediately available funds, and when made
shall be first applied to accrued costs, expenses and fees, if any, then to
accrued interest that has not yet been added to principal, and then to the
reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Payee; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By:
----------------------------------------
Its:
----------------------------------------------------
By:
------------------------------
Its:
------------------------------
EXHIBIT "B"
Installment Promissory Note
Payable to
Joseph P. Martori (as Trustee)
INSTALLMENT PROMISSORY NOTE
$57,875.00 January 1, 1995
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of Joseph P.
Martori (as Trustee) ("Payee"), at Phoenix, Arizona, or at such other place as
the holder hereof may from time to time designate, the principal sum of Fifty
Seven Thousand Eight Hundred Seventy Five Dollars ($57,875.00), together with
interest thereon as computed below, as follows:
Installments of principal and interest in the amount of $3,000 shall be
payable monthly on the first day of each month commencing February 1,
1995. The entire unpaid principal balance, together with all accrued
and unpaid interest thereon and other costs payable hereunder, shall be
paid in full on December 31, 1996.
Interest shall be charged on the unpaid principal balance of this Note
from January 1, 1995 to the date of maturity on a daily basis for the actual
number of days any portion of the principal is outstanding, computed on the
basis of a 360-day year, at a per annum rate (the "Note Rate") equal to twelve
percent (12%).
The undersigned acknowledges that the undersigned has agreed to the rate
of interest represented by the Note Rate, and any additional charges, costs and
fees arising out of or related to the transaction of which this Note is a part,
to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful money
of the United State of America and in immediately available funds, and when made
shall be first applied to accrued costs, expenses and fees, if any, then to
accrued interest that has not yet been added to principal, and then to the
reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Payee; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By:
-----------------------------------------
Its:
--------------------------------------------------------
By:
---------------------------------------
Its:
--------------------------------------
EXHIBIT "C"
Security Agreements
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is dated as of January 1, 1995,
from ILX INCORPORATED, an Arizona corporation (the "Debtor") with a mailing
address of 2777 E. Camelback Road, Phoenix, Arizona 85016, to Wedbush Morgan
Securities (IRA) ("Secured Party"), with a mailing address of 2777 East
Camelback Road, Phoenix, Arizona 85016.
1. SECURITY INTEREST AND ASSIGNMENT
1.1 For valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor hereby grants Secured Party a security interest in
and does hereby assign, convey, transfer, pledge and set over to Secured Party
all of Debtor's rights, title, interest, powers and privileges (including,
without limitation, the right to receive any monies now or hereafter due and
payable to Debtor) in and to the following property (the "Collateral"):
(a) All Debtor's interest in that Certificate of Limited
Partnership and Agreement of Los Abrigados Partners Limited Partnership, dated
June 24, 1991, and filed with the Secretary of State for the State of Arizona,
on June 27, 1991, at Filing No. 20010032 forming a limited partnership (the
"Partnership"), and any amendments or modifications thereto (the "Partnership
Agreement");
(b) All Debtor's rights and interest as a Class A Limited Partner
in the Partnership, and any successor thereto by operation of law or otherwise;
(c) All Debtor's interest, if any, in any partnership property of
the Partnership;
(d) All Debtor's share of any profits of the Partnership, now
existing or hereafter arising, and Debtor's right to any surplus and any other
money due or to become due to Debtor in respect of the Partnership;
(e) All rights to receive any cash proceeds, cash available for
distribution, property, units of ownership, or other distributions of any kind
or in any form which may be due and payable to Debtor, from time to time,
pursuant to the Partnership Agreement described above or applicable law;
(f) Debtor's Class A Limited Partner's interest, ownership
interests and ownership position in the Partnership, now or hereafter acquired;
and
(g) Any and all proceeds, monies, claims for monies due and to
become due, increases in ownership share, and all other payments or
distributions of whatever nature now existing or hereafter arising from the
foregoing Partnership, Partnership Agreement and collateral or from any
extensions, amendments or modifications thereof.
1.2 The grant of these security interests and assignments is made for the
purpose of securing:
(a) Payment of a Promissory Note of even date herewith in the face
amount of Fifty Seven Thousand Eight Hundred Seventy Five Dollars ($57,875) made
by Debtor to the order of Secured Party (said note and any and all renewals,
amendments, modifications, increases and extensions thereof being hereinafter
collectively called the "Note");
(b) The strict performance and observance of all agreements,
warranties, covenants and conditions contained in any other security agreement
and contained in any other document or instrument entered into by and between
Debtor and Secured Party (collectively, the "Documents")';
(c) The repayment of all monies expended by Secured Party under
the provisions hereof, with interest thereon at the default rate set forth in
the Note.
1.3 All matters referred to in subsections 1.2(a) through 1.2(c) above are
sometimes herein referred to as the "Obligations".
1.4 This Agreement is for security purposes only. Accordingly, Secured
Party shall have no right hereunder to enforce its rights until an Event of
Default (as defined below) has occurred hereunder or under any other Loan
Document. Notwithstanding the foregoing, Debtor hereby agrees that any
distributions of cash or property otherwise to be made by the Partnership to
Debtor shall instead be made prorata in satisfaction of the Note and the other
installment Promissory Notes described in the Purchase and Sale Agreement to
which Secured Party is a party dated October 1, 1994 as amended effective
January 3, 1995.
2. DEBTOR'S WARRANTIES AND COVENANTS
2.1 Debtor hereby warrants and covenants as follows:
(a) The execution, delivery and performance hereof does not
contravene or violate any law or the terms of any agreement or undertaking to
which Debtor is a party or by which Debtor is bound. Debtor has full power and
authority to make the assignments and grant the security interests evidenced
hereby. This Agreement and the assignments and security interests created hereby
are valid, legal, binding and enforceable in accordance with their terms;
(b) Debtor is and, as to Collateral acquired after the date hereof
will be, the owner of the Collateral free from any adverse claim, lien, security
interest, co-ownership or encumbrance other than the security interests and
assignments granted to Secured Party hereby. Debtor shall notify Secured Party
of and shall defend the Collateral against all claims and demands of all other
persons at any time claiming any interest in the Collateral;
(c) Debtor agrees to faithfully perform and discharge each and
every obligation, covenant and agreement to be performed by Debtor under the
agreements constituting the Collateral and agrees that Debtor will not default
under any such agreement. Debtor agrees to give Secured Party prompt notice of
any notice of default or breach or termination received from or made by any
party to the agreements constituting the Collateral. Debtor shall provide
Secured Party with such information concerning the Collateral as Secured Party
may reasonable request including copies of reports or certificates delivered by
Debtor or received by Debtor pursuant to the agreements constituting the
Collateral;
(d) Debtor will not modify, amend, waive, cancel, compromise or in
any way alter the terms of any of the agreements constituting the Collateral
without the prior written consent of Secured Party. Debtor will not release or
discharge any other party from its obligations, covenants or agreements
contained in the agreements constituting the Collateral. Debtor shall take all
such actions with reference to the collection of monies due under the Collateral
as Secured Party may reasonably request;
(e) Debtor will not further assign or attempt to assign its rights
under any of the agreements constituting the Collateral nor pledge or grant any
other security interest in any of the Collateral nor permit any other lien or
encumbrance to attach thereto;
(f) Debtor warrants that all of the agreements constituting the
Collateral are valid, legal, enforceable and in full force and effect. Such
agreements have not been amended or modified in any way and are free from any
default, breach, dispute, defenses and counterclaims;
(g) Debtor shall from time to time do all acts and things and will
execute and file all instruments in a timely and proper manner as reasonably
required by Secured Party to establish, maintain, continue, guarantee and
protect the security interests and assignments contained herein, and will
promptly on demand pay all costs and expenses of filing and recording, including
costs of any search reasonably deemed necessary by Secured Party from time to
time to establish and determine the validity and the continuing priority of the
security interest and assignments of Secured Party, and also pay all other
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Collateral or Secured Party's interest therein;
(h) Debtor shall pay promptly when due all taxes and assessments
upon the Collateral or upon this Agreement or upon any agreements or notes
evidencing any of the Obligations;
(i) Debtor warrants that the assignment of its partnership
interest in the Partnership is an assignment of all of its rights and interests
as a Class A Limited Partner in the Partnership and not a mere assignment of
distributions due to Debtor and the Partnership Agreement of Partnership permits
the assignment given by Debtor to Secured Party hereunder and will allow Secured
Party to assume all partnership rights of Debtor in and to the Partnership upon
the occurrence of an Event of Default hereunder; and
(j) Debtor warrants that its interest as a Class A Limited Partner
constitutes a 7.5 percentage interest in the Partnership as a whole.
3. AUTHORITY OF SECURED PARTY TO PERFORM FOR DEBTOR
3.1 Should Debtor fail or refuse to make any payment, perform any covenant
or obligation, observe any condition or take any action which Debtor is
obligated hereunder to make, perform, observe, take or do, at the time or in the
manner herein provided, then Secured Party may, at Secured Party's sole
discretion, without notice to or demand upon Debtor (except as provided in any
of the Documents), and without releasing Debtor from any obligation, covenant or
condition hereof, make, perform, observe, take or do the same in such manner and
to such extent as Secured Party may deem necessary to protect the security of
this Agreement and the Collateral. Debtor agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party
hereunder, together with interest thereon at the default rate of interest set
forth in the Note from the date of said payment or expenditure, and any such
payments and expenses, together with interest thereon, shall be added to the
Obligations secured hereby and shall be deemed secured hereby.
3.2 Debtor hereby constitutes and appoints Secured Party as the Debtor's
true and lawful attorney-in-fact with full right of appointment and
substitution, to perform any and all acts necessary or convenient to preserve
and protect Secured Party's and Debtor's interest in and to the Collateral. Said
power of attorney shall empower Secured Party to endorse the Debtor's name on
all checks and other forms of payment, which may come into the possession of
Secured Party and to sign and endorse the Debtor's name on any other instruments
or documents. Secured Party is further empowered under such power of attorney to
take any and all action necessary to effect, protect, or preserve Debtor's
rights under the agreements constituting the Collateral including the execution
of documents and agreements substituting Secured Party as general partner and/or
limited partner of the Partnership upon an Event of Default hereunder. The
powers granted herein, being coupled with an interest, are irrevocable until all
Obligations to Secured Party have been fully paid and satisfied.
4. EVENTS OF DEFAULT
4.1 Debtor shall be in default under this agreement upon the occurrence of
any of the following events or conditions ("Events of Default"):
(a) Any breach of any covenant or condition in this Agreement and
such breach continues for a period of thirty (30) days after notice thereof from
Secured Party to Debtor; or, if such failure is not capable of being cured
within such thirty (30) day period, Debtor does not commence to cure the failure
within such thirty (30) day period and thereafter diligently and continuously
prosecutes the cure to completion (such cure must be completed to Secured
Party's reasonable satisfaction in its reasonable discretion within sixty (60)
days after Debtor has actual or constructive notice of such failure);
(b) Any breach or default by Debtor of any of its Obligations
under any agreement constituting the Collateral;
(c) Any warranty, representation or statement made in this
Agreement or the Documents by Debtor proves to have been false in any material
respect when made or furnished;
(d) Default in the payment or performance of any of the
Obligations after giving effect to any applicable grace or cure period; or the
occurrence of any Event of Default under the Note or any other Document after
giving effect to any applicable grace or cure period.
5. SECURED PARTY'S RIGHTS UPON DEFAULT
5.1 Upon the happening of any Event of Default, Secured Party may, at its
option and without further notice to Debtor, declare all of the Obligations to
be immediately due and payable and Secured Party shall have the rights, options,
duties and remedies of Secured Party and Debtor shall have the rights and duties
of a Debtor under the Uniform Commercial Code as adopted in the State of
Arizona. Without limitation thereto, Secured Party shall have the following
specific rights:
(a) To take immediate possession of all records, instruments,
documents and writings of Debtor pertaining to the Collateral without resort to
legal process and without notice and for such purpose to enter upon any premises
in which such records, instruments, documents, writings or any part thereof may
be situated and remove the same therefrom;
(b) To require Debtor to assemble all records, instruments,
documents or writings pertaining to the Collateral and make such available to
Secured Party at a place to then be designated by Secured Party;
(c) To have a public or private sale of all or any part of the
Collateral;
(d) To be substituted for Debtor as a Class A Limited Partner of
Partnership with all rights, powers and privileges of the same under the terms
of the Partnership Agreement of Partnership;
(e) To collect by legal proceedings or otherwise, endorse, receive
and receipt for all money or other property now or hereafter payable upon or on
account of the Collateral and enforce performance of all Obligations of obligors
under the Collateral; to make any compromise or settlement with respect to the
Collateral; to cause the Collateral to be transferred to Secured Party's name or
to the name of its nominee; and to exercise as to the Collateral all the rights,
powers and remedies of an owner;
(f) To bring suit for specific performance against any or all of
the persons and entities constituting Debtor;
(g) To have any other rights or remedies available by law.
6. CUMULATIVE REMEDIES
6.1 Any and all remedies herein expressly conferred upon Secured Party
shall be deemed cumulative with, and not exclusive of, any other remedy
conferred hereby or by law on Secured Party, and the exercise of any one remedy
shall not preclude the exercise of any other.
6.2 Failure of Secured Party to exercise any rights it may have upon
Debtor's breach hereof or upon Debtor's default in payment of any Obligation
secured hereby shall not release Debtor from any of its Obligations hereunder or
under any loan, unless such waiver or release be express and in writing signed
by Secured Party. In addition, the waiver by Secured Party of any breach hereof
or default in payment of any Obligation secured hereby shall not be deemed to
constitute a waiver of any succeeding breach or default. By exercising or
failing to exercise any of the options or elections contained in this Agreement,
Secured Party shall not be deemed to have waived any breach or default on the
part of Debtor.
6.3 Debtor hereby waives any right or privilege which it or its creditors
might otherwise have to require Secured Party to proceed against the assets
encumbered hereby or by any other security document or instrument securing any
loan to Partnership, in any particular order or fashion under any legal or
equitable doctrine or principle of marshaling and/or suretyship and further
agrees that upon default, Secured Party may proceed to exercise any or all
remedies with regard to any or all assets encumbered hereby or by any other
security document or instrument in such manner and order as Secured Party in its
sole discretion may determine.
7. PAYMENT TO SECURED PARTY
7.1 During the existence of any Event of Default hereunder, Debtor and
Secured Party agree that all proceeds, cash, payments or distributions of any
nature due, owing or to be paid to Debtor by reason of the Collateral, including
but not limited to earnings distributable under the Partnership Agreement, shall
be paid directly to Secured Party. All such sums received may be applied by
Secured Party to the Obligations, whether or not then due, in such order and
manner as Secured Party shall determine. Debtor agrees to promptly advise
Secured Party, before any payment or distribution is due and before Debtor
receives or is credited with payment, of the amount of any sum due and owing and
the intended medium or form of payment.
7.2 Secured Party shall not be obligated to perform or discharge any
obligation, duty or liability of Debtor under any agreement. Secured Party shall
not be obligated to assume or exercise any rights or obligations as general
partner of the Partnership.
7.3 At such time as no Event of Default exists hereunder, Debtor may
exercise all its rights as a partner in the Partnership and receive all
distributions from the Partnership without the consent of Secured Party, except
as otherwise provided herein and in the Documents.
8. LIMITATION OF LIABILITY
Subject to the provisions below, nothing contained herein shall be
construed as creating any personal liability on the part of the Class A Limited
Partners or the General Partner, the Class B Limited Partners, or the
Partnership for all obligations of Debtor under the Documents to Secured Party,
all such liability being expressly waived by Secured Party for itself, its
successors and assigns, and Secured Party agrees to look solely to Debtor and to
any collateral heretofore, now or hereafter pledged by any party to secure the
Loan.
The foregoing shall in no way limit or impair the enforcement against any
security granted by the Documents of any of the Secured Party's rights and
remedies pursuant to the Documents.
9. MISCELLANEOUS
9.1 Debtor hereby agrees to indemnify and hold Secured Party harmless from
and against any and all claims, demands, liabilities, losses, lawsuits,
judgments and costs and expenses (including without limitation, reasonable
attorneys' fees) to which Secured Party may become exposed, or which Secured
Party may incur, in properly and legally exercising any of its rights under this
Agreement. In addition to the foregoing award of attorneys' fees, Secured Party
shall be entitled to its attorneys' fees incurred in any post judgment
proceedings to collect or enforce any judgment related to this Agreement. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement.
9.2 The failure of Secured party to enforce any of the terms, covenants, or
conditions herein shall not be construed or deemed to be a waiver of any rights
or remedies hereunder. Secured Party shall have the full right, power and
authority to enforce this Agreement, or any of the terms, covenants, or
conditions hereof, at any time that Secured Party shall deem proper.
9.3 This Agreement applies to and binds the parties hereto and their
respective heirs, administrators, executors, successors, and assigns. Any
provisions in any other agreement creating rights in Secured Party other than
those created herein shall be deemed incorporated herein by reference and made a
part hereof for all purposes.
9.4 Debtor shall execute such documents and take such further actions as
may be reasonably required by Secured Party to carry out the provisions hereof.
9.5 Time is the essence of this Agreement and all its provisions.
9.6 THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT ARE TO BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA.
ILX Incorporated
By:
-------------------------------------
Its:
--------------------------------------
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is dated as of January 1, 1995,
from ILX INCORPORATED, an Arizona corporation (the "Debtor") with a mailing
address of 2777 E. Camelback Road, Phoenix, Arizona 85016, to Joseph P. Martori
(as Trustee) ("Secured Party"), with a mailing address of 2777 East Camelback
Road, Phoenix, Arizona 85016.
1. SECURITY INTEREST AND ASSIGNMENT
1.1 For valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Debtor hereby grants Secured Party a security interest in
and does hereby assign, convey, transfer, pledge and set over to Secured Party
all of Debtor's rights, title, interest, powers and privileges (including,
without limitation, the right to receive any monies now or hereafter due and
payable to Debtor) in and to the following property (the "Collateral"):
(a) All Debtor's interest in that Certificate of Limited
Partnership and Agreement of Los Abrigados Partners Limited Partnership, dated
June 24, 1991, and filed with the Secretary of State for the State of Arizona,
on June 27, 1991, at Filing No. 20010032 forming a limited partnership (the
"Partnership"), and any amendments or modifications thereto (the "Partnership
Agreement");
(b) All Debtor's rights and interest as a Class A Limited Partner
in the Partnership, and any successor thereto by operation of law or otherwise;
(c) All Debtor's interest, if any, in any partnership property of
the Partnership;
(d) All Debtor's share of any profits of the Partnership, now
existing or hereafter arising, and Debtor's right to any surplus and any other
money due or to become due to Debtor in respect of the Partnership;
(e) All rights to receive any cash proceeds, cash available for
distribution, property, units of ownership, or other distributions of any kind
or in any form which may be due and payable to Debtor, from time to time,
pursuant to the Partnership Agreement described above or applicable law;
(f) Debtor's Class A Limited Partner's interest, ownership
interests and ownership position in the Partnership, now or hereafter acquired;
and
(g) Any and all proceeds, monies, claims for monies due and to
become due, increases in ownership share, and all other payments or
distributions of whatever nature now existing or hereafter arising from the
foregoing Partnership, Partnership Agreement and collateral or from any
extensions, amendments or modifications thereof.
1.2 The grant of these security interests and assignments is made for the
purpose of securing:
(a) Payment of a Promissory Note of even date herewith in the face
amount of Fifty Seven Thousand Eight Hundred Seventy Five Dollars ($57,875) made
by Debtor to the order of Secured Party (said note and any and all renewals,
amendments, modifications, increases and extensions thereof being hereinafter
collectively called the "Note");
(b) The strict performance and observance of all agreements,
warranties, covenants and conditions contained in any other security agreement
and contained in any other document or instrument entered into by and between
Debtor and Secured Party (collectively, the "Documents")';
(c) The repayment of all monies expended by Secured Party under
the provisions hereof, with interest thereon at the default rate set forth in
the Note.
1.3 All matters referred to in subsections 1.2(a) through 1.2(c) above are
sometimes herein referred to as the "Obligations".
1.4 This Agreement is for security purposes only. Accordingly, Secured
Party shall have no right hereunder to enforce its rights until an Event of
Default (as defined below) has occurred hereunder or under any other Loan
Document. Notwithstanding the foregoing, Debtor hereby agrees that any
distributions of cash or property otherwise to be made by the Partnership to
Debtor shall instead be made prorata in satisfaction of the Note and the other
installment Promissory Notes described in the Purchase and Sale Agreement to
which Secured Party is a party dated October 1, 1994 as amended effective
January 3, 1995.
2. DEBTOR'S WARRANTIES AND COVENANTS
2.1 Debtor hereby warrants and covenants as follows:
(a) The execution, delivery and performance hereof does not
contravene or violate any law or the terms of any agreement or undertaking to
which Debtor is a party or by which Debtor is bound. Debtor has full power and
authority to make the assignments and grant the security interests evidenced
hereby. This Agreement and the assignments and security interests created hereby
are valid, legal, binding and enforceable in accordance with their terms;
(b) Debtor is and, as to Collateral acquired after the date hereof
will be, the owner of the Collateral free from any adverse claim, lien, security
interest, co-ownership or encumbrance other than the security interests and
assignments granted to Secured Party hereby. Debtor shall notify Secured Party
of and shall defend the Collateral against all claims and demands of all other
persons at any time claiming any interest in the Collateral;
(c) Debtor agrees to faithfully perform and discharge each and
every obligation, covenant and agreement to be performed by Debtor under the
agreements constituting the Collateral and agrees that Debtor will not default
under any such agreement. Debtor agrees to give Secured Party prompt notice of
any notice of default or breach or termination received from or made by any
party to the agreements constituting the Collateral. Debtor shall provide
Secured Party with such information concerning the Collateral as Secured Party
may reasonable request including copies of reports or certificates delivered by
Debtor or received by Debtor pursuant to the agreements constituting the
Collateral;
(d) Debtor will not modify, amend, waive, cancel, compromise or in
any way alter the terms of any of the agreements constituting the Collateral
without the prior written consent of Secured Party. Debtor will not release or
discharge any other party from its obligations, covenants or agreements
contained in the agreements constituting the Collateral. Debtor shall take all
such actions with reference to the collection of monies due under the Collateral
as Secured Party may reasonably request;
(e) Debtor will not further assign or attempt to assign its rights
under any of the agreements constituting the Collateral nor pledge or grant any
other security interest in any of the Collateral nor permit any other lien or
encumbrance to attach thereto;
(f) Debtor warrants that all of the agreements constituting the
Collateral are valid, legal, enforceable and in full force and effect. Such
agreements have not been amended or modified in any way and are free from any
default, breach, dispute, defenses and counterclaims;
(g) Debtor shall from time to time do all acts and things and will
execute and file all instruments in a timely and proper manner as reasonably
required by Secured Party to establish, maintain, continue, guarantee and
protect the security interests and assignments contained herein, and will
promptly on demand pay all costs and expenses of filing and recording, including
costs of any search reasonably deemed necessary by Secured Party from time to
time to establish and determine the validity and the continuing priority of the
security interest and assignments of Secured Party, and also pay all other
claims and charges that in the opinion of Secured Party might prejudice, imperil
or otherwise affect the Collateral or Secured Party's interest therein;
(h) Debtor shall pay promptly when due all taxes and assessments
upon the Collateral or upon this Agreement or upon any agreements or notes
evidencing any of the Obligations;
(i) Debtor warrants that the assignment of its partnership
interest in the Partnership is an assignment of all of its rights and interests
as a Class A Limited Partner in the Partnership and not a mere assignment of
distributions due to Debtor and the Partnership Agreement of Partnership permits
the assignment given by Debtor to Secured Party hereunder and will allow Secured
Party to assume all partnership rights of Debtor in and to the Partnership upon
the occurrence of an Event of Default hereunder; and
(j) Debtor warrants that its interest as a Class A Limited Partner
constitutes a 7.5 percentage interest in the Partnership as a whole.
3. AUTHORITY OF SECURED PARTY TO PERFORM FOR DEBTOR
3.1 Should Debtor fail or refuse to make any payment, perform any covenant
or obligation, observe any condition or take any action which Debtor is
obligated hereunder to make, perform, observe, take or do, at the time or in the
manner herein provided, then Secured Party may, at Secured Party's sole
discretion, without notice to or demand upon Debtor (except as provided in any
of the Documents), and without releasing Debtor from any obligation, covenant or
condition hereof, make, perform, observe, take or do the same in such manner and
to such extent as Secured Party may deem necessary to protect the security of
this Agreement and the Collateral. Debtor agrees to reimburse Secured Party on
demand for any payment made, or any expense incurred, by Secured Party
hereunder, together with interest thereon at the default rate of interest set
forth in the Note from the date of said payment or expenditure, and any such
payments and expenses, together with interest thereon, shall be added to the
Obligations secured hereby and shall be deemed secured hereby.
3.2 Debtor hereby constitutes and appoints Secured Party as the Debtor's
true and lawful attorney-in-fact with full right of appointment and
substitution, to perform any and all acts necessary or convenient to preserve
and protect Secured Party's and Debtor's interest in and to the Collateral. Said
power of attorney shall empower Secured Party to endorse the Debtor's name on
all checks and other forms of payment, which may come into the possession of
Secured Party and to sign and endorse the Debtor's name on any other instruments
or documents. Secured Party is further empowered under such power of attorney to
take any and all action necessary to effect, protect, or preserve Debtor's
rights under the agreements constituting the Collateral including the execution
of documents and agreements substituting Secured Party as general partner and/or
limited partner of the Partnership upon an Event of Default hereunder. The
powers granted herein, being coupled with an interest, are irrevocable until all
Obligations to Secured Party have been fully paid and satisfied.
4. EVENTS OF DEFAULT
4.1 Debtor shall be in default under this agreement upon the occurrence of
any of the following events or conditions ("Events of Default"):
(a) Any breach of any covenant or condition in this Agreement and
such breach continues for a period of thirty (30) days after notice thereof from
Secured Party to Debtor; or, if such failure is not capable of being cured
within such thirty (30) day period, Debtor does not commence to cure the failure
within such thirty (30) day period and thereafter diligently and continuously
prosecutes the cure to completion (such cure must be completed to Secured
Party's reasonable satisfaction in its reasonable discretion within sixty (60)
days after Debtor has actual or constructive notice of such failure);
(b) Any breach or default by Debtor of any of its Obligations
under any agreement constituting the Collateral;
(c) Any warranty, representation or statement made in this
Agreement or the Documents by Debtor proves to have been false in any material
respect when made or furnished;
(d) Default in the payment or performance of any of the
Obligations after giving effect to any applicable grace or cure period; or the
occurrence of any Event of Default under the Note or any other Document after
giving effect to any applicable grace or cure period.
5. SECURED PARTY'S RIGHTS UPON DEFAULT
5.1 Upon the happening of any Event of Default, Secured Party may, at its
option and without further notice to Debtor, declare all of the Obligations to
be immediately due and payable and Secured Party shall have the rights, options,
duties and remedies of Secured Party and Debtor shall have the rights and duties
of a Debtor under the Uniform Commercial Code as adopted in the State of
Arizona. Without limitation thereto, Secured Party shall have the following
specific rights:
(a) To take immediate possession of all records, instruments,
documents and writings of Debtor pertaining to the Collateral without resort to
legal process and without notice and for such purpose to enter upon any premises
in which such records, instruments, documents, writings or any part thereof may
be situated and remove the same therefrom;
(b) To require Debtor to assemble all records, instruments,
documents or writings pertaining to the Collateral and make such available to
Secured Party at a place to then be designated by Secured Party;
(c) To have a public or private sale of all or any part of the
Collateral;
(d) To be substituted for Debtor as a Class A Limited Partner of
Partnership with all rights, powers and privileges of the same under the terms
of the Partnership Agreement of Partnership;
(e) To collect by legal proceedings or otherwise, endorse, receive
and receipt for all money or other property now or hereafter payable upon or on
account of the Collateral and enforce performance of all Obligations of obligors
under the Collateral; to make any compromise or settlement with respect to the
Collateral; to cause the Collateral to be transferred to Secured Party's name or
to the name of its nominee; and to exercise as to the Collateral all the rights,
powers and remedies of an owner;
(f) To bring suit for specific performance against any or all of
the persons and entities constituting Debtor;
(g) To have any other rights or remedies available by law.
6. CUMULATIVE REMEDIES
6.1 Any and all remedies herein expressly conferred upon Secured Party
shall be deemed cumulative with, and not exclusive of, any other remedy
conferred hereby or by law on Secured Party, and the exercise of any one remedy
shall not preclude the exercise of any other.
6.2 Failure of Secured Party to exercise any rights it may have upon
Debtor's breach hereof or upon Debtor's default in payment of any Obligation
secured hereby shall not release Debtor from any of its Obligations hereunder or
under any loan, unless such waiver or release be express and in writing signed
by Secured Party. In addition, the waiver by Secured Party of any breach hereof
or default in payment of any Obligation secured hereby shall not be deemed to
constitute a waiver of any succeeding breach or default. By exercising or
failing to exercise any of the options or elections contained in this Agreement,
Secured Party shall not be deemed to have waived any breach or default on the
part of Debtor.
6.3 Debtor hereby waives any right or privilege which it or its creditors
might otherwise have to require Secured Party to proceed against the assets
encumbered hereby or by any other security document or instrument securing any
loan to Partnership, in any particular order or fashion under any legal or
equitable doctrine or principle of marshaling and/or suretyship and further
agrees that upon default, Secured Party may proceed to exercise any or all
remedies with regard to any or all assets encumbered hereby or by any other
security document or instrument in such manner and order as Secured Party in its
sole discretion may determine.
7. PAYMENT TO SECURED PARTY
7.1 During the existence of any Event of Default hereunder, Debtor and
Secured Party agree that all proceeds, cash, payments or distributions of any
nature due, owing or to be paid to Debtor by reason of the Collateral, including
but not limited to earnings distributable under the Partnership Agreement, shall
be paid directly to Secured Party. All such sums received may be applied by
Secured Party to the Obligations, whether or not then due, in such order and
manner as Secured Party shall determine. Debtor agrees to promptly advise
Secured Party, before any payment or distribution is due and before Debtor
receives or is credited with payment, of the amount of any sum due and owing and
the intended medium or form of payment.
7.2 Secured Party shall not be obligated to perform or discharge any
obligation, duty or liability of Debtor under any agreement. Secured Party shall
not be obligated to assume or exercise any rights or obligations as general
partner of the Partnership.
7.3 At such time as no Event of Default exists hereunder, Debtor may
exercise all its rights as a partner in the Partnership and receive all
distributions from the Partnership without the consent of Secured Party, except
as otherwise provided herein and in the Documents.
8. LIMITATION OF LIABILITY
Subject to the provisions below, nothing contained herein shall be
construed as creating any personal liability on the part of the Class A Limited
Partners or the General Partner, the Class B Limited Partners, or the
Partnership for all obligations of Debtor under the Documents to Secured Party,
all such liability being expressly waived by Secured Party for itself, its
successors and assigns, and Secured Party agrees to look solely to Debtor and to
any collateral heretofore, now or hereafter pledged by any party to secure the
Loan.
The foregoing shall in no way limit or impair the enforcement against any
security granted by the Documents of any of the Secured Party's rights and
remedies pursuant to the Documents.
9. MISCELLANEOUS
9.1 Debtor hereby agrees to indemnify and hold Secured Party harmless from
and against any and all claims, demands, liabilities, losses, lawsuits,
judgments and costs and expenses (including without limitation, reasonable
attorneys' fees) to which Secured Party may become exposed, or which Secured
Party may incur, in properly and legally exercising any of its rights under this
Agreement. In addition to the foregoing award of attorneys' fees, Secured Party
shall be entitled to its attorneys' fees incurred in any post judgment
proceedings to collect or enforce any judgment related to this Agreement. This
provision is separate and several and shall survive the merger of this provision
into any judgment on this Agreement.
9.2 The failure of Secured party to enforce any of the terms, covenants, or
conditions herein shall not be construed or deemed to be a waiver of any rights
or remedies hereunder. Secured Party shall have the full right, power and
authority to enforce this Agreement, or any of the terms, covenants, or
conditions hereof, at any time that Secured Party shall deem proper.
9.3 This Agreement applies to and binds the parties hereto and their
respective heirs, administrators, executors, successors, and assigns. Any
provisions in any other agreement creating rights in Secured Party other than
those created herein shall be deemed incorporated herein by reference and made a
part hereof for all purposes.
9.4 Debtor shall execute such documents and take such further actions as
may be reasonably required by Secured Party to carry out the provisions hereof.
9.5 Time is the essence of this Agreement and all its provisions.
9.6 THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT ARE TO BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ARIZONA.
ILX Incorporated
By:
------------------------------------------------
Its:
-----------------------------------------
INSTALLMENT PROMISSORY NOTE
$57,875.00 January 1, 1995
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of Wedbush Morgan
Securities (IRA) ("Payee"), at Phoenix, Arizona, or at such other place as the
holder hereof may from time to time designate, the principal sum of Fifty Seven
Thousand Eight Hundred Seventy Five Dollars ($57,875.00), together with interest
thereon as computed below, as follows:
Installments of principal and interest in the amount of $3,000 shall be
payable monthly on the first day of each month commencing February 1,
1995. The entire unpaid principal balance, together with all accrued
and unpaid interest thereon and other costs payable hereunder, shall be
paid in full on December 31, 1996.
Interest shall be charged on the unpaid principal balance of this Note
from January 1, 1995 to the date of maturity on a daily basis for the actual
number of days any portion of the principal is outstanding, computed on the
basis of a 360-day year, at a per annum rate (the "Note Rate") equal to twelve
percent (12%).
The undersigned acknowledges that the undersigned has agreed to the rate
of interest represented by the Note Rate, and any additional charges, costs and
fees arising out of or related to the transaction of which this Note is a part,
to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful money
of the United State of America and in immediately available funds, and when made
shall be first applied to accrued costs, expenses and fees, if any, then to
accrued interest that has not yet been added to principal, and then to the
reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Payee; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By: Joseph P. Martori
-------------------------
Its: Chairman
------------------------
By: Stephanie D. Castronova
--------------------------
Its: Secretary
-------------------------
INSTALLMENT PROMISSORY NOTE
$57,875.00 January 1, 1995
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of Joseph P.
Martori (as Trustee) ("Payee"), at Phoenix, Arizona, or at such other place as
the holder hereof may from time to time designate, the principal sum of Fifty
Seven Thousand Eight Hundred Seventy Five Dollars ($57,875.00), together with
interest thereon as computed below, as follows:
Installments of principal and interest in the amount of $3,000 shall be
payable monthly on the first day of each month commencing February 1,
1995. The entire unpaid principal balance, together with all accrued
and unpaid interest thereon and other costs payable hereunder, shall be
paid in full on December 31, 1996.
Interest shall be charged on the unpaid principal balance of this Note
from January 1, 1995 to the date of maturity on a daily basis for the actual
number of days any portion of the principal is outstanding, computed on the
basis of a 360-day year, at a per annum rate (the "Note Rate") equal to twelve
percent (12%).
The undersigned acknowledges that the undersigned has agreed to the rate
of interest represented by the Note Rate, and any additional charges, costs and
fees arising out of or related to the transaction of which this Note is a part,
to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful money
of the United State of America and in immediately available funds, and when made
shall be first applied to accrued costs, expenses and fees, if any, then to
accrued interest that has not yet been added to principal, and then to the
reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
other indebtedness of the undersigned to Payee is not paid as agreed; (ii) any
petition or application for any form of relief under any provision of Title 11,
United States Code, as amended from time to time (the "Bankruptcy Code") or any
other law pertaining to reorganization, insolvency or readjustment of debts is
filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) there is a termination, failure to exist or dissolution of the undersigned;
or (vii) there is any default or breach of any representation, warranty or
covenant, or there is any false statement or material omission, by the
undersigned under any document forming part of the transaction in respect of
which this Note is made or forming part of any other transaction under which the
undersigned is indebted to Payee.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Payee; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security Agreement of even date herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
ATTEST: By: Joseph P. Martori
-------------------------------------
Its: Chairman
------------------------------------
By: Stephanie D. Castronova
-----------------------------
Its: Secretary
---------------------------
INSTALLMENT PROMISSORY NOTE
$150,000 February 11, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of MARTORI
ENTERPRISES INCORPORATED, an Arizona corporation ("Seller"), at Phoenix,
Arizona, or at such other place as the holder hereof may from time to time
designate, the principal sum of One Hundred Fifty Thousand Dollars
($150,000.00), together with interest thereon at the rate of 10% (ten percent)
per annum (the "Note Rate"), payable in 36 equal monthly installments of
principal and interest in the amount of $4,840.08 commencing on March 11, 1994,
and on the 11th day of each calendar month thereafter. The entire unpaid
principal balance, together with all accrued and unpaid interest thereon and
other costs payable hereunder, shall be paid in full on February 11, 1997.
The undersigned acknowledges that the undersigned has agreed to the
rate of interest represented by the Note Rate, and any additional charges, costs
and fees arising out of or related to the transaction of which this Note is a
part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful
money of the United States of America and in immediately available funds, and
when made shall be first applied to accrued costs, expenses and fees, if any,
then to accrued interest that has not yet been added to principal, and then to
the reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
any other indebtedness of the undersigned to Seller is not paid as agreed; (ii)
any petition or application for any form of relief under any provision of Title
11, United States Code, as amended from time to time (the "Bankruptcy Code") or
any other law pertaining to reorganization, insolvency or readjustment of debts
is filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) termination, failure to exist or dissolution of the undersigned; or (vii)
there is any default or breach of any representation, warranty or covenant, or
there is any false statement or material omission, by the undersigned under any
document forming part of the transaction in respect of which this Note is made
or forming part of any other transaction under which the undersigned is indebted
to Seller.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Seller; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security (Pledge) Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
By:
---------------------------------------
Its:
---------------------------------------
ATTEST:
By:
------------------------------
Its:
--------------------------
INSTALLMENT PROMISSORY NOTE
$150,000 February 11, 1994
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, ILX INCORPORATED, an Arizona
corporation (the "undersigned"), promises to pay to the order of ALAN R. MISHKIN
and CAROL MISHKIN (collectively "Seller"), at Phoenix, Arizona, or at such other
place as the holder hereof may from time to time designate, the principal sum of
One Hundred Fifty Thousand Dollars ($150,000.00), together with interest thereon
at the rate of 10% (ten percent) per annum (the "Note Rate"), payable in 36
equal monthly installments of principal and interest in the amount of $4,840.08
commencing on March 11, 1994, and on the 11th day of each calendar month
thereafter. The entire unpaid principal balance, together with all accrued and
unpaid interest thereon and other costs payable hereunder, shall be paid in full
on February 11, 1997.
The undersigned acknowledges that the undersigned has agreed to the
rate of interest represented by the Note Rate, and any additional charges, costs
and fees arising out of or related to the transaction of which this Note is a
part, to the extent deemed to be interest under applicable law.
Each and every payment due under this Note shall be made in lawful
money of the United States of America and in immediately available funds, and
when made shall be first applied to accrued costs, expenses and fees, if any,
then to accrued interest that has not yet been added to principal, and then to
the reduction of the principal amount of this Note. This Note may be prepaid, in
whole or in part, without penalty or premium, provided that each such payment
shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind,
all of which are hereby expressly waived: (i) any sum owing hereunder or under
any other indebtedness of the undersigned to Seller is not paid as agreed; (ii)
any petition or application for any form of relief under any provision of Title
11, United States Code, as amended from time to time (the "Bankruptcy Code") or
any other law pertaining to reorganization, insolvency or readjustment of debts
is filed by or against the undersigned, its assets or affairs; (iii) the
undersigned makes an assignment for the benefit of creditors, is not paying
debts as they become due, or is granted an order for relief under any chapter of
the Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of the undersigned; (v) garnishment, attachment, levy or
execution is issued against any of the property or effects of the undersigned;
(vi) termination, failure to exist or dissolution of the undersigned; or (vii)
there is any default or breach of any representation, warranty or covenant, or
there is any false statement or material omission, by the undersigned under any
document forming part of the transaction in respect of which this Note is made
or forming part of any other transaction under which the undersigned is indebted
to Seller.
The undersigned hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of the undersigned to the holder hereof;
(ii) that any written modification, extension or renewal hereof executed by the
undersigned shall constitute a representation and warranty of the undersigned
that the unpaid balance of principal, interest and other sums owing hereunder at
the time of such modification, renewal or extension are owed without adjustment
for offset, counterclaim or other defense of any kind by the undersigned against
Seller; (iii) that the acceptance by the holder hereof of any performance which
does not comply strictly with the terms hereof shall not be deemed to be a
waiver or bar of any right of said holder, nor a release of any obligation of
the undersigned to the holder hereof; (iv) to offsets of any sums or property
owed to the undersigned by the holder hereof at any time; (v) that this Note
shall be governed by the laws of the State of Arizona applicable to promissory
notes made and to be paid in the State of Arizona; and (vi) to pay the holder
hereof upon demand any and all costs, expenses and fees (including reasonable
attorneys' fees) incurred in enforcing or attempting to recover payment of the
amounts due under this Note, including negotiating, documenting and otherwise
pursuing or consummating modifications, extensions, compositions, renewals or
other similar transactions pertaining to this Note, irrespective of the
existence of an event of default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
This Note is secured by a Security (Pledge) Agreement of even date
herewith.
This Note is executed to be effective as of the date set forth above.
ILX INCORPORATED, an Arizona corporation
By:
----------------------------------------
Its:
-------------------------------------
ATTEST:
By:
------------------------------------
Its:
----------------------------------
When Recorded, return to:
Joseph P. Martori
Martori Enterprises Incorporated
2777 E. Camelback Road
Phoenix, Arizona 85016
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made effective the 31st day of
March, 1994, by and between INDIAN WELLS PARTNERS, LTD., a California limited
partnership ("Seller"), and MARTORI ENTERPRISES INCORPORATED, an Arizona
corporation ("Buyer").
1. Option Agreements.
1.1. Upon execution hereof, this Agreement shall constitute a
binding contract between Buyer and Seller concerning 667 "Jerome," every year,
time share units at Los Abrigados Resort, Sedona, Arizona, consisting of (a) the
real property described on Exhibit "A" attached hereto (the "Real Property") and
(b) the contract rights of a Member described in Exhibit "B" attached hereto
(the "Membership Rights"). The Real Property and Membership Rights are referred
to collectively herein as the "Property," and individually or in the plural as a
"Unit" or "Units".
1.2 Commencing July 1, 1994, Seller shall have the option to
sell to Buyer, and Buyer shall have the obligation to purchase from Seller,
Units in accordance with the terms and conditions hereof (the "Sell Option").
The Sell Option shall consist of the Regular Option and the Bulk Option. The
Regular Option shall entitle Seller to sell to Buyer from time to time Units in
groups of twenty-five (25) Units; provided, however, that Buyer shall only be
required to purchase one such group of Units in any thirty (30) day period.
Seller may exercise its Regular Option upon no less than thirty (30) days prior
written notice to Buyer. The Bulk Option shall entitle Seller to sell to Buyer
from time to time one half (1/2) of Seller's then-remaining Units; provided,
however, that Buyer shall only be required to purchase one such group of Units
in any three hundred sixty five day (365) day period. Seller may exercise its
Bulk Option upon no less than one hundred eighty (180) days prior written notice
to Buyer. Upon exercise of the Bulk Option, Seller's Regular Option shall abate
for a period of one hundred eighty (180) days.
1.3 Commencing July 1, 1995, Buyer shall have the option to
purchase from Seller, and Seller shall have the obligation to sell to Buyer,
Units in accordance with the terms and conditions hereof (the "Purchase
Option"). The Purchase Option shall entitle Buyer to purchase from Seller from
time to time Units in groups of no less than twenty-five (25) Units. Buyer may
exercise its Purchase Option upon no less than thirty (30) days prior written
notice to Seller.
1.4 Any written notice provided under this Section 1 (the
"Option Notice") shall specify the Units the subject thereof and the date and
time of closing.
2. Purchase Price. The purchase price for each Unit shall be Two
Thousand One Hundred Dollars ($2,100.00) (the "Purchase Price"), in United
States funds, payable to Seller in cash, wire transfer or cashier's check drawn
on an institution and in a form acceptable to Seller.
3. Closing. Consummation of any purchase of Property contemplated
hereby (the "Close" or "Closing") shall take place on such date and at such time
as may be specified in the Option Notice. Except as provided below, such
Closings shall be without the necessity of an escrow and title insurance, and
rather will be between Seller and Buyer in accordance with the terms and
provisions of this Agreement.
4. Optional Title Insurance and Establishment of Escrow. Upon Buyer's
written election within ten (10) days after receipt of any Option Notice, an
escrow (the "Escrow") shall be established at such escrow company as may be
specified in such written election ("Escrow Agent") to facilitate consummation
of the purchase and sale of the Property in accordance with the terms and
conditions of this Agreement and said Option Notice and to provide Buyer, at its
sole cost and expense, an owner's policy of title insurance insuring its
interest in the Units the subject of the Option Notice. The cost of the Escrow
and all other closing costs not otherwise specifically provided for under this
Agreement shall be paid by Buyer. Upon such election, Buyer shall immediately
deposit a fully executed copy of this Agreement and the Option Notice with the
Escrow Agent. The opening of such Escrow shall be deemed to have occurred upon
the date of such deposit with Escrow Agent (the "Opening of Escrow"). As soon
thereafter as practicable, Buyer and Seller shall execute the printed form
escrow instructions of Escrow Agent, with such changes as the parties may agree,
and deposit same with Escrow Agent. Upon execution of the printed form escrow
instructions, this Agreement and the Option Notice shall become an addendum to
said printed form escrow instructions and together they shall constitute the
purchase contract for the Property the subject of the Option Notice and joint
instructions to the Escrow Agent. In the event of any conflict or inconsistency
between any provision of this Agreement and the Option Notice and any provision
in the printed form escrow instructions and the matters entered thereon, the
provision of this Agreement and the Option Notice shall control.
4.1. The paragraphs of Escrow Agent's printed escrow
instructions dealing with the "13 day" notice and cure period for default; all
provisions relating to real estate brokers or their commissions; and any
provisions agreeing to indemnify Escrow Agent from any form of its negligence or
intentional wrongful acts, are deemed stricken therefrom.
4.2. THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS MAY BE
PROVIDED IN THIS SECTION 4, NO TITLE INSURANCE IS BEING ISSUED IN CONNECTION
WITH THIS TRANSACTION AND THAT BUYER IS RELYING ENTIRELY ON ANY WARRANTIES,
COVENANTS AND REPRESENTATIONS OF THE SELLER HEREIN AND IN THE DEEDS DELIVERED
PURSUANT HERETO, NOTWITHSTANDING ANY INVESTIGATION OR KNOWLEDGE BY BUYER, WHICH
INVESTIGATION OR KNOWLEDGE SHALL NOT DIMINISH ANY RIGHTS OR REMEDIES OF BUYER
HEREIN.
5. Transfer. At Close, Seller shall convey fee simple title to the Real
Property to Buyer by executing and delivering a special warranty deed in the
form attached hereto as Exhibit "C" (the "Deed"). The Property will be conveyed
subject to that certain lease dated December 21, 1992 (and amended thereafter)
wherein Seller is Landlord and Los Abrigados Partners Limited Partnership, an
Arizona limited partnership, is Tenant (the "Lease"). Effective upon Close and
with respect to the Units the subject of the Close, and further subject to
Seller's properly assigning its rights under the Lease to Buyer, Buyer shall
assume the future obligations of Seller under the Lease. Buyer shall be entitled
to a pro-rata portion of the rent payable under the Lease, based upon the number
of Units it owns of the total 667 Units the subject of this Agreement.
Prior to each Close, Seller agrees to provide to Buyer a properly
executed and acknowledged "Non-Foreign Affidavit," Deed and Affidavit of Value
for the Units the subject of the Closing.
6. Remedies upon Default. Provided a party has then performed in all
material respects its obligations hereunder, in the event of the other party's
default, then such non-defaulting party shall be entitled to seek any remedy
available in law or equity, including without limitation specific performance of
this Agreement. If Buyer, without default on its part, is prepared to Close at
the Closing Date and Seller is in default on such date, Buyer shall not be
required to deposit the closing funds, or to leave same on deposit in any Escrow
if deposited (and Buyer may withdraw same upon demand including any interest
thereon), in order to exercise its rights and remedies hereunder.
7. No Brokers. The parties warrant to one another that neither has
utilized a broker, agent or finder (collectively "Broker") entitled to a
commission or other payment for this transaction. If any Broker shall assert a
claim to a fee, commission or other compensation on account of alleged
employment as a broker, agent or finder or for performance of services as a
broker, agent or finder in connection with this transaction, the party hereto
under whom the broker, agent or finder is claiming shall defend, indemnify and
hold harmless the other party against and from any such claim and all costs,
expenses and liabilities incurred in connection with such claim or any action or
proceeding brought thereon (including, but without limitation, counsel and
witness fees and court costs in defending against such claim). The provisions of
this paragraph shall survive the Close.
8. Seller's Representations, Warranties and Additional Covenants.
Seller hereby represents, warrants and covenants, as of the date hereof and as
of each Closing hereunder (with the understanding that Buyer is relying on said
representations, warranties and covenants), that:
8.1. Organization. Seller is a duly organized and validly
existing California limited partnership with full right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, and has taken all action necessary to authorize Seller's execution of,
and performance under, this Agreement.
8.2. Authority. The individual(s) executing this Agreement on
behalf of Seller is duly authorized to do so, and upon execution of this
Agreement by said individual(s) (and by Buyer), this Agreement shall be binding
and enforceable against Seller in accordance with its terms.
8.3. Litigation. There are no actions, suits, decrees, orders,
judgments, proceedings or investigations pending or threatened, by any person or
entity, governmental or otherwise, affecting any portion of the Property or any
interest therein, nor does Seller have any knowledge of any facts or conditions
that may give rise to same.
8.4. Compliance With Other Documents. The execution and
delivery of this Agreement and the documents described herein, the consummation
of the transactions contemplated thereby and the performance by Seller of its
obligations herein and under such documents will not result in any breach of, or
constitute a default under, any mortgage, deed of trust, lease, bank loan,
financing or security agreement, or any other instrument or agreement to which
Seller is a party or by which Seller may be bound or affected.
8.5. Status of Title on Deeds. Seller warrants that the status
of title to the Property will in each case be as stated in the Deed, which is
Exhibit "C" hereto, at the time of recording thereof with the Coconino County,
Arizona, Recorder in connection with the Closing.
It shall be a condition precedent to Buyer's obligation to further
perform or consummate its purchase of the Property that the Seller's covenants
in this Agreement shall be performed in a timely manner, and the Seller's
covenants, representations and warranties in this Agreement shall be true at the
date hereof and on and as of the Close. They and the following indemnity shall
survive the Close of Escrow and Seller will defend, indemnify and hold Buyer
harmless from all loss, cost, damages, judgments, claims, suits and expense
(including reasonable attorneys' fees) for any breach or inaccuracy in the
foregoing covenants, warranties or representations. No knowledge or
investigation by Buyer shall diminish or waive the effectiveness, validity and
binding nature of the covenants, warranties, representations and indemnity
herein.
9. Buyer's Representations, Warranties and Additional Covenants. Buyer
hereby represents, warrants, and covenants, as of the date hereof and as of each
Closing hereunder (with the understanding that Seller is relying on said
representations, warranties and covenants) that:
9.1. Organization. Buyer is a duly organized and validly
existing Arizona corporation with full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby, and has
taken all action necessary to authorize Buyer's execution of, and performance
under, this Agreement.
9.2. Authority. The individual(s) executing this Agreement on
behalf of Buyer is duly authorized so to do, and upon execution of this
Agreement by said individual(s) (and by Seller), this Agreement shall be binding
and enforceable against Buyer in accordance with its terms.
It shall be a condition precedent to Seller's obligation to further
perform or consummate its sale of the Property that the Buyer's covenants in
this Agreement shall be performed in a timely manner, and the Buyer's
representations and warranties in this Agreement shall be true at the date
hereof and on and as of the Close. They and the following indemnity shall
survive the Close and Buyer will defend, indemnify and hold Seller harmless from
all loss, cost, damages, judgments, claims, suits and expense (including
reasonable attorneys' fees) for any breach or inaccuracy in the foregoing
covenants, warranties or representations. No knowledge or investigation by
Seller shall diminish or waive the effectiveness, validity and binding nature of
the covenants, warranties, representations and indemnity herein.
10. Condemnation or Destruction. In the event that prior to the Close
any portion of the Property is damaged or destroyed by any casualty or is taken
by condemnation or the exercise of the right of eminent domain or proceedings
therefor are instituted or threatened, at its election, Buyer may:
10.1. Cancel this Agreement, and all documents and sums
deposited by Buyer in Escrow (if any) shall be promptly returned to Buyer; or
10.2. Proceed with the purchase of the Property as provided in
this Agreement, and Buyer shall receive all proceeds of any insurance in the
case of damage or destruction, or the proceeds of any condemnation or eminent
domain proceeding and this Agreement shall otherwise remain in full force and
effect. In the event the proceeds of the insurance or condemnation do not equal
the full value of the portion damaged or taken, the Purchase Price shall be
reduced by the amount of the shortfall, with the adjustment to be made by refund
from Seller if the amount is not known until after Closing.
11. Risk of Loss. The risk of loss with respect to the Property to and
until the Close, including without limitation loss or damage to the Property by
fire, wind, storm, tornado or any other casualty, whether an act of God or
otherwise, shall be borne by Seller, except as may otherwise be expressly
provided in this Agreement.
12. Expenses. Except as may be expressly provided to the contrary in
this Agreement, Buyer shall bear all of the costs, expenses and fees (including
attorneys' fees) in connection with the transaction contemplated hereby.
13. Notices. Any and all notices required or permitted hereunder shall
be given in writing to the following parties, addressed as follows:
IF TO SELLER: Indian Wells Partners
Attn: Jerome M. White
10801 National Boulevard, Ste. 600
Los Angeles, California 90064
Telephone: (310) 474-9534
Telecopy: (310) 475-0985
and to:
Lawrence S. Held
250 Mira Verde Drive
La Habra Heights, California 90631
With Required
Copies To: George C. Wallach, Esq.
Brown & Bain, P.A.
2901 North Central Avenue
Phoenix, Arizona 85012
Telephone: (602) 351-8230
Telecopy: (602) 351-8516
IF TO BUYER: Martori Enterprises Incorporated
Attn: Joseph P.Martori
2777 E. Camelback Road
Phoenix, Arizona 85016
Telephone: (602) 957-2777
Telecopy: (602) 957-2780
IF TO ESCROW
AGENT (if any): To such address as Escrow Agent may
specify in writing
or at any other address designated by notice in writing by Buyer, Seller or
Escrow Agent. Any written notice that is telecopied to the number shown above,
or hand-delivered to the address shown above, shall be deemed a valid notice and
shall be effective when received. Any written communication mailed to the
addresses shown above shall be effective when received. Copies of all notices to
Buyer or Seller shall be given, at the same time and in the manner set forth
above, to Escrow Agent, if any. Copies of all notices by Buyer or Seller to
Escrow Agent shall be given, at the same time and in the manner set forth above,
to the other party hereto.
14. Attorneys' Fees. In the event either Seller or Buyer commences
litigation to enforce or interpret any of the terms or conditions of this
Agreement and/or to recover damages or for other relief on account of the breach
of this Agreement, the prevailing party in such litigation shall be entitled to
receive, in addition to all other relief to which such party shall be entitled,
all costs and expenses, including reasonable attorneys' fees, incurred by the
prevailing party (which costs and expenses shall be fixed by the court sitting
without a jury, the parties hereby waiving any entitlement to a trial by jury on
all issues in such litigation). If the court awards both parties relief, such
sums shall be awarded among the parties as the Court determines in its
discretion.
15. Possession. Buyer shall be entitled to possession of the portion of
the Property at the Close.
16. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties to this Agreement and their respective legal
representatives, successors and assigns.
17. Further Instruments and Documents. Each party hereto shall,
promptly upon the request of the other or Escrow Agent, have acknowledged and
delivered to the other any and all further instruments and assurances reasonably
requested or otherwise necessary to carry out the intent of this Agreement.
18. Construction. The parties agree that each party has reviewed this
Agreement and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not apply to the interpretation
of this Agreement.
19. Severability and Waiver. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof. Any waivers must be in writing and signed by the party
sought to be charged. The waiver by any party of a right provided hereunder
shall not be deemed to be a continuing waiver of that right or a waiver of any
other right.
20. Time. Timeliness is the essence of this Agreement. All times
referred to herein are Phoenix, Arizona times. The expiration time on the last
day to perform an obligation, or the last day of any stated period, shall be
5:00 p.m., unless specifically stated otherwise.
21. Assignment. Either Buyer or Seller may assign this Agreement
without the prior written consent of the other party.
22. Gender. The use of the masculine, feminine or neuter shall be
deemed to include the others when the context requires, and the use of the
singular or plural shall be deemed to include the other when the context
requires.
23. Counterparts. This Agreement may be executed in any number of
counterparts, and when a counterpart hereof has been executed and delivered by
both Buyer and Seller, this Agreement shall be deemed binding upon the parties
hereto.
24. Affidavit as to "Nonforeign" Status. On or before each Close, and
as a condition to Buyer's obligation to close, Seller shall deliver or cause to
be delivered to Buyer a "Nonforeign Affidavit" as defined in Section 1445 of the
Internal Revenue Code. In the event that Seller fails to provide the
certification provided for above, or if Buyer has actual knowledge that the
information contained in the certification is false, Buyer is expressly
authorized (but not required) to withhold (or direct Escrow Agent to withhold)
from the Purchase Price a sum equal to the amount required to be withheld
pursuant to Section 1445(a) of the Internal Revenue Code (as such amount shall
reasonably be determined by Buyer), which sum shall be paid by Buyer or Escrow
Agent to the United States Treasury pursuant to the requirements of Section
1445. Any amount so paid shall, nevertheless, be considered for all purposes as
a payment by Buyer to Seller on account of the Purchase Price.
25. Business Day. A "business day" is any day, other than a Saturday or
Sunday, on which ILX Incorporated's corporate offices are open for business
during normal business hours and is not a federal or State of Arizona, or State
of California holiday. If the due date of any performance falls on a
non-business day, the day of performance is extended to the next succeeding
business day.
26. Headings. The paragraph captions or headings contained herein are
inserted only for convenience of reference and are in no way to be used in the
interpretation of this Agreement or as a description, expansion, modification or
limitation of the scope of the particular paragraphs to which they refer. Any
reference to a paragraph shall include all its subparagraphs.
27. Exhibits. All exhibits attached to this Agreement are incorporated
herein by this reference.
28. Arizona Law. The parties agree that Arizona law will control both
this Agreement, any Escrow and the Closing documents and agree that any
litigation related to either this Agreement, any Escrow or the Closing documents
will have Maricopa County, Arizona, as the proper venue.
29. Integration. This Agreement contains the complete understanding and
agreement of the parties hereto with respect to the subject matter hereof, and
all prior representations, negotiations and understandings, written or oral, are
superseded hereby and merged into this Agreement. No party shall be liable or
bound to any other party hereto in any manner by any agreement, warranty,
representation or guarantee, except as specifically set forth herein or in any
instrument executed pursuant hereto.
30. Consideration. The parties hereto acknowledge and agree there is
adequate, good and valuable consideration in hand received for the making and
entering into this Agreement and each and every obligation and undertaking
herein.
31. "Doing Business Name". The parties acknowledge that Seller is
registered as a foreign limited partnership with the Arizona Secretary of State
under the trade name "Indian Wells Realty Partners Limited Partnership."
IN WITNESS WHEREOF, the parties agree to the foregoing.
SELLER: BUYER:
INDIAN WELLS PARTNERS, LTD., MARTORI ENTERPRISES
INCORPORATED
a California limited partnership an Arizona corporation
By: Lawrence S. Held By: Joseph P. Martori
-------------------------------- --------------------------------
Lawrence S. Held Joseph P. Martori
Its: General Partner Its: Chairman
The obligations of Buyer under this Option Agreement are personally guaranteed
to the fullest extent by Joseph P. Martori, a single man, and Edward J. Martori,
a single man.
Joseph P. Martori
-------------------------------------- ---------------------------------
Joseph P. Martori Edward J. Martori
STATE OF )
) ss.
County of )
On this the day of , 199 , before the
undersigned Notary Public personally appeared Lawrence S. Held, a General
Partner of INDIAN WELLS PARTNERS, LTD., a California limited partnership, and
acknowledged that as such officer, being authorized so to do, he/she executed
the foregoing Option Agreement for the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary public
My Commission Expires:
----------------------
STATE OF Arizona )
) ss.
County of Maricopa )
On this the 29th day of March, 1994, before the undersigned Notary
Public personally appeared Joseph P. Martori , the Chairman of MARTORI
ENTERPRISES INCORPORATED, an Arizona corporation, and acknowledged that as such
officer, being authorized so to do, he/she executed the foregoing Option
Agreement for the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Mia A. Green
--------------------------------------
Notary public
My Commission Expires:
May 14, 1994
SUMMARY
OF
EXHIBITS
EXHIBIT DESCRIPTION
------ -----------
A Legal Description
B Membership Rights
C Form of Deed from Seller
EXHIBIT "A"
LEGAL DESCRIPTION
LEGAL DESCRIPTION
An undivided 667/8,925 fee simple interest in and to the real property situated
in Coconino County, Arizona, more particularly described in Docket 1422, page
850, at the office of the Coconino County Recorder, Coconino County, Arizona.
Subject to the terms and conditions set forth in the Membership Plan for Sedona
Vacation Club at Los Abrigados (the "Plan") recorded on September 16, 1991, in
the official records of the Coconino County Recorder, Coconino County, Arizona
at Docket 1422, page 850.
EXHIBIT "B"
MEMBERSHIP RIGHTS
EXHIBIT "C"
FORM OF DEED FROM SELLER
When Recorded, return to:
Joseph P. Martori
Martori Enterprises Incorporated
2777 E. Camelback Road
Phoenix, Arizona 85016
SPECIAL WARRANTY DEED
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, INDIAN WELLS PARTNERS, LTD., a California limited
partnership ("Grantor"), hereby conveys to MARTORI ENTERPRISES INCORPORATED, an
Arizona corporation ("Grantee"), the following property situated in Coconino
County, Arizona, together with all rights and privileges appurtenant thereto:
an undivided /8,925 fee simple interest in and to the real property
situated in Coconino County, Arizona, more particularly described in
Docket 1422, page 850, at the office of the Coconino County Recorder,
Coconino County, Arizona.
Subject to the terms and conditions set forth in the Membership Plan
for Sedona Vacation Club at Los Abrigados (the "Plan") recorded on September 16,
1991, in the official records of the Coconino County Recorder, Coconino County,
Arizona at Docket 1422, page 850, and to current taxes and other assessments,
reservations in patents and all easements, rights of way, covenants, conditions,
restrictions, obligations and liabilities as may appear of record. Subject to
the foregoing matters, the Grantor warrants the title to Grantee, and to its
successors and assigns, against the acts of Grantor only against all persons
whomsoever.
This Warranty Deed shall not be conveyed separate from Grantee's Certificate of
Membership in Sedona Vacation Club Incorporated and all such conveyances or
transfers of any nature shall be accomplished in accordance with the terms and
conditions set forth in the Plan.
By Acceptance of this Warranty Deed, Grantee acknowledges that Grantee
shall have no right to compel a partition of the above described real property.
TYPE OF MEMBERSHIP: JEROME-EVERY YEAR
Dated this day of , 199 .
------- --------------------- --
INDIAN WELLS PARTNERS, LTD.,
a California limited partnership
Jerome M. White
Its: General Partner
By:
---------------------------------
Lawrence S. Held
Its: General Partner
STATE OF )
) ss.
County of )
On this the day of , 199 , before the
------ ------------------- --
undersigned Notary Public personally appeared
, the of INDIAN WELLS
---------------------------- --------------------------
PARTNERS, LTD., a California limited partnership, and acknowledged that as such
officer, being authorized so to do, he/she executed the foregoing Special
Warranty Deed for the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary public
My Commission Expires:
----------------------
STATE OF )
) ss.
County of )
On this the day of , 199 , before the
------- ------------------ ---
undersigned Notary Public personally appeared
, the of INDIAN WELLS
---------------------------- --------------------------
PARTNERS, LTD., a California limited partnership, and acknowledged that as such
officer, being authorized so to do, he/she executed the foregoing Special
Warranty Deed for the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
--------------------------------
Notary public
My Commission Expires:
----------------------
When Recorded, return to:
Samuel L. Ciatu
Genesis Investment Group, Inc.
2777 E. Camelback Road
Phoenix, Arizona 85016
ASSIGNMENT OF OPTION
THIS ASSIGNMENT OF OPTION ("Assignment") is made effective the 15th day
of September, 1994, by and between MARTORI ENTERPRISES INCORPORATED, an Arizona
corporation ("Assignor"), and GENESIS INVESTMENT GROUP, INC., an Arizona
corporation ("Assignee").
1. Assignment. Assignor hereby assigns to Assignee all of its right,
title and interest existing under that certain Option Agreement ("Option
Agreement") entered into effective March 31, 1994 by and between Assignor as
Buyer thereunder and Indian Wells Partners, Ltd., a California limited
partnership, as Seller thereunder. The Option Agreement relates to that certain
real property described on Exhibit "A" attached hereto and incorporated herein
by this reference.
2. Assumption. Assignee hereby assumes all future obligations of
Assignor as Buyer under the Option Agreement, and, effective upon execution
hereof, agrees to indemnify and hold Assignor harmless from any and all future
claims and liabilities arising under said Option Agreement.
3. Further Action. Each party hereto shall, promptly upon the request
of the other, have executed (and, if applicable, acknowledged) and delivered to
the other any and all further instruments and assurances reasonably requested or
otherwise necessary to carry out the intent of this Assignment.
4. Consideration. The parties hereto acknowledge and agree there is
adequate, good and valuable consideration in hand received for the making and
entering into this Assignment and each and every obligation and undertaking
herein.
IN WITNESS WHEREOF, the parties agree to the foregoing.
ASSIGNOR: ASSIGNEE:
MARTORI ENTERPRISES INCORPORATED, GENESIS INVESTMENT GROUP,
INC.,
an Arizona corporation an Arizona corporation
By: Joseph P. Martori By: Nancy J. Stone
--------------------------- ----------------------------
Joseph P. Martori Nancy J. Stone
Its: Chairman Its: Vice President
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this the 15th day of September, 1994, before the undersigned Notary
Public personally appeared Joseph P. Martori, the Chairman of MARTORI
ENTERPRISES INCORPORATED, an Arizona corporation, and acknowledged that as such
officer, being authorized so to do, he/she executed the foregoing Assignment for
the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Michelle C. Lemieux
--------------------------------
Notary public
My Commission Expires:
April 11, 1997
----------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this the 15th day of September, 1994, before the undersigned Notary
Public personally appeared Nancy J. Stone, the Vice President of GENESIS
INVESTMENT GROUP, INC., an Arizona corporation, and acknowledged that as such
officer, being authorized so to do, he/she executed the foregoing Assignment for
the purposes herein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Michelle C. Lemieux
-------------------------------------
Notary public
My Commission Expires:
April 11, 1997
---------------
EXHIBIT "A"
LEGAL DESCRIPTION
An undivided 667/8,925 fee simple interest in and to the real property
situated in Coconino County, Arizona, more particularly described in
Docket 1422, page 850, at the office of the Coconino County Recorder,
Coconino County, Arizona.
Subject to the terms and conditions set forth in the Membership Plan
for Sedona Vacation Club at Los Abrigados (the "Plan") recorded on
September 16, 1991, in the official records of the Coconino County
Recorder, Coconino County, Arizona at Docket 1422, page 850, and any
amendments thereto.
SECOND AMENDMENT TO LEASE
INDIAN WELLS PARTNERS, LTD.
LOS ABRIGADOS PARTNERS
This Second Amendment to Lease is made by and between INDIAN WELLS
PARTNERS, LTD., a California limited partnership ("Landlord"), and LOS ABRIGADOS
PARTNERS LIMITED PARTNERSHIP, an Arizona limited partnership ("Tenant"), to be
effective on the 31st day of March, 1994.
WHEREAS, Landlord and Tenant entered into a Lease Agreement, dated
December 21, 1992, of real property (including 667 timeshare memberships related
thereto) at the Los Abrigados Resort, Sedona, Arizona (the "Lease");
WHEREAS, the parties amended the Lease pursuant to an Amendment to
Lease dated effective January 1, 1993; and
WHEREAS, the parties desire to further amend the Lease as set forth
below;
NOW, THEREFORE, for good and valuable consideration in hand received,
the sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Paragraph 1 of the Lease is hereby amended in its entirety as
follows:
1. TERM: The term of this Lease commenced on the 1st day of January,
1993 and shall continue through the 30th day of June, 1997.
2. Paragraph 3 of the Lease is hereby amended to delete the first
sentence in its entirety and to replace it with the following:
Tenant agrees to pay Landlord base rent at the rate of FOURTEEN
THOUSAND DOLLARS ($14,000) per month commencing April 1, 1994.
3. The remainder of the Lease (as previously amended) is unamended and
continues in full force and effect.
Dated as of the day above written.
TENANT: LANDLORD:
LOS ABRIGADOS PARTNERS LIMITED INDIAN WELLS PARTNERS, LTD.,
PARTNERSHIP, an Arizona limited a California limited partnership
partnership
By: ILE Sedona Incorporated,
an Arizona corporation, By: Lawrence S. Held
Managing General Partner -------------------------------
Lawrence S. Held
Its: General Partner
By: Joseph P. Martori
--------------------------
Its: President
--------------------------
ILX INCORPORATED
An Arizona Corporation
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated March 31, 1994 (the "Warrant Agreement"),
is entered into between ILX INCORPORATED, an Arizona corporation (the
"Company"), and the purchaser(s) listed below on the signature page hereto (the
"Warrantholders").
WITNESSETH
WHEREAS, the Company proposes to issue up to fifty thousand (50,000)
warrants (the "Warrants") to purchase up to an aggregate of fifty thousand
(50,000) shares (the "Warrant Shares") of its common stock, no par value (the
"Common Stock," which term shall, if applicable, include any other capital stock
into which such common stock may be converted or reclassified or that may be
issued in respect of or in exchange or substitution for such common stock by
reason of any stock split, stock dividend, distribution, merger, consolidation
or similar event), each such Warrant initially entitling the registered owner
thereof to purchase one share of Common Stock as hereinafter provided; and
WHEREAS, the Company in this Warrant Agreement wishes to set forth,
among other things, the form and provisions of the Warrants and the terms and
conditions on which they may be issued, exchanged, transferred, exercised and
replaced;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and other good and valuable consideration, the
parties hereto agree as follows:
SECTION 1. Transferability.
1.1 Transferability. The Warrants will be subject to the same
restrictions on transfer and legend requirements as are set forth in Section
13.8 below with respect to Registrable Shares.
SECTION 2. Form of Warrants.
2.1 Form of Warrant Certificates. The text of the certificates
evidencing the Warrants (the "Warrant Certificates") and the form of election to
purchase Warrant Shares shall be substantially as set forth in Exhibit A
attached hereto. The Warrant Certificates shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase one share of
Common Stock at the price specified therein, in each case subject to adjustment
as provided herein and therein. The Warrant Certificates shall be executed on
behalf of the Company by its President or one of its Vice Presidents and
attested by its Secretary or an Assistant Secretary. The signature of any of
such officers on the Warrant Certificates may be manual or facsimile.
Warrant Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any one of them shall have
ceased to hold such offices prior to the delivery of such Warrant Certificates
or did not hold such office on the date of this Warrant Agreement.
2.2 Warrant Register. The Warrant Certificates shall be numbered and
shall be registered in a register (the "Warrant Register" maintained by the
Company as they are issued and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the officers of the Company executing the
same may approve (execution thereof to be conclusive evidence of such approval)
and as are not inconsistent with the provisions of this Warrant Agreement, or as
may be required to comply with any applicable law or with any rule or regulation
made pursuant thereto. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, notwithstanding any
notice to the Company to the contrary.
2.3 Statement on Warrant Certificates. Irrespective of any adjustments
pursuant to the provisions of Section 9 hereof in the Warrant Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrant Certificates
initially issuable pursuant to this Warrant Agreement. Notwithstanding the
foregoing, the Warrant Price and the number or kind of shares or other property
receivable upon exercise of the Warrants shall be governed by this Warrant
Agreement including, without limitation, Section 9 hereof and not by the
statements contained on the face of the Warrant Certificates.
SECTION 3. Transfer or Exchange of Warrants.
3.1 Transfer. Upon surrender at the principal office of the Company,
Warrant Certificates evidencing Warrants may be exchanged for Warrant
Certificates in other denominations evidencing such Warrants or, subject to
Section 1, the transfer thereof may be registered in whole or in part; provided
that such other Warrant Certificates evidence the same aggregate number of
Warrants as the Warrant Certificates so surrendered (less the aggregate number
of Warrants, if any, that are surrendered in connection with their exercise).
The Company shall keep the Warrant Register in which, subject to such reasonable
regulations as it may prescribe, it shall register Warrant Certificates and
exchanges and transfers of outstanding Warrant Certificates, upon surrender of
the Warrant Certificates to the Company at its principal office for exchange or
registration of transfer, properly endorsed or accompanied by appropriate
instruments of registration of transfer and written instructions for transfer,
all in form satisfactory to the Company. A reasonable service charge established
by the Company may be required to be paid by a Warrantholder for any exchange or
registration of transfer of Warrant Certificates, and the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that may be imposed in connection with any such exchange or
registration of transfer. Whenever any Warrant Certificates are so surrendered
for exchange or registration of transfer, the authorized officers of the Company
shall execute and deliver to the person or persons entitled thereto a Warrant
Certificate or Warrant Certificates duly authorized and executed by the Company,
as so requested. All Warrant Certificates issued upon any exchange or
registration of transfer of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Warrant Agreement as the Warrant Certificates in respect of
which they are issued.
The Warrants shall be transferable only on the books of the Company
maintained at the office of the Company in Phoenix, Arizona upon delivery
thereof duly endorsed by the Holder or by his duly authorized attorney or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by personal
representatives, executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced and may be required to be deposited and remain with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant Certificate to the person entitled thereto.
3.2 Treatment of Holders of Warrant Certificates. Every Holder of a
Warrant Certificate, by accepting the same, consents and agrees with the Company
and with every subsequent Holder of such Warrant Certificate that until the
transfer of the Warrant Certificate is registered on the Warrant Register,
before such Warrant Certificate is surrendered for transfer pursuant to Section
3.1 hereof, the Company may treat the Holder of a Warrant Certificate as the
absolute owner thereof for any purpose and as the person entitled to exercise
the rights represented by the Warrants evidenced thereby, any notice to the
contrary notwithstanding.
3.3 Cancellation of Warrant Certificates. Any Warrant Certificate
surrendered for exchange or transfer or exercise of the Warrants evidenced
thereby shall be surrendered to the Company and all Warrant Certificates
surrendered and so delivered to the Company shall be promptly canceled by the
Company and shall not be reissued and, except as expressly permitted by this
Warrant Agreement, no Warrant Certificates shall be issued hereunder in exchange
therefor or in lieu thereof.
SECTION 4. Mutilated or Missing Warrants.
In case any Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only, in case of any such loss, theft or
destruction, upon receipt of evidence satisfactory to the Company thereof and
indemnity, if requested, also satisfactory to it. An applicant for such
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 5. Terms of Warrants; Exercise of Warrants.
5.1 Terms and Exercise. Subject to the terms of this Warrant Agreement,
each Holder shall have the right until 5:00 p.m., Phoenix, Arizona time, on June
30, 1997 (such date being herein referred to as the "Expiration Date"), to
purchase from the Company the number of fully paid and nonassessable Warrant
Shares to which the Holder may at the time be entitled to purchase pursuant to
such Warrants, upon surrender to the Company, at the principal office of the
Company in Phoenix, Arizona, of the Warrant Certificates to be exercised,
together with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Warrant Price (as
defined in and determined in accordance with the provisions of Sections 8 and 9
hereof) for the number of Warrant Shares in respect of which such Warrants are
then being exercised. Payment of the aggregate Warrant Price shall be made (i)
in cash, (ii) by certified or official bank check, or (iii) by bank wire
transfer of immediately available funds to the Company.
Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price as aforesaid, the Company shall issue and cause to
be delivered, with all reasonable dispatch, to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants, together with cash or a check, as provided in Section
10 hereof, in respect of any fractional Warrant Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of the Warrant Price, as aforesaid; provided,
however, that if, at the date of surrender of such Warrants and payment of such
Warrant Price, the transfer books for the Warrant Shares shall be closed, the
certificates for the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened (whether before or after the Expiration Date) and until such date the
Company shall be under no duty to deliver any certificates of such Warrant
Shares; provided further, however, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than 10 days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part (provided, however, that any partial exercise shall be in
increments of ten thousand (10,000) Warrant Shares) and, in the event that less
than all the Warrants represented by a Warrant Certificate are exercised, such
Warrant Certificate shall be exercised and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not surrendered shall be
executed by the Company shall be registered in such name or names as may be
directed in writing by the Holder, and shall be delivered to the person entitled
to receive the same.
5.2 Expiration. All Warrants that have not been exercised in accordance
with the provisions of this Warrant Agreement shall expire and all rights of
Holders of such Warrants shall terminate and cease as of 5:00 P.M., Phoenix,
Arizona time, on June 30, 1997, whether or not such Warrants have become
exercisable before that date.
SECTION 6. Payment of Taxes.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Warrant Shares issuable upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay, and
the Holder shall pay, any tax or taxes that may be payable in respect of any
transfer involved in the issue or delivery of any Warrant Certificates or
certificates for Warrant Shares in a name other than that of the registered
Holder of the Warrants that were surrendered.
SECTION 7. Reservation of Warrant Shares; Purchase and Cancellation of
Warrants; Acceleration of Effective Date.
7.1 Reservation of Warrant Shares. The Company covenants that there
have been reserved, and the Company shall at all times keep reserved out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the right of purchase represented by the outstanding
Warrants.
7.2 Purchase of Warrants by the Company. The Company shall have the
right, except as limited by law, other agreement or herein, to offer to purchase
or otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate. In the event the Company shall
purchase or otherwise acquire Warrants, the related Warrant Certificates shall
thereupon be canceled and retired.
SECTION 8. Warrant Price.
The price per share at which Warrant Shares shall be purchasable upon
exercise of each Warrant (the "Warrant Price") shall be one dollar and sixty-two
and one-half cents ($1.625), subject to adjustment pursuant to Section 9 hereof.
SECTION 9. Adjustment of Warrant Price and Number of Warrant Shares.
9.1 Adjustments. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price shall be subject to adjustment as
follows:
(a) Stock dividends, splits, etc. In case the Company shall at any time
after the date of this Warrant Agreement (i) pay a dividend in shares of Common
Stock or make a distribution to all holders of shares of Common Stock in shares
of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or (iv) issue
by reclassification of its shares of Common Stock other securities of the
Company, then the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive upon exercise of such Warrant the kind and
number of Warrant Shares or other securities of the Company that he would have
owned or would have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event. Notwithstanding the foregoing provisions of this paragraph (a), the
Company may elect, in lieu of the adjustment in the number of Warrant Shares
pursuant to this paragraph (a), to adjust the number of Warrants pursuant to
paragraph (e) of this subsection 9.1.
(b) Minimum Adjustment. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the number of Warrant
Shares purchasable upon the exercise of each Warrant; provided, however, that
any adjustments which by reason of this paragraph (b) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
(c) Warrant Price Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as herein provided,
the Warrant Price per Warrant Share payable upon exercise of each Warrant shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares so purchasable immediately thereafter; provided,
however, that if the Company elects to adjust the number of Warrants pursuant to
paragraph (e) of this subsection 9.1, the formula to adjust the Warrant Price
set forth in this paragraph (c) shall nevertheless be employed using the
adjustment to the number of Warrant Shares that would have been made had the
Company elected to adjust such number pursuant to paragraph (a) of this Section
9.1.
(d) Notice of Adjustment. Whenever the number of Warrants or the number
of Warrant Shares purchasable upon the exercise of Warrants or the Warrant Price
of such Warrant Shares is adjusted, as herein provided, the Company shall mail
by first class mail, postage prepaid, to each Holder of a Warrant or Warrants
notice of such adjustment or adjustments and shall prepare a certificate setting
forth (i) the number of Warrants or Warrant Shares purchasable upon the exercise
of each Warrant and the Warrant Price of such Warrant Shares after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, and
(iii) the computation by which such adjustment was made. The Company will
exhibit the certificate, from time to time, to any Holder desiring an inspection
thereof.
(e) Increase in Number of Warrants. In lieu of any adjustment in the
number of Warrant Shares purchasable upon the exercise of each Warrant as
provided in this Warrant Agreement, the Company may elect to adjust the number
of Warrants so that each Warrant outstanding (after such adjustment in the
number of Warrants) shall be exercisable for one Warrant Share. Each Warrant
held of record immediately prior to such adjustment of the number of Warrants
shall become that number of Warrants determined (to the nearest hundredth) by
multiplying the number of Warrant Shares purchasable upon exercise of a Warrant
immediately prior to such adjustment by a fraction, the numerator of which shall
be the Warrant Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Price in effect immediately after such
adjustment. Upon each adjustment of the number of Warrants pursuant to this
paragraph (e) the Company may but shall not be required to cause to be
distributed to Holders of Warrant Certificates on such record date Warrant
Certificates evidencing, subject to Section 10, the additional Warrants to which
such Holders shall be entitled as a result of such adjustment or, at the option
of the Company, shall cause to be distributed to such Holders of record in
substitution and replacement for the Warrant Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof if required by the
Company, new Warrant Certificates evidencing all the Warrants to which such
Holders shall be entitled after such adjustment. Warrant Certificates to be so
distributed may, at the option of the Company, bear the adjusted Warrant Price
and shall be registered in the names of the Holders of record of Warrant
Certificates on the record date specified in the public announcement. If new
Warrant Certificates are not delivered upon an adjustment, the old Warrant
Certificates shall, notwithstanding the provisions set forth on their face, have
the benefit of such adjustment.
9.2 No Adjustment for Dividends. Except as provided in subsection 9.1,
no adjustment in respect of any dividends shall be made during the term of a
Warrant or upon the exercise of a Warrant.
9.3 Preservation of Purchase Rights Upon Reclassification,
Consolidation, Etc. The Company shall not enter into any consolidation of the
Company with or merger of the Company into another corporation or any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, unless the successor (if other than the
Company) or such purchasing corporation, as the case may be, shall, by
supplemental agreement executed and delivered to each Holder of a Warrant, agree
and provide (i) that each Holder of a Warrant shall have the right thereafter
upon payment of the Warrant Price in effect immediately prior to such action
(or, if a record date is set with respect to such action, such record date) to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities and property that he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had such Warrant been exercised immediately prior to such action (or if
applicable, such record date) and (ii) that such survivor (if other than the
Company) or such purchasing corporation expressly assumes the due and punctual
performance of each and every covenant and condition of this Warrant Agreement
to be performed or observed by the Company. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The provisions of this subsection
9.3 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
SECTION 10. Fractional Interests.
10.1 Fractional Warrant Shares. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares that shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares represented by the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash or by check equal to the Current Market Price per share of
Common Stock (as defined in subsection 10.2 below) multiplied by such fraction.
10.2 Computation of Market Price. For the purpose of any computation
under Section 9.1 or this Section 10, the "Current Market Price" per share of
Common Stock at any date shall be deemed to be the average of the daily closing
price per share for the 30 consecutive NASDAQ National Market System trading
days commencing 45 NASDAQ National Market System trading days before such record
date. The closing price for each day shall be the last sale price regular way
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices regular way, or, if the Common Stock is not listed or admitted
to trading on the NASDAQ National Market System, the average of the highest
reported bid and lowest reported asked prices as furnished by the National
Association of Securities Dealers, Inc. (the "NASD") through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information. If on any such
trading day the Common Stock is not quoted by any such organization, the fair
value of such Common Stock on such day, as determined by the Board of Directors
of the Company, shall be used.
SECTION 11. No Rights as Stockholders; Notices and Reports to Warrant
Holders.
Nothing contained in this Warrant Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration of
the Warrants and prior to their exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into
shares of Common Stock or any right to subscribe thereto; or
(c) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger, or sale of all or substantially all
of its property, assets, and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Holders as provided in Section 12 hereof. Such notice shall
be given at least 10 business days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to such dividend or offer, or for the determination of stockholders
entitled to vote on such proposed dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such dividend, offer, or proposed dissolution, liquidation or winding up.
SECTION 12. Notices.
Unless otherwise provided in this Warrant Agreement, any notice
pursuant to this Warrant Agreement by the Company to the Holders or by any
Holder of any Warrant to the Company shall be in writing and shall be delivered
either personally or by telegram, telex, telefax or similar facsimile memo or by
or by registered or certified mail as follows: (a) if to the Company, to 2777
East Camelback Road, Phoenix, Arizona 85016, attention of President; and (b) if
to a Holder, to the address for such Holder specified in the Warrant Register.
Each party hereto may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in writing to the other
party.
Notices shall be deemed given when received if sent by telegram, telex,
telecopy or similar facsimile means (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communications sent by telex,
telecopy or the facsimile means) and four days following deposit in the U.S.
mail if by registered or certified mail.
SECTION 13. Registration Rights.
13.1 Definitions. For purposes of this section 13 the following terms
have the meanings indicated:
"Common Stock" shall mean the common stock, no par value per share, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holder" means any Warrantholder holding Registrable Shares or Common
Stock, including permitted transferees of such Holder who satisfy the
requirements of Section 13.12 of this Warrant Agreement.
"Participation Notice" means a written or oral notice by a Holder of
his desire to sell Registrable Shares in a registration by the Company.
"Person" means any individual, firm, corporation, trust, association,
partnership, joint venture or other entity.
"Registrable Shares" means all shares of Common Stock of the Company
owned by a Holder and permitted transferees of a Holder which are acquired by
exercise of the Warrants.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement.
"Registration Notice" means a written notice by the Company to the
Holders of its intent to file a registration statement with the SEC, which
notice shall state that it is being delivered pursuant to the registration
rights provisions of this Warrant Agreement.
"Rights" means rights, remedies, powers, benefits, and privileges.
"SEC" means the federal Securities and Exchange Commission or any
successor thereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Warrants" means the warrants of the Company issued to the Holders
pursuant to the terms of this Warrant Agreement.
13.2 Registration Rights. (a) If, at any time, the Company proposes to
file a registration statement in connection with the public offering of shares
of Common Stock to be sold by the Company for its own account or for the account
of any shareholder under the Securities Act, prior to such filing, the Company
shall give each Holder a Registration Notice. Within ten business days after
receipt by any Holder of a Registration Notice, such Holder shall, if it desires
to include any of its Registrable Shares in such registration, deliver to the
Company a Participation Notice. The Participation Notice shall state the number
of Registrable Shares held by such Holder to be disposed of in such
registration; provided, however, such Holder's right to registration of such
Registrable Shares shall be subject to any limitations in the number thereof
required by the underwriters pursuant to Section 13.5 and to the restrictions
set forth in Section 13.12(b); provided, that (i) the Company shall not be
required to give notice or include such Registrable Shares in any such
registration if the proposed registration is (x) a registration of a stock
option or other employee incentive compensation plan or of securities issued or
issuable pursuant to any such plan, (y) securities issued or issuable pursuant
to a dividend or interest reinvestment plan, or other similar plan, or (z) a
registration of securities proposed to be issued in exchange for securities of
assets of, or in connection with a merger or consolidation with, another
corporation; (ii) the Company shall not be required to include the Registrable
Shares of a Holder in any such registration if the Holder fails to timely
provide the Company with all information which is in the possession of and
relates to such Holder and which is necessary in connection with such
registration and take all such action as may be reasonably required in order not
to delay the registration and offering of the securities by the Company; and
(iii) the Company may, in its sole discretion and without the consent of the
Holder, withdraw such registration statement and abandon any such proposed
offering, notwithstanding any Holder's request to participate therein in
accordance with this provision. The Company shall be obligated to effect three
"piggyback" registrations pursuant to this Section 2(a) with respect to all
Holders on the terms set forth herein.
(b) The Company shall use its best efforts to promptly cause all such
Registrable Shares to be registered along with the other shares of Common Stock
to be registered.
(c) If requested by a Holder, the Registrable Shares proposed to be
registered under any registration statement under Section 13.2(a) hereof will be
offered for sale upon the same terms as the shares of Common Stock, if any,
offered for sale by the Company.
13.3 Obligations of the Company. Whenever required under Section 13.2
to use its best efforts to effect the registration of any Registrable Shares,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Shares and use its best reasonable efforts to cause such
registration statement to become and remain effective; provided, however, that
the Company shall have no obligation to maintain the effectiveness of any
registration statement filed hereunder or to cause the information therein to
remain current for more than 90 days following such registration statement's
effective date in the case of a best efforts underwritten public offering or for
longer than such period as is customary and is required by the underwriter in
the case of a firmly underwritten public offering.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective in order to dispose of the shares registered thereunder in the manner
described in the underwriting agreement executed in connection therewith and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement; provided, however,
that the Company shall have no obligation to maintain the effectiveness of any
registration statement filed hereunder or to cause the information therein to
remain current for more than 90 days following such registration statement's
effective date in the case of a best efforts underwritten public offering or for
longer than such period as is customary and is required by the underwriter in
the case of a firmly underwritten public offering.
(c) Furnish to the Holders registering securities in such registration
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Shares owned by the Holders.
(d) Use its best reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such Jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdictions.
13.4 Expenses of Registration. All expenses incurred in connection with
a registration pursuant to Section 13.2 (excluding underwriters' discounts and
commissions applicable to Registrable Shares), including without limitation all
registration and qualification fees, printing and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
Each Holder of Registrable Shares shall pay the underwriters' discounts
and commissions applicable to the Registrable Shares sold by such Holder. In
addition, each selling Holder shall pay its own legal fees and expenses of
separate counsel, and costs for experts or professionals employed by it or on
its behalf in connection with the registration of Registrable Shares. No Holder
shall have the right to cause the Company to employ any expert or professional
to act on behalf of the Company.
13.5 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required to include any of the Holders' Registrable Shares in such
underwriting unless the Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company.
Additionally, the Company shall be required to include in such
piggyback registration under section 13.2(a) only such quantity of the
Registrable Shares as will not, in the written opinion of the underwriters,
interfere with the orderly sale, price and/or distribution of the securities
being offered by the Company. If, however, the underwriters have consented to
inclusion in any such offering of securities of any person other than the
Company, then the Holders shall be entitled to include such number of their
Registrable Shares in such underwriting pro rata to the total number of shares
of Common Stock owned by all of such persons (including all shares of Common
Stock issuable upon exchange of the Warrants) who are entitled to sell
securities in such offering (such apportionment shall not include securities
offered by the Company for its own account).
13.6 Indemnification. (a) In the event of registration of any of the
Registrable Shares under the Securities Act, the Company will indemnify and hold
harmless the seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for all legal or any other expenses reasonably incurred by them in connection
with the investigation or defense of any said loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, or liability arises out of or
is based upon any untrue statement or omission made in such registration
statement, preliminary prospectus or final prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of
such seller or underwriter specifically for use in the preparation thereof. The
foregoing indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of an indemnified person and shall survive
the transfer of the Registrable Share by the holder thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act, each seller of the Registrable Shares, severally and
not jointly, will indemnify and hold harmless the Company, each of its directors
and officers and each underwriter (if any), and each person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to the registration statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by or
on behalf of such seller specifically for use in the preparation thereof.
(c) Each party entitled to indemnification under this Section 13.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom (except to the extent that the Indemnified Party
has been advised by its counsel that the interests of the Indemnifying Party may
conflict with those of the Indemnified Party), provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 13.6. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or litigation, the Indemnifying Party will not be liable
to such Indemnified Party for any legal or other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation, unless the Indemnifying Party abandons the
defense of such claim or litigation. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
13.7 Lockup Agreement. In connection with any such registration, upon
the request of the Company or the underwriters managing any underwritten
offering of Common Stock of the Company, each Holder agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Shares without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed 180 days) from the effective date of such registration as the Company
or the underwriters may specify.
13.8 Representations, Agreements, Warranties and Restrictions on
Transfer. In connection with the acquisition by Holder of the Warrants for the
purchase of Registerable Shares (the foregoing are collectively referred to as
the "Securities" in the remainder of this paragraph), the undersigned Holder
(severally if more than one) represents, agrees and warrants to the Company
that:
(a) Such Warrants are being, and if exercised, the underlying
Registerable Shares will be, acquired by Holder for its own account and not with
a view to, or for assignment or resale in connection with, any distribution of
such Securities or any part thereof. No other person or entity has a direct or
indirect beneficial interest in such Securities and the Holder was not formed
for the specific purpose of acquiring the Securities. Holder understands that
neither the Warrants being issued, nor the underlying Registerable Shares, have
been reviewed or approved by any governmental securities agency nor has either
been registered under the Securities Act, or applicable state statutes, by
reason of specific exemptions claimed under the provisions of such act and such
statutes which depend in part upon the representations herein.
(b) Holder is a sophisticated investor and, either alone or together
with any advisors, understand the merits, nature and degree of financial risk of
the investment being made herein and is able to bear the financial risks
thereof. Holder, and its advisors if applicable, has been accorded access
(including discussions with the Company and the opportunity to ask questions of
the Company and its representatives and receive answers thereto) to information
regarding the Company's present and proposed business operations and financial
condition and has been furnished with all information regarding the Company
which Holder has requested and deemed necessary; Holder has examined the same or
caused the same to be examined by its representatives; and no further
information or data concerning the Company is desired.
(c) Holder (i) has adequate means of providing for its current needs
and contingencies, (ii) has no need for liquidity in this investment, (iii) has
not made overall commitments to investments which are not readily marketable
which are disproportionate to its net worth and this investment will not cause
such overall commitment to become disproportionate, (iv) is able to bear the
economic risks of an investment in the Securities for an indefinite period, (v)
at the present time, could afford a complete loss of such investment, (vi) would
qualify as an "accredited investor" under Regulation D promulgated pursuant to
the Securities Act, and (vii) a principal part of Holder's business consists of
buying securities.
(d) Holder also understands the corporation plans to pay no dividends
on its Common Stock for the foreseeable future.
(e) Holder understands that the securities referred to herein have not
been registered under the Act, or any applicable state securities laws, in
reliance upon exemptions therefrom (including without limitation exemptions for
"private" or non-public offerings). Holder understands and agrees that such
Securities, including the underlying Registerable Shares after any exercise of
the Warrants, must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or an exemption from
such registration is available.
(f) Holder agrees that the Company may permit the transfer of the
Warrants (or any part thereof), or the underlying Registerable Shares (or any
party thereof) upon any exercise referred to herein, out of Holder's name only
if its request for transfer is accompanied by evidence satisfactory to the
Company (including without limitation an opinion of counsel satisfactory to the
Company) that the proposed transfer will not result in a violation of any
applicable law, rule or regulation, federal or state, and Holder agrees that it
will not sell, transfer or otherwise dispose of the Warrants or the underlying
Registerable Securities, or any part of either without registration under the
Act and applicable state statutes or exemption therefrom. For itself, its
successors and assigns, Holder consents to the taking of any action or the
imposition of any requirements reasonably intended by the Company or its
attorneys to prevent the disposition of any interest in such Securities which
would appear to the Company or them to be inconsistent with any of Holder's
foregoing statements, to include without limitation an appropriate restrictive
legend imprinted upon any certificate or document representing such Securities
and "stop transfer" notations on the Company's records.
(g) Holder is duly authorized and empowered and otherwise duly
qualified to subscribe for, purchase and hold the Securities and any person
signing on its behalf is duly authorized and empowered to sign for and bind the
undersigned; and such entity has its principal place of business as set forth on
the signature page hereof.
13.9 Reports Under the Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of a company to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to ninety (90) days
after the effective date of the first registration statement covering an
underwritten public offering filed by the Company;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to the Holders, so long as the Holders own any Registrable
Shares, forthwith upon request, a written statement by the Company that it has
complied with the reporting requirements of Rule 144 (at any time after ninety
(90) days after the effective date of such first registration statement filed by
the Company) and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as may be reasonably requested in availing Holders of
any rule or regulation of the SEC permitting the selling of any such securities
without registration.
13.10 Transfer of Registration Rights. The registration rights of
Holders under this Section 13 may be assigned and transferred to any transferee
purchasing Registrable Shares, other than a public offering pursuant to a
registration statement; provided, however, that the Company is given written
notice by the Holder at the time of such transfer stating the name and address
of the transferee and identifying the Registrable Shares with respect to which
the rights under this Agreement are being assigned. Notwithstanding anything to
the contrary contained in this Warrant Agreement, the registration rights so
assigned and transferred shall apply only upon execution of an agreement by the
transferee binding such transferee to the obligations of the transferor
hereunder. The provisions of this Section 13 shall also be binding upon and
enforceable by the heirs, executors, or other personal representatives of the
Holders and the successors and assigns of the Company.
13.11 Miscellaneous Provisions Relating to Registrable Shares.
Relationships and Rights of the Holders. If more than one, the Holders
agree that, notwithstanding that certain rights of each Holder herein may be
affected by similar rights of other Holders, the Holders shall, in respect of
the ownership of the Registrable Shares, not be related as, or deemed to be, a
partnership, joint venture, or other "group" for the purpose of acquiring,
holding, voting, or disposing of capital stock of the Company.
SECTION 14. Supplements and Amendments.
The Company may from time to time supplement or amend this Warrant
Agreement, without the approval of any Holder in order to cure any ambiguity or
to correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with regard to matters or questions arising hereunder that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
Holders of Warrants. Any other amendments or supplements shall require the
affirmative vote of the Company and Holders of Warrants representing in the
aggregate at least 50% of the total Warrant Shares covered by the Warrants.
SECTION 15. Successors.
All the covenants and provisions of this Warrant Agreement shall be
binding upon and shall inure to the benefit of the Company and its permitted
successors and assigns hereunder and the Holders from time to time of the
Warrants. Except in a transaction of the nature referred to in, and conducted in
compliance with, Section 9.3 hereof, the Company may not assign or delegate any
of its obligations or responsibilities under this Warrant Agreement.
SECTION 16. Applicable Law.
This Warrant Agreement and each Warrant issued hereunder shall be
deemed to be a contract made under the laws of the State of Arizona and for all
purposes shall be construed in accordance with the laws of said state and with
applicable federal law.
SECTION 17. Benefits of this Warrant Agreement.
Nothing in this Warrant Agreement shall be construed to give to any
person or corporation other than the Company and the Holders of the Warrants any
legal or equitable right, remedy or claim under this Warrant Agreement; and this
Warrant Agreement shall be for the sole and exclusive benefit of the Company and
its successors and assigns hereunder, and the Holders from time to time of the
Warrants.
SECTION 18. Counterparts.
This Warrant Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
SECTION 19. Captions.
The captions of the Sections and subsections of this Warrant Agreement
have been inserted for convenience only and shall have no substantive effect in
the interpretation of this Warrant Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed as of the day and year first above written.
COMPANY:
ILX INCORPORATED, an Arizona corporation
By: Joseph P. Martori
----------------------------------
Title: Chairman
----------------------------------
HOLDER:
Lawrence S. Held
--------------------------------------
Lawrence S. Held
Address: 250 Mira Verde Drive
#400 La Habra Heights, CA 90631
EXHIBIT "A"
WARRANT CERTIFICATE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH SUCH ACT AND THE WARRANT AGREEMENT REFERRED TO
HEREIN.
ILX INCORPORATED
Warrants to Purchase
Common Stock,
no par value
of ILX Incorporated
an Arizona corporation
THE WARRANT AGREEMENT (REFERRED TO HEREIN) AND THE
WARRANTS SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ARIZONA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PROVISIONS THEREOF.
No. **50,000** Warrants
------------------
This certifies that Lawrence S. Held or registered assigns is the
registered owner of the above indicated number of Warrants, each Warrant
entitling such owner to purchase initially one share of common stock, no par
value ("Common Stock"), of ILX Incorporated, an Arizona corporation ("Company"),
at the price of one dollar and sixty-two and one-half cents ($1.625) per share
(the "Warrant Price"), subject to the terms and conditions hereof and of the
Warrant Agreement hereinafter referred to. The holder may exercise the Warrants
evidenced hereby by providing certain information set forth on the back hereof
and by paying in full (i) in lawful money of the United States of America in
cash, (ii) by certified check or official bank check, or (iii) by bank wire
transfer of immediately available funds, the Warrant Price for each Warrant
exercised to Company and by surrendering this Warrant Certificate, with the
purchase form on the back hereof duly executed, at the principal office of
Company.
This Warrant Certificate is issued for good and valuable consideration
under and in accordance with the Warrant Agreement dated as of March 31, 1994
(the "Warrant Agreement") between Company and the initial Purchasers of the
Warrants listed on Exhibit A thereto and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
holder of this Warrant Certificate consents by acceptance hereof. Copies of the
Warrant Agreement are on file at the principal office of Company. All
capitalized terms not otherwise defined herein shall have the meanings assigned
such terms in the Warrant Agreement.
1. Exercise
Warrants are exercisable for the purchase of Common Stock, on the terms
and conditions set forth in the Warrant Agreement.
2. Expiration
All Warrants that have not been exercised in accordance with the
provisions of the Warrant Agreement shall expire and all rights of holders of
such Warrants shall terminate and cease as of 5:00 P.M., Phoenix, Arizona time,
on June 30, 1997.
3. Adjustments
The number of shares of Common Stock of Company purchasable upon the
exercise of each Warrant and the exercise price of each Warrant are subject to
adjustment as provided in Section 9 of the Warrant Agreement.
Any number of Warrants evidenced by this Warrant Certificate may be
exercised to purchase shares of Common Stock, provided, however, that any
partial exercise shall be in increments of ten thousand (10,000) Warrant Shares.
Upon the exercise of the Warrants represented hereby, Company shall not issue
fractions of shares of Common Stock or distribute stock certificates that
evidence fractional shares of Common Stock, but shall purchase such fraction of
a share that the holder hereof would have been entitled to purchase on the basis
of the then-current market value of any such fraction of a share. Upon any
exercise of fewer than all of the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder hereof a new Warrant
Certificate evidencing the number of Warrants remaining unexercised.
4. Common Stock
Subject to payment by the Holder of the Warrant Price then in effect,
all shares of Common Stock issuable by Company upon the exercise of Warrants
shall be validly issued, fully paid and nonassessable.
Transfer of this Warrant Certificate may be registered when this
Warrant Certificate is surrendered at the principal office of Company by the
registered owner or his assigns, in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the Warrant
Agreement.
After execution and delivery by Company and prior to the expiration of
this Warrant Certificate, this Warrant Certificate may be exchanged at the
principal office of Company for Warrant Certificates representing the same
aggregate number of Warrants.
This Warrant Certificate shall not entitle the holder hereof to any of
the rights of a holder of Common Stock of Company, including, without
limitation, the right to vote at or receive notice of meetings of the
stockholders of Company or to receive dividends or other distributions upon the
Common Stock, except as specifically set forth in the Warrant Agreement.
THE WARRANTS REPRESENTED HEREIN AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AS SET FORTH AND DISCLOSED IN THE WARRANT AGREEMENT.
Dated , 1994
---------------
ILX INCORPORATED, an Arizona
corporation
By:
------------------------------
Title:
------------------------------
Attest:
By:
------------------
Title:
------------------
REVERSE OF WARRANT CERTIFICATE
Instructions for Exercise of Warrant
To exercise the Warrants evidenced hereby, the holder must pay (i) in
cash, (ii) by certified check or official bank check, or (iii) by bank wire
transfer of immediately available funds, an amount equal to the Warrant Price
(subject to the restrictions described in the Warrant Agreement) for all
Warrants exercised to ILX Incorporated, 2777 East Camelback Road, Phoenix,
Arizona 85016, Attention: President, which payment must specify the name of the
holder and the number of Warrants exercised by such holder. In addition, the
holder must complete the information required below and present this Warrant
Certificate in person or by mail (certified or registered mail, return receipt
requested, is recommended) to Company at the appropriate address set forth
below. This Warrant Certificate, completed and duly executed, must be received
by Company within five business days of the payment.
To Be Executed Upon Exercise of Warrant
The undersigned hereby irrevocably elects to exercise Warrants,
evidenced by this Warrant Certificate, in accordance with the terms hereof.
If the number of Warrants exercised is less than all of the Warrants
evidenced hereby, the undersigned requests that a new Warrant Certificate
representing the remaining Warrants evidenced hereby be issued and delivered to
the undersigned unless otherwise specified in the instructions below.
Dated: Name:
--------------------------- ---------------------------------
-------------------------------- (Please Print)
(Insert Social Security or
Tax Identifying Number of Address:
Holder) ---------------------------------
---------------------------------
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate.)
The Warrants evidenced hereby may be exercised at the following
address:
By hand or mail at: ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Attention: President
Instructions as to form and delivery of Common Stock and, if
applicable, Warrant Certificates evidencing unexercised Warrants:
ASSIGNMENT
(Form of Assignment To Be Executed If Holder Desires To Transfer
Warrants Evidenced Hereby)
FOR VALUE RECEIVED hereby sells, assigns
-------------------------------
and transfers unto
Please insert social security
or tax identification number
-----------------------------------------------
-----------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
(Please print name and address including zip code)
the Warrants represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint the Secretary of ILX Incorporated as
attorney-in-fact, to transfer said Warrant Certificate on the books of Company
with full power of substitution in the premises.
Dated:
---------------------------------- -----------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Warrant
Certificate and must bear a signature
guarantee by a bank, trust company or
member firm of a national securities
exchange.)
Signature Guaranteed
-------------------------------------------
ILX INCORPORATED
An Arizona Corporation
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated March 31, 1994 (the "Warrant Agreement"),
is entered into between ILX INCORPORATED, an Arizona corporation (the
"Company"), and the purchaser(s) listed below on the signature page hereto (the
"Warrantholders").
WITNESSETH
WHEREAS, the Company proposes to issue up to fifty thousand (50,000)
warrants (the "Warrants") to purchase up to an aggregate of fifty thousand
(50,000) shares (the "Warrant Shares") of its common stock, no par value (the
"Common Stock," which term shall, if applicable, include any other capital stock
into which such common stock may be converted or reclassified or that may be
issued in respect of or in exchange or substitution for such common stock by
reason of any stock split, stock dividend, distribution, merger, consolidation
or similar event), each such Warrant initially entitling the registered owner
thereof to purchase one share of Common Stock as hereinafter provided; and
WHEREAS, the Company in this Warrant Agreement wishes to set forth,
among other things, the form and provisions of the Warrants and the terms and
conditions on which they may be issued, exchanged, transferred, exercised and
replaced;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and other good and valuable consideration, the
parties hereto agree as follows:
SECTION 1. Transferability.
1.1 Transferability. The Warrants will be subject to the same
restrictions on transfer and legend requirements as are set forth in Section
13.8 below with respect to Registrable Shares.
SECTION 2. Form of Warrants.
2.1 Form of Warrant Certificates. The text of the certificates
evidencing the Warrants (the "Warrant Certificates") and the form of election to
purchase Warrant Shares shall be substantially as set forth in Exhibit A
attached hereto. The Warrant Certificates shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase one share of
Common Stock at the price specified therein, in each case subject to adjustment
as provided herein and therein. The Warrant Certificates shall be executed on
behalf of the Company by its President or one of its Vice Presidents and
attested by its Secretary or an Assistant Secretary. The signature of any of
such officers on the Warrant Certificates may be manual or facsimile.
Warrant Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any one of them shall have
ceased to hold such offices prior to the delivery of such Warrant Certificates
or did not hold such office on the date of this Warrant Agreement.
2.2 Warrant Register. The Warrant Certificates shall be numbered and
shall be registered in a register (the "Warrant Register" maintained by the
Company as they are issued and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the officers of the Company executing the
same may approve (execution thereof to be conclusive evidence of such approval)
and as are not inconsistent with the provisions of this Warrant Agreement, or as
may be required to comply with any applicable law or with any rule or regulation
made pursuant thereto. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, notwithstanding any
notice to the Company to the contrary.
2.3 Statement on Warrant Certificates. Irrespective of any adjustments
pursuant to the provisions of Section 9 hereof in the Warrant Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrant Certificates
initially issuable pursuant to this Warrant Agreement. Notwithstanding the
foregoing, the Warrant Price and the number or kind of shares or other property
receivable upon exercise of the Warrants shall be governed by this Warrant
Agreement including, without limitation, Section 9 hereof and not by the
statements contained on the face of the Warrant Certificates.
SECTION 3. Transfer or Exchange of Warrants.
3.1 Transfer. Upon surrender at the principal office of the Company,
Warrant Certificates evidencing Warrants may be exchanged for Warrant
Certificates in other denominations evidencing such Warrants or, subject to
Section 1, the transfer thereof may be registered in whole or in part; provided
that such other Warrant Certificates evidence the same aggregate number of
Warrants as the Warrant Certificates so surrendered (less the aggregate number
of Warrants, if any, that are surrendered in connection with their exercise).
The Company shall keep the Warrant Register in which, subject to such reasonable
regulations as it may prescribe, it shall register Warrant Certificates and
exchanges and transfers of outstanding Warrant Certificates, upon surrender of
the Warrant Certificates to the Company at its principal office for exchange or
registration of transfer, properly endorsed or accompanied by appropriate
instruments of registration of transfer and written instructions for transfer,
all in form satisfactory to the Company. A reasonable service charge established
by the Company may be required to be paid by a Warrantholder for any exchange or
registration of transfer of Warrant Certificates, and the Company may require
payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that may be imposed in connection with any such exchange or
registration of transfer. Whenever any Warrant Certificates are so surrendered
for exchange or registration of transfer, the authorized officers of the Company
shall execute and deliver to the person or persons entitled thereto a Warrant
Certificate or Warrant Certificates duly authorized and executed by the Company,
as so requested. All Warrant Certificates issued upon any exchange or
registration of transfer of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Warrant Agreement as the Warrant Certificates in respect of
which they are issued.
The Warrants shall be transferable only on the books of the Company
maintained at the office of the Company in Phoenix, Arizona upon delivery
thereof duly endorsed by the Holder or by his duly authorized attorney or legal
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by personal
representatives, executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced and may be required to be deposited and remain with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant Certificate to the person entitled thereto.
3.2 Treatment of Holders of Warrant Certificates. Every Holder of a
Warrant Certificate, by accepting the same, consents and agrees with the Company
and with every subsequent Holder of such Warrant Certificate that until the
transfer of the Warrant Certificate is registered on the Warrant Register,
before such Warrant Certificate is surrendered for transfer pursuant to Section
3.1 hereof, the Company may treat the Holder of a Warrant Certificate as the
absolute owner thereof for any purpose and as the person entitled to exercise
the rights represented by the Warrants evidenced thereby, any notice to the
contrary notwithstanding.
3.3 Cancellation of Warrant Certificates. Any Warrant Certificate
surrendered for exchange or transfer or exercise of the Warrants evidenced
thereby shall be surrendered to the Company and all Warrant Certificates
surrendered and so delivered to the Company shall be promptly canceled by the
Company and shall not be reissued and, except as expressly permitted by this
Warrant Agreement, no Warrant Certificates shall be issued hereunder in exchange
therefor or in lieu thereof.
SECTION 4. Mutilated or Missing Warrants.
In case any Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Company may, in its discretion, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only, in case of any such loss, theft or
destruction, upon receipt of evidence satisfactory to the Company thereof and
indemnity, if requested, also satisfactory to it. An applicant for such
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 5. Terms of Warrants; Exercise of Warrants.
5.1 Terms and Exercise. Subject to the terms of this Warrant Agreement,
each Holder shall have the right until 5:00 p.m., Phoenix, Arizona time, on June
30, 1997 (such date being herein referred to as the "Expiration Date"), to
purchase from the Company the number of fully paid and nonassessable Warrant
Shares to which the Holder may at the time be entitled to purchase pursuant to
such Warrants, upon surrender to the Company, at the principal office of the
Company in Phoenix, Arizona, of the Warrant Certificates to be exercised,
together with the form of election to purchase on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Warrant Price (as
defined in and determined in accordance with the provisions of Sections 8 and 9
hereof) for the number of Warrant Shares in respect of which such Warrants are
then being exercised. Payment of the aggregate Warrant Price shall be made (i)
in cash, (ii) by certified or official bank check, or (iii) by bank wire
transfer of immediately available funds to the Company.
Subject to Section 6 hereof, upon such surrender of Warrants and
payment of the Warrant Price as aforesaid, the Company shall issue and cause to
be delivered, with all reasonable dispatch, to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants, together with cash or a check, as provided in Section
10 hereof, in respect of any fractional Warrant Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrants and payment of the Warrant Price, as aforesaid; provided,
however, that if, at the date of surrender of such Warrants and payment of such
Warrant Price, the transfer books for the Warrant Shares shall be closed, the
certificates for the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened (whether before or after the Expiration Date) and until such date the
Company shall be under no duty to deliver any certificates of such Warrant
Shares; provided further, however, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than 10 days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part (provided, however, that any partial exercise shall be in
increments of ten thousand (10,000) Warrant Shares) and, in the event that less
than all the Warrants represented by a Warrant Certificate are exercised, such
Warrant Certificate shall be exercised and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not surrendered shall be
executed by the Company shall be registered in such name or names as may be
directed in writing by the Holder, and shall be delivered to the person entitled
to receive the same.
5.2 Expiration. All Warrants that have not been exercised in accordance
with the provisions of this Warrant Agreement shall expire and all rights of
Holders of such Warrants shall terminate and cease as of 5:00 P.M., Phoenix,
Arizona time, on June 30, 1997, whether or not such Warrants have become
exercisable before that date.
SECTION 6. Payment of Taxes.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Warrant Shares issuable upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay, and
the Holder shall pay, any tax or taxes that may be payable in respect of any
transfer involved in the issue or delivery of any Warrant Certificates or
certificates for Warrant Shares in a name other than that of the registered
Holder of the Warrants that were surrendered.
SECTION 7. Reservation of Warrant Shares; Purchase and Cancellation of
Warrants; Acceleration of Effective Date.
7.1 Reservation of Warrant Shares. The Company covenants that there
have been reserved, and the Company shall at all times keep reserved out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the right of purchase represented by the outstanding
Warrants.
7.2 Purchase of Warrants by the Company. The Company shall have the
right, except as limited by law, other agreement or herein, to offer to purchase
or otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate. In the event the Company shall
purchase or otherwise acquire Warrants, the related Warrant Certificates shall
thereupon be canceled and retired.
SECTION 8. Warrant Price.
The price per share at which Warrant Shares shall be purchasable upon
exercise of each Warrant (the "Warrant Price") shall be one dollar and sixty-two
and one-half cents ($1.625), subject to adjustment pursuant to Section 9 hereof.
SECTION 9. Adjustment of Warrant Price and Number of Warrant Shares.
9.1 Adjustments. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price shall be subject to adjustment as
follows:
(a) Stock dividends, splits, etc. In case the Company shall at any time
after the date of this Warrant Agreement (i) pay a dividend in shares of Common
Stock or make a distribution to all holders of shares of Common Stock in shares
of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares of Common Stock, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or (iv) issue
by reclassification of its shares of Common Stock other securities of the
Company, then the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive upon exercise of such Warrant the kind and
number of Warrant Shares or other securities of the Company that he would have
owned or would have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event. Notwithstanding the foregoing provisions of this paragraph (a), the
Company may elect, in lieu of the adjustment in the number of Warrant Shares
pursuant to this paragraph (a), to adjust the number of Warrants pursuant to
paragraph (e) of this subsection 9.1.
(b) Minimum Adjustment. No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the number of Warrant
Shares purchasable upon the exercise of each Warrant; provided, however, that
any adjustments which by reason of this paragraph (b) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
(c) Warrant Price Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as herein provided,
the Warrant Price per Warrant Share payable upon exercise of each Warrant shall
be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares so purchasable immediately thereafter; provided,
however, that if the Company elects to adjust the number of Warrants pursuant to
paragraph (e) of this subsection 9.1, the formula to adjust the Warrant Price
set forth in this paragraph (c) shall nevertheless be employed using the
adjustment to the number of Warrant Shares that would have been made had the
Company elected to adjust such number pursuant to paragraph (a) of this Section
9.1.
(d) Notice of Adjustment. Whenever the number of Warrants or the number
of Warrant Shares purchasable upon the exercise of Warrants or the Warrant Price
of such Warrant Shares is adjusted, as herein provided, the Company shall mail
by first class mail, postage prepaid, to each Holder of a Warrant or Warrants
notice of such adjustment or adjustments and shall prepare a certificate setting
forth (i) the number of Warrants or Warrant Shares purchasable upon the exercise
of each Warrant and the Warrant Price of such Warrant Shares after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, and
(iii) the computation by which such adjustment was made. The Company will
exhibit the certificate, from time to time, to any Holder desiring an inspection
thereof.
(e) Increase in Number of Warrants. In lieu of any adjustment in the
number of Warrant Shares purchasable upon the exercise of each Warrant as
provided in this Warrant Agreement, the Company may elect to adjust the number
of Warrants so that each Warrant outstanding (after such adjustment in the
number of Warrants) shall be exercisable for one Warrant Share. Each Warrant
held of record immediately prior to such adjustment of the number of Warrants
shall become that number of Warrants determined (to the nearest hundredth) by
multiplying the number of Warrant Shares purchasable upon exercise of a Warrant
immediately prior to such adjustment by a fraction, the numerator of which shall
be the Warrant Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Price in effect immediately after such
adjustment. Upon each adjustment of the number of Warrants pursuant to this
paragraph (e) the Company may but shall not be required to cause to be
distributed to Holders of Warrant Certificates on such record date Warrant
Certificates evidencing, subject to Section 10, the additional Warrants to which
such Holders shall be entitled as a result of such adjustment or, at the option
of the Company, shall cause to be distributed to such Holders of record in
substitution and replacement for the Warrant Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof if required by the
Company, new Warrant Certificates evidencing all the Warrants to which such
Holders shall be entitled after such adjustment. Warrant Certificates to be so
distributed may, at the option of the Company, bear the adjusted Warrant Price
and shall be registered in the names of the Holders of record of Warrant
Certificates on the record date specified in the public announcement. If new
Warrant Certificates are not delivered upon an adjustment, the old Warrant
Certificates shall, notwithstanding the provisions set forth on their face, have
the benefit of such adjustment.
9.2 No Adjustment for Dividends. Except as provided in subsection 9.1,
no adjustment in respect of any dividends shall be made during the term of a
Warrant or upon the exercise of a Warrant.
9.3 Preservation of Purchase Rights Upon Reclassification,
Consolidation, Etc. The Company shall not enter into any consolidation of the
Company with or merger of the Company into another corporation or any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, unless the successor (if other than the
Company) or such purchasing corporation, as the case may be, shall, by
supplemental agreement executed and delivered to each Holder of a Warrant, agree
and provide (i) that each Holder of a Warrant shall have the right thereafter
upon payment of the Warrant Price in effect immediately prior to such action
(or, if a record date is set with respect to such action, such record date) to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities and property that he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had such Warrant been exercised immediately prior to such action (or if
applicable, such record date) and (ii) that such survivor (if other than the
Company) or such purchasing corporation expressly assumes the due and punctual
performance of each and every covenant and condition of this Warrant Agreement
to be performed or observed by the Company. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The provisions of this subsection
9.3 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
SECTION 10. Fractional Interests.
10.1 Fractional Warrant Shares. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares that shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares represented by the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash or by check equal to the Current Market Price per share of
Common Stock (as defined in subsection 10.2 below) multiplied by such fraction.
10.2 Computation of Market Price. For the purpose of any computation
under Section 9.1 or this Section 10, the "Current Market Price" per share of
Common Stock at any date shall be deemed to be the average of the daily closing
price per share for the 30 consecutive NASDAQ National Market System trading
days commencing 45 NASDAQ National Market System trading days before such record
date. The closing price for each day shall be the last sale price regular way
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices regular way, or, if the Common Stock is not listed or admitted
to trading on the NASDAQ National Market System, the average of the highest
reported bid and lowest reported asked prices as furnished by the National
Association of Securities Dealers, Inc. (the "NASD") through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information. If on any such
trading day the Common Stock is not quoted by any such organization, the fair
value of such Common Stock on such day, as determined by the Board of Directors
of the Company, shall be used.
SECTION 11. No Rights as Stockholders; Notices and Reports to Warrant
Holders.
Nothing contained in this Warrant Agreement or in any of the Warrants
shall be construed as conferring upon the Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration of
the Warrants and prior to their exercise, any of the following events shall
occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into
shares of Common Stock or any right to subscribe thereto; or
(c) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger, or sale of all or substantially all
of its property, assets, and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Holders as provided in Section 12 hereof. Such notice shall
be given at least 10 business days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to such dividend or offer, or for the determination of stockholders
entitled to vote on such proposed dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such dividend, offer, or proposed dissolution, liquidation or winding up.
SECTION 12. Notices.
Unless otherwise provided in this Warrant Agreement, any notice
pursuant to this Warrant Agreement by the Company to the Holders or by any
Holder of any Warrant to the Company shall be in writing and shall be delivered
either personally or by telegram, telex, telefax or similar facsimile memo or by
or by registered or certified mail as follows: (a) if to the Company, to 2777
East Camelback Road, Phoenix, Arizona 85016, attention of President; and (b) if
to a Holder, to the address for such Holder specified in the Warrant Register.
Each party hereto may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in writing to the other
party.
Notices shall be deemed given when received if sent by telegram, telex,
telecopy or similar facsimile means (confirmation of such receipt by confirmed
facsimile transmission being deemed receipt of communications sent by telex,
telecopy or the facsimile means) and four days following deposit in the U.S.
mail if by registered or certified mail.
SECTION 13. Registration Rights.
13.1 Definitions. For purposes of this section 13 the following terms
have the meanings indicated:
"Common Stock" shall mean the common stock, no par value per share, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holder" means any Warrantholder holding Registrable Shares or Common
Stock, including permitted transferees of such Holder who satisfy the
requirements of Section 13.12 of this Warrant Agreement.
"Participation Notice" means a written or oral notice by a Holder of
his desire to sell Registrable Shares in a registration by the Company.
"Person" means any individual, firm, corporation, trust, association,
partnership, joint venture or other entity.
"Registrable Shares" means all shares of Common Stock of the Company
owned by a Holder and permitted transferees of a Holder which are acquired by
exercise of the Warrants.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of effectiveness of such
registration statement.
"Registration Notice" means a written notice by the Company to the
Holders of its intent to file a registration statement with the SEC, which
notice shall state that it is being delivered pursuant to the registration
rights provisions of this Warrant Agreement.
"Rights" means rights, remedies, powers, benefits, and privileges.
"SEC" means the federal Securities and Exchange Commission or any
successor thereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Warrants" means the warrants of the Company issued to the Holders
pursuant to the terms of this Warrant Agreement.
13.2 Registration Rights. (a) If, at any time, the Company proposes to
file a registration statement in connection with the public offering of shares
of Common Stock to be sold by the Company for its own account or for the account
of any shareholder under the Securities Act, prior to such filing, the Company
shall give each Holder a Registration Notice. Within ten business days after
receipt by any Holder of a Registration Notice, such Holder shall, if it desires
to include any of its Registrable Shares in such registration, deliver to the
Company a Participation Notice. The Participation Notice shall state the number
of Registrable Shares held by such Holder to be disposed of in such
registration; provided, however, such Holder's right to registration of such
Registrable Shares shall be subject to any limitations in the number thereof
required by the underwriters pursuant to Section 13.5 and to the restrictions
set forth in Section 13.12(b); provided, that (i) the Company shall not be
required to give notice or include such Registrable Shares in any such
registration if the proposed registration is (x) a registration of a stock
option or other employee incentive compensation plan or of securities issued or
issuable pursuant to any such plan, (y) securities issued or issuable pursuant
to a dividend or interest reinvestment plan, or other similar plan, or (z) a
registration of securities proposed to be issued in exchange for securities of
assets of, or in connection with a merger or consolidation with, another
corporation; (ii) the Company shall not be required to include the Registrable
Shares of a Holder in any such registration if the Holder fails to timely
provide the Company with all information which is in the possession of and
relates to such Holder and which is necessary in connection with such
registration and take all such action as may be reasonably required in order not
to delay the registration and offering of the securities by the Company; and
(iii) the Company may, in its sole discretion and without the consent of the
Holder, withdraw such registration statement and abandon any such proposed
offering, notwithstanding any Holder's request to participate therein in
accordance with this provision. The Company shall be obligated to effect three
"piggyback" registrations pursuant to this Section 2(a) with respect to all
Holders on the terms set forth herein.
(b) The Company shall use its best efforts to promptly cause all such
Registrable Shares to be registered along with the other shares of Common Stock
to be registered.
(c) If requested by a Holder, the Registrable Shares proposed to be
registered under any registration statement under Section 13.2(a) hereof will be
offered for sale upon the same terms as the shares of Common Stock, if any,
offered for sale by the Company.
13.3 Obligations of the Company. Whenever required under Section 13.2
to use its best efforts to effect the registration of any Registrable Shares,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Shares and use its best reasonable efforts to cause such
registration statement to become and remain effective; provided, however, that
the Company shall have no obligation to maintain the effectiveness of any
registration statement filed hereunder or to cause the information therein to
remain current for more than 90 days following such registration statement's
effective date in the case of a best efforts underwritten public offering or for
longer than such period as is customary and is required by the underwriter in
the case of a firmly underwritten public offering.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective in order to dispose of the shares registered thereunder in the manner
described in the underwriting agreement executed in connection therewith and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement; provided, however,
that the Company shall have no obligation to maintain the effectiveness of any
registration statement filed hereunder or to cause the information therein to
remain current for more than 90 days following such registration statement's
effective date in the case of a best efforts underwritten public offering or for
longer than such period as is customary and is required by the underwriter in
the case of a firmly underwritten public offering.
(c) Furnish to the Holders registering securities in such registration
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Shares owned by the Holders.
(d) Use its best reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such Jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdictions.
13.4 Expenses of Registration. All expenses incurred in connection with
a registration pursuant to Section 13.2 (excluding underwriters' discounts and
commissions applicable to Registrable Shares), including without limitation all
registration and qualification fees, printing and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
Each Holder of Registrable Shares shall pay the underwriters' discounts
and commissions applicable to the Registrable Shares sold by such Holder. In
addition, each selling Holder shall pay its own legal fees and expenses of
separate counsel, and costs for experts or professionals employed by it or on
its behalf in connection with the registration of Registrable Shares. No Holder
shall have the right to cause the Company to employ any expert or professional
to act on behalf of the Company.
13.5 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required to include any of the Holders' Registrable Shares in such
underwriting unless the Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company.
Additionally, the Company shall be required to include in such
piggyback registration under section 13.2(a) only such quantity of the
Registrable Shares as will not, in the written opinion of the underwriters,
interfere with the orderly sale, price and/or distribution of the securities
being offered by the Company. If, however, the underwriters have consented to
inclusion in any such offering of securities of any person other than the
Company, then the Holders shall be entitled to include such number of their
Registrable Shares in such underwriting pro rata to the total number of shares
of Common Stock owned by all of such persons (including all shares of Common
Stock issuable upon exchange of the Warrants) who are entitled to sell
securities in such offering (such apportionment shall not include securities
offered by the Company for its own account).
13.6 Indemnification. (a) In the event of registration of any of the
Registrable Shares under the Securities Act, the Company will indemnify and hold
harmless the seller of such Registrable Shares, each underwriter of such
Registrable Shares, and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to such registration statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for all legal or any other expenses reasonably incurred by them in connection
with the investigation or defense of any said loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, or liability arises out of or
is based upon any untrue statement or omission made in such registration
statement, preliminary prospectus or final prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by or on behalf of
such seller or underwriter specifically for use in the preparation thereof. The
foregoing indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of an indemnified person and shall survive
the transfer of the Registrable Share by the holder thereof.
(b) In the event of any registration of any of the Registrable Shares
under the Securities Act, each seller of the Registrable Shares, severally and
not jointly, will indemnify and hold harmless the Company, each of its directors
and officers and each underwriter (if any), and each person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, against losses, claims, damages or
liabilities, joint or several, to which the Company, such directors and
officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement to the registration statement, or arise out of or are based upon any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if the
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by or
on behalf of such seller specifically for use in the preparation thereof.
(c) Each party entitled to indemnification under this Section 13.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom (except to the extent that the Indemnified Party
has been advised by its counsel that the interests of the Indemnifying Party may
conflict with those of the Indemnified Party), provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 13.6. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or litigation, the Indemnifying Party will not be liable
to such Indemnified Party for any legal or other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation, unless the Indemnifying Party abandons the
defense of such claim or litigation. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
13.7 Lockup Agreement. In connection with any such registration, upon
the request of the Company or the underwriters managing any underwritten
offering of Common Stock of the Company, each Holder agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Shares without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed 180 days) from the effective date of such registration as the Company
or the underwriters may specify.
13.8 Representations, Agreements, Warranties and Restrictions on
Transfer. In connection with the acquisition by Holder of the Warrants for the
purchase of Registerable Shares (the foregoing are collectively referred to as
the "Securities" in the remainder of this paragraph), the undersigned Holder
(severally if more than one) represents, agrees and warrants to the Company
that:
(a) Such Warrants are being, and if exercised, the underlying
Registerable Shares will be, acquired by Holder for its own account and not with
a view to, or for assignment or resale in connection with, any distribution of
such Securities or any part thereof. No other person or entity has a direct or
indirect beneficial interest in such Securities and the Holder was not formed
for the specific purpose of acquiring the Securities. Holder understands that
neither the Warrants being issued, nor the underlying Registerable Shares, have
been reviewed or approved by any governmental securities agency nor has either
been registered under the Securities Act, or applicable state statutes, by
reason of specific exemptions claimed under the provisions of such act and such
statutes which depend in part upon the representations herein.
(b) Holder is a sophisticated investor and, either alone or together
with any advisors, understand the merits, nature and degree of financial risk of
the investment being made herein and is able to bear the financial risks
thereof. Holder, and its advisors if applicable, has been accorded access
(including discussions with the Company and the opportunity to ask questions of
the Company and its representatives and receive answers thereto) to information
regarding the Company's present and proposed business operations and financial
condition and has been furnished with all information regarding the Company
which Holder has requested and deemed necessary; Holder has examined the same or
caused the same to be examined by its representatives; and no further
information or data concerning the Company is desired.
(c) Holder (i) has adequate means of providing for its current needs
and contingencies, (ii) has no need for liquidity in this investment, (iii) has
not made overall commitments to investments which are not readily marketable
which are disproportionate to its net worth and this investment will not cause
such overall commitment to become disproportionate, (iv) is able to bear the
economic risks of an investment in the Securities for an indefinite period, (v)
at the present time, could afford a complete loss of such investment, (vi) would
qualify as an "accredited investor" under Regulation D promulgated pursuant to
the Securities Act, and (vii) a principal part of Holder's business consists of
buying securities.
(d) Holder also understands the corporation plans to pay no dividends
on its Common Stock for the foreseeable future.
(e) Holder understands that the securities referred to herein have not
been registered under the Act, or any applicable state securities laws, in
reliance upon exemptions therefrom (including without limitation exemptions for
"private" or non-public offerings). Holder understands and agrees that such
Securities, including the underlying Registerable Shares after any exercise of
the Warrants, must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or an exemption from
such registration is available.
(f) Holder agrees that the Company may permit the transfer of the
Warrants (or any part thereof), or the underlying Registerable Shares (or any
party thereof) upon any exercise referred to herein, out of Holder's name only
if its request for transfer is accompanied by evidence satisfactory to the
Company (including without limitation an opinion of counsel satisfactory to the
Company) that the proposed transfer will not result in a violation of any
applicable law, rule or regulation, federal or state, and Holder agrees that it
will not sell, transfer or otherwise dispose of the Warrants or the underlying
Registerable Securities, or any part of either without registration under the
Act and applicable state statutes or exemption therefrom. For itself, its
successors and assigns, Holder consents to the taking of any action or the
imposition of any requirements reasonably intended by the Company or its
attorneys to prevent the disposition of any interest in such Securities which
would appear to the Company or them to be inconsistent with any of Holder's
foregoing statements, to include without limitation an appropriate restrictive
legend imprinted upon any certificate or document representing such Securities
and "stop transfer" notations on the Company's records.
(g) Holder is duly authorized and empowered and otherwise duly
qualified to subscribe for, purchase and hold the Securities and any person
signing on its behalf is duly authorized and empowered to sign for and bind the
undersigned; and such entity has its principal place of business as set forth on
the signature page hereof.
13.9 Reports Under the Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of a company to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times subsequent to ninety (90) days
after the effective date of the first registration statement covering an
underwritten public offering filed by the Company;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to the Holders, so long as the Holders own any Registrable
Shares, forthwith upon request, a written statement by the Company that it has
complied with the reporting requirements of Rule 144 (at any time after ninety
(90) days after the effective date of such first registration statement filed by
the Company) and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as may be reasonably requested in availing Holders of
any rule or regulation of the SEC permitting the selling of any such securities
without registration.
13.10 Transfer of Registration Rights. The registration rights of
Holders under this Section 13 may be assigned and transferred to any transferee
purchasing Registrable Shares, other than a public offering pursuant to a
registration statement; provided, however, that the Company is given written
notice by the Holder at the time of such transfer stating the name and address
of the transferee and identifying the Registrable Shares with respect to which
the rights under this Agreement are being assigned. Notwithstanding anything to
the contrary contained in this Warrant Agreement, the registration rights so
assigned and transferred shall apply only upon execution of an agreement by the
transferee binding such transferee to the obligations of the transferor
hereunder. The provisions of this Section 13 shall also be binding upon and
enforceable by the heirs, executors, or other personal representatives of the
Holders and the successors and assigns of the Company.
13.11 Miscellaneous Provisions Relating to Registrable Shares.
Relationships and Rights of the Holders. If more than one, the Holders
agree that, notwithstanding that certain rights of each Holder herein may be
affected by similar rights of other Holders, the Holders shall, in respect of
the ownership of the Registrable Shares, not be related as, or deemed to be, a
partnership, joint venture, or other "group" for the purpose of acquiring,
holding, voting, or disposing of capital stock of the Company.
SECTION 14. Supplements and Amendments.
The Company may from time to time supplement or amend this Warrant
Agreement, without the approval of any Holder in order to cure any ambiguity or
to correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with regard to matters or questions arising hereunder that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
Holders of Warrants. Any other amendments or supplements shall require the
affirmative vote of the Company and Holders of Warrants representing in the
aggregate at least 50% of the total Warrant Shares covered by the Warrants.
SECTION 15. Successors.
All the covenants and provisions of this Warrant Agreement shall be
binding upon and shall inure to the benefit of the Company and its permitted
successors and assigns hereunder and the Holders from time to time of the
Warrants. Except in a transaction of the nature referred to in, and conducted in
compliance with, Section 9.3 hereof, the Company may not assign or delegate any
of its obligations or responsibilities under this Warrant Agreement.
SECTION 16. Applicable Law.
This Warrant Agreement and each Warrant issued hereunder shall be
deemed to be a contract made under the laws of the State of Arizona and for all
purposes shall be construed in accordance with the laws of said state and with
applicable federal law.
SECTION 17. Benefits of this Warrant Agreement.
Nothing in this Warrant Agreement shall be construed to give to any
person or corporation other than the Company and the Holders of the Warrants any
legal or equitable right, remedy or claim under this Warrant Agreement; and this
Warrant Agreement shall be for the sole and exclusive benefit of the Company and
its successors and assigns hereunder, and the Holders from time to time of the
Warrants.
SECTION 18. Counterparts.
This Warrant Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
SECTION 19. Captions.
The captions of the Sections and subsections of this Warrant Agreement
have been inserted for convenience only and shall have no substantive effect in
the interpretation of this Warrant Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed as of the day and year first above written.
COMPANY:
ILX INCORPORATED, an Arizona
corporation
By: Joseph P. Martori
--------------------------------
Title: Chairman
--------------------------------
HOLDER:
Jerome M. White
------------------------------
Jerome M. White
Address: 10801 National Boulevard
#300 Suite 600
Los Angeles, CA 90064
EXHIBIT "A"
WARRANT CERTIFICATE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS SUCH OFFER,
SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH SUCH ACT AND THE WARRANT AGREEMENT REFERRED TO
HEREIN.
ILX INCORPORATED
Warrants to Purchase
Common Stock,
no par value
of ILX Incorporated
an Arizona corporation
THE WARRANT AGREEMENT (REFERRED TO HEREIN) AND THE
WARRANTS SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ARIZONA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PROVISIONS THEREOF.
No. **50,000** Warrants
-------------------
This certifies that Jerome M. White or registered assigns is the
registered owner of the above indicated number of Warrants, each Warrant
entitling such owner to purchase initially one share of common stock, no par
value ("Common Stock"), of ILX Incorporated, an Arizona corporation ("Company"),
at the price of one dollar and sixty-two and one-half cents ($1.625) per share
(the "Warrant Price"), subject to the terms and conditions hereof and of the
Warrant Agreement hereinafter referred to. The holder may exercise the Warrants
evidenced hereby by providing certain information set forth on the back hereof
and by paying in full (i) in lawful money of the United States of America in
cash, (ii) by certified check or official bank check, or (iii) by bank wire
transfer of immediately available funds, the Warrant Price for each Warrant
exercised to Company and by surrendering this Warrant Certificate, with the
purchase form on the back hereof duly executed, at the principal office of
Company.
This Warrant Certificate is issued for good and valuable consideration
under and in accordance with the Warrant Agreement dated as of March 31, 1994
(the "Warrant Agreement") between Company and the initial Purchasers of the
Warrants listed on Exhibit A thereto and is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
holder of this Warrant Certificate consents by acceptance hereof. Copies of the
Warrant Agreement are on file at the principal office of Company. All
capitalized terms not otherwise defined herein shall have the meanings assigned
such terms in the Warrant Agreement.
1. Exercise
Warrants are exercisable for the purchase of Common Stock, on the terms
and conditions set forth in the Warrant Agreement.
2. Expiration
All Warrants that have not been exercised in accordance with the
provisions of the Warrant Agreement shall expire and all rights of holders of
such Warrants shall terminate and cease as of 5:00 P.M., Phoenix, Arizona time,
on June 30, 1997.
3. Adjustments
The number of shares of Common Stock of Company purchasable upon the
exercise of each Warrant and the exercise price of each Warrant are subject to
adjustment as provided in Section 9 of the Warrant Agreement.
Any number of Warrants evidenced by this Warrant Certificate may be
exercised to purchase shares of Common Stock, provided, however, that any
partial exercise shall be in increments of ten thousand (10,000) Warrant Shares.
Upon the exercise of the Warrants represented hereby, Company shall not issue
fractions of shares of Common Stock or distribute stock certificates that
evidence fractional shares of Common Stock, but shall purchase such fraction of
a share that the holder hereof would have been entitled to purchase on the basis
of the then-current market value of any such fraction of a share. Upon any
exercise of fewer than all of the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder hereof a new Warrant
Certificate evidencing the number of Warrants remaining unexercised.
4. Common Stock
Subject to payment by the Holder of the Warrant Price then in effect,
all shares of Common Stock issuable by Company upon the exercise of Warrants
shall be validly issued, fully paid and nonassessable.
Transfer of this Warrant Certificate may be registered when this
Warrant Certificate is surrendered at the principal office of Company by the
registered owner or his assigns, in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the Warrant
Agreement.
After execution and delivery by Company and prior to the expiration of
this Warrant Certificate, this Warrant Certificate may be exchanged at the
principal office of Company for Warrant Certificates representing the same
aggregate number of Warrants.
This Warrant Certificate shall not entitle the holder hereof to any of
the rights of a holder of Common Stock of Company, including, without
limitation, the right to vote at or receive notice of meetings of the
stockholders of Company or to receive dividends or other distributions upon the
Common Stock, except as specifically set forth in the Warrant Agreement.
THE WARRANTS REPRESENTED HEREIN AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AS SET FORTH AND DISCLOSED IN THE WARRANT AGREEMENT.
Dated , 1994
-----------------
ILX INCORPORATED, an Arizona
corporation
By:
------------------------------
Title:
------------------------------
Attest:
By:
--------------------------
Title:
--------------------------
REVERSE OF WARRANT CERTIFICATE
Instructions for Exercise of Warrant
To exercise the Warrants evidenced hereby, the holder must pay (i) in
cash, (ii) by certified check or official bank check, or (iii) by bank wire
transfer of immediately available funds, an amount equal to the Warrant Price
(subject to the restrictions described in the Warrant Agreement) for all
Warrants exercised to ILX Incorporated, 2777 East Camelback Road, Phoenix,
Arizona 85016, Attention: President, which payment must specify the name of the
holder and the number of Warrants exercised by such holder. In addition, the
holder must complete the information required below and present this Warrant
Certificate in person or by mail (certified or registered mail, return receipt
requested, is recommended) to Company at the appropriate address set forth
below. This Warrant Certificate, completed and duly executed, must be received
by Company within five business days of the payment.
To Be Executed Upon Exercise of Warrant
The undersigned hereby irrevocably elects to exercise Warrants,
evidenced by this Warrant Certificate, in accordance with the terms hereof.
If the number of Warrants exercised is less than all of the Warrants
evidenced hereby, the undersigned requests that a new Warrant Certificate
representing the remaining Warrants evidenced hereby be issued and delivered to
the undersigned unless otherwise specified in the instructions below.
Dated: Name:
--------------------------- ------------------------------
-------------------------------- (Please Print)
(Insert Social Security or
Tax Identifying Number of Address:
Holder) ------------------------------
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate.)
The Warrants evidenced hereby may be exercised at the following
address:
By hand or mail at: ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Attention: President
Instructions as to form and delivery of Common Stock and, if
applicable, Warrant Certificates evidencing unexercised Warrants:
ASSIGNMENT
(Form of Assignment To Be Executed If Holder Desires To Transfer
Warrants Evidenced Hereby)
FOR VALUE RECEIVED hereby sells, assigns
------------------------------
and transfers unto
Please insert social security
or tax identification number
---------------------------------
---------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
(Please print name and address including zip code)
the Warrants represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint the Secretary of ILX Incorporated as
attorney-in-fact, to transfer said Warrant Certificate on the books of Company
with full power of substitution in the premises.
Dated:
----------------------------- ---------------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Warrant
Certificate and must bear a signature
guarantee by a bank, trust company or
member firm of a national securities
exchange.)
Signature Guaranteed
----------------------------------
SECOND MODIFICATION AGREEMENT
This Second Modification Agreement (the "Agreement") is made and
entered into as of December 20, 1994, by and between ILX INCORPORATED, an
Arizona corporation formerly known as INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED ("ILX"), LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona
limited partnership ("LAP"), and ILE SEDONA INCORPORATED, an Arizona corporation
("ILES") which is a wholly-owned subsidiary of ILX, (ILX, LAP and ILES being
collectively referred to herein as "Borrower"), and THE STEELE FOUNDATION, INC.,
an Arizona nonprofit corporation ("Lender").
R E C I T A L S:
A. Lender is the owner of that certain Promissory Note dated May 28,
1993, made by ILX in the original principal amount of $500,000.00 (the "Note").
The Note evidences a loan made by Lender's predecessor pursuant to a
Construction/Permanent Loan Agreement dated May 28, 1993 (the
"Construction/Permanent Loan Agreement"), and is secured by: (a) a Deed of
Trust, Security Agreement and Financing Statement dated May 28, 1993, made by
ILX to the Public Trustee of Larimer County, Colorado, for the benefit of
Lender's predecessor (the "Deed of Trust"), and recorded June 1, 1993 at
Reception No. 93035413, Records of Larimer County Clerk and Recorder (relating
to the Golden Eagle Resort real property); (b) a Collateral Assignment dated May
28, 1993 made by ILX (the "Collateral Assignment") (relating to certain contract
and other rights associated with the Golden Eagle Resort); (c) a Continuing
Guaranty Agreement dated May 28, 1993, made by ILES (the "Guaranty"); (d) a
Collateral Assignment of Partnership Interest dated May 28, 1993 made by ILES
(the "Partnership Assignment"); and (e) a Collateral Assignment dated May 28,
1993 made by Golden Eagle Resort, Inc. (the "Golden Assignment") (relating to
the Golden Eagle Resort management agreement).
B. The Construction/Permanent Loan Agreement was amended and replaced
by that certain Loan Agreement dated July 21, 1993 made by ILX, LAP and Lender
(the "Loan Agreement"), pursuant to which, among other things, additional
security was provided for the Note consisting of Los Abrigados Resort timeshare
receivables notes (and deeds of trusts securing them). This additional security
is represented by: (a) a Financing Agreement dated July 21, 1993, made by ILX,
LAP and Lender (the "Financing Agreement"); (b) an Assignment of Deeds of Trust
dated July 21, 1993 made by LAP and Lender (the "Assignment of Deeds of Trust");
(c) an Assignment of Contract Rights and Accounts Collateral dated July 21, 1993
made by LAP and Lender (the "Assignment of Contract Rights"); and (d) a Blanket
Assignment dated July 21, 1993 made by LAP (the "Blanket Assignment").
C. The Note, the Collateral Assignment, the Partnership Assignment, the
Golden Assignment and the Guaranty were all simultaneously modified by that
certain Promissory Note/Collateral Assignment Modification Agreement between ILX
and Lender made as of July 21, 1993 (the "Modification").
D. The Deed of Trust was also simultaneously modified by that certain
Amendment to Deed of Trust, Security Agreement and Financing Statement dated
July 21, 1993, by ILX and Lender and recorded July 27, 1993 at Reception No.
93051737, Records of Larimer County Clerk and Recorder (the "Amendment").
E. The Loan Agreement, the Note, the Deed of Trust, the Guaranty, the
Collateral Assignment, the Partnership Assignment, the Golden Assignment, the
Financing Agreement, the Assignment of Deeds of Trust, the Assignment of
Contract Rights and the Blanket Assignment, all as previously modified, if
applicable, by the Modification or the Amendment, are referred to collectively
herein as the "Loan Documents".
F. Borrower has requested that Lender increase the amount available
under the Note (the "Loan") from $1,000,000.00 to $1,650,000.00. Lender is
willing to comply with said request and to make revisions to the Loan Documents
upon the terms and conditions hereinafter set forth.
A G R E E M E N T :
NOW THEREFORE, in consideration of the premises and promises
hereinafter set forth, the parties hereto agree as follows:
1. Accuracy of Recitals. The parties hereby acknowledge that the
Recitals are true and accurate in every respect.
2. Modification of the Note and Loan Agreement. Effective as of the
date of this Agreement, the Note and the Loan Agreement are amended and modified
as follows:
(a) As defined in the Note, "Borrower" shall mean ILX, LAP and ILES;
ILX, LAP and ILES are to be each jointly and severally liable for all
obligations of ILX under the Note.
(b) The principal amount of the Note is hereby increased to
$1,650,000.00, and the maturity date thereof shall be December 20, 1998. The sum
of $1,009,313, which is the difference between the face amount hereof
($1,650,000) and the outstanding principal balance as of the date hereof
($640,687), shall be advanced by Lender on or before March 1, 1995.
(c) The outstanding principal balance under the Note shall bear
interest at the rate of 12% (twelve percent) per annum. Interest only payments
shall be due monthly commencing on February 1, 1995, and continuing on the first
day of each month thereafter until the maturity date. Principal payments of
$100,000 each shall be due on December 20, 1995, December 20, 1996 and December
20, 1997. All remaining unpaid principal and accrued interest shall be fully
paid to Lender on December 20, 1998.
(d) The fourth, fifth and sixth paragraphs appearing on page 1 of the
Note are deleted.
(e) Borrower's payments under the Note shall entitle Borrower to
seventeen (17) releases per month for timeshare intervals sold or to be sold at
the Golden Eagle Resort without any charge, release fee or administration fee.
Lender will provide in advance to Borrower executed and notarized blank release
forms in recordable form to be used for such purposes; provided, however, that
Borrower, and by execution below, Joseph P. Martori personally, specifically
represent and warrant that such releases will be used solely in accordance with
the terms of this Agreement. Borrower may use more than seventeen (17) releases
in a given month upon prior written consent of Lender, which consent will not be
unreasonably withheld.
(f) Prepayment of principal due under the Note may be made in whole or
in part at any time without penalty or premium upon six (6) month's prior
written notice from Borrower to Lender. Lender may declare the entire balance of
principal and accrued interest under the Note immediately due and payable upon
one (1) year's prior written notice from Lender to Borrower.
(g) Section 4 of the Loan Agreement is modified to require that the
policy amount of the existing title policy (as previously assigned and endorsed
to Lender) be increased to One Million Six Hundred Fifty Thousand Dollars
($1,650,000.00).
3. Modification of Collateral Assignment, Partnership Assignment,
Golden Assignment, Financing Agreement and Assignment of Contract Rights.
Effective as of the date of this Agreement: the first recital on page 1 of each
of the Collateral Assignment, the Partnership Assignment and the Golden
Assignment; the fourth recital on page 1 of the Financing Agreement; and the
third recital on page 1 of the Assignment of Contract Rights; and any and all
subsequent references in such documents to the Loan, the Note and the other Loan
Documents, shall be deemed amended to refer to the Loan, the Note and the other
Loan Documents as modified hereby, including the increase in the principal
amount of the Note to $1,650,000.00.
4. Modification of Guaranty. Effective as of the date of this
Agreement, the Guaranty shall be deemed amended to refer to the Loan, the Note
and the other Loan Documents as modified hereby, including the increase in
principal amount of the Note to $1,650,000.00. ILES further agrees that its
liability under the Note, pursuant to paragraph 2(a) hereof, shall not be
limited or modified in any way by reason of the Guaranty, nor shall its
liability under the Guaranty be limited or modified in any way by reason of its
liability under the Note.
5. Expenses and Fees. Borrower shall pay to Lender all fees and
expenses (including attorneys fees) incurred in connection with the negotiation
and preparation of this Agreement, and for all recording and other fees.
6. The Collateral. Borrower's performance hereunder, and with respect
to all obligations owing by it to Lender, including all extensions, renewals or
replacement hereof, shall continue to be secured by, among other things, the
liens and security interests evidenced by the Loan Documents and the instruments
and documents executed in connection with the Construction/Permanent Loan
Agreement and the Loan Agreement.
7. Miscellaneous. The undersigned hereby agree: (a) the undersigned are
and shall remain subject to the in personam, in rem and subject matter
jurisdiction of the Courts of the State of Arizona (including the Federal
District Court for the District of Arizona) for all purposes pertaining to the
Note, this Agreement and all documents and instruments executed in connection
therewith, securing the same, or in any way pertaining thereto; (b) the Note and
the other Loan Documents shall be governed by the laws of the State of Arizona,
and notwithstanding any prior limitation under the terms of the Note or
applicable law, the interest rate to be charged on the Note shall be governed by
this Agreement and the law in force in the State of Arizona as of the date of
this Agreement. This Agreement is executed and delivered in the State of
Arizona, and the law of the State of Arizona shall govern its interpretation and
enforcement. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The obligations
of the parties hereto under this and all other instruments and agreements
contemplated hereby, shall be joint and several. Inapplicability or
unenforceability of any provision of this Agreement shall not limit or impair
the operation or validity of any other provision of this Agreement. This
Agreement and all other agreements referred to herein constitute the entire
agreement among the parties with respect to the subject matter hereof and no
modification or waiver shall be effective unless in writing and signed by the
party to be charged. Time is the essence hereof. All sections and descriptive
headings of paragraphs in this Agreement are inserted for convenience only and
shall not affect the construction or interpretation hereof.
8. Continued Effect. Except as amended hereby, the Loan Documents shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LOS ABRIGADOS PARTNERS ILX INCORPORATED
LIMITED PARTNERSHIP
By: ILE Sedona Incorporated, By: Joseph P. Martori
General Partner ----------------------------
Its: Chairman & President
----------------------------
By: Joseph P. Martori ILE SEDONA INCORPORATED
-------------------------------
Its: President
-------------------------------
By: Alan J. Tucker
-----------------------------
Its: Treasurer
-----------------------------
THE STEELE FOUNDATION, INC.,
an Arizona non-profit corporation
By: /S/
------------------------------
Dan Cracchiolo, President
JOSEPH P. MARTORI
personally, but solely
as to the representation
and warranty provisions
in Section 2(e).
Joseph P. Martori
----------------------------
Joseph P. Martori
When Recorded, Mail to:
Burch & Cracchiolo
Attn: Dan Cracchiolo
702 E. Osborn Road, Suite 200
Phoenix, Arizona 85011
ASSIGNMENT OF BENEFICIAL INTEREST UNDER
PROMISSORY NOTE, DEED OF TRUST AND TITLE POLICY
FOR VALUE RECEIVED, the undersigned Beneficiary hereby assigns and
transfers to Daniel Cracchiolo as Personal Representative of the Estate of Ethel
Steele ("Assignee"), all beneficial interest under that certain Deed of Trust
dated May 31, 1994, executed by Cheney Manor, L.L.C. as Trustor, to United Title
Agency of Arizona, Inc., an Arizona corporation, as Trustee, and recorded June
6, 1994 at Instrument No. 94-0449034, at the office of the Maricopa County,
Arizona Recorder, together with the Promissory Note described or referred to in
said Deed of Trust, all sums including interest, due or to become due
thereunder, and all rights thereunder. Beneficiary obtained its interest in said
Deed of Trust and Promissory Note pursuant to that certain Assignment of
Beneficial Interest under Promissory Note and Deed of Trust dated May 31, 1994
executed by Paradise Valley-Bethel Partnership, an Arizona general partnership,
and recorded June 6, 1994 at Instrument No. 94-0449035, at the office of the
Maricopa County, Arizona Recorder. The undersigned Beneficiary also assigns its
interest in that certain Preliminary Title Report #420084-7 and agrees to take
any and all action necessary to cause the title company to issue the standard
mortgagee's policy with an endorsement in favor of Assignee.
IN WITNESS WHEREOF, undersigned Beneficiary has signed this instrument
on June 17, 1994.
Genesis Investment Group, Inc., an
Arizona corporation (Beneficiary)
By: Joseph P. Martori
-------------------------------
Its: President
-------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17th day of
June, 1994, Joseph P. Martori, as President of Genesis Investment Group, Inc.,
an Arizona corporation, on behalf of the corporation.
Michelle C. Lemieux
------------------------------
Notary Public
My Commission Expires:
April 11, 1997
---------------------
2
CONTINUING GUARANTY
TO: DAN CRACCHIOLO PERSONAL REPRESENTATIVE OF THE ESTATE OF ETHEL STEELE
1. For valuable consideration, the undersigned (hereinafter the
"Guarantor") unconditionally guarantees and promises to pay to DAN CRACCHIOLO
PERSONAL REPRESENTATIVE OF THE ESTATE OF ETHEL STEELE (hereinafter the
"Assignee"), or order, on demand, in lawful money of the United States, any and
all indebtedness and other obligations of CHENEY MANOR LLC, an Arizona limited
liability company (hereinafter the "Borrower") to PARADISE VALLEY - BETHEL
PARTNERSHIP, an Arizona general partnership, as set forth in the Promissory Note
and Deed of Trust, dated May 31, 1994, said interest of PARADISE VALLEY -BETHEL
PARTNERSHIP, having been assigned to GENESIS INVESTMENT GROUP, INC., an Arizona
corporation ("Assignor" or "Lender") in an amount of NINE HUNDRED FIFTY THOUSAND
AND NO/DOLLARS ($950,000) (collectively, the "Loan Documents"), which Loan
Documents are being assigned on or about the date hereof from Lender to Assignee
(such collective indebtedness referred to hereinafter as the "Obligations"). The
terms and conditions of each Loan Document are hereby incorporated herein.
Should there be any conflict between the terms hereof and the terms of the Loan
Documents, the terms hereof shall control.
2. This is a continuing guaranty relating to the Obligations, including
that arising under any renewal, modification, or extension of the Loan
Documents.
3. The obligations of the Guarantor hereunder are independent of the
Obligations of Borrower, and a separate action or actions may be brought and
prosecuted against Guarantor whether action is brought against Borrower or
whether Borrower be joined in any such action or actions; and Guarantor waives
the benefit of any statute of limitations affecting its liability hereunder or
the enforcement thereof, including, but not limited to A.R.S. Section 12-1641.
Assignee's rights hereunder shall not be exhausted by its exercise of any one of
its rights or remedies or by any such action or by any number of successive
actions until and unless all indebtedness and Obligations have been paid and
fully performed.
4. Guarantor authorizes Assignee, without notice or demand and without
affecting its liability hereunder, from time to time to (a) renew, compromise,
extend, accelerate or otherwise change the time for payment of, or otherwise
change the terms of the Obligations or any part thereof, including increase or
decrease of the rate of interest thereon; (b) take and hold additional security
for the payment of this Guaranty or the Obligations guaranteed, and exchange,
enforce, waive, subordinate and release any such security; (c) apply such
security and direct the order or manner of sale thereof as Assignee in its
discretion may determine; and (d) release or substitute any one or more of any
other guarantors, or add one or more guarantors or endorsers.
Assignee may without notice assign this Guaranty in whole or in part.
5. Guarantor waives any right to require Assignee to (a) proceed
against Borrower; (b) proceed against or exhaust any security held from
Borrower; or, (c) pursue any other remedy in Assignee's power whatsoever.
Guarantor waives any defense arising by reason of any disability or other
defense of Borrower or by reason of the cessation from any cause whatsoever of
the liability of Borrower. Until all of the Obligations of Borrower to Assignee
shall have been paid in full, Guarantor shall have no right of subrogation, and
waives any right to enforce any remedy which Assignee now has or may hereafter
have against Borrower, and waives any benefit of, and any right to participate
in any security now or hereafter held by Assignee. Guarantor waives all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
indebtedness.
6. Guarantor waives and agrees not to assert any duty on the part of
Assignee to disclose to Guarantor any facts that Assignee may now or hereafter
know about Borrower. Guarantor is fully responsible for being and keeping
informed of the financial condition of Borrower and all circumstances bearing on
the risk of non-payment of the Obligations guaranteed hereby.
7. Credit may be granted from time to time at the request of Borrower
and without further authorization from or notice to Guarantor, even though
Borrower's financial condition may have deteriorated since the date hereof.
Assignee need not inquire into the power of Borrower or the authority of its
officers, directors, or agents acting or purporting to act in its behalf. Each
credit heretofore or hereafter granted to Borrower shall be considered to have
been granted at the special instance and request of Guarantor and in
consideration of and in reliance upon this Guaranty.
8. Guarantor will file all claims against Borrower in any bankruptcy or
other proceeding in which the filing of claims is required by law upon any
indebtedness of Borrower to Guarantor and shall concurrently assign to Assignee
all of Guarantor's rights thereunder. If Guarantor does not file any such
claim,, Assignee, as Guarantor's attorney in fact, is hereby authorized to do so
in Guarantor's names or, in Assignee's discretion, to assign the claim and to
cause proof of claim to be filed in the name of Assignee's nominee. In all such
cases, whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Assignee the full amount thereof and,
to the full extent necessary, Guarantor hereby assigns to Assignee all of
Guarantor's rights to any and all such payments or distributions to which
Guarantor would otherwise be entitled. If the amount so paid is greater than the
Obligations then outstanding, Assignee will pay the amount of the excess to the
person entitled thereto.
9. The amount of Guarantor's liability and all rights, powers, and
remedies of Assignee hereunder and under the Loan Documents and any other
agreement now or at any time hereafter in force between Assignee and Guarantor
shall be cumulative and not alternative, and such rights, powers, and remedies
shall be in addition to all rights, powers, and remedies given to Assignee by
law.
10. This Guaranty shall benefit Assignee, its successors and assigns,
including the assignees of any indebtedness hereby guaranteed, and binds
Guarantor's successors and assigns. This Guaranty is assignable by Assignee with
respect to all or any portion of the indebtedness and obligations guaranteed
hereunder, and when so assigned Guarantor shall be liable to the assignees under
this Guaranty without in any manner affecting Guarantor's liability hereunder
with respect to any indebtedness or obligations retained by Assignee. No
delegation or assignment of this Guaranty by Guarantor shall be of any force or
effect or release Guarantor from any obligations hereunder.
11. Except as provided in any other written agreement now or at any
time hereafter in force between Assignee and Guarantor, this Guaranty shall
constitute the entire agreement of Guarantor with Lender with respect to the
subject matter hereof and supersedes all prior representations, understandings,
promises, and agreements.
12. No provision of this Guaranty or right of Assignee hereunder can be
waived nor can Guarantor be released from its obligations hereunder except by a
writing duly executed by an authorized officer of Assignee.
13. Lender shall have a lien upon and a right of set-off against all
money, securities and other property of Guarantor now or hereafter in the
possession of or on deposit with Assignee, and every such lien and right of
set-off may be exercised without demand upon or notice to Guarantor. No lien or
right of set-off shall be deemed to have been waived by any act of Assignee or
any failure to exercise such right of set-off, and every right of set-off and
lien shall continue in full force and effect until such right of set-off or lien
is specifically waived or released by an instrument in writing executed by
Assignee.
14. Any indebtedness of Borrower now or hereafter held by Guarantor is
hereby subordinated to the indebtedness of Borrower to Assignee; and such
indebtedness of Borrower to Guarantor if Assignee so requests shall be
collected, enforced and received by Guarantor as trustee for Assignee and be
paid over to Assignee on account of the Obligations of Borrower to Assignee but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guaranty.
15. Guarantor agrees to pay to Assignee without demand reasonable
attorneys' fees and accountants' fees and all other costs and expenses which may
be incurred by Assignee in the enforcement of this Guaranty or in collecting or
compromising the Obligations; whether or not suit is filed. Time is of the
essence of each term and condition hereof.
16. Except where preempted by the laws of the United States or the
rules or regulations of any agency or instrumentality thereof, this Guaranty is
to be governed by the laws of the State of Arizona, and the parties agree that
this Guaranty is, except where preempted by the laws, rules or regulations of
the United States to be interpreted, construed and governed by the laws of the
State of Arizona. Guarantor irrevocably and unconditionally submits to the
jurisdiction of the Superior Court of the State of Arizona for the County of
Maricopa or the United States District Court of Arizona, as Assignee may deem
appropriate, in connection with any legal action or proceeding arising out of or
relating to this Guaranty and Guarantor waives any objection relating to the
basis for personal or in rem jurisdiction or to venue which it may now or
hereafter have in any such suit, action or proceeding. If any paragraph, clause
or provision hereof is construed or interpreted by a court of competent
jurisdiction to be void, invalid, or unenforceable, such decision shall affect
only those paragraphs, clauses or provisions and shall not affect the remainder
hereof.
17. In all cases where there is but a single Borrower or a single
Guarantor, then all words used herein in the plural shall be deemed to have been
used in the singular where the context and construction so require; and when
there is more than one Borrower named herein, or when this Guaranty is executed
by more than one Guarantor, the word "Borrowers" and the word "Guarantors"
respectively shall mean all and any one or more of them.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this
Guaranty this 17th day of June , 1994.
ILX INCORPORATED, an Arizona corporation
By: Joseph P. Martori
---------------------------------
Its President
MODIFICATION AGREEMENT
DATE: June 28, 1994
PARTIES: Borrower: LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
an Arizona limited partnership
Bank: BANK ONE, ARIZONA, NA, a national banking association,
formerly known as The Valley National Bank of Arizona
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$5,000,000.00 pursuant to the Loan Agreement, dated September 9, 1991 ("Loan
Agreement") and evidenced by the Promissory Note, dated September 9, 1991
("Note"). The unpaid principal of the Loan as of the date hereof is $769,000.00.
B. The Loan is secured by, among other things, the Deed of Trust (With
Assignment of Rents and Security Agreement (Variable Rate) dated September 9,
1991 ("Deed of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded on September 10, 1991 in Docket No. 1421 at page 705,
records of Coconino County, Arizona (the agreements, documents, and instruments
securing the Loan and the Note are referred to individually and collectively as
the "Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, the Loan
Agreement, and/or the Security Documents: Letter Agreement dated September 9,
1991, Modification Agreement dated October 22, 1993, Letter Agreement dated
April 18, 1994. (The Note, the Loan Agreement, the Security Documents, any
arbitration resolution, any environmental certification and indemnity agreement,
and all other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan, as modified in the Modifications, are sometimes
referred to individually and collectively as the ("Loan Documents").
Hereinafter, "Note", "Loan Agreement", "Deed of Trust", and "Security Documents"
shall mean such documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan Documents as
provided herein. Bank is willing to so modify the Loan and the Loan Documents,
subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS
2.1 The Loan Documents are modified as follows:
2.1.1 The definition of "Release Price" in the Loan Agreement is hereby changed
from $2,000.00 per Timeshare Interval to $1,000.00 per Timeshare Interval with
respect to which Lender provides a Release pursuant to Article VIII of said Loan
Agreement.
2.1.2 Paragraph 3 (c) of the Note is hereby modified to read in its entirety as
follows:
(c) Accrued interest shall be payable commencing on October 1, 1991 and on the
first day of each month thereafter. Principal shall be due and payable in
quarterly installments on the first day of each January, April, July and October
during the term of this Note through April 1, 1994 as follows:
Quarterly Payment Date Amount
---------------------- ------
January 1, 1992 ...................................... $ 250,000.00
April 1, 1992 ........................................ 250,000.00
July 1, 1992 ......................................... 250,000.00
October 1, 1992 ...................................... 250,000.00
January 1, 1993 ...................................... 312,500.00
April 1, 1993 ........................................ 312,500.00
July 1, 1993 ......................................... 312,500.00
October 1, 1993 ...................................... 312,500.00
January 1, 1994 ...................................... 375,000.00
April 1, 1994 ........................................ 375,000.00
Thereafter, principal shall be due and payable in monthly installments of
$80,000.00 each on the first day of each month commencing on July 1, 1994. All
other amounts at any time outstanding pursuant to this Note or the Loan
Documents and not otherwise paid shall be due and payable in full on the
Maturity Date.
2.2 Each of the Loan Documents is modified to provide that it shall be a default
or an event of default thereunder if Borrower shall fail to comply with any of
the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 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 Borrower 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 Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as modified
herein, nor any event, that, with the giving of notice or the passage of time or
both, would be a default or an event of default under the Loan Documents as
modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with respect to
the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its formation or
organization and has the requisite power and authority to execute and deliver
this Agreement and to perform the Loan Documents as modified herein. The
execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS
Borrower covenants with Bank:
5.1 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 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
Borrower, whether now known or unknown to 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,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts, other than
interest and principal, due and payable by Borrower under the Loan Documents as
of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank in
connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. 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.
10. 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.
DATED as of the date first above stated.
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
an Arizona limited partnership
By: ILE Sedona Incorporated, an Arizona corporation,
General Partner
By: Joseph P. Martori
--------------------------
Name: JOSEPH P. MARTORI
--------------------------
Title: President
--------------------------
State of Arizona
County of
The above instrument was acknowledged before me this 30th day of June, 1994, by
JOSEPH P. MARTORI the President of ILE Sedona Incorporated, an Arizona
corporation, the General Partner of Los Abrigados Partners Limited Partnership,
an Arizona limited partnership, on behalf of the partnership.
My commission expires:
February 9, 1998 Lorraine Wing
---------------------- -----------------------------------
Notary Public
SECOND MODIFICATION AGREEMENT
DATE: October 4, 1994
PARTIES: Borrower: LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
an Arizona limited partnership.
Bank: BANK ONE, ARIZONA, NA, a national banking
association.
RECITALS:
A. Bank has extended to Borrower credit ("Acquisition Loan") in the
principal amount of up to $5,000,000.00 pursuant to the Loan Agreement, dated
September 9, 1991 ("Acquisition Loan Agreement"), and evidenced by the Secured
Promissory Note, dated September 9, 1991 ("Acquisition Note"). The unpaid
principal of the Acquisition Loan as of the date hereof is $329,000.00. Bank and
Borrower have executed and delivered previously the Modification Agreement dated
October 22, 1993 ("Modification") modifying the terms of the Acquisition Loan,
the Acquisition Note, the Acquisition Loan Agreement, and/or the Acquisition
Security Documents (hereinafter defined).
B. Bank also has extended to Borrower credit ("Additional Loan") in the
principal amount of $750,000.00 pursuant to the Loan Agreement dated October 22,
1993 ("Additional Loan Agreement"), and evidenced by the Secured Promissory Note
dated October 22, 1993 ("Additional Note"). The unpaid principal of the
Additional Loan as of the date hereof is $752,419.56.
C. The Acquisition Loan is secured by, among other things, (i) the Deed of
Trust (With Assignment of Rents and Security Agreement), dated September 9, 1991
("Deed of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded on September 10, 1991, at Docket 1421, page 705, as
Instrument No. 91-19146, records of Coconino County, Arizona, (ii) the Repayment
Guaranty of Arthur J. Martori and L. Sue Martori dated September 9, 1991, and
the Repayment Guaranty of Alan R. Mishkin dated September 9, 1991 (the
"Acquisition Loan Guarantees"), (iii) the Collateral Assignment dated September
9, 1991, by Borrower in favor of Bank, recorded on September 10, 1991 at Docket
1421, page 758, as Instrument No. 91-19147, records of Coconino County, Arizona
(the "Collateral Assignment"), (iv) the Security Agreement dated September 9,
1991, by Borrower in favor of Bank (the "Security Agreement"), and (v) the
Assignment of Management Agreement dated as of September 9, 1991, by and between
Borrower and Bank (the "Assignment") (the agreements, documents, and instruments
securing the Acquisition Loan and the Acquisition Note are referred to
individually and collectively as the "Acquisition Security Documents").
D. The Additional Loan is secured by, among other things, (i) certain
irrevocable standby letters of credit delivered to Bank pursuant to Section 6.9
of the Additional Loan Agreement (the "Letter of Credit"), and (ii) the
Repayment Guaranty dated October 22, 1993 of Arthur J. Martori and L. Sue
Martori and the Repayment Guaranty dated October 22, 1993 of Alan R. Mishkin
(collectively, the "Additional Loan Guarantees"). The Agreements, documents, and
instruments securing the Additional Loan and Additional Note are referred to
individually and collectively as the "Additional Loan Security Documents").
E. The Acquisition Loan Guarantees and the Additional Loan Guarantees are
referred to collective herein as the "Guarantees". The Acquisition Note, the
Acquisition Loan Agreement, the Acquisition Security Documents, any arbitration
resolution, any environmental certification and indemnity agreement, and all
other agreements, documents, and instruments evidencing, securing, or otherwise
relating to the Acquisition Loan, as modified in the Modification, are sometimes
referred to individually and collectively as the "Loan Documents". Hereinafter,
"Acquisition Note", "Acquisition Loan Agreement", "Acquisition Deed of Trust",
and "Acquisition Security Documents" shall mean such documents as modified in
the Modification.
F. Borrower has requested that Bank modify the Acquisition Loan and the
Loan Documents as provided herein. Bank is willing to so modify the Acquisition
Loan and the Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Acquisition Loan Agreement is modified as follows:
2.1.1 The definition of "Guarantor(s)" is modified in its entirety
to read as follows:
"Guarantor" shall mean ILX Incorporated, an Arizona corporation.
2.1.2 The definition of "Interest Rate" is modified in its
entirety to read as follows:
"Interest Rate" shall mean one and one-quarter percent (1.25%) per
annum above the Index Rate. The Interest Rate shall change from time
to time as and when the Index Rate changes.
2.1.3 The definition of "Letter of Credit" is hereby deleted in
its entirety.
2.1.4 The definition of "Loan Amount" set forth in the Acquisition
Loan Agreement is modified in its entirety to read as follows:
"Loan Amount" shall mean the amount of Two Million and No/100
Dollars ($2,000,000.00), plus any sum in addition thereto advanced
by Lender at its discretion in accordance with the Loan Documents.
2.1.5 The definition of "Maturity Date" set forth in the
Acquisition Loan Agreement is modified in its entirety to read as follows:
"Maturity Date" shall mean October 4, 1996.
2.1.6 The definition of "Refurbishment Account" and "Refurbishment
Amount" are hereby deleted. Borrower acknowledges and agrees that no further
funds remain in the Refurbishment Account and that Bank has no further
obligations with respect thereto.
2.1.7 The definition of "Release Price" set forth in the
Acquisition Loan Agreement is hereby modified in its entirety to read as
follows:
"Release Price" shall mean the sum of $1,000.00 per Timeshare
Interval with respect to which Lender provides a Release pursuant
to Article VIII hereof.
2.1.8 Subsection 2.5(c) is modified in its entirety to read as
follows:
(c) [Intentionally deleted.]
2.1.9 A new Section 4.18 is added to provide as follows:
4.18 Sewer Connection. Borrower has caused the Premises to be
connected to a sanitary sewer system constructed by the City of
Sedona, Arizona, and the connection to such system is adequate to
serve the Premises and the present and anticipated use thereof.
Borrower is not liable for or obligated to pay any fees, costs, or
expenses with respect to such construction or connection, nor is
Borrower otherwise obligated to perform any services or take any
other action with respect thereto.
2.1.10 Section 5.16 is modified in its entirety to read as
follows:
5.16 Loan-to-Value. At all times during the term of the Loan,
the unpaid principal balance of the Loan shall not exceed sixty
percent (60%) of the value of the Project, as determined by Lender
in its sole discretion based on the Appraisals obtained pursuant
to Section 5.15 hereof. If for any reason the loan-to-value ratio
exceeds said percentage, then Borrower shall, upon Lender's
demand, immediately reduce the unpaid principal balance of the
Loan, or deposit sufficient sums with Lender to reduce the
loan-to-value ratio to at or below said percentage. For the
purposes of determining the loan-to-value ratio, the value of the
Project as determined pursuant to any Appraisal shall represent
the fractional interest in the Project encumbered by the Deed of
Trust (which may be adjusted by Lender from time to time in its
sole discretion as fractional interests are sold and released)
and, unless otherwise agreed or elected by Lender in its sole and
absolute discretion, shall not include the value of Timeshare
Intervals that have been sold or any amounts receivable in respect
to the sale of such Timeshare Intervals.
2.1.11 Section 5.17 is modified in its entirety to read as follows:
5.17 [Intentionally deleted.]
2.1.12 Section 5.18 is modified in its entirety to read as follows:
5.18 Consent Judgment. Borrower shall at all times comply with
all of the obligations (relating to, among other things, the waste
water treatment facilities on the Premises) arising pursuant to
that certain Consent Judgment entered in the civil action titled
State of Arizona v. BIS-ILE Associates, et al. (Superior Court,
Maricopa County, Arizona, Civil Action No. CV 91-16634), dated
June 28, 1991 (the "Consent Judgment"), and shall notify Lender of
any breach or default under the Consent Judgment. If Borrower
fails to comply with the Consent Judgment, then the giving of
thirty (30) days' notice to Borrower, Lender may, in addition to
any of its other rights and remedies, and with or without
declaring an Event of Default, pay any amount Borrower is
obligated to pay in connection with the Consent Judgment,
including, without limitation, fines due under the Consent
Judgment or expenditures to repair or replace the existing waste
water treatment facilities on the Premises. Borrower shall
reimburse Lender for all such expenditures immediately on demand
and such expenditures shall bear interest at the rate applicable
from time to time under the Note from the date of expenditure
until paid.
2.1.13 Section 6.1(a) (xv) is modified in its entirety to read as
follows:
(xv) Guarantor shall fail to perform any obligation set forth
in the Repayment Guaranty.
2.1.14 A new Section 6.1(a)(xvi) is added to provide as follows:
The occurrence of an Event of Default under or pursuant to that
certain Promissory Note dated October 4, 1994, executed by
Guarantor in favor of Lender, in the original principal amount of
$500,000.00, as such Promissory Note may be extended, modified,
amended, renewed or restated from time to time.
2.1.15 A new Section 6.1(a)(xvii) is added to provide as follows:
Any representation and warranty of Guarantor in the Repayment
Guaranty is materially false, incorrect or misleading as of the
date made or renewed.
2.1.16 Section 8.3 is modified in its entirety to read as follows:
8.3 [Intentionally deleted.]
2.1.17 Exhibit C is modified in its entirety to appear in the form
set forth in Exhibit C attached hereto.
2.1.18 Exhibit D is modified in its entirety to appear in the form
attached hereto as Exhibit D.
2.2 The securing clause of the Security Agreement is modified in its
entirety to read as follow:
To secure performance of the covenants and agreements herein set
forth and payment of Debtor's promissory note dated October 4,
1994 in the sum of Two Million and no/100 Dollars ($2,000,000.00),
which Note restates Debtor's promissory note dated September 9,
1991, and interest as specified therein and any and all extensions
or renewals thereof in whole or in part.
2.3 Recital B of the Assignment is modified in its entirety to read as
follows:
B. Pursuant to the Loan Agreement, Lender has agreed to lend to
Borrower up to Two Million and no/100 Dollars ($2,000,000) (the
"Loan") for the purpose of, among other things, acquiring the
Premises and Improvements (collectively the "Project").
2.4 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein is materially incomplete, incorrect, or misleading as of the
date hereof.
2.5 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
2.6 Effective upon Borrower's satisfaction of all conditions precedent set
forth herein and performance of all obligations set forth in Section 5 herein,
Bank and Borrower confirm and acknowledge the termination of the Additional Loan
Agreement. In connection therewith, Bank agrees to (i) return the Letter of
Credit, and (ii) stamp the Guarantees as "paid" or "cancelled", returning the
same to the guarantors.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower 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 Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
4.7 All Timeshare Documents (as defined in the Acquisition Loan Agreement)
remain in full force and effect and no amendments, modifications, restatements
or supplements have been entered into since the execution of the Acquisition
Loan Agreement, except as disclosed to Bank in writing concurrently herewith.
4.8 Borrower's fractional interest in the Project as of the date hereof is
4450/8925, less any fractional interests sold, in the normal course of business,
by Borrower during the period from September 23, 1994 through October 4, 1994.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 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 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 Borrower, whether now known or unknown to 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,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Acquisition Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank in
connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
5.3.3 A fee for the commitment in an amount equal to one percent (1%) of
the difference between (i) $2,000,000.00, and (ii) the sum of the balances of
the Acquisition Loan and the Additional Loan set forth in Recitals A and B to
this Agreement.
5.3.4 All outstanding and unpaid principal under the Additional Note,
together with accrued and unpaid interest thereon and all amounts, other than
interest and principal, due and payable by Borrower under the Additional Loan
Agreement or any other document, instrument or agreement executed in connection
therewith.
5.4 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused to be executed and delivered to Bank the First Amendment to
Deed of Trust, dated of even date herewith, amending the Deed of Trust to secure
repayment of the restated promissory note delivered pursuant to Section 5.6
below.
5.5 On or before October 15, 1994, Borrower shall cause to be delivered to
Bank, at Borrower's sole cost and expense, a new title insurance policy insuring
the Deed of Trust, issued by a title insurance company acceptable to Bank in its
sole discretion, and subject only to such exceptions as may be acceptable to
Bank in its sole discretion. Such policy shall reflect that the interest in the
property encumbered by the Deed of Trust is not less than a 4450/8925 fractional
interest therein.
5.6 Contemporaneously with the execution and delivery of this Agreement,
Borrower has executed and delivered to Bank a restated promissory note
evidencing Borrower's indebtedness under or pursuant to the Acquisition Loan
Agreement as modified hereby.
5.7 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused Guarantor to execute and deliver to Bank a Repayment
Guaranty in form and substance satisfactory to Bank.
5.8 On or before October 15, 1994, Borrower shall cause to be executed and
delivered to Bank by Tammac Financial Corp., a Delaware corporation, a
Subordination Agreement in favor of Bank and in form satisfactory to Bank,
subordinating the lien and encumbrance of the Tammac Deed of Trust (as defined
in the Acquisition Loan Agreement) to the lien and encumbrance of the Deed of
Trust, as amended by the First Amendment to Deed of Trust executed and delivered
pursuant to Section 5.4 above.
5.9 Contemporaneously with the execution and delivery of this Agreement,
Borrower has delivered to Bank all amendments, modifications, restatements, or
supplements to any or all of the Timeshare Documents (as defined in the
Acquisition Loan Agreement). All such amendments or supplements shall be in form
satisfactory to Bank in its sole discretion.
5.10 Contemporaneously with the execution and delivery of this Agreement,
Borrower has delivered to Bank a partnership certificate authorizing Borrower's
execution of this Agreement and all other documents and instruments referred to
herein and the transaction contemplated hereby.
5.11 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused Guarantor to deliver to Bank a resolution of Guarantor's
Board of Directors authorizing Guarantor's execution of the Repayment Guarantee
required pursuant to Section 5.7 above, together with certified copies of
Guarantor's Articles of Incorporation and Bylaws, and a good standing
certificate issued by Guarantor's state of incorporation.
5.12 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused to be delivered to Bank an opinion of Borrower's counsel
with respect to such matters as Bank may require and in form and substance
satisfactory to Bank in its sole discretion.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement and has satisfied any and all other
conditions precedent set forth herein, and (iii) if required by Bank, Borrower
and any guarantor(s) have executed and delivered to Bank an arbitration
resolution, an environmental questionnaire, and an environmental certification
and indemnity agreement. Until all of the foregoing are satisfied, Bank shall be
under no obligation to advance additional proceeds under the Acquisition Loan or
to release any collateral securing the Acquisition Loan or the Additional Loan.
If Borrower does not perform its obligations hereunder and satisfy all
conditions precedent herein as and when required, Bank, at its option, may
terminate its obligations hereunder, and the Acquisition Loan and the Additional
Loan shall continue to be payable in accordance with their terms. If Borrower
performs all obligations hereunder and satisfies all conditions precedent herein
as and when required (as determined by Bank), the amendments to the Loan set
forth herein shall become effective and Bank shall make the disbursements of the
Loan set forth on Exhibit D hereto.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding
and agreement of Borrower and Bank in respect of the Acquisition Loan and
supersede all prior representations, warranties, agreements, arrangements,
understandings, and negotiations. No provision of the Loan Documents as modified
herein may be changed, discharged, supplemented, terminated, or waived except in
a writing signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. 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.
10. 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.
DATED as of the date first above stated.
LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited
partnership
By: ILE Sedona Incorporated, an
Arizona corporation,
General Partner
By: Joseph P. Martori
--------------------------
Name: Joseph P. Martori
------------------------
Title: Chairman/President
-----------------------
BANK ONE, ARIZONA, NA, a national
banking association
By: Steve Strehlow
--------------------------
Name: Steve Strehlow
------------------------
Title: A.V.P.
-----------------------
EXHIBIT D
LOAN DISBURSEMENT SCHEDULE
Amount of Loan .......................................... $ 2,000,000.00
Less: Existing balance as of 10/4/94: .................. (329,000.00)
Subtotal: ................................................ $ 1,671,000.00
1. Appraisal fee due Lender .............................. 10,000.00
2. Commitment fee due Lender ............................. 9,185.80
3. Legal fees of Lender .................................. 6,500.00
4. Title and recording fees due
Transamerica Title .................................. 3,361.00
5. Lender's processing and closing fee ................... 1,500.00
6. Payoff of balance due pursuant to the
Loan Agreement dated October 22, 1993 ............... 752,419.56
Balance (to Borrower): ................................... $ 888,033.64
SECURED PROMISSORY NOTE
Phoenix, Arizona
$2,000,000.00 October 4, 1994
1. FUNDAMENTAL PROVISIONS.
The following terms will be used as defined terms in this Note:
Payee and Holder: BANK ONE, ARIZONA, NA, a national banking
association.
Maker: LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
an Arizona limited partnership.
Principal Amount: Two Million and No/100 Dollars ($2,000,000).
Interest Rate: One and one-quarter percent (1.25%)
per annum above the Index Rate. The Interest
Rate shall change from time to time as and
when the Index Rate changes.
Default
Interest Rate: Four percent (4%) per annum above the
Interest Rate. The Default Interest Rate
shall change from time to time as and when
the Interest Rate changes as a result of
changes in the Index Rate.
Index Rate: The rate of interest most recently
announced by Payee, or its successors, in
Phoenix, Arizona as its "prime rate." Any
change in the "prime rate" shall become
effective as of the same date of any such
change.
Maturity Date: October 4, 1996.
Business Day: Any day of the year on which banks are
neither required nor authorized to close in
Phoenix, Arizona.
Deed of Trust: That certain Deed of Trust (With
Assignment of Rents and Security Agreement),
dated September 9, 1991, between Maker, as
Trustor, and Payee, as Beneficiary, as
amended from time to time.
Loan Documents: The Loan Agreement, the Note, the
Deed of Trust and any other documents
securing the repayment of the Note.
Commitment Fee: An amount equal to one percent (1%) of
the difference between (i) $2,000,000.00,
and (ii) the sum of (A) the balance
outstanding hereunder on the date hereof,
plus (B) the balance outstanding on the date
hereof under that certain Secured Promissory
Note dated October 22, 1993 of Maker payable
to Holder.
Loan: The loan from Payee to Maker in the
Principal Amount and evidenced by this Note.
Loan Agreement: That certain Loan Agreement dated
September 9, 1991, between Maker, as
Borrower, and Holder, as Lender, as amended
by that certain Modification Agreement dated
October 22, 1993 and that certain Second
Modification Agreement dated as of October
4, 1994, and as the same may be further
amended, modified, restated, renewed or
supplemented from time to time.
2. PROMISE TO PAY.
For value received, Maker promises to pay to the order of Holder, at
its office at 241 North Central Avenue, Phoenix, Arizona 85004, or at
such other place as the holder hereof may from time to time designate
in writing, the Principal Amount, together with accrued interest from
the date of disbursement on the unpaid principal balance at the
Interest Rate.
3. INTEREST; PAYMENTS.
(a) Absent an Event of Default hereunder or under any of the Loan
Documents, this Note shall bear interest at the Interest Rate
in effect from time to time. Throughout the term of this Note,
interest shall be calculated on a 360-day year with respect to
the unpaid balance of the Principal Amount and, in all cases,
shall be computed for the actual number of days in the period
for which interest is charged, which period shall consist of
365-days on an annual basis.
(b) All payments of principal and interest due hereunder shall be
made (i) without deduction of any present and future taxes,
levies, imposts, deductions, charges or withholdings, which
amounts shall be paid by Maker, and (ii) without any other set
off. Maker will pay the amounts necessary such that the gross
amount of the principal and interest received by the holder
hereof is not less than that required by this Note.
(c) Principal and accrued interest shall be payable in monthly
installments commencing on November 1, 1994 and on the first
day of each month thereafter, each in an amount equal to the
sum of (i) $80,000.00 for application to the unpaid principal
balance hereof, plus (ii) accrued interest on the unpaid
principal balance hereof at the Interest Rate. All remaining
principal, accrued interest and other amounts outstanding
pursuant to this Note or the Loan Documents and not otherwise
paid shall be due and payable in full on the Maturity Date.
4. PREPAYMENT.
(a) Maker may prepay the Loan, in whole or in part at any time
without penalty or premium. All prepayments shall be applied
to payments due hereunder in the reverse chronological order
of maturity; provided that release payments pursuant to
Section 8.2 of the Loan Agreement shall be applied to
principal payments due pursuant to Section 3(c) hereof in the
chronological order of maturity.
(b) In no event shall Maker be entitled to reborrow any amounts
repaid or prepaid.
5. LAWFUL MONEY.
Principal and interest are payable in lawful money of the United States
of America.
6. APPLICATION OF PAYMENTS/LATE CHARGE.
(a) Absent the occurrence of an Event of Default hereunder or
under any of the other Loan Documents, (i) any payment of a
Release Price pursuant to Article VIII of the Loan Agreement
shall be applied to the principal balance of the Note, and
(ii) any other payments received by the holder hereof pursuant
to the terms hereof shall be applied first to sums, other than
principal and interest, due the holder hereof pursuant to the
Loan Documents, next to the payment of all interest accrued to
the date of such payment, and the balance, if any, to the
payment of principal. Any payments received by the holder
hereof after the occurrence of an Event of Default hereunder
or under any of the Loan Documents, shall be applied to the
amounts specified in this Paragraph 6(a) in such order as the
holder hereof may, in its sole discretion, elect.
(b) If any payment of interest and/or principal is not received by
the holder hereof within fifteen (15) days of the date such
payment is due, then in addition to the remedies conferred
upon the holder hereof pursuant to Paragraph 9 hereof and the
other Loan Documents, (i) a late charge of four percent (4%)
of the amount of the installment due and unpaid will be added
to the delinquent amount to compensate the holder hereof for
the expense of handling the delinquency, regardless of any
notice and cure periods, and (ii) the amount due and unpaid
(including, without limitation, the late charge) shall bear
interest at the Default Interest Rate, computed from the date
on which the amount was due and payable until paid.
7. SECURITY AND GUARANTY.
This Note is secured by, inter alia, the Deed of Trust, which Deed of
Trust creates a lien on that certain real and personal property
described therein. This Note is guaranteed by that certain Repayment
Guaranty of even date herewith wherein ILX Incorporated, an Arizona
corporation, is guarantor (the "Repayment Guaranty").
8. EVENT OF DEFAULT.
The occurrence of any of the following shall be deemed to be an event
of default ("Event of Default") hereunder:
(a) default in the payment of principal or interest when due
pursuant to the terms hereof and the expiration of ten (10)
days after notice of such default is given by the holder
hereof to Maker without such default having been cured; or
(b) the occurrence of an Event of Default under any of the other
Loan Documents.
9. REMEDIES.
Upon the occurrence of an Event of Default, then at the option of the
holder hereof, the entire balance of principal together with all
accrued interest thereon, and all other amounts payable by Maker under
the Loan Documents shall, without demand or notice, immediately become
due and payable. Upon the occurrence of an Event of Default (and so
long as such Event of Default shall continue), the entire balance of
principal hereof, together with all accrued interest thereon, all other
amounts due under the Loan Documents, and any judgment for such
principal, interest, and other amounts shall, at the option of the
holder hereof, bear interest at the Default Interest Rate, subject to
the limitations contained in Paragraph 4 hereof. No delay or omission
on the part of the holder hereof in exercising any right under this
Note or under any of the other Loan Documents hereof shall operate as a
waiver of such right.
10. WAIVER.
Maker, endorsers, guarantors, and sureties of this Note hereby waive
diligence, demand (pound)or payment, presentment for payment, protest,
notice of nonpayment, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of dishonor, and notice of
nonpayment, and all other notices or demands of any kind (except
notices specifically provided for in the Loan Documents) and expressly
agree that, without in any way affecting the liability of Maker,
endorsers, guarantors, or sureties, the holder hereof may extend any
maturity date or the time for payment of any installment due hereunder,
otherwise modify the Loan Documents, accept additional security,
release any Person liable, and release any security or guaranty. Maker,
endorsers, guarantors, and sureties waive, to the full extent permitted
by law, the right to plead any and all statutes of limitations as a
defense.
11. CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
No provision of this Note may be changed, discharged, terminated, or
waived except in a writing signed by the party against whom enforcement
of the change, discharge, termination, or waiver is sought. No failure
on the part of the holder hereof to exercise and no delay by the holder
hereof in exercising any right or remedy under this Note or under the
law shall operate as a waiver thereof.
12. ATTORNEYS' FEES.
If this Note is not paid when due or if any Event of Default occurs,
Maker promises to pay all costs of enforcement and collection and
preparation therefor, including but not limited to, reasonable
attorneys' fees, whether or not any action or proceeding is brought to
enforce the provisions hereof (including, without limitation, all such
costs incurred in connection with any bankruptcy, receivership, or
other court proceedings (whether at the trial or appellate level)).
13. SEVERABILITY.
If any provision of this Note is unenforceable, the enforceability of
the other provisions shall not be affected and they shall remain in
full force and effect.
14. INTEREST RATE LIMITATION.
Maker hereby agrees to pay an effective rate of interest that is the
sum of the interest rate provided for herein, together with any
additional rate of interest resulting from any other charges of
interest or in the nature of interest paid or to be paid in connection
with the Loan, including, without limitation, the Commitment Fee and
any other fees to be paid by Maker pursuant to the provisions of the
Loan Documents. Holder and Maker agree that none of the terms and
provisions contained herein or in any of the Loan Documents shall be
construed to create a contract for the use, forbearance or detention of
money requiring payment of interest at a rate in excess of the maximum
interest rate permitted to be charged by the laws of the State of
Arizona. In such event, if any holder of this Note shall collect monies
which are deemed to constitute interest which would otherwise increase
the effective interest rate on this Note to a rate in excess of the
maximum rate permitted to be charged by the laws of the State of
Arizona, all such sums deemed to constitute interest in excess of such
maximum rate shall, at the option of the holder, be credited to the
payment of other amounts payable under the Loan Documents or returned
to Maker.
15. NUMBER AND GENDER.
In this Note the singular shall include the plural and the masculine
shall include the feminine and neuter gender, and vice versa.
16. HEADINGS.
Headings at the beginning of each numbered section of this Note are
intended solely for convenience and are not part of this Note.
17. CHOICE OF LAW.
This Note shall be governed by and construed in accordance with the
laws of the State of Arizona without giving effect to conflict of laws
principles.
18. COMMITMENT FEE.
Upon execution and delivery of this Note, and as a condition precedent
to any obligation of Holder to disburse any portion of the Loan, Maker
agrees to pay Holder the non-refundable Commitment Fee as partial
compensation for Holder agreeing to extend the Loan to Maker.
19. INTEGRATION.
The Loan Documents contain the complete understanding and agreement of
the holder hereof and Maker and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations.
20. BINDING EFFECT.
The Loan Documents will be binding upon, and inure to the benefit of,
the holder hereof, Maker, and their respective successors and assigns.
Maker may not delegate its obligations under the Loan Documents.
21. TIME OF THE ESSENCE.
Time is of the essence with regard to each provision of the Loan
Documents as to which time is a factor.
22. SURVIVAL.
The representations, warranties, and covenants of the Maker in the Loan
Documents shall survive the execution and delivery of the Loan
Documents and the making of the Loan.
23. ARBITRATION.
(a) Binding Arbitration. Payee and Maker hereby agree that all
controversies and claims of any nature between them arising
directly or indirectly out of this Note 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.
(b) 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.
(c) Provisional Remedies; Self-Help; and Foreclosure. No
provisions of subparagraph (a) 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 Payee'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 to any
arbitration proceeding.
24. RESTATED PROMISSORY NOTE.
This Note is a restatement of, and supersedes and replaces, that
certain Secured Promissory Note dated September 9, 1991, of Maker in
favor of Holder.
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an
Arizona limited partnership
By: ILE Sedona Incorporated, an Arizona
corporation, General Partner
By: Joseph P. Martori
-------------------------------------
Name: Joseph P. Martori
-----------------------------------
Title: Chairman/President
----------------------------------
"Maker"
REPAYMENT GUARANTY
THIS REPAYMENT GUARANTY (the "Guaranty") is made as of October 4, 1994
by ILX INCORPORATED, an Arizona corporation (the "Guarantor"), whose address is
set forth in Paragraph 9 hereof, in favor of BANK ONE, ARIZONA, NA, a national
banking association ("Holder"), whose address is Real Estate Lending Division,
P.O. Box 29542, Phoenix, Arizona 85038.
1. Except as otherwise provided in this Guaranty, all terms
defined in that certain Promissory Note of even date herewith
by and between LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an
Arizona limited partnership ("Maker"), and Holder (as it may
be amended and modified from time to time) (the "Note") shall
have the same meaning when used in this Guaranty. Such defined
terms are denoted in the Note and in this Guaranty by initial
capital letters.
2. In order to induce Holder to loan to Maker the sum of TWO
MILLION AND NO/100 DOLLARS ($2,000,000) (the "Loan"), to be
evidenced by the Note of even date herewith executed by Maker
and payable to the order of Holder, Guarantor hereby
unconditionally and irrevocably, jointly and severally,
guarantees to Holder and to its successors, endorsees and/or
assigns, (i) the full and prompt payment of the principal sum
of the Note in accordance with its terms when due, by
acceleration or otherwise, together with all interest accrued
thereon, (ii) the full and prompt payment of all other sums,
together with all interest accrued thereon, when due under the
terms of the Note, and in any deed of trust, security
agreement, loan agreement, lease assignment and other
assignment or agreement referred to in the Note and/or now or
hereafter evidencing or securing the Note or setting forth
obligations of Maker in connection with the Loan (which
documents, together with the Note, are collectively referred
to herein as the "Loan ---- Documents") and (iii) the full and
complete performance of all other obligations of Maker now or
hereafter arising pursuant to the Loan Documents. The
obligations guaranteed pursuant to this Paragraph 2 are
hereinafter referred to as the "Guaranteed Obligations".
3. Guarantor agrees, represents and warrants to Holder as
follows:
(a) Guarantor shall continue to be liable under this
Guaranty and the provisions hereof shall remain in
full force and effect notwithstanding (i) any
modification, agreement or stipulation between Maker
and Holder, or their respective successors and
assigns, with respect to the Loan Documents or the
obligations encompassed thereby, including, without
limitation, the Guaranteed Obligations; (ii)
Holder's waiver of or failure to enforce any of the
terms, covenants or conditions contained in the Loan
Documents or in any modification thereof, including,
without limitation, the Deed of Trust; (iii) any
release of Maker or any other guarantor from any
liability with respect to the Guaranteed
Obligations; or (iv) any release or subordination of
any real or personal property then held by Holder as
security for the performance of the Guaranteed
Obligations.
(b) Guarantor's liability under this Guaranty shall
continue until all sums due under the Note have been
paid in full and until all Guaranteed Obligations of
Maker to Holder have been satisfied, and shall not
be reduced by virtue of any payment by Maker of any
amount due under the Note or under any of the Loan
Documents or by Holder's recourse to any collateral
or security. Each Guarantor acknowledges that Holder
may apply any payment made by Maker to Holder to any
obligation of Maker to Holder under the terms of any
Loan Documents in such amounts and such manner as
Holder may elect, regardless of whether such
application complies with any instruction or
designation given or made by Maker with respect to
such payment and agrees that any such application
shall not in any manner reduce, extinguish or
otherwise affect the liability of the Guarantor
hereunder.
(c) Guarantor has and will continue to have full and
complete access to any and all information
concerning the transactions contemplated by the Loan
Documents or referred to therein, the value of the
assets owned or to be acquired by Maker, Maker's
financial status and its ability to pay and perform
the Guaranteed Obligations owed to Holder. Guarantor
further warrants and represents that he has approved
copies of the Loan Documents and is fully informed
of the remedies Holder may pursue, with or without
notice to Maker, in the event of default under the
Note or other Loan Documents. So long as any of the
Guaranteed Obligations remains unsatisfied or owing
to Holder, Guarantor shall keep himself fully
informed as to all aspects of Maker's financial
condition and the performance of the Guaranteed
Obligations.
4. The liability of Guarantor under this Guaranty is a guaranty
of payment and performance and not of collectibility, and is
not conditioned or contingent upon the genuineness, validity,
regularity or enforceability of the Loan Documents or other
instruments relating to the creation or performance of the
Guaranteed Obligations or the pursuit by Holder of any
remedies which it now has or may hereafter have with respect
thereto under the Loan Documents, at law, in equity or
otherwise.
5. Guarantor hereby waives to the extent permitted by law: (i)
all notices to Guarantor, to Maker, or to any other person,
including, but not limited to, notices of the acceptance of
this Guaranty or the creation, renewal, extension,
modification or accrual of any of the Guaranteed Obligations
owed to Holder and, except to the extent set forth in
Paragraph 7 hereof, enforcement of any right or remedy with
respect thereto, and notice of any other matters relative
thereto; (ii) diligence and demand of payment, presentment,
protest, dishonor and notice of dishonor; (iii) any statute of
limitations affecting Guarantor's liability hereunder or the
enforcement thereof; and (iv) all principles or provisions of
law which conflict with the terms of this Guaranty. Guarantor
further agrees that Holder may enforce this Guaranty upon the
occurrence and during the continuation of an Event of Default
under the Note or the Loan Documents (as Event of Default is
defined therein), notwithstanding the existence of any dispute
between Maker and Holder with respect to the existence of the
default or performance of the Guaranteed Obligations or any
counterclaim, set-off or other claim which Maker may allege
against Holder with respect thereto. Moreover, Guarantor
agrees that his obligations shall not be affected by any
circumstances which constitute a legal or equitable discharge
of a guarantor or surety.
6. Guarantor agrees that Holder may enforce this Guaranty without
the necessity of resorting to or exhausting any security or
collateral or proceeding against Maker or any other guarantor,
including without limitation, any other Guarantor named
herein. Guarantor hereby waives the right to require Holder to
proceed against Maker, to proceed against any other guarantor,
including without limitation any other Guarantor named herein,
to foreclose any lien on any real or personal property, to
exercise any right or remedy under the Loan Documents, to
pursue any other remedy or to enforce any other right.
7. (a) Guarantor agrees that nothing contained herein shall
prevent Holder from suing on the Note or from
exercising any rights available to it thereunder or
under any of the Loan Documents and that the exercise
of any of the aforesaid rights shall not constitute a
legal or equitable discharge of any of the
Guarantors. Guarantor hereby authorizes and empowers
Holder to exercise, in its sole discretion, any
rights and remedies, or any combination thereof,
which may then be available to Holder, since it is
the intent and purpose of Guarantor that the
obligations hereunder shall be absolute, independent
and unconditional under any and all circumstances.
Without limiting the generality of the foregoing,
Guarantor hereby expressly waives any and all
benefits under Arizona Revised Statutes ("A.R.S.")
Sections 12-1641 through 12-1646 and Rule 17(f) of
the Arizona Rules of Civil Procedure. Notwithstanding
any foreclosure of the lien of any deed of trust or
security agreement with respect to any or all of any
real or personal property secured thereby, whether by
the exercise of the power of sale contained therein,
by an action for judicial foreclosure or by an
acceptance of a deed in lieu of foreclosure,
Guarantor shall remain bound under this Guaranty.
(b) Guarantor hereby waives and relinquishes all rights
of subrogation, contribution and reimbursement from
or against Maker or against any collateral or
security. Guarantor further agrees that, to the
extent the waiver of its rights of subrogation,
contribution and reimbursement as set forth herein is
found by a court of competent jurisdiction to be void
or voidable for any reason, any rights of subrogation
Guarantor may have against Maker or against any
collateral or security shall be junior and
subordinate to any right Holder may have against
Maker and to all right, title and interest Holder may
have in any collateral or security. Holder may use,
sell or dispose of any item of collateral or security
as it sees fit without regard to any subrogation
right Guarantor may have, and upon disposition or
sale, any right of subrogation Guarantor may have
shall terminate. With respect to the enforced
collection of the Guaranteed Obligations or the
foreclosure of any security interest in any personal
property collateral then securing the Guaranteed
Obligations, Holder agrees to give Guarantor five (5)
days' prior written notice, in the manner set forth
in Paragraph 9 hereof, of any sale or disposition of
any such personal property collateral, other than
collateral which is perishable, threatens to decline
speedily in value, is of a type customarily sold on a
recognized market, or is cash, cash equivalents,
certificates of deposit or the like.
(c) Guarantor's sole right with respect to any such
foreclosure of real or personal property collateral
shall be to bid at such sale in accordance with
applicable law. Guarantor acknowledges and agrees
that Holder may also bid at any such sale and in the
event such collateral is sold to Holder in whole or
in partial satisfaction of the Guaranteed
Obligations, Guarantor shall have no further right or
interest with respect thereto. Notwithstanding
anything to the contrary contained herein, no
provision of this Guaranty shall be deemed to limit,
decrease, or in any way to diminish any rights of
set-off Holder may have with respect to any cash,
cash equivalents, certificates of deposit or the like
which may now or hereafter be put on deposit with
Holder by Maker.
(d) To the extent any dispute exists at any time between
or among any of the guarantors as to Guarantor's
right to contribution or otherwise, Guarantor agrees
to indemnify, defend and hold Holder harmless for,
from and against any loss, damage, claim, demand,
cost or any other liability (including reasonable
attorneys' fees and costs) Holder may suffer as a
result of such dispute.
(e) Guarantor hereby subordinates any liabilities or
indebtedness of Maker held by Guarantor to the
obligation of Maker to Holder under the Loan
Documents or any other instrument of indebtedness;
provided, however, that unless and until an Event of
Default shall have occurred, Maker may make and
Guarantor may accept regular payments of principal
and interest on such liabilities and indebtedness as
the same shall become due and payable.
8. (a) Guarantor warrants and represents that any financial
statements of Guarantor heretofore delivered to
Holder are true and correct in all material respects.
(b) Guarantor covenants and agrees to immediately notify
Holder of any material adverse change in Guarantor's
financial status.
9. All notices, requests and demands to be made hereunder to the
parties hereto shall be in writing and shall be delivered by
hand, or sent by registered or certified mail, postage
prepaid, through the United States Postal Service to the
addresses shown below or such other addresses which the
parties may provide to one another in accordance herewith.
Such notices, requests and demands, if sent by mail, shall be
deemed given two (2) days after deposit in the United States
mail, and if delivered by hand shall be deemed given when
delivered.
To Guarantor: ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
To Holder: Bank One, Arizona, NA
Real Estate Lending Division
P.O. Box 29542
Phoenix, Arizona 85038
10. This Guaranty shall be binding upon Guarantor, its successors
and assigns and shall inure to the benefit of and shall be
enforceable by Holder, its successors, endorsees and assigns.
Any married person executing this Guaranty agrees that
recourse may be had against community assets and against his
or her separate property for the satisfaction of all
obligations herein guaranteed. As used herein, the singular
shall include the plural, and the masculine shall include the
feminine and neuter and vice versa, if the context so
requires.
11. If any or all of the Guaranteed Obligations are not paid when
due or if an Event of Default occurs, Guarantor agrees to pay
all costs of enforcement and collection and preparation
therefore (including, without limitation, reasonable
attorney's fees) whether or not any action or proceeding is
brought (including, without limitation, all such costs
incurred in connection with any bankruptcy, receivership, or
other court proceedings (whether at the trial or appellate
level).
12. This Guaranty shall be governed by and construed in accordance
with the laws of the State of Arizona, without giving effect
to conflict of laws principles.
13. This Guaranty is solely for the benefit of Holder, its
successors, endorsees and assigns, and is not intended to nor
shall it be deemed to be for the benefit of any third party,
including Maker.
14. If any provision of this Guaranty is unenforceable, the
enforceability of the other provisions shall not be affected
and they shall remain in full force and effect.
15. This Guaranty may be executed in counterparts, all of which
executed counterparts shall together constitute a single
document.
16. (a) Binding Arbitration. Holder and Guarantor hereby
agree that all controversies and claims arising
directly or indirectly out of this Guaranty 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.
(b) 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.
(c)
Provisional Remedies, Self-Help, and Foreclosure. No
provision of subparagraph (a) shall limit the right
of any party to exercise self-help remedies, to draw
on any letters of credit, 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 Holder'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.
17. Guarantor shall maintain:
(a) As of the end of each fiscal quarter, an Owner's
Equity Percentage equal to or exceeding thirty-five
percent (35%). "Owner's Equity Percentage" means the
result obtained by dividing (i) Tangible Net Worth by
(ii) total assets, less Intangible Assets.
"Intangible Assets" means all intangible assets under
GAAP, including, without limitation, copyrights,
franchises, goodwill, licenses, loan origination
fees, non-competition covenants, organization or
formation expenses, patents, shares of the capital
stock of Guarantor, service marks, service names,
trademarks, trade names, write-up in the book value
of any asset in excess of the acquisition cost of the
asset to Guarantor, any amount, however designated on
the balance sheet, representing the excess of the
purchase price paid for assets or stock acquired over
the value assigned thereto on the books of Guarantor,
loans and advances to stockholders, directors,
officers, and employees of Guarantor, unamortized
leasehold improvements expense not recoverable at the
end of the lease term, unamortized debt discount, and
deferred discount. "Tangible Net Worth" means (i) the
sum of all capital accounts of Guarantor (including,
without limitation, any paid-in capital, capital
surplus, and retained earnings), plus (ii) the book
value, in accordance with GAAP, of the limited
partnership interest in Maker of shareholders of
Guarantor, as determined by Holder, less (iii) the
sum of the value on Guarantor's books of all
Intangible Assets.
(b) As of the end of each fiscal quarter, a Debt to
Equity Percentage equal to or less than 1.15 to 1.
"Debt to Equity Percentage" means the result obtained
by dividing (i) Debt of Guarantor by (ii) Tangible
Net Worth. "Debt" means, without limitation, (a) any
indebtedness for borrowed money, (b) all indebtedness
evidenced by bonds, debentures, notes, letters of
credit, drafts or similar instruments, (c) all
indebtedness to pay the deferred purchase price of
property or services, but not including accounts
payable and accrued expenses arising in the ordinary
course of business, (d) all capitalized lease
obligations, (e) all Debt of others secured by a lien
on any asset, whether or not such Debt is assumed by
Guarantor or guaranteed by Guarantor, and (f) all
Debt of others guaranteed by Guarantor and all other
indebtedness that would appear as a liability upon a
balance sheet of Guarantor prepared in accordance
with GAAP.
(c) At all times, cash, cash equivalents, and readily
marketable securities, free and clear of all liens
and encumbrances, in an aggregate amount not less
than $500,000.
18. At all times, Guarantor shall own all outstanding capital
stock of ILE Sedona Incorporated, an Arizona corporation
("ILE"), and ILE shall be the only general partner in Maker
with an ownership interest therein of not less than that held
on and as of the date hereof.
19. Guarantor hereby represents and warrants to Holder the
following:
(a) Organization and Powers. Guarantor is a corporation,
duly organized and validly existing under the laws of
the State of Arizona, and is qualified to transact
business in the State of Arizona. Guarantor has all
requisite power and authority, rights and franchises
to own and operate its properties, to carry on its
businesses as now conducted and as proposed to be
conducted, and to enter into and perform this
Agreement and the other Loan Documents. The address
of the Guarantor's chief executive office and
principal place of business is 2777 East Camelback
Road, Phoenix, Arizona 85016.
(b) Good Standing. Guarantor has made all filings and is
in good standing in the State of Arizona and in each
other jurisdiction in which the character of the
property it owns or the nature of the business it
transacts makes such filings necessary or where the
failure to make such filings could have a materially
adverse effect on the business, operations, assets or
condition (financial or otherwise) of Guarantor.
(c) Non-Foreign Status. Guarantor is not a "foreign
corporation," "foreign partnership," "foreign trust,"
or "foreign estate," as those terms are defined in
the Internal Revenue Code and the regulations
promulgated thereunder. Guarantor's U.S. employer
identification number is as set forth in the
Certification of Non-Foreign Status.
(d) Authorization. The execution, delivery and
performance of each of this Guaranty by Guarantor and
each other Loan Document to be executed and delivered
by Guarantor are within Guarantor's powers and have
been duly authorized by all necessary action by
Guarantor.
(e) No Conflict. The execution, delivery and performance
of this Guaranty and the other Loan Documents by
Guarantor will not violate (i) Guarantor's Articles
of Incorporation or Bylaws; or (ii) any legal
requirement affecting Guarantor or any of its
properties; or (iii) any agreement to which Guarantor
is bound or to which it is a party and will not
result in or require the creation (except as provided
in or contemplated by this Agreement) of any lien
upon any of such properties.
(f) Binding Obligations. This Guaranty and each of the
other Loan Documents executed by Guarantor have been
duly executed by Guarantor, and are legally valid and
binding obligations of Guarantor, enforceable against
Guarantor in accordance with their terms, except as
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and by
general principles of equity.
(g) No Material Defaults. There exists no material
violation of or material default by Guarantor and, to
the best knowledge of Guarantor, no event has
occurred which, upon the giving of notice or the
passage of time, or both, would constitute a material
default with respect to any mortgage, instrument,
agreement or document by which Guarantor, or any of
its properties is bound.
(h) Litigation; Adverse Facts. There is no action, suit,
investigation, proceeding or arbitration (whether or
not purportedly on behalf of the Guarantor) at law or
in equity or before or by any foreign or domestic
court or other governmental entity (a "Legal
Action"), pending or, to the knowledge of Guarantor,
threatened against or affecting Guarantor or any of
its assets which could reasonably be expected to
result in any material adverse change in the
business, operations, assets or condition (financial
or otherwise) of Guarantor or would materially and
adversely affect Guarantor's ability to perform its
obligations under this Guaranty and the other Loan
Documents. There is no basis known to Guarantor for
any such action, suit or proceeding. Guarantor is not
(a) in violation of any applicable law which
violation materially and adversely affects or may
materially and adversely affect the business,
operations, assets or condition (financial or
otherwise) of Guarantor, (b) subject to, or in
default with respect to any other legal requirement
that would have a materially adverse effect on the
business, operations, assets or condition (financial
or otherwise) of Guarantor, or (c) in default with
respect to any agreement to which Guarantor is a
party or to which it is bound. There is no Legal
Action pending or, to the knowledge of Guarantor,
threatened against or affecting Guarantor questioning
the validity or the enforceability of this Agreement
or any of the other Loan Documents.
(i) Payment of Taxes. All tax returns and reports of
Guarantor required to be filed by it have been timely
filed, and all taxes, assessments, fees and other
governmental charges upon Guarantor and upon its
properties, assets, income and franchises which are
due and payable have been paid when due and payable.
Guarantor knows of no proposed tax assessment against
it that would be material to the condition (financial
or otherwise) of Guarantor, and Guarantor has not
contracted with any government entity in connection
with such taxes.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the day and year first above written.
INCORPORATED, an Arizona corporation
By: Joseph P. Martori
---------------------------
Name: Joseph P. Martori
-------------------------
Title: Chairman/President
-----------------------
LOAN AGREEMENT
DATE: October 4, 1994
PARTIES: Borrower: ILX INCORPORATED, an Arizona corporation.
Borrower Address: 2777 East Camelback Road, Phoenix, Arizona
85016.
Bank: BANK ONE, ARIZONA, NA, a national banking
association.
Bank Address: Post Office Box 29542, Phoenix, Arizona 85038
Attention: Department A383
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank agree as follows:
1. SCHEDULE OF TERMS.
2. Commitment Amount: $500,000.00
3.1 Scheduled Commitment expiration date:
October 4, 1995.
3.1 and 5.1.6Purpose of Advances: Working capital requirements of Borrower.
3.2 Each of the following Persons acting alone is authorized to request
Advances:
Joseph P. Martori, Chairman/President Joseph P. Martori
Typed Name and Title (if any) Sample Signature
Nancy J. Stone, Executive Vice President Nancy J. Stone
Typed Name and Title (if any) Sample Signature
3.3.1 Commitment fee: $1,000.00 per quarter pursuant to Section 3.3
5.1.5, 6.2, 6.3.1, and 6.3.2. Financial statements and accounting system
requirements: Accrual Basis and GAAP
5.1.5 Fiscal year of Borrower: From January 1 to December 31.
6.3.1 Financial statements due within 60 days after the end of each fiscal
quarter.
Certificationrequirements: Borrower prepared financial statements.
Person(s) to sign financial statements on behalf of Borrower: Nancy
J. Stone, Executive Vice President, or Borrower's president
or chief financial officer.
6.3.2 Financial statements due within 120 days after the end of each fiscal
year of Borrower.
Certification requirements: Independent certified public
accountant satisfactory to Bank to audit financial statements and
deliver an unqualified opinion on the financial statements.
Person(s) to sign financial statements on behalf of Borrower:
Nancy J. Stone, Executive Vice President, or Borrower's president
or chief financial officer.
2. DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"Advance" means an advance by Bank to Borrower hereunder.
"Agreement" means this Loan Agreement as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"Approvals and Permits" means each and all approvals, authorizations, bonds,
consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, appropriate, or desirable for ownership or lease by Borrower
of its assets and property or for the conduct of the business and operations of
Borrower.
"Borrower Loan Documents" means the Loan Documents executed or delivered by
Borrower from time to time.
"Collateral" means the property, interests in property, and rights to property
securing any or all Obligations from time to time.
"Commitment" means the agreement of Bank in Section 3.1 to make Advances
pursuant to the terms and conditions herein.
"Commitment Amount" means the amount specified in Section 1.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
regulations and published interpretations thereunder, as in effect from time to
time.
"Event of Default" has the meaning specified in the Note and the other Loan
Documents.
"GAAP" means generally accepted accounting principles consistently applied.
"Governmental Authority" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"Intangible Assets" means all intangible assets under GAAP, including, without
limitation, copyrights, franchises, goodwill, licenses, loan origination fees,
non-competition covenants, organization or formation expenses, patents, shares
of the capital stock of Borrower, service marks, service names, trademarks,
trade names, write-up in the book value of any asset in excess of the
acquisition cost of the asset to Borrower, any amount, however designated on the
balance sheet, representing the excess of the purchase price paid for assets or
stock acquired over the value assigned thereto on the books of Borrower, loans
and advances to stockholders, directors, officers, and employees of Borrower,
unamortized leasehold improvements expense not recoverable at the end of the
lease term, unamortized debt discount, and deferred discount.
"LAP" means Los Abrigados Partners Limited Partnership, an Arizona limited
partnership.
"Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively, each and
all of the following: (i) any lease or other right to use; (ii) any assignment
as security, conditional sale, grant in trust, lien, mortgage, pledge, security
interest, title retention arrangement, other encumbrance, or other interest or
right securing the payment of money or the performance of any other liability or
obligation, whether voluntarily or involuntarily created and whether arising by
agreement, document, or instrument, under any law, ordinance, regulation, or
rule (federal, state, or local), or otherwise; and (iii) any option, right of
first refusal, other right to acquire, or other interest or right.
"Loan Documents" means this Agreement, the Note, and any other agreements,
documents, or instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Note, as they may be amended, modified, extended,
renewed, or supplemented from time to time.
"Loan Party" means Borrower and each other Person that from time to time is or
becomes obligated to Bank under any Loan Document or grants any Collateral.
"Material Adverse Change" means any change in the assets, business, financial
condition, operations, prospects, or results of operations of any Loan Party or
any other event or condition that in the reasonable opinion of Bank (i) could
affect the likelihood of performance by any Loan Party of any of the
Obligations, (ii) could affect the ability of any Loan Party to perform any of
the Obligations, (iii) could affect the legality, validity, or binding nature of
any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations.
"Net Income" means net income (loss) for such period, in accordance with GAAP.
"Note" means the Promissory Note, dated of even date herewith, of Borrower
payable to Bank, as it may be amended, modified, extended, renewed, restated, or
supplemented from time to time.
"Obligations" means the obligations of the Loan Parties under the Loan
Documents.
"Permitted Exceptions" means Liens and Encumbrances in favor of Bank, Liens and
Encumbrances shown on financial statements of Borrower delivered to Bank prior
to the date of this Agreement, Liens and Encumbrances otherwise disclosed to
Bank in writing prior to the date of this Agreement, and other Liens and
Encumbrances consented to by Bank in writing from time to time in its absolute
and sole discretion.
"Person" means a natural person, a partnership, a joint venture, an
unincorporated association, a limited liability company, a corporation, a trust,
any other legal entity, or any Governmental Authority.
"Tangible Net Worth" means (i) the sum of all capital accounts of the Borrower
(including, without limitation, any paid-in capital, capital surplus, and
retained earnings), plus (ii) the book value, in accordance with GAAP, of the
limited partnership interest in LAP of Persons who are also shareholders of
Borrower, as determined by Bank, less (iii) the sum of the value on Borrower's
books of all Intangible Assets.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
3. LOAN FACILITY.
3.1 Loan Facility. Subject to the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower from time to time on or before the
scheduled Commitment expiration date specified in Section 1. Proceeds of
Advances may be used only for the purposes described in Section 1. Borrower
shall not be entitled to any Advances after such scheduled Commitment expiration
date. Advances shall be on a revolving basis. Advances prepaid may be
re-borrowed subject to the terms and the conditions herein. Although the
outstanding principal of the Note may be zero from time to time, the Loan
Documents shall remain in full force and effect until the Commitment terminates,
and all Obligations are paid and performed in full. Upon occurrence of an Event
of Default or an Unmatured Event of Default, Bank, in its absolute and sole
discretion and without notice, may suspend the commitment to make Advances. In
addition, upon the occurrence of an Event of Default, Bank, in its absolute and
sole discretion and without notice, may terminate the commitment to make
Advances. The obligation of Borrower to repay Advances is evidenced by the Note.
If the amount of the outstanding Advances shall ever exceed the Commitment
Amount, Borrower shall immediately pay the amount of such excess to Bank.
3.2 Request for the Advances. Advances may be made by Bank at the oral or
written request of the Person or Persons designated in Section 1. Such Person or
Persons are hereby authorized by Borrower to request Advances and to direct
disposition of the proceeds of Advances until written notice of the revocation
of such authority is received from Borrower by Bank and Bank has had a
reasonable time to act upon such notice. Bank shall have no duty to monitor for
Borrower or to report to Borrower the use of proceeds of Advances. Advances
shall be disbursed by Bank into an account of Borrower with Bank.
3.3 Fees. As additional consideration for the Commitment, Borrower agrees
to pay to Bank the following fees, which shall be earned by Bank on the date due
under the Loan Documents and shall be non-refundable to Borrower:
3.3.1 Commitment Fee. Quarterly, in arrears, commencing on January 1, 1995
and continuing on the same date each three (3) months thereafter (each a "Fee
Payment Date"), a fee for the Commitment in the amount set forth in Section 1.
Notwithstanding the foregoing, on each Fee Payment Date, Bank agrees to waive
the commitment fee that would otherwise be due on that Fee Payment Date if,
during the fiscal quarter of Borrower then ended and the immediately preceding
three (3) fiscal quarters (or in the case of the first two Fee Payment Dates,
the fiscal quarters ending on or after September 30, 1994), the Borrower and LAP
have collectively maintained an average daily balance of $250,000.00 in
non-interest bearing accounts at Bank.
3.3.2Attorneys' Costs, Expenses, and Fees. Attorneys costs, expenses, and
fees for Bank's counsel in the amount specified by Bank, payable on or before
the date hereof.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT, TO EFFECTIVENESS OF
THE COMMITMENT, AND TO EACH ADVANCE. This Agreement and the Commitment shall
become effective only upon satisfaction of the following conditions precedent
and Bank shall be obligated to make an Advance when requested by Borrower only
if all conditions precedent to the effectiveness of that certain Second
Modification Agreement of even date herewith by and between Bank and LAP have
been satisfied within the time periods provided therein and all of the following
conditions precedent are satisfied, as determined by Bank in its absolute and
sole discretion.
4.1 Representations and Warranties Accurate. The representations and
warranties by each Loan Party in the Loan Documents are correct on and as of the
date of this Agreement and on and as of the date of each Advance, before and
after giving effect to such Advance and to the application of the proceeds
thereof, as though made on and as of such date.
4.2 Documents. Bank has received on the date of this Agreement the Loan
Documents, which shall include all agreements, documents, and instruments
specified by Bank.
4.3 Other Matters. Bank has received on the date of this Agreement
resolutions of Borrower authorizing Borrower to enter into this Agreement and
request Advances hereunder, copies of the articles and bylaws of Borrower
certified as true and complete by Borrower's secretary, an opinion of Borrower's
counsel if requested by Bank covering such matters as Bank may require, and any
and all other documents or information requested by Bank.
Borrower hereby authorizes Bank, and Bank reserves the right in its
absolute and sole discretion, to verify any documents and information submitted
to Bank in connection with this Agreement. Bank may elect, in its absolute and
sole discretion, to waive any of the foregoing conditions precedent. Any such
waiver shall be effective only if (i) it is in writing executed by Bank, (ii) it
specifically identifies the condition precedent, and (iii) it states whether the
condition precedent is waived as a requirement of the effectiveness of this
Agreement, the effectiveness of the Commitment, and/or as a requirement for a
particular Advance. Any such waiver shall be limited to the condition(s)
precedent specifically described therein and the requirements therein. Delay or
failure by Bank to insist on satisfaction of any condition of an Advance shall
not be a waiver of such condition precedent or any other condition precedent. If
Borrower is unable to satisfy any condition precedent of an Advance, the making
of such Advance shall not preclude Bank from thereafter declaring the condition
or event causing such inability to be an Event of Default.
5. BORROWER REPRESENTATIONS AND WARRANTIES.
5.1 Closing Representations and Warranties. Borrower represents and
warrants to Bank as of the date of this Agreement:
5.1.1 Corporate, Limited Liability Company, or Partnership Existence and
Authorization. If Borrower is a corporation, a limited liability company, or a
partnership, Borrower is validly existing, and in the case of a corporation or
limited liability company is in good standing, under the laws of the
jurisdiction of its formation or organization and has the requisite power and
authority to execute, deliver, and perform the Borrower Loan Documents. The
execution, delivery, and performance by Borrower of the Borrower Loan Documents
have been duly authorized by all requisite action by or on behalf of Borrower
and will not conflict with, or result in a violation of or a default under, the
certificate of incorporation and bylaws, the limited liability company operating
agreement, or the partnership agreement of Borrower, as the case may be. If
Borrower is not formed or organized under the law of the State of Arizona,
Borrower is qualified to do business as a foreign corporation, limited liability
company, or partnership, as the case may be, and in the case of a corporation or
limited liability company is in good standing, under the law of the State of
Arizona.
5.1.2 No Approvals. No approval, authorization, bond, consent, certificate,
franchise, license, permit, registration, qualification, or other action or
grant by or filing with any Person is required in connection with the execution,
delivery, or performance by Borrower of the Borrower Loan Documents.
5.1.3 No Conflicts. The execution, delivery, and performance by Borrower of
the Borrower Loan Documents will not conflict with, or result in a violation of
or a default under: any applicable law, ordinance, regulation, or rule (federal,
state, or local); any judgment, order, or decree of any arbitrator, other
private adjudicator, or Governmental Authority to which Borrower is a party or
by which Borrower or any of the assets or property of Borrower is bound; any of
the Approvals or Permits; or any agreement, document, or instrument to which
Borrower is a party or by which Borrower or any of the assets or property of
Borrower is bound.
5.1.4 Execution and Delivery and Binding Nature of Borrower Loan Documents.
The Borrower Loan Documents have been duly executed and delivered by or on
behalf of Borrower. The Borrower Loan Documents are legal, valid, and binding
obligations of Borrower, enforceable in accordance with their terms against
Borrower, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, or similar laws and by equitable
principles of general application.
5.1.5 Accurate Information. All information in any loan application,
financial statement, certificate, or other document and all other information
delivered by or on behalf of Borrower to Bank in obtaining the Commitment is
correct and complete, and there are no omissions therefrom that result in any
such information being incomplete, incorrect, or misleading as of the date
thereof. There has been no Material Adverse Change as to Borrower since the date
of such information. All financial statements heretofore delivered to Bank by
Borrower were prepared in accordance with the requirements set forth in Section
1 and accurately present the financial condition and results of operations of
Borrower as at the dates thereof and for the periods covered thereby. The fiscal
year of Borrower is as set forth in Section 1.
5.1.6 Purpose of Advances. The purpose of the Advances is as set forth in
Section 1.
5.1.7 Legal Proceedings; Hearings, Inquiries, and Investigations. Except as
disclosed to Bank in writing prior to the date of this Agreement, (i) no legal
proceeding is pending or, to best knowledge of Borrower, threatened before any
arbitrator, other private adjudicator, or Governmental Authority to which
Borrower is a party or by which Borrower or any assets or property of Borrower
may be bound or affected that if resolved adversely to Borrower could result in
a Material Adverse Change, and to the best knowledge of Borrower, there exist no
facts that would form any basis for any of the foregoing, and (ii) no hearing,
inquiry, or investigation relating to Borrower or any assets or property of
Borrower is pending or, to the best knowledge of Borrower, threatened by any
Governmental Authority.
5.1.8 No Event of Default or Unmatured Event of Default. No Event of
Default and no Unmatured Event of Default has occurred and is continuing.
5.1.9 Approvals and Permits; Assets and Property. Borrower has obtained and
there are in full force and effect all Approvals and Permits. Borrower owns or
leases all assets and property necessary for conduct of the business and
operations of Borrower. Such assets and property are not subject to any Liens
and Encumbrances, other than Permitted Exceptions.
5.1.10 Taxes. Borrower has filed or caused to be filed all tax returns
(federal, state, and local) required to be filed by Borrower and has paid all
taxes and other amounts shown thereon to be due (including, without limitation,
any interest and penalties).
5.1.11 ERISA. Borrower is in compliance with ERISA. No Reportable Event or
Prohibited Transaction (as defined in ERISA) or termination of any plan has
occurred and no notice of termination has been filed with respect to any plan
established or maintained by Borrower and subject to ERISA. Borrower has not
incurred any material funding deficiency within the meaning of ERISA or any
material liability to the Pension Benefit Guaranty Corporation in connection
with any such plan established or maintained by Borrower. Borrower is not a
party to any Multi-employer Plan (as defined in ERISA).
5.1.12 Environmental Matters. The information in any environmental
questionnaire delivered to Bank is accurate and complete with no material
omissions therefrom as of the date thereof. To the best knowledge of Borrower
after due investigation, Borrower is in compliance in all material respects with
all environmental, all health, and all safety laws, ordinances, regulations, and
rules (federal, state, and local) applicable to Borrower, the assets or property
of Borrower, the business or operations of Borrower, or the products or services
of Borrower. Borrower does not have any material existing or contingent
liability in connection with any disposal, generation, manufacture, processing,
production, release, storage, transportation, treatment, or use of any hazardous
or toxic substance or waste.
5.1.13 Investment Company Act. Borrower is not an "investment company" or a
company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Borrower is not a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.1.14 Margin Securities. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of Advances will be used to purchase or carry
any margin stock or extend credit to others for the purpose of purchasing or
carrying margin stock or for any purpose that violates or is inconsistent with
Regulation X of the Board of Governors.
5.2 Representations and Warranties Upon Requests for Advances. Each request
for an Advance shall be a representation and warranty by Borrower to Bank that
the representations and warranties in this Section 5 are correct and complete as
of the date of the Advance and that the conditions precedent in Section 4 are
satisfied as of the date of the Advance.
5.3 Representations and Warranties Upon Delivery of Financial Statements,
Documents, and Other Information. Each delivery by Borrower to Bank of financial
statements, other documents, or information after the date of this Agreement
(including, without limitation, any documents and information delivered in
obtaining an Advance) shall be a representation and warranty that such financial
statements, other documents, or information is correct and complete, that there
are no omissions therefrom that result in such financial statements, other
documents, or information being incomplete, incorrect, or misleading as of the
date thereof, and that such financial statements accurately present the
financial condition and results of operations of Borrower as at the dates
thereof and for the periods covered thereby.
6. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full and
until the Obligations are paid and performed in full, Borrower agrees that,
unless Bank otherwise agrees in writing in Bank's absolute and sole discretion:
6.1 Corporate, Limited Liability Company, or Partnership Existence. If
Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall continue to be validly existing, and in the case of a corporation
or a limited liability company in good standing, under the law of the
jurisdiction of its organization or formation. If Borrower is not formed or
organized under the laws of the State of Arizona, Borrower shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
6.2 Books and Records; Access By Bank. Borrower will maintain a single,
standard, modern system of accounting, in accordance with the requirements in
Section 1 (including, without limitation, a single, complete, and accurate set
of books and records of its assets, business, financial condition, operations,
property, prospects, and results of operations) in accordance with good
accounting practices. During business hours Borrower will give representatives
of Bank access to all assets, property, books, records, and documents of
Borrower and will permit such representatives to inspect such assets and
property and to audit, copy, examine, and make excerpts from such books,
records, and documents.
6.3 Information and Statements. Borrower shall furnish to Bank:
6.3.1 Fiscal Period Financial Statements. As soon as available and in any
event within the number of days set forth in Section 1 after the end of each
fiscal period of Borrower set forth in Section 1, except the last period in each
fiscal year of Borrower, copies of the balance sheet of Borrower as of the end
of such fiscal period and statements of income and retained earnings and a
statement of cash flow of Borrower for such fiscal period and for the portion of
the fiscal year of Borrower ending with such fiscal period, in each case setting
forth in comparative form the figures for the corresponding period for the
preceding fiscal year, all in reasonable detail, prepared in accordance with the
requirements in Section 1, containing the certifications specified in Section 1,
and signed on behalf of Borrower by the person(s) named in Section 1, together
with a certificate signed on behalf of Borrower by the person(s) named in
Section 1, representing and warranting to Bank Borrower's compliance with the
financial covenants set forth in Section 6.12 hereof.
6.3.2 Annual Financial Statements. As soon as available and in any event
within the number of days set forth in Section 1 after the end of each fiscal
year of Borrower, copies of the balance sheet of Borrower as of the end of such
fiscal year and statements of income and retained earnings and a statement of
cash flow of Borrower for such fiscal year, in each case setting forth in
comparative form the figures for the preceding fiscal year of Borrower, all in
reasonable detail and prepared in accordance with the requirements in Section 1,
containing the certifications specified in Section 1, and signed on behalf of by
the person(s) named in Section 1.
6.3.3. Securities Reports. As and when filed, copies of all statements and
reports filed with the Securities Exchange Commission.
6.3.4 Other Information. Such other information concerning Borrower and the
assets, business, financial condition, operations, property, prospects, and
results of operations of Borrower as Bank reasonably requests from time to time.
6.4 Law; Judgments; Material Agreements; Approvals and Permits. Borrower
shall comply with all laws, ordinances, regulations, and rules (federal, state,
and local) and all judgments, orders, and decrees of any arbitrator, other
private adjudicator, or Government Authority relating to Borrower or the assets,
business, operations, or property of Borrower. Borrower shall comply in all
material respects with all material agreements, documents, and instruments to
which Borrower is a party or by which Borrower or any of the assets or property
of Borrower is bound or affected. Borrower shall obtain and maintain in full
force and effect all Approvals and Permits and shall comply with all conditions
and requirements of all Approvals and Permits.
6.5 Taxes and Other Indebtedness. Borrower will pay and discharge (i)
before delinquency all taxes, assessments, and governmental charges or levies
imposed upon it, upon its income or profits, or upon any of its assets or
property, (ii) when due all lawful claims (including, without limitation, claims
for labor, materials, and supplies), that, if unpaid, might become a Lien or
Encumbrance upon any of its assets or property, and (iii) when due all its other
indebtedness.
6.6 Assets and Property. Borrower will maintain, keep, and preserve all of
its assets and property (tangible and intangible) necessary or useful in the
proper conduct of its business and operations in good working order and
condition, ordinary wear and tear excepted.
6.7 Insurance. In addition to any insurance required under any of the other
Loan Documents, Borrower shall maintain workmen's compensation insurance,
product and public liability insurance, insurance on its assets and property now
or hereafter owned, and such other forms of insurance as is customary in the
industry of Borrower, against such casualties, risks, and contingencies, in such
amounts, and with such insurance companies as are satisfactory to Bank, in its
reasonable discretion. Borrower shall deliver to Bank from time to time as Bank
may request, schedules setting forth all insurance then in effect and copies of
the policies.
6.8 Environmental Laws. Without limiting the generality of Section 6.4,
Borrower shall comply with all environmental, all health, and all safety laws,
ordinances, regulations, and rules (federal, state, local, and foreign)
applicable to Borrower, the business or operations of Borrower, the assets or
property of Borrower, or the products or services of Borrower. Borrower may use
and store for its own use hazardous or toxic substances. Borrower shall not
dispose of, generate, manufacture, process, produce, release, transport, or
treat or otherwise store or use any hazardous or toxic substances or wastes.
Borrower shall notify Bank immediately of any environmental inquiry or claim
from any Governmental Authority or other Person relating to Borrower or any
assets, property, business, operations, product, or service of Borrower.
6.9 ERISA. Borrower will fund each Defined Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) so that there is never an
Accumulated Funding Deficiency (as defined in Section 412 of the Internal
Revenue Code of 1986, as amended).
6.10 Further Assurances. Borrower shall promptly execute, acknowledge, and
deliver and, as appropriate, cause to be duly filed and recorded such additional
agreements, documents, and instruments and do or cause to be done such other
acts as Bank may reasonably request from time to time to better assure, perfect,
preserve, and protect the interest of Bank in the Collateral and the rights and
remedies of Bank under the Loan Documents.
6.11 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions. Borrower will perform all of its obligations and
satisfy all conditions under the Loan Documents at its sole cost and expense.
6.12 Financial Covenants. Except as otherwise noted, all capitalized terms
in this Section 6.12 not defined in this Agreement shall have the meanings
determined in accordance with GAAP. Borrower shall maintain:
6.12.1 Owner's Equity Percentage. As of the end of each fiscal quarter, an
Owner's Equity Percentage equal to or exceeding thirty-five percent (35%).
"Owner's Equity Percentage" means the result obtained by dividing (i) Tangible
Net Worth by (ii) Total Assets, less Intangible Assets.
6.12.2 Debt to Equity Percentage. As of the end of each fiscal quarter, a
Debt to Equity Percentage equal to or less than 1.15 to 1. "Debt to Equity
Percentage" means the result obtained by dividing (i) Debt of Borrower by (ii)
Tangible Net Worth. "Debt" means, without limitation, (a) any indebtedness for
borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes,
letters of credit, drafts or similar instruments, (c) all indebtedness to pay
the deferred purchase price of property or services, but not including accounts
payable and accrued expenses arising in the ordinary course of business, (d) all
capitalized lease obligations, (e) all Debt of others secured by a lien on any
asset, whether or not such Debt is assumed by Borrower or guaranteed by
Borrower, and (f) all Debt of others guaranteed by Borrower and all other
indebtedness that would appear as a liability upon a balance sheet of Borrower
prepared in accordance with GAAP.
6.12.3 Cash. At all times, cash, cash equivalents, and readily marketable
securities, free and clear of all Liens and Encumbrances, in an aggregate amount
not less than $500,000.
6.13Interest in LAP. At all times Borrower shall own all outstanding
capital stock of ILE Sedona Incorporated, an Arizona corporation ("ILE"), and
ILE shall be the only general partner in LAP with an ownership interest therein
of not less than that held on and as of the date hereof.
6.14Line Clearance. At least once prior to the scheduled Commitment
expiration date set forth in Section 1, Borrower shall repay all Advances
outstanding hereunder, together with accrued and unpaid interest thereon, and
shall thereafter have no Advances outstanding and unpaid for a period of thirty
(30) consecutive days.
7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and
until the Obligations are paid and performed in full, Borrower agrees that,
unless Bank otherwise agrees in Bank's absolute and sole discretion:
7.1 Corporate, Limited Liability Company, and Partnership Restrictions.
Borrower shall not be dissolved or liquidated. Borrower shall not amend, modify,
restate, supplement, or terminate its certificate of incorporation or bylaws.
Borrower shall not reorganize itself or consolidate with or merge into any other
corporation or permit any other corporation to be merged into Borrower.
7.2 Name, Fiscal Year, Accounting Method. Borrower shall not change its
name, fiscal year, or method of accounting.
7.3 Acquisition or Disposition of All or Substantially All Assets. Borrower
shall not sell, transfer, lease, or otherwise dispose of all or any substantial
part of the assets, business, operations, or property of Borrower.
8. BANK'S OBLIGATIONS TO BORROWER ONLY. The obligations of Bank under this
Agreement are for the benefit of Borrower only. No other Person shall have any
rights hereunder or be a third-party beneficiary hereof.
9. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to
certain terms and provisions in the Note, to which reference is made for a
statement of such terms and provisions.
10. 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.
DATED as of the date first above stated.
ILX INCORPORATED, an Arizona corporation
By: Joseph P. Martori
-----------------------------------
Name: Joseph P. Martori
---------------------------------
Title: Chairman/President
--------------------------------
BANK ONE, ARIZONA, NA, a national banking
association
By: Steven D. Strehlow
-----------------------------------
Name: Steven D. Strehlow
---------------------------------
Title: A.V.P.
--------------------------------
PROMISSORY NOTE
Principal Amount: $500,000.00 Date: October 4, 1994
Headquarters, Phoenix, Arizona.
PROMISE TO PAY AND INTEREST. For value received, the undersigned ("Borrower"),
promises to pay to BANK ONE, ARIZONA, NA, a national banking association, or
order ("Bank") at its above office, or at such other place as Bank may designate
in writing, in lawful money of the United States of America, the principal sum
of Five Hundred Thousand and No/100 Dollars ($500,000.00), or such lesser amount
as shall have been disbursed and is unpaid as shown on the records of Bank which
shall be conclusive as to such amount, with interest thereon from the date
advanced at the rate per annum ("Interest Rate") equal to the sum of (i) one and
one-half percent (1.5%) 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 Interest Rate will change on
each day that such "prime rate" changes. The "prime rate" is not necessarily the
best or lowest rate offered by Bank, and Bank may lend to its customers at rates
that are at, above, or below its "prime rate".
Interest shall be due and payable commencing on November 1, 1994, and
continuing on the same day of each successive month thereafter until October 4,
1995. Commencing on November 1, 1995, and continuing on the same day of each
successive month thereafter until April 4, 1996 ("Maturity Date"), Borrower
shall pay (i) principal in an amount equal to (A) the unpaid principal balance
hereof as of October 4, 1995, divided by (B) six, and (ii) interest on the
remaining unpaid principal balance at the Interest Rate then in effect.
On the Maturity Date Borrower shall pay to Bank the unpaid principal,
all accrued and unpaid interest, and all other amounts ("Other Amounts") payable
by Borrower to Bank under the Loan Documents. "Loan Documents" means this Note,
any related loan agreement, any related letter of credit agreements, and any
other agreements, documents, and instruments evidencing, guarantying, securing,
or otherwise relating to this Note, as they may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
Principal shall bear interest at the Interest Rate from the date of
disbursement until the due date thereof, whether due by acceleration or
otherwise. Principal, interest, and Other Amounts not paid when due and any
judgment therefor shall bear interest from its due date or the judgment date, as
applicable, until paid at a rate ("Default Rate") equal to the sum of (i) four
percent (4%) per annum and (ii) the Interest Rate, and such interest shall be
immediately due and payable.
All interest shall be computed on the basis of a 360-day year and
accrue on a daily basis for the actual number of days elapsed. Borrower agrees
to pay an effective rate of interest that is the sum of (i) the interest rate
provided herein and (ii) any additional rate of interest resulting from any
other charges or fees paid or to be paid in connection herewith that are
determined to be interest or in the nature of interest.
APPLICATION OF PAYMENTS. At the option of Bank, payments shall be applied to
principal, interest, and Other Amounts in such order as Bank shall determine.
PREPAYMENT. Borrower may prepay the outstanding principal balance hereof, in
whole or in part, at any time prior to the Maturity Date without penalty or
premium. All prepayments shall be applied to payments due hereunder in the
reverse chronological order of maturity.
LATE CHARGE. If any payment of principal and/or interest is not received by Bank
within fifteen (15) days after its due date, then, in addition to the other
rights and remedies of Bank, a late charge of four percent (4%) of the amount
due and unpaid will be charged to Borrower without notice to Borrower. Such late
charge shall be immediately due and payable.
NO COUNTERCLAIMS, DEDUCTIONS, ETC. All payments and other obligations of
Borrower under the Loan Documents will be made and performed without
counterclaim, deduction, defense, deferment, reduction, or set-off.
EVENTS OF DEFAULT. Each of the following shall be an event of default ("Event of
Default"):
1. Failure by any Loan Party to pay when due any amount payable by such
Loan Party under any of the Loan Documents or failure by Borrower to pay when
due any other indebtedness of Borrower to Bank and, in each case, the
continuation of such failure for ten (10) days after the due date. "Loan Party"
means Borrower and any other person that from time to time is obligated to Bank
under any of the Loan Documents or grants any property, interests in property,
or rights to property to secure any or all obligations of any person under the
Loan Documents.
2. Failure by any Loan Party to perform any obligation not involving
the payment of money, or to comply with any other term or condition applicable
to such Loan Party, in any of the Loan Documents and the continuation of such
failure for thirty (30) days after notice thereof from Bank.
3. Any representation or warranty made by any Loan Party in any of the
Loan Documents or otherwise or any information delivered by any Loan Party to
Bank in obtaining or hereafter in connection with the credit evidenced by this
Note is materially incomplete, incorrect, or misleading as of the date made or
delivered.
4. Bank believes in good faith that a Material Adverse Change has
occurred after the date of the financial statements and other information
provided by any Loan Party in obtaining the credit evidenced by this Note.
"Material Adverse Change" means any change in the assets, business, financial
condition, operations, prospects, or results of operations of any Loan Party or
any other event or condition that in the reasonable opinion of Bank (i) could
affect the likelihood of performance by any Loan Party of any of the obligations
in the Loan Documents, (ii) could affect the ability of any Loan Party to
perform any of the obligations in any of the Loan Documents, (iii) could affect
the legality, validity, or binding nature of any of the obligations in the Loan
Documents or any lien, security interest, or other encumbrance securing any of
the obligations under the Loan Documents, or (iv) could affect the priority of
any lien or encumbrance securing any of the obligations in the Loan Documents.
5. Any Loan Party (i) is unable or admits in writing such Loan Party's
inability to pay such Loan Party's monetary obligations as they become due, (ii)
makes a general assignment for the benefit of creditors, or (iii) applies for,
consents to, or acquiesces in, appointment of a trustee, receiver, or other
custodian for such Loan Party or any or all of the property of such Loan Party,
or in the absence of such application, consent, or acquiescence by such Loan
Party a trustee, receiver, or other custodian is appointed for such Loan Party
or any or all of the property of such Loan Party.
6. Commencement of any case under the Bankruptcy Code (Title 11 of the
United States Code) or commencement of any other bankruptcy, arrangement,
reorganization, receivership, custodianship, or similar proceeding under any
federal, state, or foreign law by or against any Loan Party.
7. The death, incompetence, dissolution, or liquidation of any Loan
Party; the consolidation or merger of any Loan Party with any other Person; or
the taking of any action by any Loan Party toward a dissolution, liquidation,
consolidation, or merger.
8. Any Loan Party or any other person on behalf of any Loan Party
claims that any Loan Document is not legal, valid, binding, and enforceable
against any Loan Party, that any lien, security interest, or other encumbrance
securing any of the obligations under the Loan Documents is not legal, valid,
binding, and enforceable, or that the priority of any lien, security interest,
or other encumbrance securing any of the obligations in the Loan Documents is
different than the priority represented and warranted in the Loan Documents.
9. The occurrence of any condition or event that is a default or is
designated as a default, an event of default, or an Event of Default in any
other Loan Document or in any agreement, document, or instrument relating to any
other indebtedness of any Loan Party to Bank.
10. The occurrence of any condition or event that is a default or is
designated as a default, an event of default, or an Event of Default in or
pursuant to that certain Loan Agreement dated September 9, 1991, by and between
Bank and Los Abrigados Partners Limited Partnership, an Arizona limited
partnership, as the same may be amended, modified, restated or renewed from time
to time.
RIGHTS AND REMEDIES OF BANK. Upon occurrence of an Event of Default, Bank may,
at its option, in its absolute and sole discretion, and without demand or
notice, (i) declare the obligations in the Loan Documents to be immediately due
and payable, whereupon the obligations in the Loan Documents shall be
immediately due and payable, and (ii) exercise any or all other rights and
remedies of Bank concurrently or consecutively in such order as Bank elects. The
rights and remedies of Bank shall be cumulative and non-exclusive. Delay,
discontinuance, or failure to exercise any right or remedy of Bank shall not be
a waiver thereof, or of any other right or remedy of Bank, or of the time of the
essence provision. Exercise of any right or remedy of Bank shall not cure or
waive any Event of Default or invalidate any act done in response to any Event
of Default.
LIMIT ON LIABILITY OF BANK. In exercising rights and remedies, neither Bank nor
any stockholder, director, officer, employee, agent, or representative of Bank
shall have any liability for any injury to the assets, business, operations, or
property of Borrower or any other liability to Borrower, other than for its own
gross negligence or willful misconduct.
SURVIVAL. The representations, warranties, and covenants of the Loan Parties in
the Loan Documents shall survive the execution and delivery of the Loan
Documents and the making of advances to Borrower.
INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER, APPROVAL,
CONSENT, ETC. The Loan Documents contain the complete understanding and
agreement of Borrower and Bank and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations. No
provision of the Loan Documents may be changed, discharged, supplemented,
terminated, or waived except in a writing signed by the parties thereto. Delay
or failure by Bank to insist on performance of any obligation when due or
compliance with any other term or condition in the Loan Documents shall not
operate as a waiver thereof or of any other obligation, term, or condition or of
the time of the essence provision. Acceptance of late payments shall not be a
waiver of the time of the essence provision, the right of Bank to require that
subsequent payments be made when due, or the right of Bank to declare an Event
of Default if subsequent payments are not made when due. Any approval, consent,
or statement that a matter is satisfactory by Bank under the Loan Documents must
be in writing executed by Bank and shall be construed to apply only to the
person(s) and facts specifically set forth in the writing.
BINDING EFFECT. The Loan Documents shall be binding upon and shall inure to the
benefit of Bank and the Loan Parties and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of the Loan Parties, provided, however, that the Loan Parties may
not assign any of their rights or delegate any of their obligations under the
Loan Documents and any purported assignment or delegation shall be void. Bank
may from time to time in its absolute and sole discretion assign it rights and
delegate its obligations under the Loan Documents, in whole or in part, without
notice to or consent by any Loan Party (including, without limitation,
participations). In addition to any greater or lesser limitation provided by
law, no Loan Party shall assert against any assignee of Bank any claims or
defenses such Loan Party may have against Bank, except claims and defenses
arising under the Loan Documents.
COSTS, EXPENSES, AND FEES. Borrower agrees to pay on demand all external and
internal costs, expenses, and fees (including, without limitation, as
applicable, inside and outside attorneys, paralegals, document clerks and
specialists, appraisal, appraisal review, environmental assessment,
environmental testing, environmental cleanup, other inspection, processing,
title, filing, and recording costs, expenses, and fees) of Bank (i) in the
negotiation, execution, delivery, and modification of the Loan Documents, (ii)
in the making of advances, in the monitoring the activities of Borrower, and
otherwise in administering the credit evidenced by this Note, (iii) in
enforcement of the Loan Documents and exercise of the rights and remedies of
Bank, (iv) in defense of the legality, validity, binding nature, and
enforceability of the Loan Documents and the perfection and priority of the
liens and encumbrances granted in the Loan Documents, (v) in gaining possession
of, holding, repairing, maintaining, preserving, and protecting the property
("Collateral") securing the obligations in the Loan Documents, (vi) in selling
or otherwise disposing of the Collateral, (vii) otherwise in relation to the
Loan Documents, the Collateral, or the rights and remedies of Bank under the
Loan Documents or relating to the Collateral, and (viii) in preparing for the
foregoing, whether or not any legal proceeding is brought or other action is
taken. Such costs, expenses, and fees shall include, without limitation, all
such costs, expenses, and fees incurred in connection with any bankruptcy,
receivership, replevin, or other court proceedings (whether at the trial or
appellate level). Borrower agrees to pay interest on such costs, expenses, and
fees at the Default Rate from the date incurred by Bank until paid in full.
SEVERABILITY. If any provision or any part of any provision of the Loan
Documents is unenforceable, the enforceability of the other provisions or the
other provisions and the remainder of the subject provision, respectively, shall
not be affected and they shall remain in full force and effect.
CHOICE OF LAW. The Loan Documents shall be governed by the laws of the State of
Arizona, without giving effect to conflict of laws principles.
TIME OF ESSENCE. Time is of the essence with regard to each provision of the
Loan Documents as to which time is a factor.
NOTICES AND DEMANDS. All demands or notices under the Loan Documents shall be in
writing (including, without limitation, telecopy, telegraphic, telex, or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled, or
delivered to the respective party hereto at the address specified at the end of
this paragraph or such other address as shall have been specified in a written
notice. Any demand or notice mailed shall be mailed first-class mail,
postage-prepaid, return-receipt-requested and shall be effective upon the
earlier of (i) actual receipt by the addressee, and (ii) the date shown on the
return-receipt. Any demand or notice not mailed will be effective upon the
earlier of (i) actual receipt by the addressee, and (ii) the time the receipt of
the telecopy, telegram, telex, or cable is mechanically confirmed.
Address for Notices to Borrower:
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Address for Notices to Bank:
Bank One, Arizona, NA
P.O. Box 29542
Phoenix, Arizona 85038
Attention: Dept. A383
JOINT AND SEVERAL OBLIGATIONS. All obligations in any of the Loan Documents
executed by more than one Loan Party shall be the joint and several obligations
of each such person, and each reference in any Loan Document to Borrower,
Obligor, or Trustor shall be a reference to each such person individually and
all such persons collectively.
COMMUNITY PROPERTY AND SEPARATE PROPERTY OF BORROWER. If Borrower includes one
or more persons who are married to each other or to other persons, each such
person included in Borrower agrees that (i) the Loan Documents executed by
Borrower are made on behalf of the marital community of each person included in
Borrower and his or her spouse, and (ii) Bank may have recourse against the
separate property of each person included in Borrower and the community property
of each such person included in Borrower and his or her spouse for satisfaction
of the obligations of Borrower under the Loan Documents.
BANK'S RIGHT OF SET-OFF. Borrower grants to Bank (i) the right at any time and
from time to time after an Event of Default, in the absolute and sole discretion
of Bank and without demand or notice to the Borrower, to set-off and apply
deposits (whether certificates of deposit, demand, general, savings, special,
time, or other, and whether provisional or final) held by Bank for Borrower and
any other liabilities or other obligations of Bank to Borrower ("Deposits,
Liabilities, and Obligations") against or to the obligations of Borrower under
the Loan Documents, regardless of whether the Deposits, Liabilities, and
Obligations are contingent, matured, or unmatured, and (ii) a security interest
in the Deposits, Liabilities, and Obligations to secure the obligations of
Borrower under the Loan Documents. In addition, Borrower grants to Bank the
right upon occurrence of an event that with notice, passage of time, or both
would be an Event of Default to segregate all Deposits, Liabilities, and
Obligations into an account or otherwise under the sole control of Bank.
INDEMNIFICATION OF BANK. Borrower agrees to indemnify, hold harmless, and on
demand defend Bank and its stockholders, directors, officers, employees, agents,
and representatives for, from, and against any and all damages, losses,
liabilities, costs, and expenses (including, without limitation, costs and
expenses of litigation and reasonable attorneys' fees) arising from any claim or
demand in respect of the Loan Documents, the Collateral, or the transaction
described in the Loan Documents and arising at any time, whether before or after
payment and performance of the Obligations in full, excepting any such matters
arising solely from the gross negligence or willful misconduct of Bank. The
obligations of Borrower and the rights of Bank under this paragraph shall
survive payment and performance of the Obligations in full and shall remain in
full force and effect without termination.
RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time, whether
before or after payment and performance of the obligations of the Loan Parties
under the Loan Documents in full, all or any part of any amount received by Bank
in payment of, or on account of, any obligation of the Loan Parties under the
Loan Documents is or must be, or is claimed to be, avoided, rescinded, or
returned by Bank to Borrower or any other Person for any reason whatsoever
(including, without limitation, bankruptcy, insolvency, or reorganization of
Borrower or any other Person), such obligation and any liens, security
interests, and other encumbrances that secured such obligations at the time such
avoided, rescinded, or returned payment was received by Bank shall be deemed to
have continued in existence or shall be reinstated, as the case may be, all as
though such payment had not been received.
NO CONSTRUCTION AGAINST BANK OR BORROWER. The Loan Documents are the result of
negotiations between Borrower and Bank. Accordingly, the Loan Documents shall
not be construed for or against Borrower or Bank, regardless of which party
drafted the Loan Documents or any part thereof.
HEADINGS. The headings at the beginning of each section of the Loan Documents
are solely for convenience and are not part of the Loan Documents.
NUMBER AND GENDER. In the Loan Documents the singular shall include the plural
and vice versa and each gender shall include the other genders.
MULTIPLE CREDIT ACCOMMODATIONS. If from time to time Borrower has more than one
loan or other credit accommodation with Bank, Borrower agrees that, unless
otherwise agreed by Bank and Borrower in writing, (i) the Loan Documents and the
agreements, documents, and instruments evidencing and relating to such other
loan(s) and credit accommodation(s) shall all remain in effect and neither shall
supersede the other, regardless of whether the Loan Documents and such other
agreements, documents, and instruments have differing terms, conditions, and
requirements, and (ii), regardless of any such differences, Borrower shall
comply with all the terms, conditions, and requirements of the Loan Documents
and of such other agreements, documents, and instruments.
WAIVER OF STATUTE OF LIMITATIONS. Borrower waives, to the full extent permitted
by law, the right to plead any statutes of limitations as a defense to any or
all obligations under the Loan Documents.
WAIVERS BY BORROWER. Borrower (i) waives, to the full extent permitted by law,
presentment, notice of dishonor, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of dishonor, and all other notices or
demands of any kind (except notices specifically provided for in the Loan
Documents), and (ii) agrees that Bank may enforce this Note and any other Loan
Documents against any person included in Borrower without first having sought
enforcement against any other Loan Party or any Collateral.
ILX INCORPORATED, an Arizona corporation
By: Joseph P. Martori
---------------------------
Name: Joseph P. Martori
------------------------
Title: Chairman/President
------------------------
CHANGE IN TERMS AGREEMENT
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$400,000.00 1/8/1995 02556 220 0015765 007
References above are for Lender's use only and do not limit the
applicability of this document to any particular loan or Item.
================================================================================
Borrower: LOS ABRIGADOS PARTNERS LIMITED Lender: FIRSTAR METROPOLITAN BANK
PARTNERSHIP (LAP) & TRUST
2777 E. CAMELBACK ROAD MAIN OFFICE
PHOENIX, AZ 85016 320 N. CENTRAL AVE
PHOENIX, AZ 85004
================================================================================
Principal Amount:$400,000.00 Date of Agreement: November 8, 1994
DESCRIPTION OF EXISTING INDEBTEDNESS. REVOLVING CREDIT PROMISSORY NOTE DATED
NOVEMBER 8, 1993 IN THE AMOUNT OF $250,000 WITH A MATURITY DATE OF NOVEMBER 8,
1994.
DESCRIPTION OF COLLATERAL. UNSECURED.
DESCRIPTION OF CHANGE IN TERMS. EXTEND MATURITY DATE OF NOTE TO NOVEMBER 8, 1995
AND INCREASE NOTE AMOUNT TO $400,000.
PROMISE TO PAY. LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP (LAP) ("Borrower")
promises to pay to FIRSTAR METROPOLITAN BANK & TRUST ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Four
Hundred Thousand & 00/100 Dollars ($400,000.00) or so much as may be
outstanding, together with Interest on the unpaid outstanding principal balance
of each advance.
Interest shall be calculated from the date of each advance until repayment of
each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on November 8, 1995. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning December 8,
1994, and all subsequent interest payments are due on the same day of each month
after that. Interest on this Agreement is computed on a 365/360 simple interest
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an independent index which is the FIRSTAR
BANK MILWAUKEE, N.A.'S PRIME RATE (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The interest rate change will not occur more often than
each DAY. The index currently Is 7.750% per annum. The interest rate to be
applied to the unpaid principal balance of this Agreement will be at a rate of
2.000 percentage points over the index, resulting in an initial rate of 9.750%
per annum. NOTICE: Under no circumstances will the interest rate on this
Agreement be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to perform promptly at the time
and strictly in the manner provided in this Agreement or any agreement related
to this Agreement, or in any other agreement or loan Borrower has with Lender.
(c) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect. (d) Any
partner dies or any of the partners or Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (a) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(f) Any of the events described in this default section occurs with respect to
any guarantor of this Agreement. (g) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Agreement
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) If Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within fifteen (15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Agreement to 6.000 percentage points over the index. The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Agreement if Borrower does not pay. Borrower
also will pay Lender that amount. This Includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Agreement has been delivered to
Lender and accepted by Lender in the State of Arizona. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of MARICOPA County, the State of Arizona. This Agreement shall be
governed by and construed in accordance with the laws of the State of Arizona.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, convoys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff ail sums owing on this Agreement against any and all such
accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested orally by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed in
writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the fine of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: NANCY STONE, EXEC. Vice
President. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Agreement at any time may be evidenced by endorsements on this Agreement or by
lender's internal records, including daily computer print-outs. lender will have
no obligation to advance funds under this Agreement if: (a) Borrower or any
guarantor is in default under the terms of this Agreement or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Agreement; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Agreement or any other loan with Lender; (d) Borrower has applied funds provided
pursuant to this Agreement for purposes other than those authorized by Lender;
or (e) Lender in good faith deems itself insecure under this Agreement or any
other agreement between Lender and Borrower.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, or obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
CHANGE IN TERMS AGREEMENT
(Continued)
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Agreement without losing them. Borrower and any other
person who signs, guarantees or endorses this Agreement, to the extent allowed
by law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Agreement, and unless otherwise expressly
stated in writing, no party who signs this Agreement, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fall to realize upon or perfect Lenders security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THE AGREEMENT.
BORROWER:
LOS ABRIGADOS PARTNER LIMITED PARTNERSHIP (LAP)
BY: NANCY J. STONE
-------------------------------------------------------------
ILE Sedona, Inc., General Partner, NANCY STONE, Vice President
COMMERCIAL GUARANTY
(Continued)
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED NOVEMBER 8,1994.
GUARANTOR:
ILX INCORPORATED
BY: NANCY J. STONE
------------------------------------
NANCY STONE, Executive Vice President
July , 1994
Joseph P. Martori, President
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Re: Tammac Financial Corp. ("Tammac")
to: Los Abrigados Partners Limited Partnership
(a/k/a Los Abrigados Limited Partners Limited Partnership),
an Arizona Limited Partnership ("LAP", "Developer"
or "Borrower")
Resort: Los Abrigados Resort & Spa
(a/k/a Sedona Vacation Club)
160 Portal Lane, Sedona, Arizona
Dear Mr. Martori:
Pursuant to our various discussions, you have requested that Tammac
make a loan to LAP in the approximate amount of $425,000.00 (the "Loan"), which
is to be secured by Acceptable Contracts (as that phrase is hereinafter defined)
and certain other assets owned by LAP. You have also requested, on behalf of
LAP, that Tammac: (i) extend the term of the Commitment Letter dated June 28,
1991 (the "Commitment Letter") issued by Tammac to International Leisure
Enterprises Incorporated (n/k/a ILX Incorporated) ("ILX") and assigned to LAP;
and (ii) modify certain provisions of that certain Financing Agreement dated as
of September 10, 1991 entered into by and between LAP and Tammac, as amended by
that certain Modification Agreement dated as of August 12, 1992 and again
amended by that certain Amendment to Commitment Letter, Financing Agreement, and
Reaffirmation of Various Loan Documents dated as of March 31, 1993 (the
"Financing Agreement"). The Commitment Letter and Financing Agreement, as
modified, set forth the terms and conditions regarding LAP's sale and Tammac's
purchase of certain consumer installment obligations generated at that certain
timeshare condominium project known as Los Abrigados Resort & Spa and the Sedona
Vacation Club located at 160 Portal Lane, Sedona, Coconino County, Arizona (the
"Project" or "Resort").
After reviewing LAP's request for financing as hereinabove set forth,
Tammac is pleased to confirm its proposal to make the Loan and to modify the
Commitment Letter and Financing Agreement subject to the execution and delivery
of the loan documentation in form andsubstance as is satisfactory to Tammac and
its counsel and subject to the following terms and conditions:
I. THE LOAN:
A. Borrower: Los Abrigados Partners Limited
Partnership (a/k/a Los Abrigados Limited Partners Limited
Partnership), an Arizona Limited Partnership.
B. Principal Amount
of Loan: The amount of the Loan shall be the product of seventy-five
(75%) percent multiplied by the aggregate remaining principal
balance of the Acceptable Contracts (as defined herein), but in no event greater
than $500,000.00.
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 defined in and created by the Membership Plan and By-laws for the
Resort (a "Unit Week" or "Timeshare Estate"), 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, which Contract shall have a term of at least four years
except for non-interest bearing Contracts, which shall have a term of at least
one year; (ii) the purchase price under the terms of the Contract is payable in
not more than 84 equal monthly installments 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) 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 and 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 (if said Contract provides for the payment of interest) is at least 3
percentage points above the highest prime rate as announced in The Wall Street
Journal on the business day preceding the closing of the Loan; (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) at
least one monthly payment has been made thereon and 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; and (xiii) the
Contract shall be valid, enforceable and legally binding upon the Consumer.
C. Maturity of the Loan: The maturity of the Loan shall be four (4) years from
the date of the Loan closing, 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.
D. 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.
E. Mandatory Payments: During the first twelve (12) months of the Loan, the
Borrower shall pay to Tammac a minimum payment each month of $14,406.00.
Thereafter, for the next consecutive thirty-six (36) months, the Borrower shall
pay to Tammac a minimum monthly payment of $6,280.00. 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.
F. Voluntary Prepayment: The Borrower shall have the right to prepay the
principal of the Loan at any time without penalty or premium.
G. Servicing of Acceptable Contracts: Borrower shall, at its cost and expense,
enter into a servicing agreement with a servicing entity selected by Borrower
and approved by Tammac ("Servicing Agent"), to service the Acceptable Contracts.
The Servicing Agent shall furnish to Tammac such reports, documentation and
information regarding the Acceptable Contracts as is reasonably satisfactory to
Tammac.
H. Collection of Monies Due Under Contracts: Borrower and/or the Servicing Agent
shall maintain a depository Dominion 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 provided, 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.
I. Collateral: (i) A first lien on all of the Acceptable Contracts and related
consumer documents, which shall be enumerated on a schedule prepared by Borrower
and approved by Tammac.
(ii) A valid second lien on the entire real property, structures
and fixtures located thereon at the Resort, subject only to an existing first
lien on the Resort maintained by Bank One, Arizona, N.A., with a principal
balance remaining due thereunder of no more than $2,300,000.00, and that certain
Deeds of Trust Equal Priority Agreement entered into by and among Tammac and
Resort Funding, Inc.
Notwithstanding anything contained herein to the contrary,
provided LAP is not in default under the Loan Documents or any other obligations
due to Tammac, whether now existing or hereafter arising, upon LAP's request,
Tammac shall subordinate its second lien 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 $2,500,000.00.
(iii) A valid perfected security interest in all fixtures,
furnishings, equipment, machinery, apparatus, fittings, building materials 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
the Borrower.
(iv) A collateral assignment of all leases, rents and profits
relating to he Resort.
(v) All of the Borrower's (a) accounts and accounts receivables
relating to the Acceptable Contracts and Contracts purchased by Tammac; (b)
inventory; (c) machinery, equipment, furniture and fixtures; (d) contract rights
relating to the Acceptable Contracts and the Contracts purchased by Tammac; (e)
general intangibles relating to the Acceptable Contracts and the Contracts
purchased by Tammac; (f) interests in marketing or direct mail agreements
relating to the Resort as same relate to the Acceptable Contracts and Contracts
purchased by Tammac; (g) licenses, contracts, management contracts or
agreements, permits or certificates relating to the Resort; (h) rights as
declarant, developer, 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.
J. Guarantor: The obligations of the Borrower pursuant to the Loan shall be
unconditionally guaranteed by ILX, Incorporated, an Arizona Corporation,
pursuant to a continuing guaranty agreement in such form and substance as is
satisfactory to Tammac and its counsel.
II. MODIFICATION OF COMMITMENT LETTER:
Tammac's obligation to purchase Contracts pursuant to the Commitment
Letter, as amended, expires on September 30, 1994. The Developer has requested
that Tammac extend the term of the Commitment Letter for an additional
twenty-four (24) months and purchase up to an additional $10,000,000.00 of new
Contracts to be generated by the Developer at the Project. (All capitalized or
defined terms used herein shall have the same meaning set forth in the
Commitment Letter, the Financing Agreement, the Modification Agreement, Deed of
Trust, the Security Agreement and all related loan documents, unless otherwise
defined herein).
Effective as of the date that the Second Amendment to the Financing
Agreement and related Loan Documents ("Second Amendment") executed and delivered
to Tammac by the Developer and the Guarantor, the Commitment Letter shall be
modified in the following respects:
A. Increase in Phase II Funding: From and after the date of the Second
Amendment, Tammac shall, subject to the terms and conditions of the Commitment
Letter, the Financing Agreement, as modified and amended, and all related loan
documents, purchase up to an additional $10,000,000.00 of Contracts on a going
forward basis. Said additional funding for purposes of the Commitment Letter and
Financing Agreement shall be deemed to be "Phase II" funding.
B. Collateral: Paragraph 2 of the Commitment Letter is amended in its entirety
to read as follows:
(i) Assignment of the Developer's right, title and interest in
and to the Contracts and related consumer documents purchased by Tammac.
(ii) A first lien on all of the Acceptable Contracts and related
consumer documents, which shall be enumerated on a schedule prepared by
Developer and approved by Tammac.
(iii) A valid second lien on the entire real property,
structures and fixtures located thereon at the Resort, subject only to a first
lien on the Resort maintained by Bank One, Arizona, N.A., with a principal
balance remaining due thereunder of no more than $2,300,000.00, and that certain
Deeds of Trust Equal Priority Agreement entered into by and among Tammac and
Resort Funding, Inc.
Notwithstanding anything contained herein to the contrary,
provided LAP is not in default under the Loan Documents or any other obligations
due to Tammac, whether now existing or hereafter arising, upon LAP's request,
Tammac shall subordinate its second lien 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 $2,500,000.00.
(iv) A valid perfected security interest in all fixtures,
furnishings, equipment, machinery, apparatus, fittings, building materials 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
the Borrower.
(v) A collateral assignment of all leases, rents and profits
relating to the Resort.
(vi) All of the Borrower's (a) accounts and accounts receivables
relating to the Acceptable Contracts and Contracts purchased by Tammac; (b)
inventory; (c) machinery, equipment, furniture and fixtures; (d) contract rights
relating to the Acceptable Contracts and Contracts purchased by Tammac; (e)
general intangibles relating to the Acceptable Contracts and Contracts purchased
by Tammac; (f) interests in marketing or direct mail agreements relating to the
Resort as same relate to the Acceptable Contracts and Contracts purchased by
Tammac; (g) licenses, contracts, management contracts or agreements, permits or
certificates relating to the Resort; (h) rights as declarant, developer, 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.
C. Guarantor: Paragraph 3 of the Commitment Letter is amended in its entirety to
read as follows:
3. Guarantor: The obligations of the Developer pursuant to the Financing
Agreement, shall be unconditionally guaranteed by ILX Incorporated, pursuant to
a continuing guaranty agreement in such form and substance as is satisfactory to
Tammac and it counsel.
D. Legal Fees: Paragraph 5 of the Commitment Letter is amended in its entirety
to read as follows:
5. Legal Fees: Upon Developer's and the Guarantor's acceptance of this
proposal letter, Developer and the Guarantor hereby unconditionally agree to pay
all fees, expenses and charges with respect to the transactions contemplated
hereunder (whether or not said transactions are consummated), including, without
limiting the generality thereof, title insurance, survey costs, recording and
filing fees and the fees and expenses of counsel for Tammac.
E. Title Insurance: Paragraph 6 of the Commitment Letter is amended in its
entirety to read as follows:
6. Title Insurance: LAP shall furnish Tammac with an endorsement to the
existing title insurance policy insuring Tammac's interest in the Project in an
amount of $9,000,000.00, satisfactory to Tammac, noting the recording of the
Second Modification to the Deed of Trust, Assignment of Rents and Security
Agreement. The endorsement to the existing title policy shall not reflect any
additional defects, liens, encumbrances and exceptions to title whatsoever,
except for exceptions that are approved by counsel for Tammac.
F. Financing Agreement: (a) Paragraph 10(a) of the Commitment Letter is amended
in its entirety to read as follows:
10(a). Provided LAP is not in default under the terms
and conditions of the Financing Agreement, and the Guarantor is not in default
pursuant to the terms of the guaranty agreement, Tammac shall purchase those
Contracts offered for sale by LAP, subject to the Phase I and Phase II
commitment amounts, as amended, provided said Contracts meet Tammac's lending
criteria and guidelines, as same shall be in effect on the date that the Second
Amendment is executed and delivered to Tammac by the Developer and Guarantor. A
copy of Tammac's then current lending guidelines and criteria shall be attached
to the Second Amendment. Tammac's lending guidelines and criteria shall not
change during the term of the Financing Agreement.
Except as set forth in 10(f) below, Tammac shall accept
Contracts that meet Tammac's lending guidelines and criteria and which are
written at a contract rate of five and one-quarter (5 1/4%) percentage points
above the highest prime rate as announced from time to time in The Wall Street
Journal (the "Acceptable Contract Rate"). The Acceptable Contract Rate shall be
fixed for a period of six months from the execution and delivery of the Second
Amendment and shall be based on the highest prime rate as announced in The Wall
Street Journal on the business day preceding the execution and delivery of the
Second Amendment. Thereafter, the Acceptable Contract Rate is subject to change
every six (6) months following the execution and delivery of the Second
Amendment (the "Change Date") and will be reset, if at all, based upon the
highest prime rate as announced in The Wall Street Journal then in effect on
each Change Date. See Section 3(c) of the Third Amendment to Financing
Agreement.
(b) Paragraph 10(f) is amended in its entirety to read
as follows:
10(f). Notwithstanding anything contained herein to the
contrary, for each Contract written by LAP and purchased by Tammac at a contract
interest rate less than the Acceptable Contract Rate, then in effect on the date
Tammac purchases said Contract, said Contract shall be discounted on the date
each such contract is purchased by Tammac so as to yield an equivalent rate to
Tammac of the Acceptable Contract Rate then in effect. To that extent, the
amount to be funded by Tammac to LAP on each such Contract shall be reduced. Any
and all sums paid by LAP to Tammac so as to equalize the yield as aforesaid
shall be non-refundable under any and all circumstances.
In the event that a Contract written by LAP and
purchased by Tammac provides for a contract interest rate greater than the
Acceptable Contract Rate then in effect on the date each payment is received
under the Contract by the Consumer, Tammac shall pay to the Developer, as and
when collected and earned, on a monthly basis, the Interest Rate Differential,
as hereinafter defined. The Interest Rate Differential shall be computed by
subtracting the interest component of each payment of an effected Contract
computed at the Acceptable Contract Rate then in effect from the interest
component of each payment actually received by Tammac on each Contract written
at a rate of interest in excess of the Acceptable Contract Rate. Tammac shall
furnish such documentation to the Developer, on a monthly basis, identifying
each of the Contracts purchased by Tammac which are subject to an interest rate
differential payment ("Interest Rate Differential Payment(s)") as hereinabove
provided, which documentation shall be reasonably satisfactory to Tammac and the
Developer. Tammac shall not be responsible to make any Interest Rate
Differential Payments to the Developer unless and until Tammac receives good,
collected funds required to be paid under said Contracts. LAP recognizes and
agrees that it shall bear any credit risk in the event that all or any payments
due under a particular Contract are not made and/or received by Tammac or are
otherwise dishonored. In the event that all or any portion of the Interest Rate
Differential Payments are required to be returned to a Consumer or someone
making a claim by or on behalf of the Consumer or the Consumer's creditor(s),
the Developer shall, upon the demand of Tammac, immediately return all or any
portion of the Interest Rate Differential Payment(s) required to be returned.
Tammac shall be under no obligation to make Interest
Rate Differential Payments to the Developer in connection with the Acceptable
Contracts securing the Loan referred to in Section I above.
(c) Paragraph 10(h) is amended in its entirety to read
as follows:
10(h) In the event the Developer sells one Unit Week to
two (2) Consumers, whereby one of the Consumers is purchasing the odd years of a
Unit Week and the other consumer is purchasing the even years of that Unit Week
("Split Week Contracts"), Tammac shall not be obligated to purchase any Split
Week Contracts unless said Split Week Contracts meet Tammac's lending criteria
and guidelines.
(d) The following additional subsections are added after
(10)(h):
(10)(i). Tammac shall only accept Contracts which
provide that: (i) the amount financed is an amount equal to or greater than
$7,001.00 and the term of which is eighty-four (84) months or less; (ii) the
amount financed is between $5,001.00 and $7,000.00 and the term of which is 60
months or less; or (iii) the amount financed is $5,000.00 or less and the term
of which is forty-eight (48) months or less.
(10)(j). After the expiration of the commitment period,
which shall expire two years from the execution and delivery to Tammac by the
Developer of the Second Amendment or the purchase by Tammac of an additional
$10,000,000.00 of Contracts, whichever occurs first, Developer shall not have
the option of offering Replacement Contracts to Tammac for delinquent Contracts
and Tammac shall be under no obligation to accept any Replacement Contracts.
From and after the expiration of the commitment period, Developer must
repurchase the delinquent Contracts.
G. Term of Commitment: Paragraph 18 of the Commitment Letter is amended in its
entirety to read as follows:
18. Term of Commitment: Subject to the aforementioned terms and conditions,
and there being no material adverse change in LAP's and/or the Guarantor's
financial condition, this commitment shall remain in force and effect for a
period of two (2) years from the execution and delivery to Tammac of the Second
Amendment, provided that this letter is accepted by LAP and the Guarantor within
fifteen (15) days from the date of this letter. If this proposal letter is not
accepted as aforesaid, this commitment shall be deemed to have expired and shall
be null and void and of no further force and effect.
III. CONDITIONS PRECEDENT:
A. Preliminary Documentation: The closing of the Loan and the Modification of
the Financing Agreement shall be subject to the receipt, review and approval by
Tammac, and Tammac's counsel, of the following:
(i) The existing Consumer Documentation, if same differs
from the Consumer Documentation previously reviewed and approved by Tammac and
its counsel, or a statement to the effect that the existing Consumer
Documentation has not changed;
(ii) The filed certificates or articles of incorporation
and by-laws, as amended to date, for the Guarantor. This requirement may be
satisfied by a written statement that the certificate or articles of
incorporation and by-laws of the Guarantor, which are currently in Tammac's
possession, have not been amended or modified in any respect; (iii) The filed
certificate of limited partnership of LAP and LAP's Limited Partnership
Agreement, as amended to date, or a statement that the certificate of limited
partnership and Limited Partnership Agreement for LAP, which are currently in
Tammac's possession, have not been amended or modified in any respect;
(iv) The names and titles of all officers and directors
of the Guarantor;
(v) The names of all of the general and limited partners
of LAP;
(vi) The names and the percentage of ownership interest
of each of the shareholders of ILE Sedona Incorporated;
(vii) Certificates of good standing, or such other
documentation as is reasonably satisfactory to Tammac, for LAP and the Guarantor
in all jurisdictions in which they are authorized to do business;
(viii) Corporate franchise tax searches and/or
certificates from the Directors of Revenue, or such other documentation as is
reasonably satisfactory to Tammac, that no taxes are due to the various taxing
authorities with respect to LAP and the Guarantor;
(ix) Continuation uniform commercial code financing
searches for LAP;
(x) An endorsement to the existing title insurance
policy insuring Tammac's interest in the Project noting the recording of the
first Modification to the Deed of Trust, Assignment of Rents and Security
Agreement and confirming that no liens or encumbrances affect the title to the
Project and Tammac's security interest therein, except as otherwise approved by
Tammac;
(xi) Federal tax lien, state tax lien and judgment
searches for LAP and the Guarantor;
(xii) Evidence of compliance with all applicable
federal, state and local environmental laws, rules, regulations and ordinances
relating to the Resort;
(xiii) A copy of the most current Public Report issued
by the Arizona Department of Real Estate and all approvals to sell and/or
finance timeshare interests;
(xiv) An update of the Environmental Questionnaire dated April 23, 1991
submitted to Tammac and prepared by BIS-ILE Associates;
(xv) Evidence that the Resort is in compliance with its
ground water quality protection permit(s) and the Consent Judgment entered into
between BIS-ILE Associates, the Arizona Center for Law and the Public Interest
and the Arizona Department of Environmental Quality dated June 28, 1991;
(xvi) Evidence that the Resort is connected to the
public sanitary sewer system;
(xvii) A listing and description of any pending lawsuits
involving LAP and/or the Guarantor in which LAP and/or the Guarantor is or are
defendants or otherwise defending any claim which is in excess of $10,000.00;
(xviii) An updated list of all permits, certificates
and/or approvals required or otherwise obtained in connection with the sale and
financing of the timeshare interests and the conduct of all business at the
Resort;
(xix) Written authorizations and/or waivers from Bank
One, Arizona, N.A. and any other creditors authorizing the transactions
contemplated herein, if so required pursuant to said lender's loan documents;
(xx) Any and all amendments to the Membership Plan for
Sedona Vacation Club at Los Abrigados dated September 10, 1991; and
(xxi) An opinion letter from LAP's counsel reaffirming,
as of the date of the Second Amendment to be entered into in connection with
this transaction, counsel's prior opinion letters issued to Tammac dated as of
September 10, 1991.
B. Insurance: 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.
C. Flood Insurance: If, on the date of the closing of the Second Amendment and
the 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 Developer will be required to purchase a flood insurance policy satisfactory
to Tammac, if so requested by Tammac.
D. Documentation: (i) The Loan Agreement, Promissory Note, Second Amendment to
the Loan, the Second Modification of the Deed of Trust, Assignment of Rents and
Security Agreement and related documents, including, but not limited to, the
Security Agreements, Guaranty Agreements, Certifications and opinion letters of
the Developer's and the Guarantor's counsel, shall be executed and delivered by
the Developer, the Guarantor and the Developer's and Guarantor'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 Second Amendment, 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 Developer, shall be determined
by and must be satisfactory to counsel for Tammac.
(iii) Developer's counsel shall provide to Tammac a legal
opinion regarding the Resort, the Loan, the Second Amendment, the Contracts and
related documents and various other matters pertaining to the Loan, the sale and
assignment of the Contracts, and their compliance with all applicable laws,
regulations and requirements, all in form and substance satisfactory to Tammac
and Tammac's counsel.
E. Legal Compliance: (i) The Developer 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 Developer 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 Developer 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 Developer 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 Developer shall certify or supply other evidence
satisfactory to Tammac that the Developer 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
Developer 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.
F. Environmental Compliance: The Developer shall provide Tammac with all
representations, warranties 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.
G. Exchange Group Membership: The Developer shall maintain membership in one or
more timeshare exchange services satisfactory to Tammac, until such time as the
Loan has been paid in full and all Contracts purchased by Tammac from the
Developer have been satisfied.
H. 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 Developer's and the Guarantor's request for
the financing of Contracts and 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 Developer and the Guarantor
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.
I. 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.
IV. GENERAL CONDITIONS:
The Loan and the Second Amendment and related documents are subject to
satisfaction by the Developer and the Guarantor 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 either the Financing Agreement or the Loan and/or any
related documents shall be a default in any other obligations of the Developer
owing to Tammac at any time.
B. Cross-Collateralization:
The Financing Agreement and the Loan and any other obligations of the
Developer 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 Developer and the Guarantor 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 Developer's
business, without the prior written approval of Tammac.
Notwithstanding anything contained herein to the contrary, provided the
Developer is not in default under the Loan Documents or any other obligations
due to Tammac, whether now existing or hereafter arising, LAP may further
encumber the Resort by one or more prior deeds of trust secured by the Resort
granted by one or more financial institutions or reputable funding sources,
provided the aggregate principal sum(s) due to said lender(s) is no more than
$2,500,000.00.
E. Financial Information:
The Developer and the Guarantor will provide Tammac, within sixty (60)
days of the close of each quarter-annual fiscal period, with quarterly financial
statements certified by the Developer's and Guarantor'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 Developer and the
Guarantor and satisfactory to Tammac. All such statements shall be prepared in
accordance with generally accepted accounting principles consistently applied.
V. 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 Developer's and the Guarantor'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 Developer's and Guarantor's
obligation to pay for or reimburse Tammac for Tammac's legal fees shall be
capped at $5,000.00.
(ii) The interest of the Developer, the
Guarantor and Tammac are or may be different and may conflict. Tammac's
attorneys shall represent only Tammac and not the Developer or the Guarantor.
The Developer and the Guarantor, therefore, are advised to employ an attorney
(or attorneys) of their choice to represent their 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
Developer and the Guarantor agree 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 the execution and
delivery of the Second Amendment and all related documents must occur no later
than sixty (60) days from the date of the Developer'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
Developer or the Guarantor prior to closing, the proposal to make the Loan shall
remain in full force and effect for a period of seventy-five (75) days from the
date of this proposal letter, and the proposal to purchase Contracts pursuant to
the Second Amendment and related documents as aforesaid shall remain in full
force and effect until twenty-four (24) months from the date of the closing of
the Loan and execution and delivery of the Second Amendment to the Financing
Agreement and related documents by and between all parties, provided same is
accepted in full by the Developer and the Guarantor 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 these transactions. 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: Andy G. Roosa
-----------------------------
ANDY G. ROOSA, President
The undersigned authorized representative of Los Abrigados Partners
Limited Partnership, an Arizona Limited Partnership, has read the above proposal
letter, and on behalf of Los Abrigados Partners Limited Partnership agrees to
and accepts the terms and conditions as outlined. On behalf of Los Abrigados
Partners Limited Partnership, Tammac is authorized to have its counsel commence
the necessary documentation at its earliest convenience.
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
An Arizona Limited Partnership, By
ILE Sedona Incorporated, an Arizona
Corporation, Sole General Partner
By: Joseph P. Martori, President Dated: July 27, 1994
---------------------------- ---------------
The undersigned authorized representative of ILX Incorporated, 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
By: Joseph P. Martori, President Dated: July 27, 1994
---------------------------- ---------------
JOSEPH P. MARTORI, President
LOAN AND SECURITY AGREEMENT
AGREEMENT dated this 7th day of September, 1994 by and between TAMMAC
FINANCIAL CORP., a Delaware Corporation, having its principal office located at
100 Commerce Boulevard, Wilkes-Barre, Pennsylvania 18702 (hereinafter referred
to as the "Lender"), and LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona
Limited Partnership, having its principal place of business located at 2777 East
Camelback Road, Phoenix, Arizona 85016 (hereinafter referred to as the
"Borrower").
R E C I T A L:
Borrower has requested Lender to loan it certain funds on a secured
basis, and Lender has agreed to do so, subject to and upon the terms and
conditions hereinafter set forth. The principal amount of the loan to be made by
the Lender to the Borrower is Four hundred ninety-nine thousand eight hundred
fifty-nine and 15/100 DOLLARS ($499,859.15).
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
I
DEFINITIONS
Acceptable Contract: For purposes of this Agreement, an
"Acceptable Contract" shall be a consumer contract or agreement and all related
documents entered into between the Borrower as seller and/or lender and a
Consumer as the purchaser and/or borrower of (or relating to) a timeshare
interest defined in and created by the Project Documents, which satisfy the
following requirements, and which are in all other respects acceptable to
Lender: (i) Borrower is the seller of a Unit Week under a Contract to a Consumer
who is a United States resident, which Contract shall have a term of at least
four years, except for non-interest bearing Contracts, which shall have a term
of at least one year; (ii) the purchase price under the terms of the Contract is
payable in not more than 84 equal monthly installments 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 Lender) 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 Lender 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 Lender; (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
theFederal 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 (if said Contract provides for the payment
of interest) is at least 3 percentage points above the highest prime rate as
announced in The Wall Street Journal on the business day preceding the closing
of the Loan; (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) at least one monthly payment has been made thereon
and 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 Lender; (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; and (xiii) the Contract shall be valid, enforceable
and legally binding upon the Consumer.
Accounts or Accounts Receivable: The term "Account" or
"Accounts Receivable" shall mean any and all obligations of any kind at any time
due and/or owing to Borrower relating to the Acceptable Contracts serving as
collateral for the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement and all rights of Borrower to receive
payment or other consideration (whether classified under the Uniform Commercial
Code of the State of Arizona or any other state as accounts, contract rights,
chattel paper, general intangibles, or otherwise) relating to the Acceptable
Contracts serving as collateral for the Loan and the Contracts and Related
Documents purchased by Tammac pursuant to the Financing Agreement, including
without limitation, invoices, contract rights, accounts receivable, general
intangibles, leases, choses-in-action, notes, drafts, acceptances, instruments
and all other debts, obligations and liabilities in whatever form owing to
Borrower from any person, firm, governmental authority, corporation or any other
entity, all security therefore, whether now existing or hereafter arising, all
relating to the Acceptable Contracts serving as collateral for the Loan and the
Contracts and Related Documents purchased by Lender pursuant to the Financing
Agreement, together with all proceeds and products of any and all of the
foregoing.
Agency Agreement: "Agency Agreement" shall be that certain
agreement to be entered into by and among Borrower, Lender and the Agent which
will provide, among other things, for the Agent 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 into a Dominion Account at an
insured financial institution selected by Borrower and acceptable to Lender all
funds received in connection with the Acceptable Contracts and turn said funds
over to Lender, all in accordance with the terms and conditions of this
Agreement.
Agent: "Agent" shall mean the financial institution selected
by Borrower and approved by Lender to act as agent pursuant to the Agency
Agreement.
Collateral: "Collateral" shall mean the Collateral described
in Section III of this Agreement.
Commitment Letter: The "Commitment Letter" shall incorporate
and include all of the terms and provisions set forth in that certain Commitment
Letter dated June 28, 1991 issued by Lender to International Leisure Enterprises
Incorporated and assigned to Borrower, and that certain Commitment Letter dated
July 20, 1994 issued by Lender to the Borrower, together with all amendments and
modifications thereto.
Consumer or Consumers: "Consumer" or "Consumers" shall mean
those lessees or purchasers and/or borrowers of the Borrower leasing or
purchasing and financing the purchase of Unit Weeks (including any guarantor
thereof), executing an agreement, contract, a note or lease and/or similar
documentation, which evidence his and/or her or their obligation to the Borrower
for the repayment of the unpaid portion of the cash price for the Unit Week and
the first lien and security interest granted to Borrower in and to the Unit
Week.
Contract or Contracts: "Contract" or "Contracts" means a
Consumer contract or agreement between the Borrower as lessor, seller and/or
lender and a Consumer, as the lessee or purchaser and/or borrower of (or
relating to) a Unit Week together with all Related Documents. The term
"Contract" or "Contracts" shall also mean the Acceptable Contracts where the
context and sense and circumstances so require.
Default: "Default" shall mean an event or condition, the
occurrence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
Dominion Account: "Dominion Account" shall mean the dominion
account described in Section V. 21. of this Agreement.
Event of Default: "Event of Default" shall mean the occurrence
of any of the events described in Section VIII of this Agreement.
Financing Agreement: "Financing Agreement" shall mean that
certain Financing Agreement dated as of September 10, 1991, together with all
amendments and modifications thereto, whether presently in existence or
hereafter arising, entered into by and among Borrower and Lender regarding the
sale and purchase of installment obligations generated by Borrower relating to
Borrower's development of the Resort, and any subsequent amendments or
modifications thereto.
Financing Statements: "Financing Statements" shall mean the
financing statements required to be filed with the Arizona Secretary of State's
Office, the Office of the Recorder in Coconino County, Arizona and/or any other
recording office in order to perfect the security interests granted to the
Lender by the Loan Documents.
General Intangibles: "General Intangibles" shall mean and
include all of the Borrower's now owned or hereafter acquired chooses in action,
causes of action and all other intangible personal property including, without
limitation, corporate or other business records, inventions, designs, patents,
patent applications, trademarks, trademark applications, tradenames, trade
secrets, goodwill, registrations, copyrights, licenses, franchises, customer
lists, tax refunds, tax refund claims, insurance claims and rights to
indemnification all related to the Acceptable Contracts serving as Collateral
for the Loan and the Contracts and Related Documents purchased by Lender
pursuant to the Financing Agreement.
Guarantor or Guarantors: "Guarantor" or "Guarantors" shall
mean any one or all of the following (as the context so requires) who have
executed and delivered guaranty agreements (the "Guaranty"), and/or
modifications or amendments thereto, in favor of Lender, or any additional
guarantors who may have or may in the future unconditionally guaranty the
obligations of the Borrower: ILX Incorporated (f/k/a International Leisure
Enterprises Incorporated), an Arizona Corporation.
Lender: "Lender" shall mean Tammac Financial Corp., its
successors or assigns.
Loan: "Loan" shall mean the Loan described herein, which shall
be in the principal amount of _Four hundred ninety-nine thousand eight hundred
fifty-nine and 15/100 ($499,859.15_) Dollars.
Loan Documents: "Loan Documents" shall mean this Agreement,
the Note, the Deed of Trust, the Financing Agreement, the Financing Statements,
the Guaranty, the Security Agreement, the Environmental Indemnity Agreement, the
Agency Agreement, the Incumbency Certificates, the Corporate Resolutions and all
other documents executed in connection with the Loan and the Financing
Agreement, whether executed contemporaneously herewith or at any other time,
together with all amendments, supplements, substitutions, replacements or
modifications to any or all of them.
Mortgage: "Mortgage" or "Deed of Trust" shall mean the
Mortgage or Deed of Trust covering the Premises, given by the Borrower in favor
of the Lender to secure the Loan and the Borrower's obligations under the
Financing Agreement, which may be singular or plural as the text requires.
Note: "Note" shall mean the Promissory Note made by the
Borrower and delivered to the Lender as evidence of the Loan.
Premises: "Premises" or "Project" or "Resort" shall mean the
land owned by Borrower located at 160 Portal Lane, Sedona, Coconino County,
Arizona, as more particularly described in Exhibit "A" attached hereto and made
a part hereof, at which is located the timeshare condominium project (including,
but not limited to the Unit Weeks) known as Los Abrigados Resort & Spa (f/k/a
Sedona Vacation Club), including the real estate, the improvements thereon and
all furnishings, fixtures and personalty contained thereon and all common areas
and/or elements appurtenant thereto.
Project Documents: "Project Documents" shall mean the
constituent documents for the Premises, including, but not limited to the
Membership Plan and By-laws for the Resort creating and/or establishing the
Resort, the By-laws for the Sedona Vacation Club Incorporated, an Arizona
non-profit corporation, the Public Offering Statement and any exhibits thereto,
and any supplements, additions, substitutions, modifications or amendments
thereto, as may be made from time to time.
Obligations: "Obligations" shall mean all indebtedness,
obligations, liabilities and agreements of every kind and nature of Borrower to
or with Lender, or to or with any affiliate of Lender, now existing or hereafter
arising, and now or hereafter contemplated, pursuant to this Agreement and/or
the Loan Documents, or otherwise, whether in the form of refinancing, loans,
interest, charges, expenses or otherwise, direct or indirect, including without
limitation, the Financing Agreement, the Loan and any participation or interest
of Lender (or of any affiliate of Lender) in any obligations of Borrower to
others, acquired outright, conditionally or as collateral security from another,
absolute or contingent, joint or several, liquidated or unliquidated, direct or
indirect, secured or unsecured, arising by operation of law or otherwise,
including without limitation any future advances, renewals, extensions or
changes in form of, or substitutions for, any of said indebtedness, obligations
or liabilities, the other sums and charges to be paid to and all interest and
late charges on any of the foregoing.
Related Documents: "Related Documents" means, as applicable to
each Contract, the credit package, security agreements, mortgages, mortgage
deeds, deeds of trust securing the Contracts and encumbering the Unit Weeks,
guaranty agreements, all records pertaining to the Contracts, including, but not
limited to, all files, closing or settlement statements, title insurance reports
and policies, copies of deeds, contracts, prospectuses delivered to Consumers,
public offering statements, receipts for said prospectuses and public offering
statements, truth-in-lending disclosure statements, information, documents,
records and such other writings or documents of every kind and nature submitted
and/or executed by or on behalf of a Consumer and relating to the Contracts and
the Consumer's financing thereof.
Servicing Agent: "Servicing Agent" shall mean the entity
selected by Borrower and approved by Lender to act as the servicing agent
pursuant to the Servicing Agreement.
Servicing Agreement: "Servicing Agreement" shall mean the
agreement entered into between Borrower and the Servicing Agent to service the
Acceptable Contracts as described in Section V. 20. of this Agreement.
Transaction or Transactions: "Transaction" or "Transactions"
shall mean a lease or sale transaction evidenced by a Contract and/or Related
Documents, which transactions are sold to Tammac in accordance with the
Financing Agreement.
Unit Week: "Unit Week" or "Unit Weeks" or "Timeshare Estate"
or "Timeshare Estates" shall mean the timeshare interest(s) or estate(s) defined
in or created by the Project Documents or otherwise.
II
LOAN
Loan: The Lender agrees to lend to Borrower (subject to the
terms of this Agreement) the principal sum of Four hundred ninety-nine thousand
eight hundred fifty-nine and 15/100 ($499,859.15) Dollars. The Loan shall bear
interest from the date hereof at the rate set forth herein and in the Note.
Interest Rate: The interest rate which shall be used to
calculate the amount of interest due each month shall be the highest Prime Rate
as announced, from time to time, in The Wall Street Journal during the month for
which interest is being charged, plus four (4%) percentage points per annum.
Interest shall be calculated on the outstanding principal balance at the close
of each day, on the basis that one day represents 1/360th of a year. The
interest rate may be changed from time to time without notice to the Borrower
and for the purposes of this Agreement, any such change shall be effective on
the date of the change. Interest shall continue to accrue on the unpaid
principal balance of the Loan until all sums due under the Loan are paid in
full. Any failure or delay by Lender in submitting invoices for interest
payments shall not discharge or relieve Borrower of the obligation to make such
interest payments. In the event that the interest rate charged under the Note
exceeds the legal limit permitted by law, the interest rate shall be
automatically reduced to the permitted limit and any interest charged which
exceeds or exceeded the permitted limit shall, at Lender's option, be treated as
a payment of principal or refunded directly to Borrower.
Default Rate: Upon the occurrence and during the continuation
of an Event of Default, the rate used to calculate the interest rate due on the
Loan may, at the option of Lender, increase by five (5%) percentage points per
annum above the then applicable interest rate referred to in Section II.2. above
(the "Default Rate"). In no event, however, shall the Default Rate exceed the
maximum allowable by law.
Late Charge: In the event the Lender 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 the Lender in
processing late payments and shall not be deemed to constitute additional
interest.
Maturity Date: The unpaid principal, the accrued interest and
all costs and expenses relating to the Loan shall be payable on September 1,
1998, unless sooner demanded in accordance with the terms and provisions set
forth herein.
Mandatory Payments: Commencing on the first day of October,
1994, and on the same day of each successive month thereafter through and
including September 1, 1995, the Borrower shall pay to Lender a minimum payment
each month in the amount of $20,603.00. Thereafter, commencing on the first day
of October, 1995, and on the same day of each successive month thereafter
through and including September 1, 1998, the Borrower shall pay to Lender a
minimum payment each month in the amount of $6,280.00. All of the mandatory
payments as hereinabove provided shall be applied first to the payment of
accrued and unpaid interest and the balance, if any, shall be applied to the
payment of the installments of principal then remaining unpaid. The aforesaid
payment shall be made payable out of the monthly collections received under the
Acceptable Contracts. In the event the monthly collections are in excess of the
applicable monthly Mandatory Payment as aforesaid, said excess shall be applied
as a prepayment of the principal balance remaining due under the Loan. In the
event the monthly collections from the Acceptable Contracts are insufficient to
pay the aforesaid monthly 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.
Prepayment: The Borrower shall have the right to prepay the
principal of the Loan at any time without penalty or premium, provided, however,
the Borrower shall notify Lender of each such prepayment. Any such prepayments
of principal shall be applied in the inverse order of their maturity.
Instructions to Consumers;
Payments Received by Borrower: The Borrower shall direct or
otherwise cause all Consumers under the Acceptable Contracts to pay all monies
due thereunder to the Agent or as otherwise advised by Lender in writing. The
Borrower, to the extent that it receives such payments directly from or on
behalf of such Consumers, shall hold the same (in the form so received) in trust
for the sole and exclusive benefit of Lender and immediately deliver same to
Lender or Agent. Monies (in good, collected funds) from Contracts collected and
paid to Lender by the Agent or the Borrower shall be (subject to the payment of
fees, costs and expenses as set forth in this Agreement) applied on the first
business day of the calendar month following the receipt thereof, first towards
the payment of accrued and unpaid interest on the Loan and then to the payment
of the principal amount then outstanding under the Loan, or to any other
Obligation in such order as Lender may elect in its sole discretion.
Computation of Unpaid Principal Balance: (a) For purposes of
computing the amount of interest payable on the Loan, the outstanding principal
amount of the Loan shall not be reduced by the amount of any funds collected by
the Agent or the Borrower until such funds are received by Lender as good,
collected funds and applied to the Loan.
(b) Checks received by Lender prior to 12:00 noon on any
business day shall be credited against the balance of the Obligations on such
business day. Checks received by the Lender after 12:00 noon any business day,
shall be credited against the balance of the Obligations on the following
business day. The crediting of checks received as aforesaid shall be conditioned
upon final payment to Lender at its own office in cash or solvent credits of the
items giving rise to them and if any item is not so paid, the amount of any
credit given for it shall be charged to the Loan whether or not the item is
returned.
III
SECURITY AND CROSS-COLLATERAL
To secure the payment and performance of all Obligations of
the Borrower set forth in this Agreement and the accompanying Loan Documents, as
well as any extensions, renewals and modifications therefore or substitutions
therefore and all other obligations of the Borrower to Lender, whether now
existing or hereafter arising, Borrower hereby grants or causes to be delivered
to Lender the following security interests:
(a) a valid second lien on the Premises, which shall be
evidenced by the Deed of Trust;
(b) a valid perfected security interest in all items of
personal property owned by the Borrower, including, but not limited to,
fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials, including, but not limited to, furnaces, boilers, oil burners,
radiators and piping, plumbing and bathroom fixtures, refrigeration systems,
air-conditioning systems, sprinkler systems, washtubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, refrigerators, kitchen cabinets, incinerators, plants and shrubbery and
all other equipment and machinery, tools, appliances, fittings, fixtures and
building materials of any kind and whether or not affixed to the realty located
at the Premises if and when such items exist now or are hereafter located in or
upon any portion of the Premises and used or usable in connection with any
present or future operation of the Premises;
(c) all of the Borrower's right, title and interest in and to
the Contracts and Related Documents purchased by the Lender pursuant to the
Financing Agreement;
(d) the Accounts Receivable;
(e) the General Intangibles;
(f) inventory, as that term is defined in the Uniform
Commercial Code of the State of Pennsylvania, all goods, merchandise or other
personal property held by Borrower for sale or lease and all right, title and
interest of Borrower therein and thereto, and all proceeds and products of any
of the foregoing, whether nor owned or hereafter acquired by Borrower and
wherever located;
(g) equipment, machinery, fixtures and furnishings and all
other tangible assets and/or replacements, repairs, modifications, alterations,
additions, controls and operating accessories therefore, and all substitutions
and replacements therefore, and all accessions and additions thereto and all
proceeds and products of the foregoing now or hereafter acquired by Borrower;
(h) a valid first lien on all of the Acceptable Contracts and
Related Documents which are more particularly set forth and described on the
schedule attached hereto and made a part hereof and labelled as Exhibit "B";
(i) any claims of Borrower against third parties for loss or
damage to, or destruction of, any and all of the foregoing, all guarantees,
security and liens for payment of any Accounts Receivable and documents of
title, policies, certificates of insurance, insurance proceeds, securities,
chattel paper, and other documents and instruments evidencing or pertaining
thereto, and all files, correspondence, computer programs, tapes, discs and
related data processing software owned by Borrower or in which Borrower has an
interest which contain information identifying any one or more of the items in
(a) through (h) above or (j) through (o) below, or any Consumer, showing the
amounts owed by each, payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof;
(j) with respect only to those Acceptable Contracts securing
this Loan and those Contracts and Related Documents purchased by Lender pursuant
to the Financing Agreement, any and all moneys, securities, drafts, notes,
contracts, leases, licenses, General Intangibles and other property of Borrower,
including customer lists, and all proceeds and products thereof, and all other
assets of Borrower now or hereafter held or received by or in transit to Lender
from or for Lender, or which may now or hereafter be in the possession of
Lender, or as to which Lender may now or hereafter control possession, by
documents of title or otherwise, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any and all deposits, general or
special, balances, sums, proceeds, the Reserve Account, as that term is defined
in the Financing Agreement, and credits of Borrower and all rights and remedies
which Borrower might exercise with respect to any of the foregoing, but for the
execution of this Agreement;
(k) Borrower's right, title and interest throughout the world
in and to the trade secrets, rights in information regarding computer software
programs developed by or for Borrower, as same relate to the Acceptable
Contracts securing the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement, including without limitation, the
right to prevent all persons, including Borrower, from using the programs or
from using and transferring the information contained therein without
authorization;
(l) Borrower's interest in any marketing or direct mail
agreements with respect to the Project as same relate to the Acceptable
Contracts securing the Loan and the Contracts or Related Documents purchased by
Lender pursuant to the Financing Agreement;
(m) licenses, contracts, management contracts or agreements,
franchise agreements, permits or certificates now or hereafter acquired or used
in connection with the ownership, operation or maintenance of the Project as
same relate to the Acceptable Contracts securing the Loan and the Contracts or
Related Documents purchased by Lender pursuant to the Financing Agreement;
(n) Borrower's rights as "declarant", "developer," "owner"
and/or otherwise under the Project Documents, whether now or hereafter existing
as same relate to the Acceptable Contracts securing the Loan and the Contracts
or Related Documents purchased by Lender pursuant to the Financing Agreement;
and
(o) all proceeds, including insurance proceeds, and products
of the Collateral.
Scope of Security Interest: The security interest granted
hereunder is given to and shall be held by Lender as collateral security for the
payment and performance of all liabilities and obligations of Borrower to Lender
of every kind and description, whether direct or indirect, absolute or
contingent, due or to become due, joint or several, howsoever created, arising,
or evidenced and now existing or at any time hereafter created, arising, or
incurred.
Effective as Security Agreement: This Agreement shall be
effective as a Security Agreement as that term is used in the Uniform Commercial
Code as enacted in the State of Pennsylvania.
IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Lender to enter into this Agreement and to amend the
Financing Agreement and to make the Loan hereunder, the Borrower represents,
warrants and covenants to the Lender that:
Partnership Existence: Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Arizona and has the power to execute, deliver and carry out the terms of this
Agreement and the Board of Directors of its general partner, has duly authorized
and approved the terms of the Financing Agreement, the Loan described herein,
the other Loan Documents and the taking of any and all action contemplated
hereunder or thereunder by the Borrower.
Validity of Agreement: The execution of this Agreement and the
other Loan Documents and every other instrument or document required to be
executed in accordance herewith or therewith, or which the Lender may deem
advisable in connection herewith, does not violate any provisions of the
Certificate of Limited Partnership and Agreement, or of any agreement or
undertaking to which Borrower is a party or in which the Borrower is bound in
any fashion.
Partnership Action: Borrower has taken all action required by
law to validate and make this Agreement and to enter into the Loan Documents and
any other documents required in connection herewith enforceable, and will
deliver contemporaneously herewith a certification of such partnership action.
Lien Priority: The Borrower has, and at all times will have,
good and marketable title in and to the Collateral. No other person has or will
have any right, title, interest, claim or lien therein, thereon or thereto,
other than: (a) the existing first lien on the Resort maintained by Bank One,
Arizona, N.A., with a principal balance remaining due thereunder of no more than
$2,300,000.00, (b) that certain Deeds of Trust Equal Priority Agreement entered
into by and among Tammac and Resort Funding, Inc.; (c) customary equipment lease
agreements entered into by Borrower relating to the Project, which unpaid lease
obligations thereunder do not exceed, at any time, in the aggregate, the sum of
$250,000.00 (items 4(a), (b) and (c) above being hereinafter sometimes referred
to as the "Permitted Lien(s)"); and (d) the rights, if any, of the Consumers.
Notwithstanding anything contained herein to the contrary, provided the Borrower
is not in Default under the Loan Documents or any Obligations, whether now
existing or hereafter arising, upon Borrower's request, Lender shall subordinate
its second lien 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 $2,500,000.00, which permitted prior lien(s)
shall be construed to be "Permitted Lien(s)". The Collateral will remain free
and clear of any liens other than the Permitted Liens, excepting the liens
hereby granted to Lender, which liens to Lender shall, at all times, except as
hereinabove set forth, be first and prior on the Collateral above described and
as to the Accounts and proceeds, including insurance proceeds, resulting from
the sale, disposition or loss thereof, that no further action need be take to
perfect the lien to Lender other than filing continuation statements under the
Uniform Commercial Code and continued possession by Lender of that portion of
the Collateral which constitutes instruments or other pledged collateral.
Financing Statements; Perfection of Lien: Borrower agrees at
its own expense, to execute the Financing Statements or continuation statements
required by the Uniform Commercial Code, together with any and all other
instruments or documents and take such other action including delivery as may be
required to perfect or maintain Lender's security interest in the Collateral
and, unless prohibited by law, Borrower hereby authorizes Lender to execute and
file any such financing statements or continuation statements on Borrower's
behalf.
No Governmental Consent Necessary: No consent or approval of,
giving of notice to, registration with or taking of any other action in respect
of, any governmental authority or agency is required with respect to the
execution, delivery and performance by Borrower of this Agreement or any of the
other Loan Documents.
No Proceedings: There are no actions, suits, or proceedings
pending (nor, to the knowledge of the Borrower, any actions, suits or
proceedings threatened, nor is there any basis therefore) against or in any way
relating adversely to the Borrower, the Premises, any other Collateral or any
property of the Borrower in any court or before any arbitrator of any kind or
before or by any governmental or non-governmental body which, if adversely
determined, would singly or in the aggregate have a material adverse effect on
the Borrower or the Collateral; the Borrower is not in default with respect to
any order of any court, arbitrator or governmental or non-governmental body; and
the Borrower is not subject to or a party to any order of any court or
governmental or non-governmental body arising out of any action, suit or
proceeding under any statute or other law respecting anti-trust, monopoly,
restraint of trade, unfair competition or similar matters.
Financial Statements: The financial statements of Borrower
submitted to Lender in connection with the application for the within Loan
fairly presents the financial condition of Borrower. Borrower knows of no
liability, direct or contingent, involving significant amounts, not disclosed by
or reserved against in said financial statements.
Changes in Financial Condition: There has been no material and
adverse change in Borrower's condition, financial or otherwise, since the date
of the financial statements delivered to Lender.
Further Assurances: The Borrower agrees that it will execute
and deliver any further deeds of trust or any other documents or instruments
necessary to achieve and maintain at all times the balance due to the Lender as
a valid second lien on the Premises and a first, valid lien on the other
Collateral described herein.
Taxes and Assessments: All federal, state and other tax
returns of Borrower required by law to be filed have been duly filed and all
federal, state and other taxes, assessments and other governmental charges or
levys upon the Borrower or its property, income, profits and assessments which
are due and payable have been paid. All taxes due to the Federal government, the
state of Arizona, and any taxes or assessments due to any other State, county or
municipality, have been fully paid and satisfied by the Borrower except for
current taxes not now due and payable.
Chief Executive Office and Location of Property: The
Borrower's Chief Executive Office, principal place of business and books and
records related to the Collateral pledged hereunder are located at 2777
Camelback Road, Phoenix, Arizona 85016. The Borrower will not move its Chief
Executive Office, its principal place of business or its books and records
referred to herein or change its name, identity or partnership structure without
giving the Lender prior written notice thereof and obtaining its written
consent, which consent shall not be unreasonably delayed or withheld. Borrower
further agrees that it will not remove any Collateral referred to herein from
the address where they are presently located other than in the ordinary course
of business.
Representations and Warranties True, Accurate and Complete:
None of the representations, warranties or statements made to Lender pursuant
hereto or in connection with this Agreement or the transactions contemplated
hereby contains any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances in which they are made, not misleading.
Validity and Enforceability of Acceptable Contracts: All of
the Acceptable Contracts are, and will be, legal, valid, binding and enforceable
obligations of the parties thereto (without right of set-off or subject to any
counterclaims or other defenses) in accordance with the terms thereof, and are
not, and will not be subject to any liens, and none of such Acceptable Contracts
are forged or have affixed thereto any unauthorized signatures or have been
entered into by any persons without the required legal capacity and otherwise
meet all of the criteria as set forth in the definition of an Acceptable
Contract herein above provided.
Project: The Project has direct access to a publicly dedicated
road and all roadways inside the Project are owned in fee simple by the
Borrower. Electric, gas, sewer, water facilities and other necessary utilities
are available in sufficient capacity to service the Project and any easements
necessary to the furnishing of said utility services have been obtained and duly
recorded. Each Consumer has access to and the use of all of the amenities and
public utilities of the Project. All costs arising from the construction of any
improvements or the purchase of any equipment located in the Project have been
fully paid for, except for customary equipment leases entered into by Borrower
in connection with the Project. The Project complies with all applicable
restrictive covenants, zoning and land use ordinances and building codes, all
applicable health and environmental laws and regulations and all other
applicable laws, rules and regulations.
No Default: No Event of Default (as specified in Section
VIII), and no event which, with a lapse of time or the giving of notice, would
constitute an Event of Default, shall have occurred and be continuing at the
closing date of the Loan and Borrower is not presently in violation of any of
the representations and warranties herein specified.
Other Statements: All statements contained in any certificate,
financial statement, legal opinion or other instrument delivered by or on behalf
of the Borrower pursuant to or in connection with or in any amendment to this
Agreement, shall constitute representations and warranties made under this
Agreement. All representations and warranties made under this Agreement shall be
made at and as of the date as of which this Agreement is dated. All
representations and warranties made under this Agreement shall survive and not
be waived by the execution and delivery of this Agreement or any investigation
by the Lender.
Subdivision/Final Site Plan: All right to appeal from any
decision rendered by any governmental body in connection with the subdivision or
final site plan approval of the Premises, if any, or proposed or actual use of
the Premises has expired.
O.S.H.A. and Environmental Matters: (a) Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Americans with Disabilities Act
and the Environmental Protection Act, and all rules and regulations thereunder
and all similar state and local laws, rules and regulations; and there have been
no outstanding citations, notices or orders of non-compliance issued to Borrower
or relating to its business, assets, property, leaseholds or equipment under any
such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to Borrower and its ownership,
use and development of the Premises (including without limitation, all necessary
utility connections or permits) and its facilities, business, assets, property,
leaseholds and equipment are in compliance in all material respects with, all
applicable federal, state and local laws, rules and regulations relating to, air
emissions, water discharge, noise emissions, solid or liquid waste disposal,
hazardous waste or materials, or other environmental, health or safety matters.
Protection of Collateral; Reimbursement: All insurance
expenses and all expenses of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, and any and all excise,
property, sale and use taxes imposed by any state, federal or local authority on
any of the Collateral or in respect of the sale thereof, shall be borne and paid
by Borrower; if Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and charge
Borrower's account therefore, and Borrower agrees promptly to reimburse Lender
therefore with interest accruing thereon daily at the Default Rate. All sums so
paid or incurred by Lender for any of the foregoing and any and all other sums
which Borrower may become liable hereunder and all costs and expenses (including
attorney's fees, legal expenses and court costs) which Lender may incur in
enforcing or protecting its lien on or rights and interest in the Collateral or
any of its rights or remedies under this or any other agreement between the
parties hereto or with respect to any of transactions to be had thereunder,
until paid by Borrower to Lender with interest at the rate aforesaid, shall be
considered as additional indebtedness owing by Borrower to Lender hereunder and,
as such, shall be secured by all the said Collateral and the proceeds from the
sale thereof and by any and all other collateral, security, assets, reserves or
funds of Borrower in or coming into the hands or enuring to the benefit Lender.
The Lender shall not be liable or responsible in any way for the safekeeping of
any of the Collateral or for any loss or damage thereto or for any diminution in
the value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency or other person whomsoever, but the same shall be at the
Borrower's sole risk.
Solvent Financial Condition: As to Borrower immediately prior
to the issuance of the Note, the present fair salable value of its assets is
greater than the amount required to pay its total liabilities, and it is able to
pay its debts as they mature or become due. Borrower shall maintain such solvent
financial condition, giving affect to the Obligations, as long as Borrower is
obligated to Lender under this Agreement.
Use of Proceeds: The proceeds of the Loan will be used for
working capital purposes of Borrower. None of the transactions contemplated in
this Agreement (including, without limitation, the use of the proceeds from such
loan) will violate or result in the violation of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including, without
limitation, Regulation G of the Board of Governors of the Federal Reserve
System.
V
AFFIRMATIVE COVENANTS
Until payment in full of all Obligations and the termination of this
Agreement, Borrower covenants and agrees that it will:
Notify Lender: Promptly inform Lender of any material adverse
change in circumstances with respect to matters set forth in the representations
and warranties under Section IV of this Agreement.
Pay Taxes and Liabilities; Comply with Agreements: Promptly
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits and upon any properties belonging
to it prior to the date on which penalties attach thereto, and all lawful claims
for labor, materials and supplies which, if unpaid, might become a lien or
charge upon any properties of the Borrower; except that no such tax, assessment,
charge, levy or claim need be paid which is being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside.
Observe Covenants, etc.: Observe, perform and comply with the
covenants, terms and conditions of this Agreement, the other Loan Documents and
any other agreement or document entered into between Borrower and Lender.
Access to Records and Property: At any time and from time to
time, upon request by Lender permit representatives of the Lender to:
(a) Visit and inspect the properties of the Borrower,
(b) Inspect, copy and make extracts from its books
and records at any place designated by Lender, and
(c) Discuss with its employees its respective
businesses, assets, liabilities, financial conditions, results of operations and
business prospects.
Comply with Laws: Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
compliance with which is necessary to maintain its partnership existence or the
conduct of its business or non-compliance with which would materially and
adversely affect (a) its ability to perform in accordance with the terms and
conditions of this Agreement, or (b) any security given to secure its
Obligations.
Insurance Required: (a) Cause to be maintained, in full force
and effect on the building(s) and all other structures erected or to be erected
upon the Premises and all property given as Collateral security for all
Obligations, insurance in such reasonable amounts and against such customary
risks as is satisfactory to Lender, including, but without limitation, fire,
theft, burglary, pilferage, loss in transit, boiler, machinery, workman's
compensation, builder's risk, liability and hazard insurance. Said insurance
policy or policies shall:
(i) Be in a form and with insurers which are
satisfactory to Lender;
(ii) Be for such risks and for such insured
values as Lender or its assigns may require in order to replace the property in
the event of actual or constructive total loss;
(iii) Designate Lender and its assignees, as
first (or second, as the case may be,) mortgagee and/or additional loss payees,
as their interests may from time to time appear;
(iv) Contain a "Breach of Warranty" clause
whereby the insurer agrees that a breach of the insuring conditions or any
negligence by Borrower or any other person shall not invalidate the insurance as
to Lender and its assignees;
(v) Provide that they may not be cancelled
or materially altered without thirty (30) days prior notice to the Lender and
its assignees; and
(vi) Upon demand, be delivered to Lender.
(b) Obtain such additional insurance as Lender may
reasonably require.
(c) In the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer. Borrower hereby
authorizes Lender to endorse any checks or drafts constituting insurance
proceeds.
(d) Forthwith upon receipt of insurance proceeds
endorse and deliver the same to Lender.
(e) In no event shall Lender be required to: (i)
ascertain the existence of or examine any insurance policy; or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement or any other Loan Documents; or (iii) obtain any
insurance on the aforementioned risks.
(f) Borrower hereby directs any insurance company
concerned to pay directly to Lender any monies which may become payable to
Lender or Borrower under such insurance policies, and Borrower appoints the
Lender as attorney-in-fact (which appointment is agreed to be coupled with an
interest) to endorse any draft therefore. Lender shall have the right to retain
and apply the proceeds of any such insurance, at its election, to reduction of
any sums advanced to Borrower by Lender, or to restoration or repair of the
property damaged, as more particularly set forth in the Loan Documents.
Further Assurances: Borrower shall execute and deliver to
Lender, any pledge, lien, encumbrance, security agreement, financing statement
or other documents as may reasonably be requested by Lender at any time when
there are monies due and payable to Lender under the terms and conditions of
this Agreement in order to effectuate more fully the purposes of this Agreement
and/or any other Loan Documents.
Pay Legal Fees and Expenses: Pay to Lender, upon demand,
together with interest at the rate set forth in the Note, from the date when
incurred or advanced by Lender until repaid by Borrower all costs, expenses or
other sums incurred or advanced by Lender to preserve, collect and protect its
interest in or realize on the collateral, and to enforce Lender's rights as
against Borrower, any account debtor or guarantor, or in the prosecution or
defense of any action or proceeding related to the subject matter of this
Agreement, including without limitation legal fees, expenses and disbursements
incurred by Lender. All such expenses, costs and other sums shall be deemed
Obligations secured by the Collateral.
Reaffirmation of Representations and Warranties: All
warranties and representations made herein by Borrower, and in any other
agreements or documents executed and/or delivered by Borrower to Lender in
connection with this Agreement, will continue to be true and accurate so long as
the Obligations remain unpaid.
Expenses: The Borrower agrees to pay all charges incident to
the procuring and making of the Loan and the charges for the examination of the
title of the Premises, searches relating to the Borrower, the Guarantor and the
Collateral, title insurance premiums, surveys and drawing of papers, mortgage
tax, recording fees, legal fees and expenses of Lender's attorneys (as limited
pursuant to the Commitment Letter), and for all searches which may be required
by the Lender to assure the Lender that the Deed of Trust is a second lien as
herein provided.
Taxes, Assessments, etc. The Borrower agrees to pay any tax,
assessment or other charge or liens upon the Premises, existing at any time,
whether before or after the making of the Loan, and to furnish proof thereof
satisfactory to the Lender, within thirty (30) days after such payment is due,
and upon the Borrower's failure to do so, all further obligation on the part of
the Lender to make said Loan, or the balance thereof, shall cease, and the
amount previously advanced, if any, shall become immediately due and payable; or
if the Lender shall so elect, it may pay such encumbrances or liens and add the
amount of said payments to the amount thereafter becoming due. Any sums paid or
expended in accordance with any of the foregoing provisions of this clause shall
be deemed to be advanced to the Borrower pursuant to this Agreement and shall be
secured by the Loan Documents.
Permits, Licenses, etc.: The Borrower hereby assigns as
further security for the Obligations, all permits, licenses and contracts
relating to the Premises, including but not limited to, all environmental
approvals, all approvals for sewer, water and other utilities, all building or
construction permits, zoning, site plan or subdivision approvals, all licenses,
permits or approvals in connection with the operation of the Resort and the sale
and financing of Timeshare Estates, and all prepaid fees or charges relating
thereto, if any, each as may be permitted by the entity issuing such permits,
approvals, licenses and contracts.
Notice of Environmental, Health or Safety Complaints: Borrower
shall immediately provide to Lender notice or copies if written, of all
complaints, orders, citations or notices, whether formal or informal, written or
oral, from a governmental body or private person or entity, relating to air
emissions, water discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or safety
matter.
Assignment of Leases, Contract(s) of Sale: Borrower agrees to
and hereby does assign to Lender as further security for the Obligations, all
leases and/or contract(s) of sale of or affecting the Premises.
Financial Statements:
(a) Borrower agrees to submit to Lender its financial
statements, all prepared in accordance with generally accepted accounting
principles consistently applied, and in addition to such statements, any
supplementary information to the financial statements as Lender shall reasonably
require, as more particularly set forth in the other Loan Documents.
(b) Borrower shall, within one hundred twenty (120) days after
the end of each fiscal year, furnish to Lender its balance sheet as at the end
of such year, and its income and surplus statement and statement of cash flow
for such fiscal year, all in reasonable detail, all prepared in accordance with
generally accepted accounting principals consistently applied on a consolidated
basis with its subsidiaries and affiliates (including the Guarantor), and all
audited by independent certified public accountants of recognized standing
selected by Borrower and satisfactory to Lender, and in addition to such
statements, any supplementary information to the financial reports as Lender
shall reasonably require.
(c) Borrower shall also deliver to Lender within sixty (60)
days after the end of each quarter-annual fiscal period of the Borrower, except
the 4th quarter, Borrower's and Guarantor's balance sheet as at the end of such
period, Borrower's and Guarantor's cumulative income and surplus statement and
Guarantor's statement of cash flow for the period beginning on the first day of
such fiscal year and ending on the date of such balance sheet, all in reasonable
detail, all prepared in accordance with generally accepted accounting principals
consistently applied, certified by the Chief Financing Officer of the Borrower
and in addition to such statements any supplementary information to the
financial reports as Lender shall reasonably require.
(d) As soon as practical after the end of each month, and in
any event within ten (10) days after the end of such month Borrower shall cause
to be furnished to Lender a monthly detailed trial balance of all Acceptable
Contracts and a schedule of all collections and delinquencies relating to the
Acceptable Contracts, in form and substance acceptable to Lender. All such
statements shall be certified as correct by the Chief Financial Officer of
Borrower.
Broker's Fees: Borrower agrees to promptly pay all finders'
fees, brokerage fees, commissions or similar fees payable to them in connection
with the transactions described in this Agreement, if any. Borrower agrees to
indemnify and hold harmless Lender from and against any claim of any broker,
finder or other person, together with any attorneys' fees incurred by Lender in
respect thereto, arising out of the transactions contemplated by this Agreement.
Borrower and Lender acknowledge that they are not, as of the date of this
Agreement, aware of any such fees due to any person or entity. This obligation
shall survive the expiration or termination of the Commitment Letter and this
Agreement.
Payment of Contracts: Borrower will direct all account debtors
under the Contracts to remit all payments under such Contracts to the Lender's
account established at Bank One Arizona, N.A., or such other bank or other
entity as may be acceptable to Lender pursuant to the terms of the Agency
Agreement between the Agent, Lender and Borrower. Lender agrees to apply such
funds paid to the Obligations upon collection thereof by the Agent and delivery
to Lender, provided an Event of Default shall not then exist.
Other Documents: Borrower agrees that it will maintain
accurate and complete files relating to the Contracts and other Collateral to
the satisfaction of Lender, and that such files will contain copies of each
Contract, Related Documents, copies of all relevant credit memorandum relating
to the Contracts, and all collection information and correspondence relating
thereto and such other documents as are reasonably requested by Lender.
Assignment of Acceptable Contracts: Contemporaneously with the
execution and delivery of this Agreement by Borrower, Borrower will execute and
deliver to Lender a formal written assignment of all of the Acceptable Contracts
included in the Collateral, accompanied by the executed originals of all such
Acceptable Contracts, to which shall be annexed receipted copies of all Related
Documents.
Servicing of Acceptable Contracts: Borrower shall, at its cost
and expense, enter into and maintain, for as long as the Loan remains unpaid, a
servicing agreement ("Servicing Agreement") with a servicing entity selected by
Borrower and approved by Lender ("Servicing Agent"), to service the Acceptable
Contracts. The Servicing Agent shall furnish to Lender such reports,
documentation and information regarding the Acceptable Contracts as is
reasonably satisfactory to Lender.
Dominion Account; Agency Agreement: Borrower and/or the
Servicing Agent shall maintain a Dominion Account at an insured financial
institution selected by Borrower and acceptable to Lender 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 or
the Servicing Agent into the Dominion Account. Borrower, Lender and the selected
and approved Agent shall enter into an Agency Agreement, the terms of which
Agency Agreement shall be acceptable to Lender and Lender's counsel, and which
shall provide, among other things, for the said Agent 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 Lender, all in accordance with the terms and conditions of this
Agreement. The said post office box and Dominion Account shall be subject to the
exclusive control of Lender in accordance with the terms of this Agreement and
the Agency Agreement. The Agent selected and approved as Agent shall transfer to
Lender the funds deposited to the Dominion Account by wire transfer or check as
shall be directed by Lender. Borrower shall instruct all of the Consumers under
the Acceptable Contracts to direct remittances to a post office box established
by Lender 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 agreements received by the Borrower or the Servicing
Agent in payment of or on account of any of the Acceptable Contracts. Upon
receipt by Lender, all such proceeds shall be applied in payment in full or in
part of the Obligations in such order as Lender may elect.
Notice of Default or Event of Default: Borrower shall
immediately upon becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, give a written notice to Lender
specifying the notice given or action taken by such holder and the nature of the
claimed Default or Event of Default and what action Borrower is taking or
proposes to take with respect thereto.
Material Adverse Developments: Borrower shall immediately upon
becoming aware of any developments or other information which may materially and
adversely affect the Collateral, business, prospects, profits or condition
(financial or otherwise) of Borrower or its ability to perform this Agreement,
give to Lender telephonic or telegraphic notice specifying the nature of such
development or information and such anticipated effect.
VI
NEGATIVE COVENANTS
Until payment in full of all Obligations, Borrower covenants and agrees
that it will not:
Other Liens: Incur, create or permit to exist any mortgage,
assignment, pledge, hypothecation, security interest, lien or other encumbrance
on any of its property or assets, whether now owned or hereafter acquired,
except: (a) liens for taxes not delinquent; (b) those liens in favor of Lender,
and (c) the Permitted Liens.
Other Liabilities: Incur, create, assume or permit to exist
any indebtedness or liability on account of either borrowed money or the
deferred purchase price of property, except (a) Obligations to Lender; or (b)
indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing; or (c) the Permitted Liens.
Loans: Make loans to any person, firm or entity, except in the
ordinary course of its business in connection with the financing of the sale of
Time Share Estates.
Secondary Financing: Incur, create, assume, or permit to exist
any secondary financing encumbering the Premises and/or any other Collateral
securing the Obligations, except for Permitted Liens, nor shall there be any
encumbrances or security interest conveyed in any fixture or fixtures, nor in
any personalty whether affixed to the Premises or otherwise except for Permitted
Liens.
Partnership Structure: Alter or change its partnership
structure, or materially change the present ownership of the interest of the
general partner and limited partners of the Borrower or Borrower's management
without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed.
Guaranties: Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any person, firm or
entity except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Assignment: Assign this Agreement or any loan proceeds to be
made hereunder or any part thereof.
Lease: Rent or lease all or any portion of the Premises
without the prior written consent of the Lender, except in the ordinary course
of Borrower's business.
No Indulgences to Consumers: Borrower shall not grant
extensions of time for the payment or compromise for less than the full face
value or release in whole or in part any person liable for the payment of, allow
any credit whatsoever, except for the amount of cash to be paid upon any
Collateral or any instrument or document representing the Collateral without the
prior written consent of the Lender.
Modifications of Contracts or other documents: Borrower will
not modify, amend, or otherwise alter any of the terms of the Contracts or any
other documents relating thereto without Lender's prior written consent or waive
any of Borrower's rights, if such modification might result in any diminution or
adverse affect upon the Collateral or the conduct of the business of the
Borrower. The Borrower shall also not change, alter or modify or permit any
change, alteration or modification of its Certificate of Limited Partnership and
Agreement or other governing documents without Lender's prior written consent,
which consent shall not be unreasonably withheld or delayed.
VII
MISCELLANEOUS RIGHTS OF LENDER
Collections; Modification of Terms: Lender may, in its sole
and absolute discretion, and at any time, with respect to any of the Collateral,
demand, sue for, collect or receive any money or property, at any time payable
or receivable on account of or in exchange for, or make any compromises it deems
desirable including without limitation extending the time of payment, arranging
for payment in installments, or otherwise modifying the terms or rights with
respect to any of the Collateral, all of which may be effected without notice to
or consent by Borrower and without otherwise discharging or affecting the
Obligations, the Collateral or the security interests granted hereunder.
Notification to Consumers: At any time, prior to or after an
Event of Default, Lender may notify the Consumers on any of the Acceptable
Contracts to make payment directly to Lender, and Lender may endorse all items
of payment received by it which are payable to Borrower. Borrower, at the
request of Lender, shall notify the Consumers of Lender's security interest in
the Acceptable Contracts. Until such time as Lender elects to exercise its right
of notification, Borrower is authorized to collect and enforce the Acceptable
Contracts under the terms and conditions as set forth herein.
Uniform Commercial Code: At all times prior and subsequent to
an Event of Default hereunder, Lender shall be entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in
Pennsylvania (or any other state having jurisdiction), as the same may be
amended from time to time, with respect to all Collateral.
Preservation of Collateral: At all times prior and subsequent
to an Event of Default, Lender may take any and all action which in its sole and
absolute discretion is necessary and proper to preserve its interest in the
Collateral, including without limitation the payment of debts of Borrower which
might in Lender's sole and absolute discretion, impair the Collateral or
Lender's security interest therein, purchasing insurance on the Collateral,
repairing the Collateral, or paying taxes or assessments thereon, and the sums
so expended by Lender shall be secured by the Collateral, shall be added to the
amount of the Obligation(s) due Lender and shall be payable on demand with
interest at the Default Rate from the date expended by Lender until repaid by
Borrower.
Mails: From and after an Event of Default, Lender is
authorized to (and Borrower shall, upon request of Lender) notify the postal
authorities to deliver all mail, correspondence or parcels addressed to Borrower
and relating to the Collateral to Lender at such address as Lender may direct.
Lender's Right to Cure: In the event Borrower shall fail to
perform any of its Obligations hereunder or under any of the other Loan
Documents, then Lender, in addition to all of its rights and remedies hereunder,
may perform the same, but shall not be obligated to do so, at the cost and
expense of Borrower. In any such event, Borrower shall promptly reimburse Lender
together with interest at the Default Rate from the date such sums are expended
until repaid by Borrower.
Test Verifications: Lender shall have the right to make test
verifications of any and all Acceptable Contracts in any manner and through any
medium Lender considers advisable, and Borrower shall render any necessary
assistance to Lender.
Power of Attorney: Subject to the terms, conditions and
restrictions of this Agreement, Borrower hereby irrevocably constitutes and
appoints Lender as its true and lawful attorney, with full power of
substitution, to enforce collection of the Collateral at the sole cost and
expense of Borrower but for the sole benefit of Lender, either in its own name
or in the name of Borrower including but not limited to executing releases,
compromising or settling with any debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral; to receive,
open and dispose of all mail addressed to Borrower and take therefrom, any
proceeds of Collateral pledged or assigned to Lender; to notify Post Office
authorities to change the address for delivery of mail addressed to Borrower to
such address as Lender shall designate; to endorse the money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of Borrower on and to receive as pledgee or secured party of
the property covered by any of the Collateral, any invoices, schedules of
Collateral assigned, freight or express receipts, or bills of lading, storage
receipts, warehouse receipts or other documents of title of same or different
nature relating to the Collateral and to do any and all things necessary or
proper to carry out the intent of this Agreement and to perfect the liens and
rights of Lender created under this Agreement. Lender shall not be obliged to do
any of the acts or exercise any of the powers hereinabove authorized, but if
Lender elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
said power, and it shall not be liable or responsible to Borrower for any acts
or omissions nor for any error in judgment or mistake of law or fact. All powers
conferred upon Lender by this Agreement being coupled with an interest shall be
irrevocable so long as any Obligations of Borrower to Lender shall remain
unpaid. Lender is hereby further authorized to sign on behalf of Borrower any
Financing Statement Lender deems necessary to perfect its security interest and
to file same with the appropriate authorities in Arizona or any other state. All
costs of such filings shall be charged to and be borne by Borrower.
VIII
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event
of Default (hereinafter referred to as an "Event of Default"):
The Borrower shall have failed to make any payment of any
installment of interest on the Loan when due;
The Borrower shall have failed to make any payment of any
principal when due;
Borrower's and/or the Guarantor's failure to keep, observe,
perform, and/or carryout in every particular the covenants, terms or provisions
contained in this Agreement or any of the other Loan Documents and such Default
shall have remained uncured for a period of fifteen (15) days after notice
thereof to the Borrower by the Lender;
Borrower's or the Guarantor's consent to the application for
an appointment of a receiver or trustee for them or for substantially all of
their property, their sufferance of any such appointment made without their
consent to any proceedings against them under any law relating to bankruptcy,
insolvency, or the reorganization or relief of debtors, which shall have
continued unstayed and in effect for a period of thirty (30) consecutive days;
Borrower's or the Guarantor's admission in writing of their
inability to pay their debts as they mature, or commission of any act of
bankruptcy; Borrower's or the Guarantor's making of an assignment for the
benefit of creditors, or the filing of a voluntary petition in bankruptcy by the
Borrower or by the Guarantor; or the application for a receiver by the Borrower
or by the Guarantor;
The entry of any judgment or execution or attachment order
against or affecting the Borrower and/or the Guarantor which, in the reasonable
opinion of the Lender, adversely and materially affects the credit standing of
the Borrower and/or the Guarantor. (For purposes of this subsection, the term
"materially" shall be defined to mean an amount in excess of ten (10%) percent
of the Borrower's or the Guarantor's, as the case may be, net worth, as shown on
the Borrower's or the Guarantor's, as the case may be, most recently available
financial statements or $50,000.00, whichever is greater);
Any statement, representation, or warranty by the Borrower
contained in this Agreement, the other Loan Documents, the financial statements,
applications submitted for credit or any other agreement for the payment of
money with Lender proving to be incorrect or misleading in any material respect,
or a breach in any of the terms and conditions of this Agreement, the other Loan
Documents or any other agreement with Lender at any time when the Borrower is
obligated to Lender hereunder;
The failure of the Borrower or the Guarantor to pay any
principal or interest on any other material borrowed money obligation when due,
so that the holder of such obligation declares, or may declare, such obligation
due prior to its stated maturity because of the Borrower's or the Guarantor's
default thereunder and the Borrower and/or the Guarantor shall have failed to
procure, within thirty (30) days after the declaration of said default, a
written statement cancelling said default and/or reinstating said obligation.
(For purposes of this subsection, the term "material" shall have the same
meaning as set forth in Section VIII 6. above);
Any material and adverse change in the condition or affairs,
financial or otherwise, of the Borrower or the Guarantor, which in the
reasonable opinion of Lender impairs Lender's security or increases its risk so
as to jeopardize the repurchase Obligations of the Borrower under the Financing
Agreement or any of the other Obligations of the Borrower under this Agreement
or any of the other Loan Documents or the obligations of the Guarantor pursuant
to the Guaranty;
If at any time Lender reasonably determines that an
environmental claim against the Premises will have a material adverse effect on
the financial condition of the Borrower;
The failure of the Borrower and/or the Guarantor to provide
financial statements and/or annual tax returns to Lender when required or
requested to do so, together with such financial information as may reasonably
be requested by Lender;
The passing of title, legal or equitable, to the Premises
(except as to the Transactions and Unit Weeks and any "cash sales" of Unit Weeks
at the Premises sold by Borrower in the ordinary course of Borrower's business)
without the written consent of Lender;
The failure to make payment of any tax, assessment, or
municipal or governmental charge against the Premises, or any Unit Week, when
due or the imposition of any lien thereon not paid and removed within 15 days
from the date thereof, except that no such tax, assessment or charge need be
paid which is being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside, provided, however, any such
payment must be made if necessary to prevent the forfeiture or sale of the
Premises or any Unit Week, as the case may be;
The failure to pay any insurance premium when due on or
relating to the Premises or the Collateral;
Any material change in the partnership structure or management
of the Borrower without the prior written consent of Lender, which consent shall
not be unreasonably withheld or delayed;
Any suspension of the Borrower's or the Guarantor's
transaction of its or their usual business(es);
Liquidation and/or dissolution of the Borrower or the
Guarantor;
The loss, revocation or failure to renew any license and/or
permit now held or hereafter acquired by Borrower which is necessary for the
continued operation of the Borrower's business, including, but not limited to,
the Project, which, in the sole opinion of Lender, materially adversely affects
Borrower's business or its ability to repay the Loan;
The issuance of any stay, order, cease and desist order or
similar judicial or non-judicial sanctions limiting or otherwise affecting the
sale of Contracts, if such order or sanction is not discharged within thirty
(30) days thereafter, which in the sole opinion of Lender, materially adversely
affects the Borrower's business or its ability to repay the Loan;
Borrower terminates or breaches any management or marketing
agreement and/or engages the services of a different, substitute or subsequent
management or marketing firm, or materially modifies the management or marketing
agreement(s), without first obtaining the written consent of Lender, which
consent shall not be unreasonably withheld or delayed;
The Premises is partially or totally destroyed and the
Borrower, the Association governing the Resort and/or the owners of the Unit
Weeks, as the case may be, if permitted, elect not to rebuild the improvements
at the Premises in substantially the same size, quality of construction,
architecture and in all other manner so as to conform with the improvements
which existed prior to such damage or destruction; or
A mechanics' lien, stop notice, or notice of intention or any
other lien or encumbrance shall have been filed against the Premises and/or any
of the other Collateral and the Borrower shall have failed to procure within
thirty (30) days after the same is filed, a cancellation of the said lien or a
discharge thereof or shall have failed to post a bond or escrow sufficient funds
to discharge the same in the opinion of Lender, in the manner and form provided
by law, and such default shall have remained uncured for a period of thirty (30)
days.
IX
CONSEQUENCES OF DEFAULT
In case any Event of Default shall have occurred and be continuing,
then and in every such Event of Default, the Lender may take any or all the
following actions in addition to those actions allowed in the other Loan
Documents, at law or in equity, at the same time or at different times:
Demand Obligations: Declare all Obligations owing to the
Lender from the Borrower under this Agreement, the other Loan Documents or any
other agreement between the Lender and the Borrower, to be forthwith due and
payable, whereupon all such Obligations and sums shall forthwith become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by Borrower;
Possession and Disposition of Collateral: Lender may forthwith
give written notice to Borrower, whereupon Borrower shall, at its expense,
promptly deliver any and all Collateral to such place as Lender may designate,
or Lender shall have the right to enter upon the premises where the Collateral
is located and take immediate possession of and remove the Collateral without
liability to Lender except such as occasioned by the gross negligence or willful
misconduct of Lender, its employees or agents. In the event Lender obtains
possession of the Collateral, Lender may sell any or all of the Collateral at
public or private sale, at such price or prices as Lender may deem best, either
for cash, on credit or for future delivery, in bulk or in parcels and/or lease
or retain the Collateral repossessed using it or keeping it idle.
Notwithstanding anything contained herein to the contrary, Lender shall have no
obligation to take possession of all or any portion of the Collateral. Notice of
any sale or other disposition shall be given to the Borrower at least ten (10)
days before the time of any intended sale or disposition of the Collateral is to
be made, which Borrower hereby agrees shall be reasonable notice of such sale or
other disposition. Lender may also elect to retain the Collateral or any part
thereof in satisfaction of the Borrower's Obligations. The proceeds, if any, of
any such sale or leasing by Lender shall be applied: first, to the payment of
all fees and expenses incurred by Lender as a result of such Event of Default,
including without limitation any legal fees and expenses incurred in
repossessing the Collateral and selling it or leasing it; second, to pay the
Obligations in such order and in such manner as Lender shall deem appropriate;
and third, to pay any excess remaining thereafter to Borrower.
Terminate Borrower's Rights Under Loan Documents: Upon the
occurrence of any Event of Default, Lender may also, with or without proceeding
with such sale or foreclosure of any Collateral or demanding payment of the
Obligations, without notice terminate further performance under this Agreement
or any of the other Loan Documents or exercise all rights granted in any other
agreement or agreements between Lender and Borrower without further liability or
obligation by Lender. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice or otherwise, shall absolve,
release or otherwise affect the liability of Borrower in respect to transactions
had prior to such termination, nor affect any of the liens, security interests,
rights, powers and remedies of Lender, but they shall, in all events, continue
until all Obligations are satisfied.
Foreclosure: To institute and maintain foreclosure proceedings
in accordance with the laws of the States of Pennsylvania or Arizona, as the
case may be;
Collection of Obligations: To institute proceedings to collect
all or any portion of the Obligations without instituting foreclosure
proceedings;
Other Remedies: Exercise any rights or take any of the
remedies otherwise available to it under the Loan Documents or as a matter of
law or equity; and
Set-Off: Immediately, and without notice or other action, to
set-off any money owed by the Lender in any capacity to the Borrower against any
of the Borrower's liability to the Lender, whether due or not, and the Lender
shall be deemed to have exercised such right of set-off and to have made a
charge against any such money immediately upon the occurrence of such Event of
Default, even though the actual book entries may be made at some time subsequent
thereto.
Cumulative Remedies; Waivers: No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lender at law or in
equity. No express or implied waiver by Lender of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of Lender in
exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by this Agreement, the other Loan Documents and applicable law.
Waive Jury Trial: BORROWER HEREBY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR OTHER AGREEMENTS OR INSTRUMENTS BETWEEN BORROWER AND LENDER. JPM
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Initial
No Marshalling: Lender shall be under no obligation whatsoever
to proceed first against any of the Collateral before proceeding against any
other of the Collateral. It is expressly understood and agreed that all of the
Collateral stands as equal security for all Obligations, and that Lender shall
have the right to proceed against any or all of the Collateral in any order, or
simultaneously, as in its sole and absolute discretion it shall determine. It is
further understood and agreed that Lender shall have the right, in its sole and
absolute discretion, to sell any or all of the Collateral in any order or
simultaneously.
X
MISCELLANEOUS
Reimbursement of Expenses: The Lender shall be entitled to its
reasonable expenses incurred in the enforcement or liquidation of any
Obligations due hereunder, or for the enforcement of payment of the Obligations,
and those expenses shall, without limitation, include reasonable attorneys' fees
plus other legal costs and expenses incurred. Borrower agrees to pay all costs
and expenses of the Lender in connection with the preparation, execution,
delivery, and administration of this Agreement, the other Loan Documents and
other instruments and documents to be executed contemporaneously herewith,
including reasonable attorney's fees and out-of-pocket expenses of counsel for
Lender, subject to the limitations set forth in the Commitment Letter.
No Waiver: The Borrower agrees that no delay on the part of
the Lender in exercising any power or right hereunder shall operate as a waiver
or relinquishment of any such power or right, nor preclude any further exercise
thereof, or the exercise of any other power or right. The Lender shall not by
any act or omission be deemed to have waived any of its rights or remedies
hereunder, unless such waiver is in writing and signed by the Lender, and then
only to the extent set forth therein. A waiver as to any one event shall in no
way be construed as continuing or as preventing the exercise of such rights or
remedy by subsequent event.
Waiver of Presentment, Etc.: The Borrower waives presentment,
dishonor and notice of dishonor, protest and notice of protest of all commercial
papers at any time held by the Lender on which the Borrower is in any way
liable.
Incorporation of Other Loan Documents: The provisions of this
Agreement shall be in addition to those of the other Loan Documents or other
writings held by the Lender relating to the Obligations, all of which shall be
construed as one instrument. To the extent there is any conflict between the
provisions of this Agreement and any other Loan Documents, the terms of the
agreement which affords the greater protection to Lender shall control. Borrower
agrees that all of the terms of the Commitment Letter shall be incorporated
herein as though set forth at length.
Consent to Extensions, Postponements,
Releases, Etc.: Borrower consents to any extension,
postponement of time of payment, indulgence or to any substitution exchange or
release of Collateral and to any addition to or release of, any party or persons
primarily or secondarily liable, or acceptance of partial payments on any
Contracts or instruments in the settlement, compromising or adjustment thereof.
Survival of Representations and Warranties: All
representations and warranties made herein or in any certificate or instrument
contemplated hereby shall survive any independent investigation made by Lender
in the execution and delivery of this Agreement, in said certificates or
instruments and shall continue so long as any Obligations are outstanding and
unsatisfied, applicable statutes of limitation to the contrary, notwithstanding.
Binding Effect: This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors and
assigns.
Rights and Remedies Cumulative: The rights and remedies herein
expressed to be vested in or conferred upon the Lender shall be cumulative and
shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred by any applicable law.
No Obligation to Enforce Terms: Nothing herein contained shall
impose upon the Lender any obligation to enforce any terms, covenants or
conditions contained herein. Failure of the Lender, in any one or more
instances, to insist upon strict performance by the Borrower of any terms,
covenants or conditions of this Agreement and/or the other Loan Documents, shall
not be deemed to be a waiver or relinquishment of any such terms, covenants and
conditions.
Lender's Right to Assign: This Agreement and all rights
hereunder may be assigned or otherwise transferred by the Lender to anyone of
its choosing.
Governing Law: This Agreement, the other Loan Documents and
the rights of the parties shall be governed by and construed under the laws of
the Commonwealth of Pennsylvania, except where the laws of the State of Arizona
control with respect to the exercise of Lender's rights and remedies as against
the Premises.
Indemnification: The Borrower hereby agrees to and does hereby
indemnify, protect, defend and save harmless the Lender, its directors,
employees, agents and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims or
demands including reasonable counsel fees incurred in investigating or defending
such claim, suffered by any of them, and caused by, relating to, arising out of,
or resulting from this Agreement, the other Loan Documents and the transactions
contemplated herein, including, but not limited to: (a) any act or omission to
act by the Borrower in connection with this Agreement; or (b) losses, damages,
expenses or liabilities sustained by the Lender pursuant to any provisions
contained in any local, state or federal law, statute or ordinance, including
any environmental law or regulation. The provisions of this paragraph shall
survive the termination of this Agreement, cancellation of the other Loan
Documents and the repayment of the Obligations.
Modification: This Agreement may not be modified, amended,
altered or changed orally or by course of dealing between Borrower and Lender,
but only by an agreement in writing duly executed on behalf of the party to whom
enforcement of any such waiver, change, modification or discharge is sought.
Severability: If any term or provision of this Agreement or
the application thereof shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such terms or provisions
other than that which is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
No Third Party Beneficiary; No Joint Venture or Agency
Relationship: All sums advanced hereunder and evidenced by the Note shall be
strictly for the benefit of the Borrower and shall not inure to the benefit of,
nor be intended or construed to give any third parties any legal or equitable
right, remedy or claim under or through the Borrower, the relationship between
Lender and Borrower being strictly a contractual one evidencing a
creditor-debtor relationship. Borrower and Lender hereby expressly disclaim the
existence of any partnership, joint venture, employment or other agency
relationship between them by virtue of this Agreement.
Cross Default; Cross Collateralization: All other agreements
between the Borrower and Lender and/or any of its affiliates or subsidiaries are
hereby amended so that a default under this Agreement is a default under all
other agreements and a default under any one of the other agreements is a
default under this Agreement. Further, that the Collateral under this Agreement
secures the Obligations now or hereafter outstanding under all other agreements
with Lender and/or its affiliates or subsidiaries and the collateral pledged
under any other agreement with Lender and/or its affiliates or subsidiaries
secures the Obligations under this Agreement.
Notices: Any notices under this Agreement shall be deemed duly
served on the Borrower on the date received if mailed by certified mail, return
receipt requested, postage prepaid addressed to Borrower at Borrower's last
address on the Lender's records. Any notices to Lender pursuant to this
Agreement shall be mailed to Lender by certified mail, return receipt requested,
postage prepaid at the address of set forth at the heading of this Agreement and
shall be deemed effective upon receipt by Lender.
Term of Agreement: This Agreement shall continue in full force
and effect and the liens of the Collateral granted hereby and the duties,
covenants and liabilities of Borrower hereunder and all terms, conditions and
provisions hereof relating thereto shall continue to be fully operative until
all Obligations created under this Agreement and, at Lender's option, all
Obligations under any other agreement or agreements between the Lender and
Borrower have been satisfied in full, concluded and/or liquidated. Borrower
expressly agrees that to the extent Borrower or any Consumer makes a payment or
payments to Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and are required to be repaid to a trustee, receiver or any other party under
any Bankruptcy Code, state or federal law, common law or equitable cause, then
to the extent of such payment or repayment, the Obligations or part thereof
intended to be satisfied, shall be revived and continued in full force and
effect as if said payment had not been made.
Amendment of Security Agreement: The terms and conditions of
this Agreement shall amend, modify and supersede that certain Security Agreement
dated as of September 10, 1991, executed and delivered by Borrower in favor of
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers, as of
the day and year first above written.
ATTEST: LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona Limited
Partnership
By: ILE SEDONA INCORPORATED,
an Arizona Corporation, Sole
General Partner
Nancy J. Stone By: Joseph P. Martori
------------------------- -----------------------------
NANCY J. STONE, Secretary JOSEPH P. MARTORI, President
WITNESS/ATTEST: TAMMAC FINANCIAL CORP.
Joseph J. Lombardi By: Andy G. Roosa
----------------------------- -------------------------
Joseph J. Lombardi, Asst. Sec. Andy G. Roosa, President
<PAGE>
EXHIBIT A
EXHIBIT B
LIST OF ACCEPTABLE CONTRACTS AS OF THE DATE OF THIS AGREEMENT
PROMISSORY NOTE
Phoenix, Arizona
$499,859.15 September 7, 1994
------------
FOR VALUE RECEIVED, LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an
Arizona Limited Partnership (the "Undersigned" or the "Borrower"), promises to
pay in lawful monies of the United States of America, to the order of TAMMAC
FINANCIAL CORP., having its principal office located at 100 Commerce Boulevard,
Wilkes-Barre, PA 18702 (hereinafter referred to as the "Lender") or at such
place as Lender may from time to time designate in writing, the principal sum of
Four hundred ninety-nine thousand eight hundred fifty-nine and 15/100
($499,859.15) DOLLARS (the "Loan"), together with interest as hereinafter
provided, computed from the date hereof, in accordance with the terms of a
certain Loan and Security Agreement between the undersigned and the Lender
executed contemporaneously herewith (the "Loan Agreement"), and in the following
manner and upon the following terms and conditions:
Payment of Loan.
(a) The unpaid principal, the accrued interest and all costs and
expenses relating to the Loan shall be payable on September 1, 1998, unless
sooner demanded in accordance with the terms and provisions set forth herein and
in the Loan Agreement.
(b) Commencing on the first day of October, 1994, and on the same day
of each successive month thereafter through and including September 1, 1995, the
Borrower shall pay to Lender a minimum payment each month in the amount of
$14,406.00. Thereafter, commencing on the first day of October, 1995, and on the
same day of each successive month thereafter through and including September 1,
1998, the Borrower shall pay to Lender a minimum payment each month of
$6,280.00. The aforesaid payment shall be made payable out of the monthly
collections received under the Acceptable Contracts (as that term is defined in
the Loan Agreement). In the event the monthly collections from the Acceptable
Contracts are insufficient to pay the aforesaid minimum payment, the Borrower
shall pay the interest and/or principal insufficiency on the first of each month
as aforesaid.
(c) The Borrower shall direct or otherwise cause all Consumers (as that
term is defined in the Loan Agreement) under the Acceptable Contracts to pay all
monies due thereunder to the Agent (as that term is defined in the Loan
Agreement) or as otherwise advised by Lender in writing. The Borrower, to the
extent that it receives such payments directly from or on behalf of such
Consumers, shall hold the same (in the form so received) in trust for the sole
and exclusive benefit of Lender and immediately deliver same to Lender or Agent.
Monies (in good, collected funds) from Contracts collected and paid to Lender by
the Agent or the Borrower shall be (subject to the payment of fees, costs and
expenses as set forth in this Note and the Loan Agreement)apply, on the first
business day of the calendar month following the receipt thereof, first towards
the payment of accrued and unpaid interest on the Loan and then to the payment
of the principal amount then outstanding under the Loan.
(d) For purposes of computing the amount of interest payable on the
Loan, the outstanding principal amount of the Loan shall not be reduced by the
amount of any funds collected by the Agent or the Borrower until such funds are
received by Lender as good, collected funds and applied to the Loan.
Interest Rate. The interest rate which shall be used to
calculate the amount of interest due each month shall be the highest prime rate
as announced, from time to time, in The Wall Street Journal during the month for
which interest is being charged ("Prime Rate"), plus four (4%) percentage points
per annum. Interest shall be calculated on the outstanding principal balance at
the close of each day, on the basis that one day represents 1/360th of a year.
The interest rate may be changed from time to time without notice to the
Borrower and for the purposes of this Note, any such change shall be effective
on the date of the change. Interest shall continue to accrue on the unpaid
principal balance remaining due until all sums due hereunder and under the Loan
Agreement are paid in full. Lender's failure or delay in submitting invoices of
the interest due under the Loan to the Borrower shall not discharge or relieve
the Borrower of its obligation to pay interest on the Loan when due.
Default Interest Rate. Upon the occurrence or during the
continuance of an Event of Default, as defined in the Loan Agreement, the rate
used to calculate the interest due on the Loan may, at the option of Lender,
increase by five (5%) percentage points above the interest rate referred to in
paragraph 2. above (the "Default Rate"). If such increased interest rate exceeds
that which may be collected under applicable law, the Default Rate shall be that
maximum allowable interest rate.
Late Charge. In the event Lender receives a payment of
interest or principal more than fifteen (15) days after its due date, 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 the Lender in
processing late payments and shall not be deemed to constitute additional
interest.
Collateral. (a) As security for the payment and performance of
the obligations hereunder, the undersigned has, contemporaneously herewith,
granted a security interest to Lender in and to the Collateral more particularly
described in the Loan Agreement.
(b) In addition, as security for the payment and performance of the
obligations hereunder, ILX Incorporated, an Arizona Corporation, has
contemporaneously herewith, executed and delivered to Lender an Amended and
Restated Guaranty Agreement ("Guaranty Agreement").
Application of Payments. All payments of interest and
principal or prepayments of principal, howsoever designated by the undersigned,
are to be applied first on account of interest on the unpaid balance of the
principal indebtedness, and the balance, if any, on account of said principal
indebtedness.
Events of Default; Acceleration of Balance Due. (a) The
Borrower agrees with the Lender that the Borrower shall be bound by and shall
comply with all of the terms, covenants and conditions of the Loan Agreement and
all other Loan Documents, as that term is defined in the Loan Agreement, all of
which shall be construed as one instrument and any Default in any term, covenant
or condition contained in the Loan Agreement and/or any of the other Loan
Documents shall cause this Note to be in default and all money owed by the
Borrower to the Lender by virtue of this Note, the Loan Agreement and/or any of
the other Loan Documents shall be forthwith due and payable. All of the Events
of Default set forth in the Loan Agreement and the other Loan Documents are
herein incorporated by reference as though set forth fully at length.
(b) Upon the occurrence of any Event of Default as described or defined
in the Loan Agreement, and/or any of the other Loan Documents, then, at the
option of the Lender or the holder hereof, the aforesaid principal sum or so
much thereof as shall then remain unpaid, with all arrearage of interest
thereon, and any other sums due hereunder or thereunder shall, without notice or
demand, at the option of the Lender, become and be due and payable immediately
thereafter, anything hereinbefore contained to the contrary notwithstanding. In
addition, the Lender or holder hereof may exercise any and all rights and
remedies available to it under the terms of the Loan Agreement and/or any other
Loan Documents, or at law or in equity.
Principal Prepayments. It is understood and agreed that the
undersigned may prepay in full or in part at any time without penalty or
premium, the principal of this obligation; provided, however, the Borrower shall
notify Lender of each such prepayment. Any such prepayments of principal shall
be applied in the inverse order of their maturity.
Lender's Rights Cumulative. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to herein, in the Loan Agreement and/or any of the other
Loan Documents, or other agreements or otherwise available to Lender at law or
in equity. No express or implied waiver by Lender of any Default or Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Default or Event of Default. The failure or delay of Lender
in exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such rights
upon the continuation or reoccurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by the Loan Agreement and/or any of the other Loan Documents and
applicable law.
Waiver of Jury Trial. THE BORROWER HEREBY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS NOTE, THE LOAN AGREEMENT
AND/OR ANY OF THE OTHER LOAN DOCUMENTS OR OTHER AGREEMENTS OR INSTRUMENTS
BETWEEN BORROWER AND LENDER. /S/
-------
Initial
Attorney's Fees, Costs and Charges. The Borrower shall be
liable for all costs, charges and expenses, and other sums incurred or advanced
by Lender (including reasonable legal fees and disbursements) to preserve,
protect or maintain the Collateral securing this Note, collect the sums due
hereunder and/or the other Loan Documents, protect Lender's interests in or
realize on the Collateral or to enforce Lender's rights against the Borrower.
Joint and Several Liability. The liability of the Borrower
shall be joint and several, absolute and unconditional and without regard to the
liability of any other party.
Waivers. The Borrower and all other parties who at any time
may be liable hereon in any capacity, jointly and severally, waive presentment,
demand for payment, protest and notice of protest, and notice of dishonor of
this Note, and authorize Lender, without notice, to grant any extension,
postponement of time of payment, indulgence or any substitution, exchange or
release of Collateral and the addition to or release of any party or persons
primarily or secondarily liable or acceptance of partial payments on any
accounts or instruments and the settlement, compromising or adjustment thereof.
Disclosure of Information. Lender is hereby authorized to
disclose any financial or other information about the Borrower to any regulatory
body or agency having jurisdiction over the Lender, or to any present, future or
prospective participant or successor in interest in any loan or other financial
accommodation made by Lender to the Borrower.
Further Security; Right of Set-off. (a) As further security
for the performance of the obligations hereunder and the other Obligations, as
defined in the Loan Agreement, the Borrower hereby gives Lender a general lien
upon all property and assets heretofore or hereafter delivered to Lender, and
Lender shall have the right of setoff, in addition to any other rights conferred
by statute or operation of law, with respect to any funds or tangible assets
which may, at any time, be in possession of or under Lender's custody and
control.
(b) Lender shall have the right, after the occurrence of an Event of
Default, to immediately without notice or other action, to set-off against the
Borrower or any of the Guarantor's obligations to Lender, any sum owed by the
Lender in any capacity to the Borrower or any Guarantor, whether due or not, or
any property of the Borrower or any Guarantor in the possession of the Lender,
and Lender shall be deemed to have exercised such right of set-off and have made
a charge against any such money or property immediately upon the occurrence of
any Event of Default, even though the actual book entries may be made at times
subsequent thereto.
No Waiver of Rights or Remedies. The Lender shall not by any
act or omission be deemed to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Lender, and then only to the
extent set forth therein. A waiver as to any one event shall in no way be
construed as continuing or as preventing the exercise of such rights or remedies
by a subsequent event.
Business Purpose. The proceeds of this Note shall be (or have
been) utilized for business purposes and as a result, this loan transaction does
not fall under the regulations set forth in 12 CFR Section 226, et seq.
Balloon Note. IN THE EVENT THAT THERE IS A PRINCIPAL BALANCE
REMAINING DUE AFTER ALL MANDATORY PAYMENTS REQUIRED TO BE MADE UNDER PARAGRAPH 1
ABOVE HAVE BEEN PAID BY BORROWER TO LENDER, THIS NOTE SHALL BE DEEMED TO BE A
BALLOON NOTE REQUIRING PAYMENT IN FULL ON THE DATE OF MATURITY AND THE LENDER
SHALL BE UNDER NO OBLIGATION TO REFINANCE THE AMOUNT DUE AT THAT TIME.
Loan Charges. In the event that the interest charged hereunder
exceeds the legal limit permitted by law, the interest rate shall be
automatically reduced to the permitted limit and any interest charged which
exceeds or exceeded the permitted limit shall, at Lender's option, be treated as
a payment of principal or refunded directly to the Borrower.
Invalidity. In the event any provision of this Note is
determined by competent authority to be prohibited or unenforceable in any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability, without invalidating the
remaining provisions of this Note, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable any provision
in any other jurisdiction.
Governing Law. The provisions of this Note shall be governed
by the laws of the Commonwealth of Pennsylvania.
Binding Effect. The provisions herein contained shall bind and
inure to the benefit of the Borrower and Lender and their respective legal
representatives, successors and assigns (provided, however, that the Borrower
shall not assign this Note without first obtaining the written consent of
Lender). Lender (or any subsequent assignee) may transfer and assign this Note
and deliver the Collateral securing this Note to any assignee, who shall
thereupon have all of the rights of Lender; and Lender (or any such subsequent
assignee that in turn assigns as aforesaid) shall then be relieved and
discharged of any responsibility or liability with respect to this Note and said
Collateral. For the purposes of this Note wherever the term "Lender" shall be
used it shall refer to any subsequent holder, successor or assignee hereof
unless the context requires otherwise.
Cross Default/Collateralization. All other agreements between
Lender and/or any of its affiliates or subsidiaries and the Borrower are hereby
amended so that a default under this Note is a default under all other
agreements between Lender and the Borrower and a default under any one of the
other agreements is a default under this Note. Further, such agreements are
amended so that the Collateral securing this Note secures any presently existing
or hereafter arising obligations due and owing from the Borrower to Lender
and/or its affiliates or subsidiaries and the collateral pledged under any other
agreement with Lender and/or its affiliates or subsidiaries secures this Note.
Incorporation of Commitment Letter. The terms and conditions
of the Commitment Letter from the Lender to International Leisure Enterprises
Incorporated (n/k/a ILX Incorporated), and assigned to Borrower dated June 28,
1991, as amended, and the terms and conditions of the Commitment Letter from
Lender to the Borrower dated July 20, 1994, are hereby incorporated by reference
as though same were fully set forth at length herein.
Gender. Throughout this Note, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Note indicates otherwise.
Section Headings. Section headings are for convenience only
and shall not be construed as limiting the contents of any section contained
herein and shall not be construed as part of this Note.
Conflicting Provisions. In the event that any of the terms and
conditions of this Note conflict with any of the terms and conditions of the
other Loan Documents or any other agreements between the Borrower or any
Guarantor and Lender, the provision(s) offering Lender the greatest protection
or most favorable interpretation of its rights and remedies shall control.
Definitions. Unless otherwise defined herein, the capitalized
terms found herein shall have the same meaning ascribed to them as set forth in
the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed and delivered by its proper and duly authorized officers as of the
day and year first above written.
ATTEST: LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona Limited
Partnership
By: ILE SEDONA INCORPORATED,
an Arizona Corporation; Sole
General Partner
Nancy J. Stone By: /S/
---------------------------- ------------------------------
NANCY J. STONE, Secretary JOSEPH P. MARTORI, President
THIRD AMENDMENT TO FINANCING AGREEMENT
THIS AGREEMENT, dated as of September 7, 1994, is entered into by and
between TAMMAC FINANCIAL CORP., a Delaware Corporation, with its principal
office located at 100 Commerce Boulevard, Wilkes-Barre, Pennsylvania 18702
(hereinafter referred to as "Tammac") and LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP (a/k/a Los Abrigados Limited Partners Limited Partnership), an
Arizona Limited Partnership, with its principal office located at 2777 East
Camelback Road, Phoenix, Arizona 85016 ("Developer") and ILX INCORPORATED (f/k/a
International Leisure Enterprises Incorporated), an Arizona Corporation, with
its principal office located at 2777 East Camelback Road, Phoenix, Arizona 85016
("Guarantor").
R E C I T A L S:
A. The Developer and Tammac entered into a Financing Agreement dated as
of September 10, 1991 (the "Financing Agreement" or the "Agreement"), which set
forth the terms and conditions regarding the Developer's sale and Tammac's
purchase of certain consumer installment obligations generated at that certain
timeshare condominium project known as Los Abrigados Resort, Sedona Vacation
Club, located at 160 Portal Lane, Sedona, Coconino County, Arizona (the
"Project").
B. The obligations due and owing to Tammac under the Financing
Agreement are secured, in part, by the liens and security interests granted by
Developer pursuant to a Security Agreement and a Deed of Trust, Assignment of
Rents and Security Agreement (the "Mortgage"), of even date with the Financing
Agreement.
C. Contemporaneously with the execution and delivery of the Financing
Agreement, the Guarantor executed and delivered a Continuing Guaranty Agreement
in favor of Tammac.
D. Tammac and the Developer entered into a Modification Agreement dated
as of August 12, 1992, modifying certain terms and conditions of the Financing
Agreement (the "First Modification Agreement").
E. Tammac and the Developer again amended and modified the Financing
Agreement as evidenced by that certain Amendment to Commitment Letter, Financing
Agreement, and Reaffirmation of Various Loan Documents dated as of March 31,
1993 (the "Second Modification Agreement").
F. Pursuant to the terms of that certain Commitment Letter issued to
International Leisure Enterprises Incorporated dated June 28, 1991, the rights
and obligations of which were assigned by International Leisure Enterprises
Incorporated to the Developer, and as said Commitment Letter was amended and
modified by the First Modification Agreement and the Second Modification
Agreement, Tammac's obligations to purchase Contracts expires on September 30,
1994.
G. Developer has requested that Tammac extend the term of the
Commitment Letter for an additional twenty-four (24) months and purchase up to
an additional $10,000,000.00 of new Contracts to be generated by the Developer
at the Project. Pursuant to that request, Tammac issued to Developer a
Commitment Letter dated July 20, 1994. (The aforesaid Commitment Letter dated
June 28, 1991, as amended and modified by the First Modification Agreement and
the Second Modification Agreement, and the Commitment Letter dated July 20, 1994
are hereinafter sometimes collectively referred to as the "Commitment Letter.")
H. The parties desire to amend the terms and conditions of the
Financing Agreement and to affirm certain terms and conditions of the various
loan documents executed in connection therewith.
I. To that end, the parties wish to memorialize their agreements by
this writing.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Definitions: Unless otherwise defined herein, all capitalized or
defined terms used herein shall have the same meaning set forth in the
Commitment Letter, the Financing Agreement, the Modification Agreement,
the Second Modification Agreement, the Deed of Trust, the Security
Agreement and all related Loan Documents.
Recitals: The recitals set forth above are hereby incorporated herein
as if set forth at length. Tammac, the Developer and Guarantor each,
jointly and severally, acknowledge and confirm that all of the
aforesaid recitals are true, accurate and correct in all respects.
Modification of Financing Agreement. Effective as of the date of this
Third Amendment to the Financing Agreement, the Financing Agreement is
amended and modified as follows:
(a) Section 1.4 is hereby amended in its entirety to read as
follows:
1.4. "Guarantor" or "Guarantors" shall mean any one or all of the
following (as the context so requires) who have executed and
delivered guaranty agreements ("Guaranty Agreements") in favor
of Tammac, or any additional guarantors who may have or may in
the future unconditionally guaranty the obligations of the
Developer hereunder: ILX Incorporated (f/k/a International
Leisure Enterprises Incorporated), an Arizona Corporation.
(b) Section 2.1 is hereby amended in its entirety to read as
follows:
2.1. Subject to the funding limitations for Phase I and Phase II,
as set forth in the Commitment Letter, Developer shall offer
to sell to Tammac the Transactions. Developer shall submit
completed Credit Packages to Tammac for review relating to
said Transactions so offered. Provided Developer is not in
default under the terms and conditions of this Financing
Agreement and the Guarantor is not in default pursuant to the
terms of the Guaranty Agreement, and subject to the terms,
conditions and limitations of the Commitment Letter, as same
may be amended, which Commitment Letter, together with any
amendments, is incorporated herein by reference as though set
forth fully at length, Tammac shall purchase those
Transactions which meet Tammac's lending criteria and
guidelines, as same shall be in effect on the date that the
Third Amendment to the Financing Agreement is executed and
delivered to Tammac by the Developer and Guarantor. A copy of
Tammac's current lending guidelines and criteria is attached
hereto and made a part hereof and labelled as Exhibit "C".
Tammac's lending guidelines and criteria shall not change
during the term of the Financing Agreement. Tammac shall
advise Developer in writing whether it intends to purchase a
particular Transaction. Any approval to purchase a Transaction
shall be subject to the terms and conditions contained in said
approval.
(c) Section 2.2 is hereby amended in its entirety to read as
follows:
2.2 Except as set forth in Section 2.8 of this Financing
Agreement, Tammac shall accept Contracts that meet Tammac's
lending guidelines and criteria and which are written at a
contract rate of five and one-quarter (5 1/4%) percentage
points above the highest prime rate as announced from time to
time in The Wall Street Journal (the "Acceptable Contract
Rate"). The Acceptable Contract Rate shall be fixed for a
period of six months from the execution and delivery of this
Third Amendment to the Financing Agreement and shall be based
on the highest prime rate as announced in The Wall Street
Journal on the business day preceding the execution and
delivery of this Third Amendment to the Financing Agreement
("Prime Rate"). Thereafter, the Acceptable Contract Rate is
subject to change every six (6) months following the execution
and delivery of this Third Amendment to the Financing
Agreement (the "Change Date") and will be reset, if at all,
based upon the Prime Rate then in effect on each Change Date.
Notwithstanding anything contained herein to the contrary, in
the event that the Prime Rate exceeds nine and three quarters
(9.75%) percent per annum, and provided the Developer is not
in default under the terms of the Financing Agreement, Tammac
shall continue to purchase Contracts pursuant to the terms
hereof, irrespective of the interest rate set forth in said
Contracts without discounting said Contracts. For so long as
the Prime Rate exceeds 9.75% Tammac shall have no further
obligation to make Interest Rate Differential Payments to the
Developer, as provided in Section 2.8 of this Financing
Agreement.
(d) Section 2.8 is hereby amended in its entirety to read as
follows:
2.8. Notwithstanding anything contained herein to the contrary, for
each Contract written by Developer and purchased by Tammac at
a Contract interest rate less than the Acceptable Contract
Rate, then in effect on the date Tammac purchases said
Contract, said Contract shall be discounted on the date each
such Contract is purchased by Tammac so as to yield an
equivalent rate to Tammac of the Acceptable Contract Rate then
in effect. To that extent, the amount to be funded by Tammac
to Developer on each such Contract shall be reduced. Any and
all sums paid by Developer to Tammac so as to equalize the
yield as aforesaid shall be non-refundable under any and all
circumstances.
In the event that a Contract written by Developer and
purchased by Tammac provides for a contract interest rate
greater than the Acceptable Contract Rate then in effect on
the date each payment is received under the Contract by the
Consumer, Tammac shall pay to the Developer, as and when
collected and earned, on a monthly basis, the Interest Rate
Differential, as hereinafter defined. The Interest Rate
Differential shall be computed by subtracting the interest
component of each payment of an effected Contract computed at
the Acceptable Contract Rate then in effect from the interest
component of each payment actually received by Tammac on each
Contract written at a rate of interest in excess of the
Acceptable Contract Rate. Tammac shall furnish such
documentation to the Developer, on a monthly basis,
identifying each of the Contracts purchased by Tammac which
are subject to an interest rate differential payment
("Interest Rate Differential Payment(s)") as hereinabove
provided, which documentation shall be reasonably satisfactory
to Tammac and the Developer. Tammac shall not be responsible
to make any Interest Rate Differential Payments to the
Developer unless and until Tammac receives good, collected
funds required to be paid under said Contracts. Developer
recognizes and agrees that it shall bear any credit risk in
the event that all or any payments due under a particular
Contract are not made and/or received by Tammac or are
otherwise dishonored. In the event that all or any portion of
the Interest Rate Differential Payments are required to be
returned to a Consumer or someone making a claim by or on
behalf of the Consumer or the Consumer's creditor(s), the
Developer shall, upon the demand of Tammac, immediately return
all or any portion of the Interest Rate Differential
Payment(s) required to be returned.
Tammac shall be under no obligation to make Interest Rate
Differential Payments to the Developer in connection with the
Acceptable Contracts securing the Loan referred to in the
Commitment Letter.
(e) Section 2.10 is hereby amended in its entirety to read as
follows:
2.10 In the event the Developer sells one Unit Week to two (2)
Consumers, whereby one of the Consumers is purchasing the odd
years of a Unit Week and the other consumer is purchasing the
even years of that Unit Week ("Split Week Contracts"), Tammac
shall not be obligated to purchase any Split Week Contracts
unless said Split Week Contracts meet Tammac's lending
criteria and guidelines.
(f) There is hereby added a new Section 2.11 as follows:
2.11 Tammac shall only accept Contracts which provide that: (i) the
amount financed is an amount equal to or greater than
$7,001.00 and the term of which is eighty-four (84) months or
less; (ii) the amount financed is between $5,001.00 and
$7,000.00 and the term of which is 60 months or less; or (iii)
the amount financed is $5,000.00 or less and the term of which
is forty-eight (48) months or less.
(g) The third subparagraph of Section 9.1 is hereby amended in its
entirety to read as follows:
9.1 After the expiration of the commitment period, which shall
expire two years from the execution and delivery to Tammac by
the Developer of this Third Amendment to the Financing
Agreement, or the purchase by Tammac of an additional
$10,000,000.00 of Contracts, whichever occurs first, Developer
shall not have the option of offering Replacement Contracts to
Tammac for delinquent Contracts and Tammac shall be under no
obligation to accept any Replacement Contracts. From and after
the expiration of the commitment period, Developer must
repurchase the delinquent Contracts.
Reaffirmation of Loan Documents: The Developer and Guarantor, each,
jointly and severally, ratify and confirm that: (i) the Commitment Letter, as
amended; (ii) the Financing Agreement, as amended; (iii) the Deed of Trust, as
modified; (iv) the Security Agreement and all related documents executed
contemporaneously therewith or herewith, and any and all other documents
executed in connection therewith and herewith, are ratified and confirmed and
shall remain in full force and effect in accordance with their terms to the
extent not amended or modified herein or contemporaneously herewith. Developer
and Guarantor each, jointly and severally, warrant and represent that all
representations, warranties and covenants contained in the Loan Documents are
true and complete as of the date hereof, no warranty therein contained has been
breached as of the date hereof, and Developer and Guarantor are each in full
compliance with all of the terms thereof and have performed all obligations on
their part to be performed therein.
The Developer and Guarantor each, jointly and severally, acknowledge
their respective obligations under each of the Loan Documents and hereby
restate, in their entirety, the representations, warranties and covenants set
forth herein and in the aforesaid Loan Documents, as amended, which
representations, warranties and covenants are true and complete as of the date
of the execution of this Third Amendment to the Financing Agreement.
Guarantor consents to any extension, modification or change in any of
the aforesaid Loan Documents and related documents by Tammac and waives all
notice of any such change in the terms of collateral and further waives any
right or remedy that Tammac may have or may be required to pursue against
Developer or any other party liable thereunder or hereunder prior to commencing
any action or enforcing the provisions herein or therein contained or as
contained in the Guaranty Agreement.
No Marshalling: Tammac shall be under no obligation whatsoever to
proceed against any collateral securing the obligations of the Developer or the
Guarantor pursuant to the Loan Documents and/or to first proceed against any
person or entity obligated under the Loan Documents before proceeding against
any particular collateral available to Tammac or before proceeding against any
person or entity obligated under the Loan Documents.
Continuing Validity of Loan Documents: Except as expressly modified
herein, the Financing Agreement, the First Modification Agreement, the Second
Modification Agreement and all other Loan Documents shall remain in full force
and effect.
Inconsistent Rights or Remedies available to Tammac: In the event that
any of the Loan Documents contain any inconsistent rights or remedies otherwise
available to Tammac, the rights and/or remedies accorded to Tammac giving Tammac
the greatest protection and/or affording Tammac the greater rights and/or
remedies shall control.
Binding Effect: This Agreement shall be binding upon, enure to the
benefit of the parties hereto and their respective successors and assigned.
IN WITNESS WHEREOF, the undersigned hereunder have set their hands or
caused these presents to be executed by their proper corporate officers as of
the day and year first above written.
ATTEST: LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona Limited
Partnership,
By: ILE SEDONA INCORPORATED, an
Arizona Corporation, Sole
General Partner
Nancy J. Stone By: Joseph P. Martori, President
------------------------- ------------------------------
NANCY J. STONE, Secretary JOSEPH P. MARTORI, President
ATTEST: ILX INCORPORATED, f/k/a
INTERNATIONAL LEISURE ENTERPRISES,
INCORPORATED, an Arizona
Corporation
Stephanie D. Castronova By: Joseph P. Martori, President
------------------------- ------------------------------
STEPHANIE D. CASTRONOVA, JOSEPH P. MARTORI, President
Secretary and Chief Executive Officer
ATTEST/WITNESS: TAMMAC FINANCIAL CORP.
Joseph J. Lombardi By: Andy G. Roosa
------------------------------ ------------------------------
JOSEPH J. LOMBARDI, ASST. SEC. ANDY G. ROOSA, President
AMENDED AND RESTATED CONTINUING GUARANTY
OF
ILX INCORPORATED (f/k/a INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED), an Arizona Corporation
Date: September 7, 1994
TO: TAMMAC FINANCIAL CORP. ("Tammac")
For Valuable Consideration, and to induce Tammac to: (i) amend that
certain Financing Agreement ("Financing Agreement") with LOS ABRIGADOS PARTNERS
LIMITED PARTNERSHIP, an Arizona Limited Partnership (the "Company"), which
Amendment to the Financing Agreement is being executed and delivered
contemporaneously herewith, regarding the sale and purchase of installment
obligations generated by the Company and relating to the Company's development
of a certain resort project known as the Los Abrigados Resort & Spa (a/k/a
Sedona Vacation Club) (the "Project"); (ii) modify that certain Deed of Trust
dated September 10, 1991 ("Deed of Trust") executed and delivered by the Company
in favor of Tammac; and (iii) make a Loan in the principal sum of $ 499,859.15,
as evidenced by that certain Loan Agreement and Note, which are being executed
and delivered contemporaneously herewith, (the Financing Agreement, as amended,
the Deed of Trust, as modified, the Loan Agreement, the Note and all related
documents executed and delivered in conjunction therewith and herewith are
hereinafter referred to as the "Loan Documents"), the undersigned jointly and
severally, hereby unconditionally guarantees and promises to: (i) pay when due
each and every obligation, direct or indirect, now existing or hereafter
arising, owing to Tammac by the Company pursuant to the terms and conditions of
the LoanDocuments; (ii) perform, at anytime and in the manner set forth in the
Loan Documents, all of the terms, covenants, and conditions therein required to
be kept, observed or performed by the Company; and (iii) pay all debts,
liabilities and other amounts due or to become due to Tammac under the Loan
Documents or other evidences of indebtedness, whether presently existing or
hereinafter arising, as same may be amended or modified, whether direct or
contingent, to which the Company and Tammac are parties or in which obligations
run from the Company to Tammac.
This Guaranty is a continuing guaranty and shall remain in
force until revoked by notice in writing to Tammac, and revocation hereof shall
not prejudice Tammac's claim hereunder with respect to any obligation arising
prior to revocation.
This Guaranty shall extend to and cover every extension or
renewal of, and every obligation accepted in substitution for any obligation
guaranteed hereby, and the undersigned shall be bound hereby irrespective of the
existence, value or condition of any collateral security Tammac may at any time
hold, or the inability of Tammac to fully establish or perfect a security
interest therein, or the validity, irregularity or enforceability of any
instrument, writing or arrangement relating to the Loan Documents or of the
obligations thereunder and irrespective of any present or future law or order of
any government (whether of right or in fact) or of any agency thereof,
purporting to reduce, amend or otherwise affect any obligation of the Company or
to vary the terms of payment of the obligations or the performance of any
covenants and conditions therein required to be performed by or of the Company
hereby guaranteed.
The undersigned hereby waives notice of acceptance of this
Guaranty, and also waives presentment, demand, protest and notice of dishonor of
any note or other obligation hereby guaranteed, and any right of subrogation
that the undersigned has or to which the undersigned may be entitled.
The undersigned hereby consents and agrees that Tammac may,
without prejudice to any claim against the undersigned hereunder, at any time,
or from time to time, in Tammac's discretion, and without notice to the
undersigned, (a) extend or change the time of payment, and the manner, place or
terms of payment of any obligation hereby guaranteed, (b) make advances for the
purpose of performing any term or covenant contained in the Loan Documents with
respect to which the Company shall be in default, (c) assign or otherwise
transfer the Loan Documents, or any interest therein or herein, (d) exchange,
release, impair or surrender all or any collateral security which Tammac may at
any time hold in connection with any obligation hereby guaranteed, (e) sell, and
Tammac itself purchase, any such collateral at public or private sale or at any
broker's board, crediting net proceeds upon any obligation secured thereby, or
(f) settle or compromise with the Company, or with any other person primarily or
secondarily liable with the Company, any obligation hereby guaranteed.
No delay on Tammac's part in exercising any right hereunder,
or in taking any action to collect or enforce payment of any obligation hereby
guaranteed, either as against the Company or any other party primarily or
secondarily liable with the Company, shall operate as a waiver of any such right
or in any manner prejudice Tammac's rights against the undersigned. The
undersigned's liability under this Guaranty shall be absolute and unconditional
and it shall not be a condition to enforcement of any of the undersigned's
obligations hereunder that Tammac, either prior or subsequent to such
enforcement against the undersigned (a) institute any judicial action against
the Company or any other party primarily or secondarily liable, (b) enforce any
other remedy against the Company, or any other party primarily or secondarily
liable, or (c) take any action to realize upon any property assigned, pledged or
otherwise available to Tammac as security for performance of any of the
obligations of the Company.
The undersigned agrees that, if the maturity of any obligation
hereby guaranteed is accelerated, by bankruptcy or otherwise, as against the
Company, such maturity shall also be deemed accelerated for the purposes of this
Guaranty, and without demand upon or notice to the undersigned.
The undersigned shall not be entitled to assert as a defense
to any claim based upon this Guaranty (a) any set-off or counterclaim, (b) any
claim of waiver or laches, or any demand for marshalling of assets or like
procedure, or (c) the pendency of any bankruptcy, reorganization, insolvency,
liquidation or other federal or state proceeding to which the Company is a party
or by which it is affected, whether or not any proceeding of the type described
in this clause would constitute a defense to, or operate as a stay of, a claim
or action by Tammac against the Company.
As security for the performance of the undersigned's
obligations hereunder, the undersigned hereby gives to Tammac a general lien
upon and right of setoff with respect to any of the undersigned's funds or
assets at any time in the custody or control of Tammac.
The undersigned hereby authorizes Tammac, in its sole
discretion, to disclose any financial or other information about the undersigned
to any present, future or prospective participant or successor in interest in
any loan, advance or other financial accommodation to the Company from Tammac,
or any regulatory body or agency having jurisdiction over Tammac.
This Guaranty Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time, prepayment, payment or other
value received by Tammac, from any source, or any part thereof, of any of the
obligations is rescinded or might otherwise be restored or returned by Tammac by
reason of: (a) any judgment, decree or order of any court or administrative body
having competent jurisdiction; (b) any settlement or compromise of any such
claim, or (c) otherwise, all as though such payment had not been made,
notwithstanding any termination hereof or the cancellation of any agreement
evidencing any of the obligations.
In the event any proceedings are undertaken by Tammac to
effect collection hereunder, the undersigned shall pay all costs and expenses of
every kind for collection (including reasonable attorney's fees) incurred by
Tammac in connection with the enforcement of this Guaranty, or in connection
with legal advice relating to the rights or responsibilities of Tammac under
this Guaranty, together with interest in any such amounts expended. After
deducting such costs and expenses from the proceeds of sale or collection,
Tammac may apply any residue to the liabilities of the undersigned, who shall
continue to be liable for any deficiency, together with interest.
If the obligations of the Company are also guaranteed by any
other person by continuing guaranty or by endorsement of any note of the Company
or otherwise, the obligation of such other person and the undersigned's
obligation hereunder shall be deemed to be joint and several, and the release by
Tammac of any such other guarantor, or settlement with him, or the revocation or
impairment of his guaranty, shall not operate to prejudice Tammac's rights
against the undersigned hereunder.
The undersigned agrees to deliver to Tammac: (i) not later
than one hundred (120) days after the end of each fiscal year its balance sheet
as at the end of such year, and its income and surplus statement for such fiscal
year, prepared on a consolidated basis with all of its affiliates; and (ii)
within sixty (60) days of the close of each quarter-annual fiscal period,
quarterly financial statements certified by the undersigned's chief financial
officer, all in reasonable detail, all prepared in accordance with generally
accepted accounting principles consistently applied, prepared by independent
certified public accounts of recognized standing selected by the undersigned and
satisfactory to Tammac. The undersigned shall also deliver to Tammac within ten
(10) days after its filing with the Internal Revenue Service and any other
taxing authority or jurisdiction, full and complete signed copies of the
undersigned's federal and state income tax returns and supporting schedules, and
such other financial information as Tammac shall, from time to time, reasonably
request.
All rights and remedies afforded to Tammac by reason of this
Guaranty, or by law, are separate and cumulative, and the exercise of one shall
not in any way limit or prejudice the exercise of any other such rights or
remedies. No delay on Tammac's part in exercising any of its options, powers or
rights or partial or single exercises thereof, shall constitute a waiver
thereof. No waiver of any of Tammac's rights hereunder and no modification or
amendment of this Guaranty, shall be deemed to be made by Tammac unless the same
shall be in writing, duly signed on Tammac's behalf by a duly authorized
officer, and each such waiver, if any, shall apply only with respect to the
specific instance involved, and shall in no way impair Tammac's rights or the
undersigned's obligations to Tammac in any other respect at any other time.
The undersigned represents and warrants that: (a) the
undersigned has examined the Loan Documents; (b) the undersigned has the full
power, authority and legal right to enter into, execute and deliver this
Guaranty; (c) this Guaranty is a valid and binding legal obligation of the
undersigned and is fully enforceable against the undersigned in accordance with
its terms and the undersigned has no defense to any action or proceeding that
may be brought hereunder; (d) the execution, delivery and performance by the
undersigned of this Guaranty will not violate or constitute a default under any
indenture, note, loan, credit agreement or any other document or instrument to
which the undersigned is a party or by which the undersigned is bound; (e) the
undersigned has a direct financial interest in the Company; and (f) there has
been no material adverse change in the financial condition of the undersigned
from that shown on the most recent financial statements delivered to Tammac.
The undersigned is not in violation of any decree, ruling,
judgment, order or injunction applicable to it, or any law, ordinance, rule or
regulation of whatever nature which taken alone or in the aggregate, would
materially and adversely affect its ability to carry out any of the terms,
covenants, and conditions of this Guaranty. There are no actions, proceedings or
investigations pending or threatened against or affecting the undersigned (or
any basis therefor known to the undersigned) before or by any court, arbitrator,
administrative agency or other governmental authority or entity, which, taken
alone or in the aggregate, if adversely decided, would materially and adversely
affect its ability to carry out any of the terms and conditions of this
Guaranty.
No authorization, approval, consent or permission
(governmental or otherwise) of any court, agency, commission or other authority
or entity is required for the due execution, delivery, performance or observance
by the undersigned of this Guaranty or for the payment of any sums hereunder.
The undersigned agrees that if any such authorization, approval, consent, filing
or permission shall be required in the future in order to permit or effect
performance of the obligations of the undersigned under this Guaranty, the
undersigned shall promptly inform Tammac or any of its successors or assigns and
shall use its best efforts to obtain such authorization, approval, consent,
filing or permission.
All sums advanced to the Company or its successors or assigns
by the undersigned, and if the Company or its successors or assigns shall
hereafter become indebted in any manner to the undersigned, then all such sums
of indebtedness shall be automatically subordinate in all respects to the
amounts then or thereafter due and owing to Tammac under the Loan Documents.
Nothing herein contained shall be construed to give the undersigned any right of
subrogation in and to the Loan Documents or the related documents or all or any
part of Tammac's interest therein.
The undersigned agrees that it shall make no claim or setoff,
defense, recoupment or counterclaim of any sort whatsoever against Tammac when
enforcing this Guaranty, nor shall the undersigned seek to impair, limit or
defeat in any way its obligations hereunder. The undersigned hereby waives any
right to such a claim in limitation of its obligations hereunder. THE
UNDERSIGNED HEREBY WAIVES ALL SURETYSHIP DEFENSES AND THE RIGHT TO TRIAL BY
JURY, IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE, ARISING UNDER OR BY
REASON OF OR RELATING TO THIS GUARANTY. JPM
---------
[Initial]
Any indebtedness of the Company to the undersigned now or
hereafter existing, together with any interest thereon, shall be, and such
indebtedness is, hereby deferred, postponed and subordinated to the prior
payment in full of the obligations of the Company to Tammac under the Loan
Documents. Until all of the Company's obligations to Tammac under the Loan
Documents (and including any interest accruing on the Company's obligations to
Tammac after the commencement of a case by or against the Company under the
Bankruptcy Code, which interest the parties agree shall remain a claim that is
prior and superior to any claim of the undersigned notwithstanding any contrary
practice, custom or ruling in cases under the Bankruptcy Code generally), the
undersigned agrees not to accept any payment or satisfaction of any kind of
indebtedness of the Company to the undersigned and hereby assigns such
indebtedness of the Company to the undersigned to Tammac, including the right to
file proofs of claim and to vote thereon in connection with any such case under
the Bankruptcy Code, including the right to vote on any plan or reorganization.
Any lien or charge that the undersigned may have or obtain as security for any
loans or advances to the Company is hereby subordinated to the liens granted
Tammac and to the obligations of the undersigned to Tammac.
If any provision (or any part of any provision) contained in
this Guaranty shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision (or remaining part of the affected
provision) of this Guaranty, but this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision (or part thereof) had never been
contained herein, but only to the extent such provision is invalid, illegal, or
unenforceable.
This Guaranty shall inure to the benefit of, and be
enforceable by Tammac, its successors and assigns, including any subsequent
holder of the Loan Documents, and shall be binding upon, and enforceable
against, the undersigned and its legal representatives, successors and assigns.
The undersigned hereby generally, irrevocably and
unconditionally submits to and accepts for itself (and its legal
representatives, successors and assigns) the jurisdiction of the courts in the
Commonwealth of Pennsylvania for the purpose of any such suit, action or other
proceeding and agrees not to contest the validity of any judgment rendered
thereby in any other jurisdiction. The undersigned further waives, and agrees
not to assert, by way of motion or as a defense, counterclaim or otherwise, in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of the aforesaid courts or is otherwise immune from legal
proceedings, or that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper, or that this Guaranty, the Loan Documents or the subject matter hereof
may not be enforced by any such court.
The undersigned further represents, warrants and covenants as
follows: (a) this Guaranty is executed and delivered at the Company's request
and not at the request of Tammac; (b) Tammac has made no representation to the
undersigned as to the creditworthiness of the Company; (c) the undersigned has
established the means of obtaining from the Company, on a continuous basis,
information regarding the Company's financial condition; (d) the undersigned
agrees to keep adequately informed from such means of any facts, events and
circumstances which might in any way affect the undersigned's risks under this
Guaranty; and (e) the undersigned agrees that, absent a written request for
information, Tammac shall have no obligation to disclose to the undersigned any
information or documents acquired by Tammac in the course of its relationship
with the Company.
For the purposes of this Guaranty, the singular shall be
deemed to include the plural, and the neuter shall be deemed to include the
masculine and feminine as the context may require. Any defined term not
otherwise defined herein shall have the same meaning as set forth in the Loan
Documents.
This Guaranty Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
This Amended and Restated Continuing Guaranty Agreement
supersedes that certain Corporate Guaranty dated September 10, 1991, executed
and delivered by International Leisure Enterprises Incorporated n/k/a ILX
Incorporated to Tammac. This Amended and Restated Continuing Guaranty Agreement
shall not be construed as a new guaranty agreement, nor a discharge or release
of the obligations therein contained.
IN WITNESS WHEREOF, the Guarantor has caused this instrument to be duly
executed by its proper officers the day and year first written above.
WITNESS/ATTEST: ILX INCORPORATED (f/k/a
INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED), An Arizona
Corporation
Stephanie D. Castronova By: Joseph P. Martori, President
----------------------- ------------------------------
STEPHANIE D. CASTRONOVA, JOSEPH P. MARTORI, President
Secretary and Chief Executive Officer
STATE OF ARIZONA:
SS:
COUNTY OF MARICOPA :
The foregoing instrument was acknowledged before me this 7th day of
September, 1994, by JOSEPH P. MARTORI, the President and Chief Executive
Officer of ILX INCORPORATED, formerly known as INTERNATIONAL LEISURE ENTERPRISES
INCORPORATED, an Arizona corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunder set my hand and official seal.
Mia A. Green
------------------
July 20, 1994
Joseph P. Martori, President
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Re: Tammac Financial Corp. ("Tammac")
to: ILX Incorporated ("ILX", "Developer" or "Borrower")
Resort: Golden Eagle Resort
Estes Park, Colorado
Dear Mr. Martori:
Pursuant to our various discussions, you have requested that Tammac
make a loan to ILX in the approximate amount of $2,000,000.00 (the "Loan"),
which is to be secured by Acceptable Contracts (as that phrase is hereinafter
defined) and certain other assets owned by ILX. You have also requested, on
behalf of ILX, that Tammac amend and restate that certain Financing Agreement
dated September 11, 1991 ("Financing Agreement"), entered into between ILX and
Tammac, setting forth the terms and conditions regarding ILX's sale and Tammac's
purchase of certain consumer installment obligations generated at that certain
timeshare condominium project known as the Golden Eagle Resort, located at Estes
Park, Colorado (the "Project" or "Resort").
After reviewing ILX's request for financing as hereinabove set forth,
Tammac is pleased to confirm its proposal to make the Loan and to modify the
Financing Agreement 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 $2,000,000.00 (sometimes hereinafter
referred to as the "Advance Limit").
C. Advances: Advances shall be made on the basis of seventy
(75%) percent multiplied by the aggregate
remaining principal balance of the Acceptable Contracts (as herein defined), or
such greater or lesser percentage as Tammac shall, from time to time, establish,
provided, however, that the aggregate amount of Advances outstanding shall not
exceed $2,000,000.00 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 hereafter 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 Declaration for Golden Eagle Resort, a Condominium, the
Articles of Incorporation and By-laws for the Resort, 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, which Contract shall have a term of at least four years
except for non-interest bearing Contracts, which shall have a term of at least
one year; (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; (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 3 percentage points above the
highest prime rate as announced in The Wall Street Journal on the business day
preceding the closing of the Loan; (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) at least one monthly payment has been
made thereon and 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; and (xiii) 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 four (4) 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 seventy-two
(72) consecutive minimum monthly payments each in an amount equal to
seventy-nine (79%) percent of the schedule 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 payment 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
Contracts: Borrower shall, at its cost and expense, enter
into a servicing agreement with a servicing
entity selected by Borrower and approved by Tammac ("Servicing Agent"), to
service the Acceptable Contracts. 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
Due Under Contracts: Borrower and/or the Servicing Agent shall
maintain a depository Dominion 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 provided, 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 a schedule prepared by Borrower and approved by
Tammac.
(ii) A valid second 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 $920,000.00.
Notwithstanding anything contained herein to
the contrary, provided the Borrower is not in default under the Loan Documents
or any other obligations due to Tammac, whether now existing or hereafter
arising, upon Borrower's request, Tammac shall subordinate its second lien 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 $2,000,000.00.
(iii) A valid perfected security interest in
all fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials 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 and Contracts
purchased by Tammac; (b) inventory; (c) machinery, equipment, furniture and
fixtures located at the Resort; (d) contract rights relating to the Acceptable
Contracts and Contracts purchased by Tammac; (e) general intangibles relating to
the Acceptable Contracts and Contracts purchased by Tammac; (f) interests in
marketing or direct mail agreements relating to the Resort as same relate to the
Acceptable Contracts and Contracts purchased by Tammac; (g) licenses, contracts,
management contracts or agreements, permits or certificates relating to the
Resort; (h) rights as declarant, developer, 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. PURCHASE OF CONTRACTS:
A. Developer: ILX, Incorporated, an Arizona corporation.
B. Collateral: (i) Assignment of the Developer's right, title
and interest in and to the Contracts and
related consumer documents purchased by Tammac.
(ii) A first lien on all of the Acceptable
Contracts and related consumer documents, which shall be enumerated on a
schedule prepared by Borrower and approved by Tammac.
(iii) A valid second 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 $920,000.00.
Notwithstanding anything contained herein to
the contrary, provided the Borrower is not in default under the Loan Documents
or any other obligations due to Tammac, whether now existing or hereafter
arising, upon Borrower's request, Tammac shall subordinate its second lien 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 $1,000,000.00.
(iv) A valid perfected security interest in
all fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials 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
Developer.
(v) A collateral assignment of all leases,
rents and profits relating to the Resort.
(vi) All of the Borrower's (a) accounts and
accounts receivables relating to the Acceptable Contracts and Contracts
purchased by Tammac; (b) inventory; (c) machinery, equipment, furniture and
fixtures located at the Resort; (d) contract rights relating to the Acceptable
Contracts and Contracts purchased by Tammac; (e) general intangibles relating to
the Acceptable Contracts and Contracts purchased by Tammac; (f)interests in
marketing or direct mail agreements relating to the Resort as same relate to the
Acceptable Contracts and Contracts purchased by Tammac; (g) licenses, contracts,
management contracts or agreements, permits or certificates relating to the
Resort; (h) rights as declarant, developer, 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.
C. Financing Agreement: The Financing Agreement shall be amended and
restated and will provide, among other things,
as follows:
(i) Provided Developer is not in default under
the terms and conditions of the Amended and Restated Financing Agreement, Tammac
shall purchase up to $3,000,000.00 of those Contracts offered for sale by the
Developer, provided said Contracts meet Tammac's lending criteria and
guidelines, as same shall be in effect on the date that the Amended and Restated
Financing Agreement is executed and delivered to Tammac by the Developer. A copy
of Tammac's then current lending guidelines and criteria shall be attached to
the Amended and Restated Financing Agreement. Tammac's lending guidelines and
criteria shall not change during the term of the Financing Agreement.
Except as set forth in 10(f) below, Tammac
shall accept Contracts that meet Tammac's lending guidelines and criteria and
which are written at a contract rate of six and one-quarter (6 1/4%) percentage
points above the highest prime rate as announced from time to time in The Wall
Street Journal (the "Acceptable Contract Rate"). The Acceptable Contract Rate
shall be fixed for a period of six months from the execution and delivery of the
Amended and Restated Financing Agreement and shall be based on the highest prime
rate as announced in The Wall Street Journal on the business day preceding the
execution and delivery of the Amended and Restated Financing Agreement.
Thereafter, the Acceptable Contract Rate is subject to change every six (6)
months following the execution and delivery of the Amended and Restated
Financing Agreement (the "Change Date") and will be reset, if at all, based upon
the highest prime rate as announced in The Wall Street Journal then in effect on
each Change Date. See Section 2.2 of the Amended and Restated Financing
Agreement.
(ii) Tammac shall pay the Developer for each
accepted Contract the unpaid principal balance of the Contract at the time of
purchase, subject to the provisions of (iv) and (v) and (vii) below.
(iii) The Developer shall guarantee the
payment and performance of each Contract purchased by Tammac and shall remain on
full recourse therefore.
(iv) A portion of the purchase price of each
Contract (10%) shall be deposited by Tammac in a non-interest bearing
holdback/security account to be maintained by Tammac. The monies so held in this
holdback/security account may be applied, at Tammac's discretion, to any
repurchase and/or guaranty obligations or other obligations pursuant to the
Amended and Restated Financing Agreement or otherwise.
(v) The Developer shall pay a placement/
processing fee to Tammac equal to $150.00 for each Contract purchased by Tammac
pursuant to the Amended and Restated Financing Agreement. Said fee shall be due
and payable at the time of Tammac's purchase of said Contracts. Notwithstanding
anything contained herein to the contrary, in the event that Tammac purchases a
Contract without requiring the Developer to furnish a title insurance policy for
each Contract in an amount at least equal to the total of the Consumer's
obligations under the Contract covering the Unit Week conveyed to the Consumer
and financed by Tammac, the Developer shall pay a placement/processing fee to
Tammac equal to $250.00 for each Contract purchased by Tammac pursuant to the
Amended and Restated Financing Agreement.
(vi) The Amended and Restated Financing
Agreement shall contain such representations and warranties to be made on behalf
of the Developer and such affirmative and negative covenants as shall be
satisfactory to counsel for Tammac and are of the kind and nature generally
utilized in transactions of this type.
(vii) Notwithstanding anything contained
herein to the contrary, for each Contract written by the Developer and purchased
by Tammac at a contract interest rate less than the Acceptable Contract Rate,
then in effect on the date Tammac purchases said Contract, said Contract shall
be discounted on the date each such Contract is purchased by Tammac so as to
yield an equivalent rate to Tammac of the Acceptable Contract Rate then in
effect. To that extent, the amount to be funded by Tammac to the Developer on
each such Contract shall be reduced. Any and all sums paid by the Developer to
Tammac so as to equalize the yield as aforesaid shall be non-refundable under
any and all circumstances.
In the event that a Contract written by the
Developer and purchased by Tammac provides for a contract interest rate greater
than the Acceptable Contract Rate then in effect on the date each payment is
received under the Contract by the Consumer, Tammac shall pay to the Developer,
as and when collected and earned, on a monthly basis, the Interest Rate
Differential, as hereinafter defined. The Interest Rate Differential shall be
computed by subtracting the interest component of each payment of an effected
Contract computed at the Acceptable Contract Rate then in effect from the
interest component of each payment actually received by Tammac on each Contract
written at a rate of interest in excess of the Acceptable Contract Rate. Tammac
shall furnish such documentation to the Developer, on a monthly basis,
identifying each of the Contracts purchased by Tammac which are subject to an
interest rate differential payment ("Interest Rate Differential Payment(s)") as
hereinabove provided, which documentation shall be reasonably satisfactory to
Tammac and the Developer. Tammac shall not be responsible to make any Interest
Rate Differential Payments to the Developer unless and until Tammac receives
good, collected funds required to be paid under said Contracts. The Developer
recognizes and agrees that it shall bear any credit risk in the event that all
or any payments due under a particular Contract are not made and/or received by
Tammac or are otherwise dishonored. In the event that all or any portion of the
Interest Rate Differential Payments are required to be returned to a Consumer or
someone making a claim by or on behalf of the Consumer or the Consumer's
creditor(s), the Developer shall, upon the demand of Tammac, immediately return
all or any portion of the Interest Rate Differential Payment(s) required to be
returned.
Tammac shall be under no obligation to make
Interest Rate Differential Payments to the Developer in connection with the
Acceptable Contracts securing the Loan referred to in Section I above.
(viii) In the event the Developer sells one
Unit Week to two (2) Consumers, whereby one of the Consumers is purchasing the
odd years of a Unit Week and the other consumer is purchasing the even years of
that Unit Week ("Split Week Contracts"), Tammac shall not be obligated to
purchase any Split Week Contracts unless said Split Week Contracts meet Tammac's
lending criteria and guidelines.
(ix) Tammac shall only accept Contracts which
provide that: (i) the amount financed is an amount equal to or greater than
$5,001.00 and the term of which is eighty-four (84) months or less; or (ii) the
amount financed is $5,000.00 or less and the term of which is sixty (60) months
or less.
(x) After the expiration of the commitment
period, which shall expire two years from the execution and delivery to Tammac
by the Developer of the Amended and Restated Financing Agreement or the purchase
by Tammac of $3,000,000.00 of Contracts, whichever occurs first, Developer shall
not have the option of offering Replacement Contracts to Tammac for delinquent
Contracts and Tammac shall be under no obligation to accept any Replacement
Contracts. From and after the expiration of the commitment period, Developer
must repurchase the delinquent Contracts.
III. CONDITIONS PRECEDENT:
A. Preliminary
Documentation: The closing of the Loan and the modification
of the Financing Agreement shall be subject to
the receipt, review and approval by Tammac, and Tammac's counsel, of the
following:
(i) The existing Consumer Documentation, if
same differs from the Consumer Documentation previously reviewed and approved by
Tammac and its counsel, or a statement to the effect that the existing Consumer
Documentation has not changed;
(ii) The filed certificate or articles of
incorporation and by-laws, as amended to date, for the Developer. This
requirement may be satisfied by a written statement that the certificate or
articles of incorporation and by-laws of the Developer, 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 Developer;
(iv) Certificates of good standing for the
Developer, 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 Developer;
(vi) Continuation uniform commercial code
financing searches for the Developer;
(vi) A completed and signed Environmental
Questionnaire relating to the Resort;
(viii) Federal tax lien, state tax lien and
judgment searches for the Developer;
(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 Developer 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 Developer in which the Developer 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; and
(xx) An opinion letter from the Developer's
counsel satisfactory to Tammac and Tammac's counsel.
B. Title Insurance: (i) The Developer shall furnish Tammac with a
mortgage title insurance policy in the amount
of $3,000,000.00 covering the Resort satisfactory to Tammac, the premium for
which shall be payable by the Developer insuring the interest of Tammac to be a
valid second 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.
(ii) At Tammac's request, Developer shall
furnish individual title insurance policies covering each of the Unit Weeks in
which Tammac purchases an interest, satisfactory to Tammac, the premium and cost
of which shall be payable by the Developer, insuring the interest of Tammac to
be a valid first lien on each such Unit Week, free and clear of all defects,
liens, encumbrances and exceptions to title whatsoever, except for exceptions
that are approved by counsel for Tammac.
C. Insurance: 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.
D. Flood Insurance: If, on the date of the closing of the Amended
and Restated Financing Agreement and the 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
Developer 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.
E. Documentation: (i) The Loan Agreement, Promissory Note,
Amended and Restated Financing Agreement, Deed
of Trust covering the Resort, and related documents, including, but not limited
to, the Security Agreements, Certifications and opinion letters of the
Developer's counsel, shall be executed and delivered by the Developer and the
Developer'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 Amended and Restated Financing
Agreement, 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 Developer, shall be determined by and must be satisfactory to
counsel for Tammac.
(iii) Developer's counsel shall provide to
Tammac a legal opinion regarding the Resort, the Loan, the Amended and Restated
Financing Agreement, the Contracts and related documents and various other
matters pertaining to the Loan, the sale and assignment of the Contracts, and
their compliance with all applicable laws, regulations and requirements, all in
form and substance satisfactory to Tammac
and Tammac's counsel.
F. Legal Compliance: (i) The Developer 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 Developer 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 Developer 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 Developer 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 Developer shall certify or supply other
evidence satisfactory to Tammac that the Developer 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 Developer 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.
G. Environmental
Compliance: The Developer shall provide Tammac with all
representations, warranties 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.
H. Exchange Group
Membership: The Developer shall maintain membership in one
or more timeshare exchange services
satisfactory to Tammac, until such time as the Loan has been paid in full and
all Contracts purchased by Tammac from the Developer have been satisfied.
I. 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 Developer's request for the financing of Contracts and 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 Developer 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.
J. 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.
IV. GENERAL CONDITIONS:
The Loan and the Amended and Restated Financing Agreement and related
documents are subject to satisfaction by the Developer 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 either the Amended and Restated Financing Agreement or the
Loan and/or any related documents shall be a default in any other obligations of
the Developer owing to Tammac at any time.
B. Cross-Collateralization:
The Amended and Restated Financing Agreement and the Loan and any other
obligations of the Developer 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 Developer 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 Developer's
business, without the prior written approval of Tammac.
Notwithstanding anything contained herein to the contrary, provided the
Developer is not in default under the Loan Documents or any other obligations
due to Tammac, whether now existing or hereafter arising, the Developer may
further encumber the Resort by one or more prior deeds of trust secured by the
Resort granted to one or more financial institutions or reputable funding
sources, provided the aggregate principal sum(s) due to said lender(s) is no
more than $2,000,000.00.
E. Financial Information:
The Developer will provide Tammac, within sixty (60) days of the close
of each quarter-annual fiscal period, with quarterly financial statements
certified by the Developer'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 Developer and satisfactory to Tammac. All such
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied.
The Developer 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 preceeding 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 preceeding 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.
V. 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 Developer'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 Developer's
obligation to pay or reimburse Tammac for Tammac's legal fees shall be capped at
$5,000.00.
(ii) The interest of the Developer and Tammac
are or may be different and may conflict. Tammac's attorneys shall represent
only Tammac and not the Developer. The Developer 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 Developer 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 the execution
and delivery of the Amended and Restated
Financing Agreement and all related documents must occur no later than sixty
(60) days from the date of the Developer'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 Developer prior to closing, the
proposal to make the Loan shall remain in full force and effect for a period of
seventy-five (75) days from the date of this proposal letter, and the proposal
to purchase Contracts pursuant hereto, the Amended an Restated Financing
Agreement and related documents as aforesaid shall remain in full force and
effect until twenty-four (24) months from the date of the closing of the Loan
and execution and delivery of the Amended and Restated Financing Agreement and
related documents by and between all parties, provided same is accepted in full
by the Developer 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 these transactions.
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: 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: Joseph P. Martori, President Dated: July 27, 1994
-------------------------------- ------------------------
JOSEPH P. MARTORI, President
LOAN AND SECURITY AGREEMENT
AGREEMENT dated this 7th day of September, 1994, by and between TAMMAC
FINANCIAL CORP., a Delaware Corporation, having its principal office located at
100 Commerce Boulevard, Wilkes-Barre, Pennsylvania 18702 (hereinafter referred
to as the "Lender"), and ILX INCORPORATED (f/k/a International Leisure
Enterprises Incorporated), an Arizona Corporation, having its principal place of
business located at 2777 East Camelback Road, Phoenix, Arizona 85016
(hereinafter referred to as the "Borrower").
R E C I T A L:
Borrower has requested Lender to loan it certain funds on a secured
basis, and Lender has agreed to do so, subject to and upon the terms and
conditions hereinafter set forth. The maximum principal amount of the loan to be
made by the Lender to the Borrower is TWO MILLION DOLLARS ($2,000,000.00).
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
I
DEFINITIONS
Acceptable Contract: For purposes of this Agreement, an
"Acceptable Contract" shall be a consumer contract or agreement and all related
documents entered into between the Borrower as seller and/or lender and a
Consumer as the purchaser and/or borrower of (or relating to) a timeshare
interest defined in and created by the Project Documents, which satisfy the
following requirements, and which are in all other respects acceptable to
Lender: (i) Borrower is the seller of a Unit Week under a Contract to a Consumer
who is a United States resident, which Contract shall have a term of at least
four years, except for non-interest bearing Contracts, which shall have a term
of at least one year; (ii) the purchase price under the terms of the Contract is
payable in not more than 84 equal monthly installments 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 Lender) 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 Lender 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 Lender; (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
theFederal 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 (if said Contract provides for the payment
of interest) is at least 3 percentage points above the highest prime rate as
announced in The Wall Street Journal on the business day preceding the closing
of the Loan; (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) at least one monthly payment has been made thereon
and 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 Lender; (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; and (xiii) the Contract shall be valid, enforceable
and legally binding upon the Consumer.
Accounts or Accounts Receivable: The term "Account" or
"Accounts Receivable" shall mean any and all obligations of any kind at any time
due and/or owing to Borrower relating to the Acceptable Contracts serving as
collateral for the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement and all rights of Borrower to receive
payment or other consideration (whether classified under the Uniform Commercial
Code of the State of Arizona or any other state as accounts, contract rights,
chattel paper, general intangibles, or otherwise) relating to the Acceptable
Contracts serving as collateral for the Loan and the Contracts and Related
Documents purchased by Tammac pursuant to the Financing Agreement, including
without limitation, invoices, contract rights, accounts receivable, general
intangibles, leases, choses-in-action, notes, drafts, acceptances, instruments
and all other debts, obligations and liabilities in whatever form owing to
Borrower from any person, firm, governmental authority, corporation or any other
entity, all security therefore, whether now existing or hereafter arising, all
relating to the Acceptable Contracts serving as collateral for the Loan and the
Contracts and Related Documents purchased by Lender pursuant to the Financing
Agreement, together with all proceeds and products of any and all of the
foregoing.
Advance: "Advance" shall be the proceeds of the Loan requested
by Borrower and advanced from time to time by Lender in accordance with the
terms of this Agreement.
Advance Limit: The term "Advance Limit" shall mean the loans
or Advances which the Lender may, from time to time when requested by Borrower,
make to Borrower, and which shall not in the aggregate at any time exceed the
lesser of: (i) $2,000,000.00 or (ii) the product of 75% multiplied by the
aggregate remaining principal balance of the Acceptable Contracts in which
Lender is granted a security interest hereunder.
Agency Agreement: "Agency Agreement" shall be that certain
agreement to be entered into by and among Borrower, Lender and the Agent which
will provide, among other things, for the Agent 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 into a Dominion Account at an
insured financial institution selected by Borrower and acceptable to Lender all
funds received in connection with the Acceptable Contracts and turn said funds
over to Lender, all in accordance with the terms and conditions of this
Agreement.
Agent: "Agent" shall mean the financial institution selected
by Borrower and approved by Lender to act as agent pursuant to the Agency
Agreement.
Collateral: "Collateral" shall mean the Collateral described
in Section III of this Agreement.
Commitment Letter: The "Commitment Letter" shall incorporate
and include all of the terms and provisions set forth in that certain Commitment
Letter dated July 20, 1994, issued by Lender to the Borrower, together with all
amendments and modifications thereto.
Consumer or Consumers: "Consumer" or "Consumers" shall mean
those lessees or purchasers and/or borrowers of the Borrower leasing or
purchasing and financing the purchase of Unit Weeks (including any guarantor
thereof), executing an agreement, contract, a note or lease and/or similar
documentation, which evidence his and/or her or their obligation to the Borrower
for the repayment of the unpaid portion of the cash price for the Unit Week and
the first lien and security interest granted to Borrower in and to the Unit
Week.
Contract or Contracts: "Contract" or "Contracts" means a
Consumer contract or agreement between the Borrower as lessor, seller and/or
lender and a Consumer, as the lessee or purchaser and/or borrower of (or
relating to) a Unit Week together with all Related Documents. The term
"Contract" or "Contracts" shall also mean the Acceptable Contracts where the
context and sense and circumstances so require.
Default: "Default" shall mean an event or condition, the
occurrence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
Dominion Account: "Dominion Account" shall mean the dominion
account described in Section V. 21. of this Agreement.
Event of Default: "Event of Default" shall mean the occurrence
of any of the events described in Section VIII of this Agreement.
Excess Borrowing: "Excess Borrowing" shall mean the aggregate
of all outstanding Advances minus the Advance Limit.
Financing Agreement: "Financing Agreement" shall mean that
certain Financing Agreement dated as of September 11, 1991, as modified pursuant
to that certain Amended and Restated Financing Agreement being executed and
delivered by Borrower to Lender contemporaneously herewith, together with all
subsequent amendments and modifications thereto, whether presently in existence
or hereafter arising, entered into by and among Borrower and Lender regarding
the sale and purchase of installment obligations generated by Borrower relating
to Borrower's development of the Resort.
Financing Statements: "Financing Statements" shall mean the
financing statements required to be filed with the Arizona Secretary of State's
Office, the Colorado Secretary of State's Office, the Office of the Recorder in
Coconino County, Arizona, the Larimer County recording office and/or any other
recording office in order to perfect the security interests granted to the
Lender by the Loan Documents.
General Intangibles: "General Intangibles" shall mean and
include all of the Borrower's now owned or hereafter acquired chooses in action,
causes of action and all other intangible personal property including, without
limitation, corporate or other business records, inventions, designs, patents,
patent applications, trademarks, trademark applications, tradenames, trade
secrets, goodwill, registrations, copyrights, licenses, franchises, customer
lists, tax refunds, tax refund claims, insurance claims and rights to
indemnification all related to the Acceptable Contracts serving as Collateral
for the Loan and the Contracts and Related Documents purchased by Lender
pursuant to the Financing Agreement.
Lender: "Lender" shall mean Tammac Financial Corp., its
successors or assigns.
Loan: "Loan" shall mean the Loan described herein, which shall
be in the lesser of $2,000,000.00 or the Advance Limit.
Loan Documents: "Loan Documents" shall mean this Agreement,
the Note, the Deed of Trust, the Financing Agreement, the Financing Statements,
the Collateral Assignment of Lease or Leases, the Environmental Indemnity
Agreement, the Agency Agreement, the Incumbency Certificates, the Corporate
Resolutions and all other documents executed in connection with the Loan and the
Financing Agreement, whether executed contemporaneously herewith or at any other
time, together with all amendments, supplements, substitutions, replacements or
modifications to any or all of them.
Mortgage: "Mortgage" or "Deed of Trust" shall mean the
Mortgage or Deed of Trust covering the Premises, given by the Borrower in favor
of the Lender to secure the Loan and the Borrower's obligations under the
Financing Agreement, which may be singular or plural as the text requires.
Note: "Note" shall mean the Promissory Note made by the
Borrower and delivered to the Lender as evidence of the Loan.
Premises: "Premises" or "Project" or "Resort" shall mean the
land owned by Borrower located at 300 Riverside Drive, Estes Park, Larimer
County, Colorado, as more particularly described in Exhibit "A" attached hereto
and made a part hereof, at which is located the timeshare condominium project
(including, but not limited to the Unit Weeks) known as the Golden Eagle Resort,
including the real estate, the improvements thereon and all furnishings,
fixtures and personalty contained thereon and all common areas and/or elements
appurtenant thereto.
Project Documents: "Project Documents" shall mean the
constituent documents for the Premises, including, but not limited to the
condominium and time share ownership declaration for the Golden Eagle Resort, a
condominium, recorded August 31, 1987 at Reception No. 87050248, and rerecorded
October 16, 1987 at Reception No. 8705979, by-laws and rules and regulations of
the Golden Eagle Condominium Association, Inc., the public offering statements,
and any exhibits thereto, and any supplements, additions, substitutions,
modifications or amendments thereto, as may be made from time to time.
Obligations: "Obligations" shall mean all indebtedness,
obligations, liabilities and agreements of every kind and nature of Borrower to
or with Lender, or to or with any affiliate of Lender, now existing or hereafter
arising, and now or hereafter contemplated, pursuant to this Agreement and/or
the Loan Documents, or otherwise, whether in the form of refinancing, loans,
interest, charges, expenses or otherwise, direct or indirect, including without
limitation, the Financing Agreement, the Loan and any participation or interest
of Lender (or of any affiliate of Lender) in any obligations of Borrower to
others, acquired outright, conditionally or as collateral security from another,
absolute or contingent, joint or several, liquidated or unliquidated, direct or
indirect, secured or unsecured, arising by operation of law or otherwise,
including without limitation any future advances, renewals, extensions or
changes in form of, or substitutions for, any of said indebtedness, obligations
or liabilities, the other sums and charges to be paid to and all interest and
late charges on any of the foregoing.
Related Documents: "Related Documents" means, as applicable to
each Contract, the credit package, security agreements, mortgages, mortgage
deeds, deeds of trust securing the Contracts and encumbering the Unit Weeks,
guaranty agreements, all records pertaining to the Contracts, including, but not
limited to, all files, closing or settlement statements, title insurance reports
and policies, copies of deeds, contracts, prospectuses delivered to Consumers,
public offering statements, receipts for said prospectuses and public offering
statements, truth-in-lending disclosure statements, information, documents,
records and such other writings or documents of every kind and nature submitted
and/or executed by or on behalf of a Consumer and relating to the Contracts and
the Consumer's financing thereof.
Servicing Agent: "Servicing Agent" shall mean the entity
selected by Borrower and approved by Lender to act as the servicing agent
pursuant to the Servicing Agreement.
Servicing Agreement: "Servicing Agreement" shall mean the
agreement entered into between Borrower and the Servicing Agent to service the
Acceptable Contracts as described in Section V. 20. of this Agreement.
Transaction or Transactions: "Transaction" or "Transactions"
shall mean a lease or sale transaction evidenced by a Contract and/or Related
Documents, which transactions are sold to Tammac in accordance with the
Financing Agreement.
Unit Week: "Unit Week" or "Unit Weeks" or "Time share Estate"
or "Time Share Estates" shall mean the time share interest(s) or estate(s)
defined in or created by the Project Documents or otherwise.
II
LOAN
Loan: Upon the terms and conditions set forth in this
Agreement, provided there has occurred no Event of Default, Lender will provide
Loans to Borrower in an aggregate amount up to but not in excess of the
Borrower's Advance Limit or $2,000,000.00, whichever is less, on a revolving
loan basis, payable in accordance with the terms of this Agreement. If the
outstanding amount of the Loan shall exceed the Advance Limit at any time, such
excess shall be deemed secured by the Collateral and shall be subject to the
terms of this Agreement.
Advances: (a) At Borrower's request, Advances will be made by
Lender during the period commencing from the date of this Agreement and ending
twenty-four (24) months thereafter (the "Draw Period"), provided, however, no
Advances will be made to Borrower if an Event of Default exists, or if the
aggregate amount of all Advances (including the Advance requested), exceeds, or
would exceed the Advance Limit.
(b) Lender shall Advance only as to Acceptable Contracts and shall not
be required to make any Advance if: (i) the amount of such Advance when added to
the amount of the Loan then outstanding would exceed the Advance Limit; (ii) an
Event of Default has occurred and is continuing; (iii) the request for an
Advance is for less than $50,000.00; or (iv) the Advance, when aggregated with
existing Advances, would exceed the Advance Limit.
(c) Each request for an Advance shall be: (a) in writing and shall
designate the principal amount of the Advance requested, the date on which the
Advance is to be made and the account to which the proceeds of such Advance are
to be transferred; and (b) delivered to the office of Lender at least ten (10)
days in advance of the date for which an Advance is requested.
(d) Not less than ten (10) days prior to the date on which new
Acceptable Contracts are tendered to Lender for inclusion in the Collateral,
Borrower shall have: (i) delivered to Lender all such new Acceptable Contracts
being assigned to Lender, together with such additional information concerning
the Acceptable Contracts and the Consumers thereunder, as Lender may reasonably
require; (ii) properly and effectively assign and deliver all such Contracts and
Borrower shall have executed and delivered all appropriate assignments thereof
to Lender relating to such Acceptable Contracts included in the Collateral; and
(iii) Lender shall have a perfected first lien in all such Acceptable Contracts
included in the Collateral.
Recording of Advances: The Borrower will authorize, issue,
execute and deliver to Lender a Note in the aggregate principal amount of the
total Advances required to be made by Lender under the provisions of Section
II.1 above. The principal amount outstanding under the Note shall be recorded on
Lender's internal data control systems and each payment of principal with
respect to the Note or any portion thereof, when received, shall be evidenced by
entries made by Lender on Lender's internal data control system showing the date
and amount of the Note or each payment of principal with respect thereto. The
aggregate unpaid amount of the Note as set forth on the most recent data control
system printout of Lender shall be rebuttably presumptive evidence of the sum
owing and unpaid on the Note.
Interest Rate: The interest rate which shall be used to
calculate the amount of interest due each month shall be the highest Prime Rate
as announced, from time to time, in The Wall Street Journal during the month for
which interest is being charged, plus four (4%) percentage points per annum.
Interest shall be calculated on the outstanding principal balance at the close
of each day, on the basis that one day represents 1/360th of a year. The
interest rate may be changed from time to time without notice to the Borrower
and for the purposes of this Agreement, any such change shall be effective on
the date of the change. Interest shall continue to accrue on the unpaid
principal balance of the Loan until all sums due under the Loan are paid in
full. Any failure or delay by Lender in submitting invoices for interest
payments shall not discharge or relieve Borrower of the obligation to make such
interest payments. In the event that the interest rate charged under the Note
exceeds the legal limit permitted by law, the interest rate shall be
automatically reduced to the permitted limit and any interest charged which
exceeds or exceeded the permitted limit shall, at Lender's option, be treated as
a payment of principal or refunded directly to Borrower.
Default Rate: Upon the occurrence and during the continuation
of an Event of Default, the rate used to calculate the interest rate due on the
Loan may, at the option of Lender, increase by five (5%) percentage points per
annum above the then applicable interest rate referred to in Section II.4. above
(the "Default Rate"). In no event, however, shall the Default Rate exceed the
maximum allowable by law.
Late Charge: In the event the Lender 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 the Lender in
processing late payments and shall not be deemed to constitute additional
interest.
Maturity Date: The unpaid principal, the accrued interest and
all costs and expenses relating to the Loan shall be payable on the first day of
the forty-eight (48th) month after the expiration of the Draw Period, unless
sooner demanded in accordance with the terms and provisions set forth herein.
Excess Borrowing: If at any time during the term of the Loan,
an Excess Borrowing situation occurs, the Borrower shall 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 Lender of such fact, make a payment to Lender
in such amount necessary (including accrued interest) to reduce the outstanding
principal amount of the Loan to the Advance Limit. If a payment to Lender is
required during the Draw Period as aforesaid, Borrower shall have the right, in
lieu of payment, provided no Event of Default has occurred or is continuing and
provided further that the then outstanding principal sum of all Acceptable
Contracts is not greater than $2,000,000.00, to eliminate all, or any part, of
the Excess Borrowing and thereby avoid the obligation to make a payment as
aforesaid by: (a) promptly notifying Lender in writing of Borrower's intention
to assign new Acceptable Contracts so as to increase the Advance Limit 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 Advance Limit deficiencies sent to Borrower by Lender. At any time
after the Draw Period during the term an Excess Borrowing situation occurs, the
Borrower shall be required to immediately pay to Lender an amount equal to the
Excess Borrowing and Lender shall not be obligated to accept any Acceptable
Contracts as aforesaid. Any payments to be made by Lender pursuant to this
Section II.8 will not effect any other Obligation of Borrower arising under this
Agreement or the Note.
Mandatory Payments: Unless accelerated pursuant to the terms
and conditions of this Agreement, or paid before the scheduled Maturity Date of
the Loan, the Borrower shall pay to Lender seventy-two (72) consecutive minimum
monthly payments each in an amount equal to seventy-nine percent (79%) of the
scheduled monthly payments of principal and interest due on the Acceptable
Contracts comprising the Collateral for the Loan ("Mandatory Payments"). All
Mandatory Payments as hereinabove provided shall be applied first to the payment
of accrued and unpaid interest and the balance, if any, shall be applied to the
payment of the 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 day of the month next following the date of this
Agreement 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 made payable out of the monthly collections received under the
Acceptable Contracts. In the event the monthly collections are in excess of the
applicable monthly Mandatory Payments as aforesaid, said excess shall be applied
as a prepayment of the principal balance remaining due under the Loan. In the
event the monthly collections from the Acceptable Contracts are insufficient to
pay the aforesaid monthly 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.
Prepayment: The Borrower shall have the right to prepay the
principal of the Loan at any time without penalty or premium, provided, however,
the Borrower shall notify Lender of each such prepayment. Any such prepayments
of principal shall be applied in the inverse order of their maturity.
Instructions to Consumers;
Payments Received by Borrower: The Borrower shall direct or
otherwise cause all Consumers under the Acceptable Contracts to pay all monies
due thereunder to the Agent or as otherwise advised by Lender in writing. The
Borrower, to the extent that it receives such payments directly from or on
behalf of such Consumers, shall hold the same (in the form so received) in trust
for the sole and exclusive benefit of Lender and immediately deliver same to
Lender or Agent. Monies (in good, collected funds) from Contracts collected and
paid to Lender by the Agent or the Borrower shall be (subject to the payment of
fees, costs and expenses as set forth in this Agreement) applied on the first
business day of the calendar month following the receipt thereof, first towards
the payment of accrued and unpaid interest on the Loan and then to the payment
of the principal amount then outstanding under the Loan, or to any other
Obligation in such order as Lender may elect in its sole discretion.
Computation of Unpaid Principal Balance: (a) For purposes of
computing the amount of interest payable on the Loan, the outstanding principal
amount of the Loan shall not be reduced by the amount of any funds collected by
the Agent or the Borrower until such funds are received by Lender as good,
collected funds and applied to the Loan.
(b) Checks received by Lender prior to 12:00 noon on any business day
shall be credited against the balance of the Obligations on such business day.
Checks received by the Lender after 12:00 noon any business day, shall be
credited against the balance of the Obligations on the following business day.
The crediting of checks received as aforesaid shall be conditioned upon final
payment to Lender at its own office in cash or solvent credits of the items
giving rise to them and if any item is not so paid, the amount of any credit
given for it shall be charged to the Loan whether or not the item is returned.
Monthly Statements: Once each month Lender shall render a
statement of account to Borrower showing the current status of the Loan and the
interest thereon. If these statements indicate that the outstanding balance of
the Loan exceeds the Advance Limit, Borrower forthwith either shall furnish
additional collateral or pay the difference in cash as more particularly set
forth in Section II.8. above. The statement of account rendered by Lender shall
be considered correct, accepted by Borrower and conclusively binding upon the
Borrower, unless Borrower gives notice to Lender to the contrary in writing
within ten (10) business days after the sending of such statement by the Lender.
If Borrower disputes the correctness of Lender's statement, Borrower's notice
shall specify in detail the particulars of why it contends Lender's statement of
account is incorrect.
III
SECURITY AND CROSS-COLLATERAL
To secure the payment and performance of all Obligations of
the Borrower set forth in this Agreement and the accompanying Loan Documents, as
well as any extensions, renewals and modifications therefore or substitutions
therefore and all other obligations of the Borrower to Lender, whether now
existing or hereafter arising, Borrower hereby grants or causes to be delivered
to Lender the following security interests:
(a) a valid second lien on the Premises, which shall be
evidenced by the Deed of Trust;
(b) a valid perfected security interest in all items of
personal property owned by the Borrower, including, but not limited to,
fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials, including, but not limited to, furnaces, boilers, oil burners,
radiators and piping, plumbing and bathroom fixtures, refrigeration systems,
air-conditioning systems, sprinkler systems, washtubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, refrigerators, kitchen cabinets, incinerators, plants and shrubbery and
all other equipment and machinery, tools, appliances, fittings, fixtures and
building materials of any kind and whether or not affixed to the realty located
at the Premises if and when such items exist now or are hereafter located in or
upon any portion of the Premises and used or usable in connection with any
present or future operation of the Premises;
(c) all of the Borrower's right, title and interest in and to
the Contracts and Related Documents purchased by the Lender pursuant to the
Financing Agreement;
(d) the Accounts Receivable;
(e) the General Intangibles;
(f) inventory, as that term is defined in the Uniform
Commercial Code of the State of Pennsylvania, all goods, merchandise or other
personal property held by Borrower for sale or lease and all right, title and
interest of Borrower therein and thereto, and all proceeds and products of any
of the foregoing, whether nor owned or hereafter acquired by Borrower and
wherever located;
(g) equipment, machinery, fixtures and furnishings and all
other tangible assets and/or replacements, repairs, modifications, alterations,
additions, controls and operating accessories therefore, and all substitutions
and replacements therefore, and all accessions and additions thereto and all
proceeds and products of the foregoing now or hereafter acquired by Borrower,
located in or upon any portion of the Premises;
(h) a valid first lien on all of the Acceptable Contracts and
Related Documents which are more particularly set forth and described on the
schedule attached hereto and made a part hereof and labelled as Exhibit "B",
together with all other Acceptable Contracts that are hereafter pledged to
Lender as Collateral for the Obligations, pursuant to the terms and conditions
hereof;
(i) any claims of Borrower against third parties for loss or
damage to, or destruction of, any and all of the foregoing, all guarantees,
security and liens for payment of any Accounts Receivable and documents of
title, policies, certificates of insurance, insurance proceeds, securities,
chattel paper, and other documents and instruments evidencing or pertaining
thereto, and all files, correspondence, computer programs, tapes, discs and
related data processing software owned by Borrower or in which Borrower has an
interest which contain information identifying any one or more of the items in
(a) through (h) above or (j) through (o) below, or any Consumer, showing the
amounts owed by each, payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof;
(j) with respect only to those Acceptable Contracts securing
this Loan and those Contracts and Related Documents purchased by Lender pursuant
to the Financing Agreement, any and all moneys, securities, drafts, notes,
contracts, leases, licenses, General Intangibles and other property of Borrower,
including customer lists, and all proceeds and products thereof, and all other
assets of Borrower now or hereafter held or received by or in transit to Lender
from or for Lender, or which may now or hereafter be in the possession of
Lender, or as to which Lender may now or hereafter control possession, by
documents of title or otherwise, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any and all deposits, general or
special, balances, sums, proceeds, the Reserve Account, as that term is defined
in the Financing Agreement, and credits of Borrower and all rights and remedies
which Borrower might exercise with respect to any of the foregoing, but for the
execution of this Agreement;
(k) Borrower's right, title and interest throughout the world
in and to the trade secrets, rights in information regarding computer software
programs developed by or for Borrower, as same relate to the Acceptable
Contracts securing the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement, including without limitation, the
right to prevent all persons, including Borrower, from using the programs or
from using and transferring the information contained therein without
authorization;
(l) Borrower's interest in any marketing or direct mail
agreements with respect to the Project as same relate to the Acceptable
Contracts securing the Loan and the Contracts or Related Documents purchased by
Lender pursuant to the Financing Agreement;
(m) licenses, contracts, management contracts or agreements,
franchise agreements, permits or certificates now or hereafter acquired or used
in connection with the ownership, operation or maintenance of the Project as
same relate to the Acceptable Contracts securing the Loan and the Contracts or
Related Documents purchased by Lender pursuant to the Financing Agreement;
(n) Borrower's rights as "declarant", "developer," "owner"
and/or otherwise under the Project Documents, whether now or hereafter existing
as same relate to the Acceptable Contracts securing the Loan and the Contracts
or Related Documents purchased by Lender pursuant to the Financing Agreement;
and
(o) all proceeds, including insurance proceeds, and products
of the Collateral.
Scope of Security Interest: The security interest granted
hereunder is given to and shall be held by Lender as collateral security for the
payment and performance of all liabilities and obligations of Borrower to Lender
of every kind and description, whether direct or indirect, absolute or
contingent, due or to become due, joint or several, howsoever created, arising,
or evidenced and now existing or at any time hereafter created, arising, or
incurred.
Effective as Security Agreement: This Agreement shall be
effective as a Security Agreement as that term is used in the Uniform Commercial
Code as enacted in the State of Pennsylvania.
IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Lender to enter into this Agreement and to amend
the Financing Agreement and to make the Loan hereunder, the Borrower represents,
warrants and covenants to the Lender that:
Corporate Existence: Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona and
is authorized to do business in the State of Colorado and has the power to
execute, deliver and carry out the terms of this Agreement and its Board of
Directors has duly authorized and approved the terms of the Financing Agreement,
the Loan described herein, the other Loan Documents and the taking of any and
all action contemplated hereunder or thereunder by the Borrower.
Validity of Agreement: The execution of this Agreement and the
other Loan Documents and every other instrument or document required to be
executed in accordance herewith or therewith, or which the Lender may deem
advisable in connection herewith, does not violate any provisions of the
Borrower's Articles of Incorporation or By-Laws, or of any agreement or
undertaking to which Borrower is a party or in which the Borrower is bound in
any fashion.
Corporate Action: Borrower has taken all action required by
law to validate and make this Agreement and to enter into the Loan Documents and
any other documents required in connection herewith an incumbency certificate
and corporate resolution evidencing such authority.
Lien Priority: The Borrower has, and at all times will have,
good and marketable title in and to the Collateral. No other person has or will
have any right, title, interest, claim or lien therein, thereon or thereto,
other than: (a) the existing first lien on the Resort maintained by The Steele
Foundation, Inc., with a principal balance remaining due thereunder of no more
than $920,000.00; (b) customary equipment lease agreements entered into by
Borrower relating to the Project, which unpaid lease obligations thereunder do
not exceed, at any time, in the aggregate, the sum of $100,000.00 (items 4.(a)
and (b) above being hereinafter sometimes referred to as the "Permitted
Lien(s)"); and (c) the rights, if any, of the Consumers. Notwithstanding
anything contained herein to the contrary, provided the Borrower is not in
Default under the Loan Documents or any Obligations, whether now existing or
hereafter arising, upon Borrower's request, Lender shall subordinate its second
lien 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 $2,000,000.00, which permitted prior lien(s)
shall be construed to be "Permitted Lien(s)". The Collateral will remain free
and clear of any liens other than the Permitted Lien(s), excepting the liens
hereby granted to Lender, which liens to Lender shall, at all times, except as
hereinabove set forth, be first and prior on the Collateral above described and
as to the Accounts and proceeds, including insurance proceeds, resulting from
the sale, disposition or loss thereof, that no further action need be take to
perfect the lien to Lender other than filing continuation statements under the
Uniform Commercial Code and continued possession by Lender of that portion of
the Collateral which constitutes instruments or other pledged Collateral.
Financing Statements; Perfection of Lien: Borrower agrees at
its own expense, to execute the Financing Statements or continuation statements
required by the Uniform Commercial Code, together with any and all other
instruments or documents and take such other action including delivery as may be
required to perfect or maintain Lender's security interest in the Collateral
and, unless prohibited by law, Borrower hereby authorizes Lender to execute and
file any such financing statements or continuation statements on Borrower's
behalf.
No Governmental Consent Necessary: No consent or approval of,
giving of notice to, registration with or taking of any other action in respect
of, any governmental authority or agency is required with respect to the
execution, delivery and performance by Borrower of this Agreement or any of the
other Loan Documents.
No Proceedings: There are no actions, suits, or proceedings
pending (nor, to the knowledge of the Borrower, any actions, suits or
proceedings threatened, nor is there any basis therefore) against or in any way
relating adversely to the Borrower, the Premises, any other Collateral or any
property of the Borrower in any court or before any arbitrator of any kind or
before or by any governmental or non-governmental body which, if adversely
determined, would singly or in the aggregate have a material adverse effect on
the Borrower or the Collateral; the Borrower is not in default with respect to
any order of any court, arbitrator or governmental or non-governmental body; and
the Borrower is not subject to or a party to any order of any court or
governmental or non-governmental body arising out of any action, suit or
proceeding under any statute or other law respecting anti-trust, monopoly,
restraint of trade, unfair competition or similar matters.
Financial Statements: The financial statements of Borrower
submitted to Lender in connection with the application for the within Loan
fairly presents the financial condition of Borrower. Borrower knows of no
liability, direct or contingent, involving significant amounts, not disclosed by
or reserved against in said financial statements.
Changes in Financial Condition: There has been no material and
adverse change in Borrower's condition, financial or otherwise, since the date
of the financial statements delivered to Lender.
Further Assurances: The Borrower agrees that it will execute
and deliver any further deeds of trust or any other documents or instruments
necessary to achieve and maintain at all times the balance due to the Lender as
a valid second lien on the Premises and a first, valid lien on the other
Collateral described herein.
Taxes and Assessments: All federal, state and other tax
returns of Borrower required by law to be filed have been duly filed and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Borrower or its property, income, profits and assessments which
are due and payable have been paid. All taxes due to the Federal government, the
States of Arizona and Colorado, and any taxes or assessments due to any other
state, county or municipality, have been fully paid and satisfied by the
Borrower except for current taxes not now due and payable.
Chief Executive Office and Location of Property: The
Borrower's Chief Executive Office, principal place of business and books and
records related to the Collateral pledged hereunder are located at 2777
Camelback Road, Phoenix, Arizona 85016. The Borrower will not move its Chief
Executive Office, its principal place of business or its books and records
referred to herein or change its name, identity or corporate structure without
giving the Lender prior written notice thereof and obtaining its written
consent, which consent shall not be unreasonably withheld or delayed. Borrower
further agrees that it will not remove any Collateral referred to herein from
the address where they are presently located other than in the ordinary course
of business.
Representations and Warranties True, Accurate and Complete:
None of the representations, warranties or statements made to Lender pursuant
hereto or in connection with this Agreement or the transactions contemplated
hereby contains any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances in which they are made, not misleading.
Validity and Enforceability of Acceptable Contracts: All of
the Acceptable Contracts are, and will be, legal, valid, binding and enforceable
obligations of the parties thereto (without right of set-off or subject to any
counterclaims or other defenses) in accordance with the terms thereof, and are
not, and will not be subject to any liens, and none of such Acceptable Contracts
are forged or have affixed thereto any unauthorized signatures or have been
entered into by any persons without the required legal capacity and otherwise
meet all of the criteria as set forth in the definition of an Acceptable
Contract herein above provided.
Project: The Project has direct access to a publicly dedicated
road and all roadways inside the Project are owned in fee simple by the
Borrower. Electric, gas, sewer, water facilities and other necessary utilities
are available in sufficient capacity to service the Project and any easements
necessary to the furnishing of said utility services have been obtained and duly
recorded. Each Consumer has access to and the use of all of the amenities and
public utilities of the Project. All costs arising from the construction of any
improvements or the purchase of any equipment located in the Project have been
fully paid for, except for customary equipment lease agreements entered into by
Borrower in connection with the Project. The Project complies with all
applicable restrictive covenants, zoning and land use ordinances and building
codes, all applicable health and environmental laws and regulations and all
other applicable laws, rules and regulations.
No Default: No Event of Default (as specified in Section
VIII), and no event which, with a lapse of time or the giving of notice, would
constitute an Event of Default, shall have occurred and be continuing at the
closing date of the Loan and Borrower is not presently in violation of any of
the representations and warranties herein specified.
Other Statements: All statements contained in any certificate,
financial statement, legal opinion or other instrument delivered by or on behalf
of the Borrower pursuant to or in connection with or in any amendment to this
Agreement, shall constitute representations and warranties made under this
Agreement. All representations and warranties made under this Agreement shall be
made at and as of the date as of which this Agreement is dated. All
representations and warranties made under this Agreement shall survive and not
be waived by the execution and delivery of this Agreement or any investigation
by the Lender.
Subdivision/Final Site Plan: All right to appeal from any
decision rendered by any governmental body in connection with the subdivision or
final site plan approval of the Premises, if any, or proposed or actual use of
the Premises has expired.
O.S.H.A. and Environmental Matters: (a) Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Americans with Disabilities Act
and the Environmental Protection Act, and all rules and regulations thereunder
and all similar state and local laws, rules and regulations; and there have been
no outstanding citations, notices or orders of non-compliance issued to Borrower
or relating to its business, assets, property, leaseholds or equipment under any
such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to Borrower and its ownership,
use and development of the Premises (including without limitation, all necessary
utility connections or permits) and its facilities, business, assets, property,
leaseholds and equipment are in compliance in all material respects with, all
applicable federal, state and local laws, rules and regulations relating to, air
emissions, water discharge, noise emissions, solid or liquid waste disposal,
hazardous waste or materials, or other environmental, health or safety matters.
Protection of Collateral; Reimbursement: All insurance
expenses and all expenses of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, and any and all excise,
property, sale and use taxes imposed by any state, federal or local authority on
any of the Collateral or in respect of the sale thereof, shall be borne and paid
by Borrower; if Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and charge
Borrower's account therefore, and Borrower agrees promptly to reimburse Lender
therefore with interest accruing thereon daily at the Default Rate. All sums so
paid or incurred by Lender for any of the foregoing and any and all other sums
which Borrower may become liable hereunder and all costs and expenses (including
attorney's fees, legal expenses and court costs) which Lender may incur in
enforcing or protecting its lien on or rights and interest in the Collateral or
any of its rights or remedies under this or any other agreement between the
parties hereto or with respect to any of transactions to be had thereunder,
until paid by Borrower to Lender with interest at the rate aforesaid, shall be
considered as additional indebtedness owing by Borrower to Lender hereunder and,
as such, shall be secured by all the said Collateral and the proceeds from the
sale thereof and by any and all other collateral, security, assets, reserves or
funds of Borrower in or coming into the hands or enuring to the benefit Lender.
The Lender shall not be liable or responsible in any way for the safekeeping of
any of the Collateral or for any loss or damage thereto or for any diminution in
the value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency or other person whomsoever, but the same shall be at the
Borrower's sole risk.
Solvent Financial Condition: As to Borrower immediately prior
to the issuance of the Note, the present fair salable value of its assets is
greater than the amount required to pay its total liabilities, and it is able to
pay its debts as they mature or become due. Borrower shall maintain such solvent
financial condition, giving affect to the Obligations, as long as Borrower is
obligated to Lender under this Agreement.
Use of Proceeds: The proceeds of the Loan will be used for
working capital purposes of Borrower. None of the transactions contemplated in
this Agreement (including, without limitation, the use of the proceeds from such
loan) will violate or result in the violation of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including, without
limitation, Regulation G of the Board of Governors of the Federal Reserve
System.
V
AFFIRMATIVE COVENANTS
Until payment in full of all Obligations and the termination
of this Agreement, Borrower covenants and agrees that it will:
Notify Lender: Promptly inform Lender of any material adverse
change in circumstances with respect to matters set forth in the representations
and warranties under Section IV of this Agreement.
Pay Taxes and Liabilities; Comply with Agreements: Promptly
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits and upon any properties belonging
to it prior to the date on which penalties attach thereto, and all lawful claims
for labor, materials and supplies which, if unpaid, might become a lien or
charge upon any properties of the Borrower; except that no such tax, assessment,
charge, levy or claim need be paid which is being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside.
Observe Covenants, etc.: Observe, perform and comply with the
covenants, terms and conditions of this Agreement, the other Loan Documents and
any other agreement or document entered into between Borrower and Lender.
Access to Records and Property: At any time and from time to
time, upon request by Lender permit representatives of the Lender to:
(a) Visit and inspect the properties of the Borrower,
(b) Inspect, copy and make extracts from its books and
records at any place designated by Lender, and
(c) Discuss with its employees its respective
businesses, assets, liabilities, financial conditions, results of operations and
business prospects.
Comply with Laws: Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
compliance with which is necessary to maintain its corporate existence or the
conduct of its business or non-compliance with which would materially and
adversely affect (a) its ability to perform in accordance with the terms and
conditions of this Agreement, or (b) any security given to secure its
Obligations.
Insurance Required: (a) Cause to be maintained, in full force
and effect on the building(s) and all other structures erected or to be erected
upon the Premises and all property given as Collateral security for all
Obligations, insurance in such reasonable amounts and against such customary
risks as is satisfactory to Lender, including, but without limitation, fire,
theft, burglary, pilferage, loss in transit, boiler, machinery, workman's
compensation, builder's risk, liability and hazard insurance. Said insurance
policy or policies shall:
(i) Be in a form and with insurers which are
satisfactory to Lender; (ii) Be for such risks and for such insured values as
Lender or its assigns may require in order to replace the property in the event
of actual or constructive total loss;
(iii) Designate Lender and its assignees, as
first (or second, as the case may be,) mortgagee and/or additional loss payees,
as their interests may from time to time appear;
(iv) Contain a "Breach of Warranty" clause
whereby the insurer agrees that a breach of the insuring conditions or any
negligence by Borrower or any other person shall not invalidate the insurance as
to Lender and its assignees;
(v) Provide that they may not be cancelled or
materially altered without thirty (30) days prior notice to the Lender and its
assignees; and
(vi) Upon demand, be delivered to Lender.
(b) Obtain such additional insurance as Lender may
reasonably require.
(c) In the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer. Borrower hereby
authorizes Lender to endorse any checks or drafts constituting insurance
proceeds.
(d) Forthwith upon receipt of insurance proceeds endorse
and deliver the same to Lender.
(e) In no event shall Lender be required to: (i)
ascertain the existence of or examine any insurance policy; or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement or any other Loan Documents; or (iii) obtain any
insurance on the aforementioned risks.
(f) Borrower hereby directs any insurance company
concerned to pay directly to Lender any monies which may become payable to
Lender or Borrower under such insurance policies, and Borrower appoints the
Lender as attorney-in-fact (which appointment is agreed to be coupled with an
interest) to endorse any draft therefore. Lender shall have the right to retain
and apply the proceeds of any such insurance, at its election, to reduction of
any sums advanced to Borrower by Lender, or to restoration or repair of the
property damaged, as more particularly set forth in the Loan Documents.
Further Assurances: Borrower shall execute and deliver to
Lender, any pledge, lien, encumbrance, security agreement, financing statement
or other documents as may reasonably be requested by Lender at any time when
there are monies due and payable to Lender under the terms and conditions of
this Agreement in order to effectuate more fully the purposes of this Agreement
and/or any other Loan Documents.
Pay Legal Fees and Expenses: Pay to Lender, upon demand,
together with interest at the rate set forth in the Note, from the date when
incurred or advanced by Lender until repaid by Borrower all costs, expenses or
other sums incurred or advanced by Lender to preserve, collect and protect its
interest in or realize on the collateral, and to enforce Lender's rights as
against Borrower, any account debtor or guarantor, or in the prosecution or
defense of any action or proceeding related to the subject matter of this
Agreement, including without limitation legal fees, expenses and disbursements
incurred by Lender. All such expenses, costs and other sums shall be deemed
Obligations secured by the Collateral.
Reaffirmation of Representations and Warranties: All
warranties and representations made herein by Borrower, and in any other
agreements or documents executed and/or delivered by Borrower to Lender in
connection with this Agreement, will continue to be true and accurate so long as
the Obligations remain unpaid.
Expenses: The Borrower agrees to pay all charges incident to
the procuring and making of the Loan and the charges for the examination of the
title of the Premises, searches relating to the Borrower and the Collateral,
title insurance premiums, surveys and drawing of papers, mortgage tax, recording
fees, legal fees and expenses of Lender's attorneys (as limited pursuant to the
Commitment Letter), and for all searches which may be required by the Lender to
assure the Lender that the Deed of Trust is a second lien as herein provided.
Taxes, Assessments, etc. The Borrower agrees to pay any tax,
assessment or other charge or liens upon the Premises, existing at any time,
whether before or after the making of the Loan, and to furnish proof thereof
satisfactory to the Lender, within thirty (30) days after such payment is due,
and upon the Borrower's failure to do so, all further obligation on the part of
the Lender to make said Loan, or the balance thereof, shall cease, and the
amount previously advanced, if any, shall become immediately due and payable; or
if the Lender shall so elect, it may pay such encumbrances or liens and add the
amount of said payments to the amount thereafter becoming due. Any sums paid or
expended in accordance with any of the foregoing provisions of this clause shall
be deemed to be advanced to the Borrower pursuant to this Agreement and shall be
secured by the Loan Documents.
Permits, Licenses, etc.: The Borrower hereby assigns as
further security for the Obligations, all permits, licenses and contracts
relating to the Premises, including but not limited to, all environmental
approvals, all approvals for sewer, water and other utilities, all building or
construction permits, zoning, site plan or subdivision approvals, all licenses,
permits or approvals in connection with the operation of the Resort and the sale
and financing of Timeshare Estates, and all prepaid fees or charges relating
thereto, if any, each as may be permitted by the entity issuing such permits,
approvals, licenses and contracts.
Notice of Environmental, Health or Safety Complaints: Borrower
shall immediately provide to Lender notice or copies if written, of all
complaints, orders, citations or notices, whether formal or informal, written or
oral, from a governmental body or private person or entity, relating to air
emissions, water discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or safety
matter.
Assignment of Leases, Contract(s) of Sale: Borrower agrees to
and hereby does assign to Lender as further security for the Obligations, all
leases and/or contract(s) of sale of or affecting the Premises.
Financial Statements:
(a) Borrower agrees to submit to Lender its financial
statements, all prepared in accordance with generally accepted accounting
principles consistently applied, and in addition to such statements, any
supplementary information to the financial statements as Lender shall reasonably
require, as more particularly set forth in the other Loan Documents.
(b) Borrower shall, within one hundred twenty (120) days after
the end of each fiscal year, furnish to Lender its balance sheet as at the end
of such year, and its income and surplus statement and statement of cash flow
for such fiscal year, all in reasonable detail, all prepared in accordance with
generally accepted accounting principals consistently applied on a consolidated
basis with its subsidiaries and affiliates, and all audited by independent
certified public accountants of recognized standing selected by Borrower and
satisfactory to Lender, and in addition to such statements, any supplementary
information to the financial reports as Lender shall reasonably require.
(c) Borrower shall also deliver to Lender within sixty (60)
days after the end of each quarter-annual fiscal period of the Borrower, except
the 4th quarter, its balance sheet as at the end of such period, its cumulative
income and surplus statement and its statement of cash flow for the period
beginning on the first day of such fiscal year and ending on the date of such
balance sheet, all in reasonable detail, all prepared in accordance with
generally accepted accounting principals consistently applied, certified by the
Chief Financing Officer of the Borrower and in addition to such statements any
supplementary information to the financial reports as Lender shall reasonably
require.
(d) As soon as practical after the end of each month, and in
any event within ten (10) days after the end of such month Borrower shall cause
to be furnished to Lender a monthly detailed trial balance of all Acceptable
Contracts and a schedule of all collections and delinquencies relating to the
Acceptable Contracts, in form and substance acceptable to Lender. All such
statements shall be certified as correct by the Chief Financial Officer of
Borrower.
Broker's Fees: Borrower agrees to promptly pay all finders'
fees, brokerage fees, commissions or similar fees payable to them in connection
with the transactions described in this Agreement, if any. Borrower agrees to
indemnify and hold harmless Lender from and against any claim of any broker,
finder or other person, together with any attorneys' fees incurred by Lender in
respect thereto, arising out of the transactions contemplated by this Agreement.
Borrower and Lender acknowledge that they are not, as of the date of this
Agreement, aware of any such fees due to any person or entity. This obligation
shall survive the expiration or termination of the Commitment Letter and this
Agreement.
Payment of Contracts: Borrower will direct all account debtors
under the Contracts to remit all payments under such Contracts to the Lender's
account established at Bank One, Arizona, N.A. , or such
--------------------
other bank or other entity as may be acceptable to Lender pursuant to the terms
of the Agency Agreement between the Agent, Lender and Borrower. Lender agrees to
apply such funds paid to the Obligations upon collection thereof by the Agent
and delivery to Lender, provided an Event of Default shall not then exist.
Other Documents: Borrower agrees that it will maintain
accurate and complete files relating to the Contracts and other Collateral to
the satisfaction of Lender, and that such files will contain copies of each
Contract, Related Documents, copies of all relevant credit memorandum relating
to the Contracts, and all collection information and correspondence relating
thereto and such other documents as are reasonably requested by Lender.
Assignment of Acceptable Contracts: Prior to Lender's funding
any Advance, including the first Advance, Borrower will execute and deliver to
Lender formal written assignments of all new Acceptable Contracts included in
the Collateral accompanied by the executed originals of all such Acceptable
Contracts to which shall be annexed receipted copies of all Uniform Commercial
Code Financing Statement filings, evidence of corporate authority on the part of
the Consumers, if corporations, and all Related Documents and instruments. The
form of the Contracts and Related Documents which now exist or shall be used by
Borrower and entered into in the future during the term of the Loan, shall be in
substantially the same form of the Acceptable Contracts reviewed and approved by
Lender prior to the execution of this Agreement. Borrower will not modify, amend
or otherwise alter any of the terms of the Acceptable Contracts or any other
documents relating thereto without Lender's prior written consent, or waive any
of Borrower's rights, if such modification might result in any diminution or
adverse effect upon the Collateral or the conduct of the business of Borrower.
Servicing of Acceptable Contracts: Borrower shall, at its cost
and expense, enter into and maintain, for as long as the Loan remains unpaid, a
servicing agreement ("Servicing Agreement") with a servicing entity selected by
Borrower and approved by Lender ("Servicing Agent"), to service the Acceptable
Contracts. The Servicing Agent shall furnish to Lender such reports,
documentation and information regarding the Acceptable Contracts as is
reasonably satisfactory to Lender.
Dominion Account; Agency Agreement: Borrower and/or the
Servicing Agent shall maintain a Dominion Account at an insured financial
institution selected by Borrower and acceptable to Lender 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 or
the Servicing Agent into the Dominion Account. Borrower, Lender and the selected
and approved Agent shall enter into an Agency Agreement, the terms of which
Agency Agreement shall be acceptable to Lender and Lender's counsel, and which
shall provide, among other things, for the said Agent 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 Lender, all in accordance with the terms and conditions of this
Agreement. The said post office box and Dominion Account shall be subject to the
exclusive control of Lender in accordance with the terms of this Agreement and
the Agency Agreement. The Agent selected and approved as Agent shall transfer to
Lender the funds deposited to the Dominion Account by wire transfer or check as
shall be directed by Lender. Borrower shall instruct all of the Consumers under
the Acceptable Contracts to direct remittances to a post office box established
by Lender 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 agreements received by the Borrower or the Servicing
Agent in payment of or on account of any of the Acceptable Contracts. Upon
receipt by Lender, all such proceeds shall be applied in payment in full or in
part of the Obligations in such order as Lender may elect.
Notice of Default or Event of Default: Borrower shall
immediately upon becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, give a written notice to Lender
specifying the notice given or action taken by such holder and the nature of the
claimed Default or Event of Default and what action Borrower is taking or
proposes to take with respect thereto.
Material Adverse Developments: Borrower shall immediately upon
becoming aware of any developments or other information which may materially and
adversely affect the Collateral, business, prospects, profits or condition
(financial or otherwise) of Borrower or its ability to perform this Agreement,
give to Lender telephonic or telegraphic notice specifying the nature of such
development or information and such anticipated effect.
VI
NEGATIVE COVENANTS
Until payment in full of all Obligations, Borrower covenants and agrees
that it will not:
Other Liens: Incur, create or permit to exist any mortgage,
assignment, pledge, hypothecation, security interest, lien or other encumbrance
on any of its property or assets, whether now owned or hereafter acquired,
except: (a) liens for taxes not delinquent; (b) those liens in favor of Lender,
and (c) the Permitted Lien(s).
Other Liabilities: Incur, create, assume or permit to exist
any indebtedness or liability on account of either borrowed money or the
deferred purchase price of property, except (a) Obligations to Lender; or (b)
indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing; or (c) the Permitted Lien(s).
Loans: Make loans to any person, firm or entity, except in the
ordinary course of its business in connection with the financing of the sale of
Time Share Estates.
Secondary Financing: Incur, create, assume, or permit to exist
any secondary financing encumbering the Premises and/or any other Collateral
securing the Obligations, except for Permitted Liens, nor shall there be any
encumbrances or security interest conveyed in any fixture or fixtures, nor in
any personalty whether affixed to the Premises or otherwise except for Permitted
Liens.
Corporate Structure: Alter or change its corporate structure,
or materially change the present ownership of the interest of the Borrower or
Borrower's management without the prior written consent of Lender, which consent
shall not be unreasonably withheld or delayed.
Guaranties: Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any person, firm or
entity except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Assignment: Assign this Agreement or any loan proceeds to be
made hereunder or any part thereof.
Lease: Rent or lease all or any portion of the Premises
without the prior written consent of the Lender, except in the ordinary course
of Borrower's business.
No Indulgences to Consumers: Borrower shall not grant
extensions of time for the payment or compromise for less than the full face
value or release in whole or in part any person liable for the payment of, allow
any credit whatsoever, except for the amount of cash to be paid upon any
Collateral or any instrument or document representing the Collateral without the
prior written consent of the Lender.
Modifications of Contracts or other documents: Borrower will
not modify, amend, or otherwise alter any of the terms of the Contracts or any
other documents relating thereto without Lender's prior written consent or waive
any of Borrower's rights, if such modification might result in any diminution or
adverse affect upon the Collateral or the conduct of the business of the
Borrower. The Borrower shall also not change, alter or modify or permit any
change, alteration or modification of its articles of incorporation or by-laws
or other governing documents without Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed.
VII
MISCELLANEOUS RIGHTS OF LENDER
Collections; Modification of Terms: Lender may, in its sole
and absolute discretion, and at any time, with respect to any of the Collateral,
demand, sue for, collect or receive any money or property, at any time payable
or receivable on account of or in exchange for, or make any compromises it deems
desirable including without limitation extending the time of payment, arranging
for payment in installments, or otherwise modifying the terms or rights with
respect to any of the Collateral, all of which may be effected without notice to
or consent by Borrower and without otherwise discharging or affecting the
Obligations, the Collateral or the security interests granted hereunder.
Notification to Consumers: At any time, prior to or after an
Event of Default, Lender may notify the Consumers on any of the Acceptable
Contracts to make payment directly to Lender, and Lender may endorse all items
of payment received by it which are payable to Borrower. Borrower, at the
request of Lender, shall notify the Consumers of Lender's security interest in
the Acceptable Contracts. Until such time as Lender elects to exercise its right
of notification, Borrower is authorized to collect and enforce the Acceptable
Contracts under the terms and conditions as set forth herein.
Uniform Commercial Code: At all times prior and subsequent to
an Event of Default hereunder, Lender shall be entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in
Pennsylvania (or any other state having jurisdiction), as the same may be
amended from time to time, with respect to all Collateral.
Preservation of Collateral: At all times prior and subsequent
to an Event of Default, Lender may take any and all action which in its sole and
absolute discretion is necessary and proper to preserve its interest in the
Collateral, including without limitation the payment of debts of Borrower which
might in Lender's sole and absolute discretion, impair the Collateral or
Lender's security interest therein, purchasing insurance on the Collateral,
repairing the Collateral, or paying taxes or assessments thereon, and the sums
so expended by Lender shall be secured by the Collateral, shall be added to the
amount of the Obligation(s) due Lender and shall be payable on demand with
interest at the Default Rate from the date expended by Lender until repaid by
Borrower.
Mails: From and after an Event of Default, Lender is
authorized to (and Borrower shall, upon request of Lender) notify the postal
authorities to deliver all mail, correspondence or parcels addressed to Borrower
and relating to the Collateral to Lender at such address as Lender may direct.
Lender's Right to Cure: In the event Borrower shall fail to
perform any of its Obligations hereunder or under any of the other Loan
Documents, then Lender, in addition to all of its rights and remedies hereunder,
may perform the same, but shall not be obligated to do so, at the cost and
expense of Borrower. In any such event, Borrower shall promptly reimburse Lender
together with interest at the Default Rate from the date such sums are expended
until repaid by Borrower.
Test Verifications: Lender shall have the right to make test
verifications of any and all Acceptable Contracts in any manner and through any
medium Lender considers advisable, and Borrower shall render any necessary
assistance to Lender.
Power of Attorney: Subject to the terms, conditions and
restrictions of this Agreement, Borrower hereby irrevocably constitutes and
appoints Lender as its true and lawful attorney, with full power of
substitution, to enforce collection of the Collateral at the sole cost and
expense of Borrower but for the sole benefit of Lender, either in its own name
or in the name of Borrower including but not limited to executing releases,
compromising or settling with any debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral; to receive,
open and dispose of all mail addressed to Borrower and take therefrom, any
proceeds of Collateral pledged or assigned to Lender; to notify Post Office
authorities to change the address for delivery of mail addressed to Borrower to
such address as Lender shall designate; to endorse the money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of Borrower on and to receive as pledgee or secured party of
the property covered by any of the Collateral, any invoices, schedules of
Collateral assigned, freight or express receipts, or bills of lading, storage
receipts, warehouse receipts or other documents of title of same or different
nature relating to the Collateral and to do any and all things necessary or
proper to carry out the intent of this Agreement and to perfect the liens and
rights of Lender created under this Agreement. Lender shall not be obliged to do
any of the acts or exercise any of the powers hereinabove authorized, but if
Lender elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
said power, and it shall not be liable or responsible to Borrower for any acts
or omissions nor for any error in judgment or mistake of law or fact. All powers
conferred upon Lender by this Agreement being coupled with an interest shall be
irrevocable so long as any Obligations of Borrower to Lender shall remain
unpaid. Lender is hereby further authorized to sign on behalf of Borrower any
Financing Statement Lender deems necessary to perfect its security interest and
to file same with the appropriate authorities in Arizona, Colorado or any other
state. All costs of such filings shall be charged to and be borne by Borrower.
VIII
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event
of Default (hereinafter referred to as an "Event of Default"):
The Borrower shall have failed to make any payment of any
installment of interest on the Loan when due;
The Borrower shall have failed to make any payment of any
principal when due;
Borrower's failure to keep, observe, perform, and/or carryout
in every particular the covenants, terms or provisions contained in this
Agreement or any of the other Loan Documents and such Default shall have
remained uncured for a period of fifteen (15) days after notice thereof to the
Borrower by the Lender;
Borrower's consent to the application for an appointment of a
receiver or trustee for it or for substantially all of its property, its
sufferance of any such appointment made without its consent to any proceedings
against it under any law relating to bankruptcy, insolvency, or the
reorganization or relief of debtors, which shall have continued unstayed and in
effect for a period of thirty (30) consecutive days;
Borrower's admission in writing of its inability to pay its
debts as they mature, or commission of any act of bankruptcy; Borrower's making
of an assignment for the benefit of creditors, or the filing of a voluntary
petition in bankruptcy by the Borrower; or the application for a receiver by the
Borrower;
The entry of any judgment or execution or attachment order
against or affecting the Borrower which, in the reasonable opinion of the
Lender, adversely and materially affects the credit standing of the Borrower.
(For purposes of this subsection, the term "materially" shall be defined to mean
an amount in excess of ten (10%) percent of the Borrower's net worth, as shown
on the most recently available financial statements or $50,000.00, whichever is
greater);
Any statement, representation, or warranty by the Borrower
contained in this Agreement, the other Loan Documents, the financial statements,
applications submitted for credit or any other agreement for the payment of
money with Lender proving to be incorrect or misleading in any material respect,
or a breach in any of the terms and conditions of this Agreement, the other Loan
Documents or any other agreement with Lender at any time when the Borrower is
obligated to Lender hereunder;
The failure of the Borrower to pay any principal or interest
on any other material borrowed money obligation when due, so that the holder of
such obligation declares, or may declare, such obligation due prior to its
stated maturity because of the Borrower's default thereunder and the Borrower
shall have failed to procure, within thirty (30) days after the declaration of
said default, a written statement cancelling said default and/or reinstating
said obligation. (For purposes of this subsection, the term "material" shall
have the same meaning as set forth in Section VIII 6. above);
Any material and adverse change in the condition or affairs,
financial or otherwise, of the Borrower, which in the reasonable opinion of
Lender impairs Lender's security or increases its risk so as to jeopardize the
repurchase Obligations of the Borrower under the Financing Agreement or any of
the other Obligations of the Borrower under this Agreement or any of the other
Loan Documents;
If at any time Lender reasonably determines that an
environmental claim against the Premises will have a material adverse effect on
the financial condition of the Borrower;
The failure of the Borrower to provide financial statements
and/or annual tax returns to Lender when required or requested to do so,
together with such financial information as may reasonably be requested by
Lender;
The passing of title, legal or equitable, to the Premises
(except as to the Transactions and Unit Weeks and any "cash sales" of Unit Weeks
at the Premises sold by Borrower in the ordinary course of Borrower's business)
without the written consent of Lender;
The failure to make payment of any tax, assessment, or
municipal or governmental charge against the Premises, or any Unit Week, when
due or the imposition of any lien thereon not paid and removed within 15 days
from the date thereof, except that no such tax, assessment or charge need be
paid which is being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside, provided, however, any such
payment must be made if necessary to prevent the forfeiture or sale of the
Premises or any Unit Week, as the case may be;
The failure to pay any insurance premium when due on or
relating to the Premises or the Collateral;
Any material change in the corporate structure or management
of the Borrower without the prior written consent of Lender, which consent shall
not be unreasonably withheld or delayed;
Any suspension of the Borrower's transaction of its usual
business(es);
Liquidation and/or dissolution of the Borrower;
The loss, revocation or failure to renew any license and/or
permit now held or hereafter acquired by Borrower which is necessary for the
continued operation of the Borrower's business, including, but not limited to,
the Project, which, in the sole opinion of Lender, materially adversely affects
Borrower's business or its ability to repay the Loan;
The issuance of any stay, order, cease and desist order or
similar judicial or non-judicial sanctions limiting or otherwise affecting the
sale of Contracts, if such order or sanction is not discharged within thirty
(30) days thereafter, which in the sole opinion of Lender, materially adversely
affects the Borrower's business or its ability to repay the Loan;
Borrower terminates or breaches any management or marketing
agreement and/or engages the services of a different, substitute or subsequent
management or marketing firm, or materially modifies the management or marketing
agreement(s), without first obtaining the written consent of Lender, which
consent shall not be unreasonably withheld or delayed;
The Premises is partially or totally destroyed and the
Borrower, the Association governing the Resort and/or the owners of the Unit
Weeks, as the case may be, if permitted, elect not to rebuild the improvements
at the Premises in substantially the same size, quality of construction,
architecture and in all other manner so as to conform with the improvements
which existed prior to such damage or destruction; or
A mechanics' lien, stop notice, or notice of intention or any
other lien or encumbrance shall have been filed against the Premises and/or any
of the other Collateral and the Borrower shall have failed to procure within
thirty (30) days after the same is filed, a cancellation of the said lien or a
discharge thereof or shall have failed to post a bond or escrow sufficient funds
to discharge the same in the opinion of Lender, in the manner and form provided
by law, and such default shall have remained uncured for a period of thirty (30)
days.
IX
CONSEQUENCES OF DEFAULT
In case any Event of Default shall have occurred and be continuing,
then and in every such Event of Default, the Lender may take any or all the
following actions in addition to those actions allowed in the other Loan
Documents, at law or in equity, at the same time or at different times:
Demand Obligations: Declare all Obligations owing to the
Lender from the Borrower under this Agreement, the other Loan Documents or any
other agreement between the Lender and the Borrower, to be forthwith due and
payable, whereupon all such Obligations and sums shall forthwith become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by Borrower;
Possession and Disposition of Collateral: Lender may forthwith
give written notice to Borrower, whereupon Borrower shall, at its expense,
promptly deliver any and all Collateral to such place as Lender may designate,
or Lender shall have the right to enter upon the premises where the Collateral
is located and take immediate possession of and remove the Collateral without
liability to Lender except such as occasioned by the gross negligence or willful
misconduct of Lender, its employees or agents. In the event Lender obtains
possession of the Collateral, Lender may sell any or all of the Collateral at
public or private sale, at such price or prices as Lender may deem best, either
for cash, on credit or for future delivery, in bulk or in parcels and/or lease
or retain the Collateral repossessed using it or keeping it idle.
Notwithstanding anything contained herein to the contrary, Lender shall have no
obligation to take possession of all or any portion of the Collateral. Notice of
any sale or other disposition shall be given to the Borrower at least ten (10)
days before the time of any intended sale or disposition of the Collateral is to
be made, which Borrower hereby agrees shall be reasonable notice of such sale or
other disposition. Lender may also elect to retain the Collateral or any part
thereof in satisfaction of the Borrower's Obligations. The proceeds, if any, of
any such sale or leasing by Lender shall be applied: first, to the payment of
all fees and expenses incurred by Lender as a result of such Event of Default,
including without limitation any legal fees and expenses incurred in
repossessing the Collateral and selling it or leasing it; second, to pay the
Obligations in such order and in such manner as Lender shall deem appropriate;
and third, to pay any excess remaining thereafter to Borrower.
Terminate Borrower's Rights Under Loan Documents: Upon the
occurrence of any Event of Default, Lender may also, with or without proceeding
with such sale or foreclosure of any Collateral or demanding payment of the
Obligations, without notice terminate further performance under this Agreement
or any of the other Loan Documents or exercise all rights granted in any other
agreement or agreements between Lender and Borrower without further liability or
obligation by Lender. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice or otherwise, shall absolve,
release or otherwise affect the liability of Borrower in respect to transactions
had prior to such termination, nor affect any of the liens, security interests,
rights, powers and remedies of Lender, but they shall, in all events, continue
until all Obligations are satisfied. Should Lender exercise the rights contained
herein, Lender shall not, in any manner be liable to Borrower for any failure to
make or continue to make loans or Advances to Borrower hereunder.
Foreclosure: To institute and maintain foreclosure proceedings
in accordance with the laws of the States of Pennsylvania or Colorado, as the
case may be;
Collection of Obligations: To institute proceedings to collect
all or any portion of the Obligations without instituting foreclosure
proceedings;
Other Remedies: Exercise any rights or take any of the
remedies otherwise available to it under the Loan Documents or as a matter of
law or equity; and
Set-Off: Immediately, and without notice or other action, to
set-off any money owed by the Lender in any capacity to the Borrower against any
of the Borrower's liability to the Lender, whether due or not, and the Lender
shall be deemed to have exercised such right of set-off and to have made a
charge against any such money immediately upon the occurrence of such Event of
Default, even though the actual book entries may be made at some time subsequent
thereto.
Cumulative Remedies; Waivers: No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lender at law or in
equity. No express or implied waiver by Lender of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of Lender in
exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by this Agreement, the other Loan Documents and applicable law.
Waive Jury Trial: BORROWER HEREBY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR OTHER AGREEMENTS OR INSTRUMENTS BETWEEN BORROWER AND LENDER. JPM
---------
Initial
No Marshalling: Lender shall be under no obligation whatsoever
to proceed first against any of the Collateral before proceeding against any
other of the Collateral. It is expressly understood and agreed that all of the
Collateral stands as equal security for all Obligations, and that Lender shall
have the right to proceed against any or all of the Collateral in any order, or
simultaneously, as in its sole and absolute discretion it shall determine. It is
further understood and agreed that Lender shall have the right, in its sole and
absolute discretion, to sell any or all of the Collateral in any order or
simultaneously.
X
MISCELLANEOUS
Reimbursement of Expenses: The Lender shall be entitled to its
reasonable expenses incurred in the enforcement or liquidation of any
Obligations due hereunder, or for the enforcement of payment of the Obligations,
and those expenses shall, without limitation, include reasonable attorneys' fees
plus other legal costs and expenses incurred. Borrower agrees to pay all costs
and expenses of the Lender in connection with the preparation, execution,
delivery, and administration of this Agreement, the other Loan Documents and
other instruments and documents to be executed contemporaneously herewith,
including reasonable attorney's fees and out-of-pocket expenses of counsel for
Lender, subject to the limitations set forth in the Commitment Letter.
No Waiver: The Borrower agrees that no delay on the part of
the Lender in exercising any power or right hereunder shall operate as a waiver
or relinquishment of any such power or right, nor preclude any further exercise
thereof, or the exercise of any other power or right. The Lender shall not by
any act or omission be deemed to have waived any of its rights or remedies
hereunder, unless such waiver is in writing and signed by the Lender, and then
only to the extent set forth therein. A waiver as to any one event shall in no
way be construed as continuing or as preventing the exercise of such rights or
remedy by subsequent event.
Waiver of Presentment, Etc.: The Borrower waives presentment,
dishonor and notice of dishonor, protest and notice of protest of all commercial
papers at any time held by the Lender on which the Borrower is in any way
liable.
Incorporation of Other Loan Documents: The provisions of this
Agreement shall be in addition to those of the other Loan Documents or other
writings held by the Lender relating to the Obligations, all of which shall be
construed as one instrument. To the extent there is any conflict between the
provisions of this Agreement and any other Loan Documents, the terms of the
agreement which affords the greater protection to Lender shall control. Borrower
agrees that all of the terms of the Commitment Letter shall be incorporated
herein as though set forth at length.
Consent to Extensions, Postponements,
Releases, Etc.: Borrower consents to any extension,
postponement of time of payment, indulgence or to any substitution exchange or
release of Collateral and to any addition to or release of, any party or persons
primarily or secondarily liable, or acceptance of partial payments on any
Contracts or instruments in the settlement, compromising or adjustment thereof.
Survival of Representations and Warranties: All
representations and warranties made herein or in any certificate or instrument
contemplated hereby shall survive any independent investigation made by Lender
in the execution and delivery of this Agreement, in said certificates or
instruments and shall continue so long as any Obligations are outstanding and
unsatisfied, applicable statutes of limitation to the contrary, notwithstanding.
Binding Effect: This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors and
assigns.
Rights and Remedies Cumulative: The rights and remedies herein
expressed to be vested in or conferred upon the Lender shall be cumulative and
shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred by any applicable law.
No Obligation to Enforce Terms: Nothing herein contained shall
impose upon the Lender any obligation to enforce any terms, covenants or
conditions contained herein. Failure of the Lender, in any one or more
instances, to insist upon strict performance by the Borrower of any terms,
covenants or conditions of this Agreement and/or the other Loan Documents, shall
not be deemed to be a waiver or relinquishment of any such terms, covenants and
conditions.
Lender's Right to Assign: This Agreement and all rights
hereunder may be assigned or otherwise transferred by the Lender to anyone of
its choosing.
Governing Law: This Agreement, the other Loan Documents and
the rights of the parties shall be governed by and construed under the laws of
the Commonwealth of Pennsylvania, except where the laws of the State of Colorado
control with respect to the exercise of Lender's rights and remedies as against
the Premises.
Indemnification: The Borrower hereby agrees to and does hereby
indemnify, protect, defend and save harmless the Lender, its directors,
employees, agents and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims or
demands including reasonable counsel fees incurred in investigating or defending
such claim, suffered by any of them, and caused by, relating to, arising out of,
or resulting from this Agreement, the other Loan Documents and the transactions
contemplated herein, including, but not limited to: (a) any act or omission to
act by the Borrower in connection with this Agreement; or (b) losses, damages,
expenses or liabilities sustained by the Lender pursuant to any provisions
contained in any local, state or federal law, statute or ordinance, including
any environmental law or regulation. The provisions of this paragraph shall
survive the termination of this Agreement, cancellation of the other Loan
Documents and the repayment of the Obligations.
Modification: This Agreement may not be modified, amended,
altered or changed orally or by course of dealing between Borrower and Lender,
but only by an agreement in writing duly executed on behalf of the party to whom
enforcement of any such waiver, change, modification or discharge is sought.
Severability: If any term or provision of this Agreement or
the application thereof shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such terms or provisions
other than that which is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
No Third Party Beneficiary; No Joint Venture
or Agency Relationship: All sums advanced hereunder and
evidenced by the Note shall be strictly for the benefit of the Borrower and
shall not inure to the benefit of, nor be intended or construed to give any
third parties any legal or equitable right, remedy or claim under or through the
Borrower, the relationship between Lender and Borrower being strictly a
contractual one evidencing a creditor-debtor relationship. Borrower and Lender
hereby expressly disclaim the existence of any partnership, joint venture,
employment or other agency relationship between them by virtue of this
Agreement.
Cross Default; Cross Collateralization: All other agreements
between the Borrower and Lender and/or any of its affiliates or subsidiaries are
hereby amended so that a default under this Agreement is a default under all
other agreements and a default under any one of the other agreements is a
default under this Agreement. Further, that the Collateral under this Agreement
secures the Obligations now or hereafter outstanding under all other agreements
with Lender and/or its affiliates or subsidiaries and the collateral pledged
under any other agreement with Lender and/or its affiliates or subsidiaries
secures the Obligations under this Agreement.
Notices: Any notices under this Agreement shall be deemed duly
served on the Borrower on the date received if mailed by certified mail, return
receipt requested, postage prepaid addressed to Borrower at Borrower's last
address on the Lender's records. Any notices to Lender pursuant to this
Agreement shall be mailed to Lender by certified mail, return receipt requested,
postage prepaid at the address of set forth at the heading of this Agreement and
shall be deemed effective upon receipt by Lender.
Term of Agreement: This Agreement shall continue in full force
and effect and the liens of the Collateral granted hereby and the duties,
covenants and liabilities of Borrower hereunder and all terms, conditions and
provisions hereof relating thereto shall continue to be fully operative until
all Obligations created under this Agreement and, at Lender's option, all
Obligations under any other Agreement or agreements between the Lender and
Borrower have been satisfied in full, concluded and/or liquidated. Borrower
expressly agrees that to the extent Borrower or any Consumer makes a payment or
payments to Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and are required to be repaid to a Trustee, receiver or any other party under
any Bankruptcy Code, State or Federal Law, common law or equitable cause, then
to the extent of such payment or repayment, the Obligations or part thereof
intended to be satisfied, shall be revived and continued in full force and
effect as if said payment had not been made.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers, as of
the day and year first above written.
ATTEST: ILX INCORPORATED (f/k/a
International Leisure Enterprises
Incorporated), an Arizona
Corporation
Stephanie D. Castronova By: Joseph P. Martori, President
------------------------- ------------------------------
STEPHANIE D. CASTRANOVA, JOSEPH P. MARTORI, President
Secretary and Chief Executive Officer
WITNESS/ATTEST: TAMMAC FINANCIAL CORP.
Joseph J. Lombardi By: Andy G. Roosa
----------------------------- -------------------------------
JOSEPH J. LOMBARDI, ASST SEC. ANDY G. ROOSA, President
EXHIBIT A
DESCRIPTION OF PREMISES
EXHIBIT B
LIST OF ACCEPTABLE CONTRACTS AS OF THE DATE OF THIS AGREEMENT
[TO BE SUPPLIED]
PROMISSORY NOTE
Phoenix, Arizona
$2,000,000.00 September 7, 1994
FOR VALUE RECEIVED, ILX INCORPORATED (f/k/a International Leisure
Enterprises Incorporated), an Arizona Corporation (the "Undersigned" or the
"Borrower"), promises to pay in lawful monies of the United States of America,
to the order of TAMMAC FINANCIAL CORP., having its principal office located at
100 Commerce Boulevard, Wilkes-Barre, PA 18702 (hereinafter referred to as the
"Lender") or at such place as Lender may from time to time designate in writing,
the principal sum of Two Million Dollars ($2,000,000.00) or so much as shall
have been advanced from time to time (the "Loan"), together with interest as
hereinafter provided, computed from the date hereof, in accordance with the
terms of a certain Loan and Security Agreement between the undersigned and the
Lender executed contemporaneously herewith (the "Loan Agreement"), and in the
following manner and upon the following terms and conditions:
Payment of Loan.
(a) The unpaid principal, the accrued interest and all costs and
expenses relating to the Loan shall be payable on the first day of the
forty-eighth (48th) month after the expiration of the Draw Period, unless sooner
demanded in accordance with the terms and provisions set forth herein.
(b) Unless accelerated pursuant to the terms and conditions of the Loan
Agreement or this Note, or paid before the scheduled Maturity Date of the Loan,
the Borrower shall pay to Lender seventy-two (72) consecutive minimum monthly
payments each in an amount equal to seventy-nine percent (79%) of the scheduled
monthly payments of principal and interest due on the Acceptable Contracts
comprising the Collateral for the Loan ("Mandatory Payments"). All Mandatory
Payments as hereinabove provided shall be applied first to the payment of
accrued and unpaid interest and the balance, if any, shall be applied to the
payment of the 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 day of the month next following the date of this Note
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 made payable out of the monthly collections received under the
Acceptable Contracts. In the event the monthly collections are in excess of the
applicable monthly Mandatory Payment as aforesaid, said excess shall be applied
as a prepayment of the principal balance remaining due under the Loan. In the
event the monthly collections from the Acceptable Contracts are insufficient to
pay the aforesaid monthly principal and/or interest on the Loan the Borrower
shall paythe interest and/or principal insufficiency on the fist of each month
as aforesaid.
(c) The Borrower shall direct or otherwise cause all Consumers (as that
term is defined in the Loan Agreement) under the Acceptable Contracts to pay all
monies due thereunder to the Agent (as that term is defined in the Loan
Agreement) or as otherwise advised by Lender in writing. The Borrower, to the
extent that it receives such payments directly from or on behalf of such
Consumers, shall hold the same (in the form so received) in trust for the sole
and exclusive benefit of Lender and immediately deliver same to Lender. Monies
(in good, collected funds) from Contracts collected and paid to Lender by the
Agent or the Borrower shall be (subject to the payment of fees, costs and
expenses as set forth herein and in the Loan Agreement) applied, on the first
business day of the calendar month following the receipt thereof, first towards
the payment of accrued and unpaid interest on the Loan and then to the payment
of the principal amount then outstanding under the Loan.
(d) For purposes of computing the amount of interest payable on the
Loan, the outstanding principal amount of the Loan shall not be reduced by the
amount of any funds collected by the Agent or the Borrower until such funds are
received by Lender as good, collected funds and applied to the Loan.
Interest Rate. The interest rate which shall be used to
calculate the amount of interest due each month shall be the highest prime rate
as announced, from time to time, in The Wall Street Journal during the month for
which interest is being charged ("Prime Rate"), plus four (4%) percentage points
per annum. Interest shall be calculated on the outstanding principal balance at
the close of each day, on the basis that one day represents 1/360th of a year.
The interest rate may be changed from time to time without notice to the
Borrower and for the purposes of this Note, any such change shall be effective
on the date of the change. Interest shall continue to accrue on the unpaid
principal balance remaining due until all sums due hereunder and under the Loan
Agreement are paid in full. Lender's failure or delay in submitting invoices of
the interest due under the Loan to the Borrower shall not discharge or relieve
the Borrower of its obligation to pay interest on the Loan when due.
Default Interest Rate. Upon the occurrence or during the
continuance of an Event of Default, as defined in the Loan Agreement, the rate
used to calculate the interest due on the Loan may, at the option of Lender,
increase by five (5%) percentage points above the interest rate referred to in
paragraph 2. above (the "Default Rate"). If such increased interest rate exceeds
that which may be collected under applicable law, the Default Rate shall be that
maximum allowable interest rate.
Late Charge. In the event Lender receives a payment of
interest or principal more than fifteen (15) days after its due date, 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 the Lender in
processing late payments and shall not be deemed to constitute additional
interest.
Collateral. As security for the payment and performance of the
obligations hereunder, the undersigned has, contemporaneously herewith, granted
a security interest to Lender in and to the Collateral more particularly
described in the Loan Agreement.
Application of Payments. All payments of interest and
principal or prepayments of principal, howsoever designated by the undersigned,
are to be applied first on account of interest on the unpaid balance of the
principal indebtedness, and the balance, if any, on account of said principal
indebtedness.
Events of Default; Acceleration of Balance Due. (a) The
Borrower agrees with the Lender that the Borrower shall be bound by and shall
comply with all of the terms, covenants and conditions of the Loan Agreement and
all other Loan Documents, as that term is defined in the Loan Agreement, all of
which shall be construed as one instrument and any Default in any term, covenant
or condition contained in the Loan Agreement and/or any of the other Loan
Documents shall cause this Note to be in default and all money owed by the
Borrower to the Lender by virtue of this Note, the Loan Agreement and/or any of
the other Loan Documents shall be forthwith due and payable. All of the Events
of Default set forth in the Loan Agreement and the other Loan Documents are
herein incorporated by reference as though set forth fully at length.
(b) Upon the occurrence of any Event of Default as described or defined
in the Loan Agreement, and/or any of the other Loan Documents, then, at the
option of the Lender or the holder hereof, the aforesaid principal sum or so
much thereof as shall then remain unpaid, with all arrearage of interest
thereon, and any other sums due hereunder or thereunder shall, without notice or
demand, at the option of the Lender, become and be due and payable immediately
thereafter, anything hereinbefore contained to the contrary notwithstanding. In
addition, the Lender or holder hereof may exercise any and all rights and
remedies available to it under the terms of the Loan Agreement and/or any other
Loan Documents, or at law or in equity.
Principal Prepayments. It is understood and agreed that the
undersigned may prepay in full or in part at any time without penalty or
premium, the principal of this obligation; provided, however, the Borrower shall
notify Lender of each such prepayment. Any such prepayments of principal shall
be applied in the inverse order of their maturity.
Lender's Rights Cumulative. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to herein, in the Loan Agreement and/or any of the other
Loan Documents, or other agreements or otherwise available to Lender at law or
in equity. No express or implied waiver by Lender of any Default or Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Default or Event of Default. The failure or delay of Lender
in exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such rights
upon the continuation or reoccurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by the Loan Agreement and/or any of the other Loan Documents and
applicable law.
Waiver of Jury Trial. THE BORROWER HEREBY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS NOTE, THE LOAN AGREEMENT
AND/OR ANY OF THE OTHER LOAN DOCUMENTS OR OTHER AGREEMENTS OR INSTRUMENTS
BETWEEN BORROWER AND LENDER. /S/
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Initial
Attorney's Fees, Costs and Charges. The Borrower shall be
liable for all costs, charges and expenses, and other sums incurred or advanced
by Lender (including reasonable legal fees and disbursements) to preserve,
protect or maintain the Collateral securing this Note, collect the sums due
hereunder and/or the other Loan Documents, protect Lender's interests in or
realize on the Collateral or to enforce Lender's rights against the Borrower.
Joint and Several Liability. The liability of the Borrower
shall be joint and several, absolute and unconditional and without regard to the
liability of any other party.
Waivers. The Borrower and all other parties who at any time
may be liable hereon in any capacity, jointly and severally, waive presentment,
demand for payment, protest and notice of protest, and notice of dishonor of
this Note, and authorize Lender, without notice, to grant any extension,
postponement of time of payment, indulgence or any substitution, exchange or
release of Collateral and the addition to or release of any party or persons
primarily or secondarily liable or acceptance of partial payments on any
accounts or instruments and the settlement, compromising or adjustment thereof.
Disclosure of Information. Lender is hereby authorized to
disclose any financial or other information about the Borrower to any regulatory
body or agency having jurisdiction over the Lender, or to any present, future or
prospective participant or successor in interest in any loan or other financial
accommodation made by Lender to the Borrower.
Further Security; Right of Set-off. (a) As further security
for the performance of the obligations hereunder and the other Obligations, as
defined in the Loan Agreement, the Borrower hereby gives Lender a general lien
upon all property and assets heretofore or hereafter delivered to Lender, and
Lender shall have the right of setoff, in addition to any other rights conferred
by statute or operation of law, with respect to any funds or tangible assets
which may, at any time, be in possession of or under Lender's custody and
control.
(b) Lender shall have the right, after the occurrence of an Event of
Default, to immediately without notice or other action, to set-off against the
Borrower's obligations to Lender, any sum owed by the Lender in any capacity to
the Borrower, whether due or not, or any property of the Borrower in the
possession of the Lender, and Lender shall be deemed to have exercised such
right of set-off and have made a charge against any such money or property
immediately upon the occurrence of any Event of Default, even though the actual
book entries may be made at times subsequent thereto.
No Waiver of Rights or Remedies. The Lender shall not by any
act or omission be deemed to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Lender, and then only to the
extent set forth therein. A waiver as to any one event shall in no way be
construed as continuing or as preventing the exercise of such rights or remedies
by a subsequent event.
Business Purpose. The proceeds of this Note shall be (or have
been) utilized for business purposes and as a result, this loan transaction does
not fall under the regulations set forth in 12 CFR Section 226, et seq.
Balloon Note. IN THE EVENT THAT THERE IS A PRINCIPAL BALANCE
REMAINING DUE AFTER ALL MANDATORY PAYMENTS REQUIRED TO BE MADE UNDER PARAGRAPH 1
ABOVE HAVE BEEN PAID BY BORROWER TO LENDER, THIS NOTE SHALL BE DEEMED TO BE A
BALLOON NOTE REQUIRING PAYMENT IN FULL ON THE DATE OF MATURITY AND THE LENDER
SHALL BE UNDER NO OBLIGATION TO REFINANCE THE AMOUNT DUE AT THAT TIME.
Loan Charges. In the event that the interest charged hereunder
exceeds the legal limit permitted by law, the interest rate shall be
automatically reduced to the permitted limit and any interest charged which
exceeds or exceeded the permitted limit shall, at Lender's option, be treated as
a payment of principal or refunded directly to the Borrower.
Invalidity. In the event any provision of this Note is
determined by competent authority to be prohibited or unenforceable in any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability, without invalidating the
remaining provisions of this Note, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable any provision
in any other jurisdiction.
Governing Law. The provisions of this Note shall be governed
by the laws of the Commonwealth of Pennsylvania.
Binding Effect. The provisions herein contained shall bind and
inure to the benefit of the Borrower and Lender and their respective legal
representatives, successors and assigns (provided, however, that the Borrower
shall not assign this Note without first obtaining the written consent of
Lender). Lender (or any subsequent assignee) may transfer and assign this Note
and deliver the Collateral securing this Note to any assignee, who shall
thereupon have all of the rights of Lender; and Lender (or any such subsequent
assignee that in turn assigns as aforesaid) shall then be relieved and
discharged of any responsibility or liability with respect to this Note and said
Collateral. For the purposes of this Note wherever the term "Lender" shall be
used it shall refer to any subsequent holder, successor or assignee hereof
unless the context requires otherwise.
Cross Default/Collateralization. All other agreements between
Lender and/or any of its affiliates or subsidiaries and the Borrower are hereby
amended so that a default under this Note is a default under all other
agreements between Lender and the Borrower and a default under any one of the
other agreements is a default under this Note. Further, such agreements are
amended so that the Collateral securing this Note secures any presently existing
or hereafter arising obligations due and owing from the Borrower to Lender
and/or its affiliates or subsidiaries and the collateral pledged under any other
agreement with Lender and/or its affiliates or subsidiaries secures this Note.
Incorporation of Commitment Letter and Loan Agreement. This
Note has been issued pursuant to the terms and conditions of the Commitment
Letter, as that term is defined in the Loan Agreement, and pursuant to the Loan
Agreement between Borrower and Lender of even date herewith, and all of the
terms, covenants and conditions of the Commitment Letter and the Loan Agreement
(including all schedules thereto) and all other instruments evidencing and/or
securing the indebtedness hereunder are hereby made part of this Note and are
deemed incorporated here in full as set forth in length.
Gender. Throughout this Note, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Note indicates otherwise.
Section Headings. Section headings are for convenience only
and shall not be construed as limiting the contents of any section contained
herein and shall not be construed as part of this Note.
Conflicting Provisions. In the event that any of the terms and
conditions of this Note conflict with any of the terms and conditions of the
other Loan Documents or any other agreements between the Borrower and Lender,
the provision(s) offering Lender the greatest protection or most favorable
interpretation of its rights and remedies shall control.
Definitions. Unless otherwise defined herein, the capitalized
terms found herein shall have the same meaning ascribed to them as set forth in
the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
duly executed and delivered by its proper and duly authorized officers as of the
day and year first above written.
ATTEST: ILX INCORPORATED (f/k/a
International Leisure Enterprises
Incorporated), an Arizona
Corporation
By: /S/
------------------------------ ---------------------------------
STEPHANIE D. CASTRANOVA, JOSEPH P. MARTORI, President
Secretary and Chief Executive Officer
AMENDED AND RESTATED
FINANCING AGREEMENT
THIS AGREEMENT is entered into by and between TAMMAC FINANCIAL CORP., a
Delaware Corporation, with its principal office located at 100 Commerce
Boulevard, Wilkes-Barre, Pennsylvania 18702 (hereinafter referred to as
"Tammac") and ILX Incorporated (f/k/a International Leisure Enterprises
Incorporated), a corporation of the State of Arizona, with its principal place
of business located at 2777 East Camelback Road, Phoenix, Arizona 85016
("Developer").
W I T N E S S E T H:
WHEREAS, Developer is the owner of a certain time share condominium
project commonly known as the Golden Eagle Resort located in Estes Park,
Colorado, including all time share estates and/or Unit Weeks now or hereafter
owned by the Developer; the resort and the real estate being more particularly
described in Exhibit "A" attached hereto and made a part hereof (said resort
being hereinafter referred to as the "Project"); and
WHEREAS, Developer has offered and plans to offer for sale and/or lease
certain interests in real estate as said interests are defined in and created by
the Project Documents (as hereinafter defined); and
WHEREAS, the Project, including the real estate underlying same, the
improvements thereon and all furnishings, fixtures and personalty contained
therein and all common elements appurtenant thereto, is presently subject to
those encumbrances represented by mortgages, deeds of trust, security agreements
and other documents previously disclosed to Tammac or Tammac's counsel in
writing; and
WHEREAS, Developer plans to enter into Contacts with Consumers
interested in leasing or purchasing and financing one or more Unit Weeks, which
Contracts shall provide for the payment of said Contracts over periods of time
in installments; and
WHEREAS, Developer and Tammac have previously entered into a Financing
Agreement dated September 11, 1991 ("1991 Financing Agreement"), which set forth
the terms and conditions under which Developer would offer and Tammac would
purchase Contracts; and
WHEREAS, Developer and Tammac desire to amend and restate the terms and
conditions of the 1991 Financing Agreement; and
WHEREAS, to that end, the parties wish to memorialize their agreements
by this writing,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is herewith acknowledged, the parties hereby agree as follows:
1. DEFINITIONS.
When used in this Agreement, the ollowing terms shall have the
meanings set forth below:
1.1. "Commitment Letter" shall mean that certain commitment letter
dated July 20, 1994, issued by Tammac to Developer (and any amendments thereto),
which Commitment Letter is incorporated herein by reference as though set forth
at length.
1.2. "Consumer" or "Consumers" shall mean those individual(s) financing
the purchase or lease of Unit Weeks from Developer (including any guarantor
thereof), who execute an agreement, contract, note, mortgage, mortgage deed,
deed of trust and/or similar documentation, which evidence his, her and/or their
obligation to the Developer for the repayment of the unpaid portion of the cash
price for the Unit Week and the first lien and security interest granted to
Developer in and to the Unit Week.
1.3. "Contract" or "Contracts" shall mean a consumer contract or
agreement between the Developer as lessor, seller and/or lender and a Consumer,
as the lessee or purchaser and/or borrower of (or relating to) a Unit Week,
together with all Related Documents.
1.4. "Credit Package" means the documents submitted by Developer to
Tammac for review and credit approval, which documents shall include a completed
loan application, credit bureau report and other information and documentation
of a similar nature to enable Tammac to determine the creditworthiness of the
Consumer and the Consumer's financial ability to repay the Contract.
1.5. "Loan Documents" shall mean this Agreement, the Commitment Letter,
the Loan and Security Agreement, the Promissory Note, the Deed of Trust,
Security Agreement and Financing Statement, the Environmental Indemnity
Agreement, the Collateral Assignment of Lease or Leases, the Agency Agreement,
Uniform Commercial Code Financing Statements, certificates, resolutions,
affidavits, opinion letters and other writings or documents of every kind and
nature submitted in connection with and/or as security for the Developer's
obligations thereunder, hereunder, or otherwise, whether executed
contemporaneously herewith or hereafter, and any and all amendments,
modifications, renewals, extensions, substitutions or replacements thereof or
thereto.
1.6. "Mortgage" or "Deed of Trust" shall mean the Deed of Trust,
Security Agreement and Financing Statement executed and delivered
contemporaneously herewith by Developer to Tammac covering the Project, all
being given as additional collateral security for the obligations of Developer
pursuant to the Loan Documents.
1.7. "Project" means the timeshare condominium project (including, but
not limited to, the Unit Weeks now owned or hereafter assigned by Developer)
known as the Golden Eagle Resort, located in the town of Estes Park, Larimer
County, Colorado, including the real estate, the improvements thereon and all
furnishings, fixtures and personalty contained therein, all common areas and/or
elements appurtenant thereto and/or used or useable in connection with the
operation of the Project.
1.8. "Project Documents" mean the constituent condominium documents for
the Project, including, but not limited to, the Condominium and Time Share
Ownership Declaration for Golden Eagle Resort, a Condominium, recorded August
31, 1987 at Reception No. 87050248, and rerecorded October 16, 1987 at Reception
No. 8705979, the Articles of Incorporation, By-Laws and Rules and Regulations of
the Golden Eagle Resort Condominium Association, Inc., the Public Offering
Statements and any exhibits thereto, and any supplements, additions or
amendments to any of the foregoing, as may be made from time to time.
1.9. "Related Documents" shall mean, as applicable to each Contract,
the Credit Package, security agreements, mortgages, mortgage deeds, deeds of
trust securing the Contracts and encumbering the Unit Weeks, guaranty
agreements, all records pertaining to the Contracts, including, but not limited
to, all files, closing or settlement statements, title insurance reports and
policies, copies of deeds, Contracts, prospectuses delivered to Consumers,
public offering statements, receipts for said prospectuses and public offering
statements, truth-in-lending disclosure statements, information, documents,
records and such other writings or documents of every kind and nature submitted
and/or executed by or on behalf of a Consumer or any guarantor of the Consumer
and relating to the Contracts and the Consumer's financing thereof.
1.10. "Transaction" or "Transactions" means a lease or sale transaction
evidenced by a Contract and/or Related Documents, which Transactions are sold to
Tammac in accordance with this Agreement.
1.11. "Unit Week" or "Unit Weeks" shall mean the timeshare interests or
estates defined in or created by the Project Documents or otherwise.
2. SALE AND PURCHASE OF CONTRACTS AND RELATED
DOCUMENTS; FUNDING.
2.1. Subject to the funding limitations as set forth in the Commitment
Letter, Developer shall offer to sell to Tammac the Transactions. Developer
shall submit complete Credit Packages to Tammac for review relating to said
Transactions so offered. Provided Developer is not in default under the terms
and conditions of this Agreement, and subject to the terms, conditions and
limitations of the Commitment Letter, as same may be amended, which Commitment
Letter, together with any amendments, is incorporated herein by reference as
though set forth fully at length, Tammac shall purchase those Transactions which
meet Tammac's lending criteria and guidelines, as same shall be in effect on the
date that the Agreement is executed and delivered to Tammac by the Developer. A
copy of Tammac's current lending guidelines and criteria is attached hereto and
made a part hereof and labelled as Exhibit "B". Tammac's lending guidelines and
criteria shall not change during the term of this Agreement. Tammac shall advise
Developer in writing whether it intends to purchase a particular Transaction.
Any approval to purchase a Transaction shall be subject to the terms and
conditions contained in said approval.
2.2. Except as set forth in Section 2.9 of this Agreement, Tammac shall
accept Contracts that meet Tammac's lending guidelines and criteria and which
are written at a contract rate of six and one-quarter (6 1/4%) percentage points
above the highest prime rate as announced from time to time in The Wall Street
Journal (the "Acceptable Contract Rate"). The Acceptable Contract Rate shall be
fixed for a period of six months from the execution and delivery of this
Agreement and shall be based on the highest prime rate as announced in The Wall
Street Journal on the business day preceding the execution and delivery of this
Agreement ("Prime Rate"). Thereafter, the Acceptable Contract Rate is subject to
change every six (6) months following the execution and delivery of this
Agreement (the "Change Date") and will be reset, if at all, based upon the Prime
Rate then in effect on each Change Date. Notwithstanding anything contained
herein to the contrary, in the event that the Prime Rate exceeds nine and three
quarters (9.75%) percent per annum, and provided the Developer is not in default
under the terms of the Financing Agreement, Tammac shall continue to purchase
Contracts pursuant to the terms hereof, irrespective of the interest rate set
forth in said Contracts without discounting said Contracts. For so long as the
Prime Rate exceeds 9.75% Tammac shall have no further obligation to make
Interest Rate Differential Payments to the Developer, as provided in Section 2.9
of this Agreement.
2.3. Upon acceptance by Tammac of a Transaction pursuant to the terms
of this Agreement, and in order to perfect Tammac's ownership interest and/or
security interest in the Contracts and Related Documents, Developer shall
deliver to Tammac all original Contracts and Related Documents evidencing and
securing the Contracts and proper assignments and endorsements thereof, all in
form and substance satisfactory to Tammac.
2.4. If Tammac purchases a particular Transaction, Tammac shall fund
the then unpaid principal balance of the Contract, less all costs and sums to be
paid into the Reserve Account (as hereinafter defined) and/or to Tammac as more
particularly set forth below. In the event Tammac declines to purchase a
particular Transaction and the Developer declines to extend credit to the
Consumer in that Transaction, Developer shall be obligated to provide the
Consumer with a declination notice all in conformity with federal and state laws
and regulations.
2.5. All costs and expenses relating to the negotiations and
consummation of this Agreement and the execution and delivery of the Loan
Documents, including, but not limited to, Tammac's attorneys' fees and costs
(except as limited pursuant to the Commitment Letter), shall be deducted from
and paid to Tammac upon demand.
2.6. In order to assure Tammac that it is being granted a valid first
lien on the Unit Weeks, free and clear of all defects, liens, encumbrances and
exceptions to title whatsoever, except for exceptions that are approved by
counsel for Tammac, Tammac shall receive written verification that the Deed of
Trust and Assignment thereof have been duly recorded in the Larimer County
Recording Office from a licensed Colorado attorney or title insurance company.
All costs and expenses relating to the aforesaid arrangement, including, but not
limited to, the costs and fees of said attorney(s) or title company, shall be
paid directly by the Developer immediately upon the presentation of invoices.
2.7. In addition to the sums paid into the Reserve Account as
hereinafter provided, a non-refundable placement/processing fee in the amount of
$150.00 for each Contract purchased by Tammac hereunder shall be deducted from
and paid to Tammac from each funding. Notwithstanding anything contained herein
and to the contrary, in the event that Tammac purchases a Contract without
requiring the Developer to furnish a title insurance policy for such Contract in
an amount at least equal to the total of the Consumer's obligations under the
Contract covering the Unit Week conveyed to the Consumer and financed by Tammac,
the Developer shall pay a placement/processing fee to Tammac equal to $250.00
for each Contract purchased by Tammac pursuant to this Agreement.
2.8. If the Developer has received any payments from a Consumer
relating to any Transaction purchased by Tammac pursuant to the terms hereof,
Developer shall provide a certificate verifying the current unpaid principal
balance due under the Contract, the amount of the periodic installments and the
date to which the interest is paid.
2.9. Notwithstanding anything contained herein to the contrary, for
each Contract written by Developer and purchased by Tammac at a Contract
interest rate less than the Acceptable Contract Rate, then in effect on the date
Tammac purchases said Contract, said Contract shall be discounted on the date
each such contract is purchased by Tammac so as to yield an equivalent rate to
Tammac of the Acceptable Contract Rate then in effect. To that extent, the
amount to be funded by Tammac to Developer on each such Contract shall be
reduced. Any and all sums paid by Developer to Tammac so as to equalize the
yield as aforesaid shall be non-refundable under any and all circumstances.
In the event that a Contract written by Developer and
purchased by Tammac provides for a contract interest rate greater than the
Acceptable Contract Rate then in effect on the date each payment is received
under the Contract by the Consumer, Tammac shall pay to the Developer, as and
when collected and earned, on a monthly basis, the Interest Rate Differential,
as hereinafter defined. The Interest Rate Differential shall be computed by
subtracting the interest component of each payment of an effected Contract
computed at the Acceptable Contract Rate then in effect from the interest
component of each payment actually received by Tammac on each Contract written
at a rate of interest in excess of the Acceptable Contract Rate. Tammac shall
furnish such documentation to the Developer, on a monthly basis, identifying
each of the Contracts purchased by Tammac which are subject to an interest rate
differential payment ("Interest Rate Differential Payment(s)") as hereinabove
provided, which documentation shall be reasonably satisfactory to Tammac and the
Developer. Tammac shall not be responsible to make any Interest Rate
Differential Payments to the Developer unless and until Tammac receives good,
collected funds required to be paid under said Contracts. Developer recognizes
and agrees that it shall bear any credit risk in the event that all or any
payments due under a particular Contract are not made and/or received by Tammac
or are otherwise dishonored. In the event that all or any portion of the
Interest Rate Differential Payments are required to be returned to a Consumer or
someone making a claim by or on behalf of the Consumer or the Consumer's
creditor(s), the Developer shall, upon the demand of Tammac, immediately return
all or any portion of the Interest Rate Differential Payment(s) required to be
returned.
Tammac shall be under no obligation to make Interest Rate
Differential Payments to the Developer in connection with the Acceptable
Contracts securing the Loan referred to in the Commitment Letter.
2.10. In the event the Developer sells one Unit Week to two (2)
Consumers, whereby one of the Consumers is purchasing the odd years of a Unit
Week and the other Consumer is purchasing the even years of that Unit Week
("Split Week Contracts"), Tammac shall not be obligated to purchase any Split
Week Contracts unless said Split Week Contracts meet Tammac's lending criteria
and guidelines.
2.11. Tammac shall only accept Contracts which provide that: (i) the
amount financed is an amount equal to or greater than $5,001.00 and the term of
which is eighty-four (84) months or less; or (ii) the amount financed is
$5,000.00 or less and the term of which is sixty (60) months or less.
3. DEVELOPER'S WARRANTIES AND REPRESENTATIONS.
Developer represents and warrants (and on the date each
Transaction is purchased, shall be deemed to have repeated each such
representation and warranty) as follows:
3.1. Developer is a Corporation duly organized and validly existing and
in good standing under the laws of the state of its incorporation or
organization and is duly qualified and authorized to do business in each state
where its failure to so qualify would materially impair its ability to perform
its obligations under this Agreement, or its ability to enforce any Contract or
the Related Documents.
3.2. The execution, delivery and performance of this Agreement, the
Loan Documents, the Contracts, the Related Documents and any other documents and
instruments contemplated by this Agreement to which Developer is a party, or in
which Developer has an interest, have been duly authorized by all necessary
action on the part of Developer and do not violate or constitute a breach under
its articles of incorporation or by-laws, or any law, rule or regulation,
indenture, contract or other instruments to which Developer is a party or by
which it is bound.
3.3. Upon Developer's execution and delivery of this Agreement, this
Agreement shall be a legal, valid and binding obligation of Developer,
enforceable in accordance with its terms.
3.4. There is no suit or proceeding now pending, (nor to the knowledge
of Developer, threatened, nor is there any basis therefor) against or affecting
it, or any of its properties or rights, which, if adversely determined, would
materially impair its ability to carry on its business or would materially
affect its financial condition.
3.5. Developer has filed or caused to be filed all federal, state and
local tax returns which are required to be filed, and has paid or caused to be
paid all taxes as shown on said returns or on any assessments received by it, to
the extent such taxes have become due.
3.6. Developer's financial statements heretofore furnished to Tammac
are true and complete, have been prepared in accordance with generally accepted
accounting principals applied on a basis consistent with those used by Developer
during its immediately preceding full fiscal year and fairly present Developer's
financial condition as of the dates noted therein and the results of its
operations for the interim period then ending. Developer knows of no liability,
direct or contingent, involving significant amounts, not disclosed by, or
reserved against in said financial statements. Since the date of the financial
statements referred to herein, there have been no material adverse changes in
the financial condition of Developer and no such change is expected to the
knowledge of the signatories to this Agreement in either their individual or
representative capacities.
3.7. All information, reports and other papers and data furnished to
Tammac were, at the time that same were furnished to Tammac, complete and
correct in all material respects, to the extent necessary to give Tammac a true
and accurate knowledge of the subject matter. No fact is known to Developer
which materially and adversely affects or in the future may materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or business prospects of Developer which have not been set forth
in such information, reports or other papers or data or otherwise disclosed in
writing to Tammac. No document furnished or statement made to Tammac in
connection with the negotiation, preparation or execution of this Agreement
contains or will contain any untrue statement of fact material to the
creditworthiness of Developer or omits to state a material fact necessary in
order to make the statements contained therein not misleading.
3.8. No consent or approval of, giving of notice to, registration with
or taking of any other action in respect of, any governmental authority or
agency is required with respect to the execution, delivery and performance by
Developer of this Agreement.
3.9. The Developer is the owner in fee of the Project and the
individual Unit Weeks and has the authority to sell and finance the sale of the
Unit Weeks. No interest in the Project and/or the Unit Weeks have been sold,
leased, assigned, pledged or otherwise encumbered in any manner whatsoever, and
to the best of Developer's knowledge, no other person, company or entity claims
any interest therein, except: (i) for those Unit Weeks sold to members of the
general public, which Unit Weeks may be subject to purchase money mortgages or
conditional sales contracts, (ii) the first Deed of Trust on the Project held by
The Steele Foundation, Inc.; (iii) the interests granted to the unit owner's
association governing the Project, if any, and (iv) the interests granted to
Tammac pursuant to the Loan Documents.
3.10. Should a Unit Week be sold by the Developer to a Consumer
pursuant to the Project Documents in an arm's length transaction, and provided
that no Event of Default, as that term is defined herein, occurs or is
continuing, Tammac shall release said Unit Week from the Deed of Trust, whether
or not said Unit Week is purchased by Tammac.
It is understood and agreed that, provided no Event of
Default, as that term is hereinafter defined, occurs or is continuing, Tammac
shall execute and deliver a partial release and/or certificate of
non-disturbance, in form and substance satisfactory to Tammac and Developer for
all Transactions in which Developer conveys an undivided fee simple interest in
the Project to a Consumer: (i) that is purchased by Tammac; (ii) is not financed
by a Consumer ("Cash Transaction"); (iii) which is offered to Tammac by
Developer pursuant to the terms hereof and do not meet Tammac's lending criteria
and guidelines, and are therefore not purchased by Tammac ("Rejected
Contracts"), or (iv) which is not offered to Tammac hereunder because said
Transaction does not meet Tammac's lending criteria and guidelines
("Unacceptable Contracts"). With regard to the Cash Transactions, the Rejected
Contracts and the Unacceptable Contracts, Developer shall furnish documentation
reasonably satisfactory to Tammac evidencing said Cash Transactions, Rejected
Contracts and Unacceptable Contracts upon Developer's request for a partial
release of the Deed of Trust.
3.11. Developer has obtained or will obtain prior to the sale,
financing and/or lease of any Unit Weeks all necessary permits, approvals and
authorization and has complied with all registration and qualification
requirements necessary to lawfully offer Unit Weeks for sale or lease in the
states in which said Unit Weeks shall be offered for sale or lease, including,
but not limited to, acceptance and approval from the appropriate governmental
authorities as may be required, of the Contracts and Related Documents presently
used for the lease or sale and financing of Unit Weeks by the Developer and all
other documents and items required to be filed or reviewed pursuant to
applicable statutes, rules and regulations.
3.12. The Unit Weeks being offered for sale and/or lease shall be
offered for the personal use and enjoyment of the Consumer and not for
investment purposes.
All representations and warranties made under this Agreement
shall survive and not be waived by the execution and delivery of the Agreement
or any investigation by Tammac relating thereto.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS
RELATING TO THE CONTRACTS AND RELATED DOCUMENTS.
Developer represents and warrants with respect to each
Transaction (and on the date that each Transaction is purchased shall be deemed
to have repeated each such representation, warranty and covenant) as follows:
4.1. Developer is the sole owner of and has indefeasible fee title to
each of the Contracts, Related Documents, the Transactions, the Project and the
Unit Weeks relating to each Transaction, and no interest in the Transactions or
the Unit Weeks has been sold, leased, assigned, pledged or otherwise encumbered
in any manner whatsoever and no other person, company or entity claims to hold
such an interest therein.
4.2. Each Transaction and the Contracts and Related Documents executed
in furtherance thereof represent a bona fide, genuine, valid, binding and
enforceable obligation of the Consumer, enforceable in accordance with its
terms, except to the extent that such enforceability may be effected by any
bankruptcy, insolvency, reorganization or similar law affecting creditor's
rights generally. The time period in which each Consumer had to rescind his
Contract has expired and each Consumer has not exercised his right to rescind
said Contract.
4.3. Each Transaction purchased was entered into and remains in
compliance with all applicable federal and state laws and regulations.
4.4. To the best of Developer's knowledge, the Consumer has full
capacity to contract.
4.5. Developer has the right to: (i) assign the Contracts and the
Related Documents to Tammac; (ii) sell and finance the sale of the Unit Weeks;
and (iii) grant a security interest therein in and to Tammac.
4.6. Full title and the right to receive all sums due or to become due
pursuant to the Transactions shall be vested solely in Tammac upon Developer's
execution and delivery of an assignment for each Transaction.
4.7. The amount stated in the Contract to be due is not past due and
will in fact be due and payable at the time or times provided therein and all
other sums due or to become due pursuant to the Transactions are free from all
liens or other outstanding rights (except the mortgage or deed of trust executed
and delivered by the Consumer as security for the repayment of the obligations
set forth in the Contract, if any), counterclaims, encumbrances, claims, rights
of recoupment, setoff and defenses of every kind whatsoever, except to the
extent that enforceability may be affected by any bankruptcy, insolvency,
reorganization or similar law affecting creditor's rights generally.
4.8. The Contracts and Related Documents are genuine and what they
purport to be and they have not and will not be modified or altered without the
prior written consent of Tammac.
4.9. No default on the part of the Consumer or Developer has occurred
under the terms of the Transactions, or any other agreement between the Consumer
and Developer. Developer has not and will not sell or make any other assignment
of or otherwise encumber the Unit Weeks, the Contracts, the Related Documents or
the rights, privileges, monies and benefits pursuant to the Transactions except
to Tammac hereunder, provided, however, Developer shall be free to assign the
Rejected Contracts and the Unacceptable Contracts, and the documents relating
thereto, to any third party.
4.10. All signatures, names, addresses, amounts and other statements of
facts contained in the documents evidencing the Transactions are genuine, true
and correct, to the best of Developer's knowledge.
4.11. Developer shall comply with all of its warranties and other
obligations with respect to the Transactions.
4.12. The filing, recordation or any other action or procedure which is
permitted or required by statute or regulations to perfect Developer's title (or
a security interest) in and to the Unit Weeks, the Contracts and/or the Related
Documents has been accomplished pursuant to all applicable laws and regulations.
4.13. Developer has submitted to Tammac all available credit
information relating to the Consumer, whether favorable or unfavorable.
4.14. There is no litigation or proceeding pending or threatened which
might, if successful, adversely affect the interest of Developer and/or Tammac
with respect to any Transaction and/or the Project and/or the Deed of Trust.
4.15. The Project and each Unit Week shall be insured in such amounts
and against such risks as is satisfactory to Tammac, naming Tammac and its
successors and assigns as first mortgagee and/or as additional insured, as is
appropriate. Developer shall furnish to Tammac certificates of such insurance
coverages and/or the original policies, at Tammac's discretion.
4.16. Only Developer's authorized and licensed (if required)
representatives were involved with the negotiation and consummation of the
Transactions.
4.17. The creation, development and operation of the Project and the
creation of the Unit Weeks are in compliance with all applicable foreign,
federal, state and local laws, rules and regulations, including, but not limited
to, environmental, zoning and subdivision laws of the State of Colorado, and all
applicable private property restrictions.
4.18. All Unit Weeks were sold by employees, agents and brokers of
Developer who, at all relevant times conducted their activities in compliance
with all applicable federal, state and local laws, rules and regulations. All
brokerage fees, commissions or other sums due to such persons with respect to
the sale and/or financing of any Unit Week have been paid in full or provided
for.
4.19. The purchase price for a particular Unit Week is the same for
cash sales and financed Contracts and in connection with financed Contracts, the
Developer does not impose, nor do the Contracts provide for prepaid finance
charges, as that term is defined in the Truth-in-Lending Act (15 U.S.C. 1601 et
seq.).
All representations and warranties made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement
or any investigation by Tammac relating thereto.
5. DEVELOPER'S COVENANTS.
Developer agrees to perform and observe all of the following
covenants:
5.1. Developer shall preserve and maintain its corporate existence,
rights, franchises, licenses and privileges in the jurisdiction of its formation
and qualify and remain qualified as a foreign corporation, and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization.
5.2. Developer shall pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits and
upon any properties belonging to it prior to the date on which penalties
attached thereto, and all lawful claims for labor, materials and supplies which,
if unpaid, might become a lien or charge upon any properties of Developer;
except no such tax, assessment, charge, levy or claim need be paid which is
being contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside.
5.3. Developer shall, at its own cost and expense, if so required or
requested by Tammac, prepare, record, file, and/or deliver to Tammac, all
Contracts, Related Documents, mortgages, deeds of trust, security agreements,
leases, financing statements and/or assignments thereof, which documents and
instruments create, grant and convey to and/or in favor of Tammac, title to
and/or a valid and enforceable first and paramount lien position in and to the
Project, the Unit Weeks and/or Contracts and Related Documents. If requested by
Tammac, Developer shall also, at its sole cost and expense, furnish to Tammac a
title insurance policy for each Transaction in an amount at least equal to the
total of the Consumer's obligations under the Contract covering the Unit Week
conveyed to the Consumer and financed by Tammac, which title insurance policy
shall be satisfactory to Tammac and shall insure the interest of Tammac to be a
valid first lien on the Unit Week, free and clear of all defects, liens,
encumbrances and exceptions to title whatsoever, except for exceptions that are
approved by counsel for Tammac.
5.4. Developer shall, within one hundred-twenty (120) days after the
end of each fiscal year, furnish to Tammac its balance sheet as at the end of
such year, and its income and surplus statement for such fiscal year, all in
reasonable detail, all prepared in accordance with generally accepted accounting
principals consistently applied on a consolidated basis with its subsidiaries,
and all audited by independent certified public accountants of recognized
standing selected by Developer and satisfactory to Tammac, and in addition to
such statements, any supplementary information to the financial reports as
Tammac shall reasonably require.
5.5. Developer shall also deliver to Tammac within sixty (60) days
after the end of each quarter-annual fiscal period of Developer, except the
fourth (4th) quarter, its balance sheet as at the end of such period and its
cumulative income and surplus statement for the period beginning on the first
day of such fiscal year and ending on the date of such balance sheet, all in
reasonable detail, all prepared in accordance with generally accepted accounting
principals consistently applied, certified by the chief financial officer of
Developer and in addition to such statements, any supplementary information to
the financial reports as Tammac shall reasonably require.
5.6. Developer shall execute and deliver to Tammac, any pledge, lien,
encumbrance, security agreement, financing statement or other documents as may
reasonably be requested by Tammac at any time when Tammac is owed any monies
pursuant to the Transactions in order to effectuate more fully the purposes of
this Agreement.
5.7. Tammac shall have the sole right to receive and collect all monies
owing on the Transactions purchased hereunder. Tammac shall, at its sole cost
and expense, be responsible for all collection activities (as hereinafter
defined) relating to any Transactions that are not more than sixty (60) days
delinquent. Tammac's collection activities shall be expressly limited to:
forwarding coupon books or payment statements to Consumers, servicing the
Transactions, generating and mailing delinquency notices to the delinquent
Consumers, and preparing and forwarding to Developer the trial balances and
delinquency reports regarding the Transactions. Developer shall, at its sole
cost and expense, undertake all other collection activity relating to the
Transactions. Such Developer collection activity shall include but not be
limited to, contacting the Consumer, instituting suit, foreclosing and selling
the Contracts and/or Unit Weeks according to applicable laws, taking judgment
and enforcing the judgment against the Consumer. Developer shall not, without
Tammac's prior written consent, (a) grant any extension of time of payment, (b)
compromise or settle any Transaction for less than the full amount owing, (c)
release, in any manner, any Consumer, (d) waive any event of default under any
Contract, or (e) refinance any Contract, provided, however, Developer shall not
be so restricted on any transaction repurchased from Tammac by Developer.
5.8. Developer shall observe, perform and comply with the covenants,
terms and conditions of the Loan Documents.
5.9. Developer shall permit Tammac, or its duly authorized
representatives, at any time during Developer's regular business hours (and upon
reasonable notice to Developer), to examine the books and records of Developer
and to make copies and excerpts thereof.
5.10. Any payments on Transactions purchased hereunder which may be
received by Developer shall be received in trust for the benefit of Tammac.
Developer shall immediately forward to Tammac all such payments in the form
received, except for necessary endorsements, without commingling any such
payments with Developer's funds.
5.11. Developer shall not suffer or permit any off-set, counterclaim,
right of recoupment or other defenses to arise in favor of a Consumer with
respect to any Transaction.
5.12. Developer agrees that upon payment in full of any Transaction
purchased, assigned or transferred to Tammac pursuant to the terms of this
Agreement, Developer, at its sole cost and expense, shall be responsible for and
shall properly undertake to provide the Consumer with all necessary evidence
that the Contract has been paid in full and to discharge all liens relating to
that Contract, if any. Tammac shall be responsible for returning to Developer
all documents, properly endorsed, necessary to provide the Consumer with such
evidence and discharge of all liens.
5.13. If so requested by Tammac, Developer shall assist Tammac in
pursuing all of Tammac's rights and remedies under and pursuant to the Contracts
and Related Documents, which assistance shall include, but not be limited to,
the collection of all sums due thereunder, the preparation and prosecution
and/or defense of any claims, suits, actions or proceedings relating thereto,
including inspections, appearances for discovery and testimony in court or
otherwise, at Developer's sole cost and expense.
5.14. So long as any sums are due to Tammac under this Agreement at
Tammac's request, Developer shall: (i) arrange for Tammac to inspect, during
normal business hours, the books and records of the association or entity
responsible for governing the Project ("Association"); (ii) arrange for Tammac
to receive annual financial statements of the Association within one hundred
twenty (120) days following the end of any fiscal year of the Association; and
(iii) so long as Developer is in control of the Association, cause the
Association to undertake all of its duties, obligations and responsibilities in
managing and administering the Project pursuant to the Project Documents or as
otherwise required by law.
5.15. Developer shall: (i) perform, carry out, and comply with all of
the obligations, agreements, duties and covenants on its part to perform or
carry out, as set forth or as required pursuant to the Project Documents; and
(ii) provide competent and responsible management to operate the Project.
6. POWER OF ATTORNEY.
Developer hereby appoints Tammac, and its duly authorized
officers and employees, as true, lawful and irrevocable attorney-in-fact, with
respect to the Contracts and Related Documents purchased by Tammac and all
obligations of Developer hereunder, to: (i) demand, receive and enforce payment,
endorse Developer's name on any notes, checks, drafts or other evidences of
payment relative to Transactions purchased by Tammac; (ii) give receipts,
releases and satisfactions upon collection in full or all amounts due under the
Contracts by or, with the written consent of Developer, which consent shall not
be unreasonably withheld or delayed, of or pertaining to the Contracts or
Related Documents; (iii) sue, either in the name of Developer or in Tammac's
name, for all sums payable under the Transactions; (iv) execute and deliver any
financing statements or similar documents in conjunction with the Loan
Documents; or (v) otherwise enforce the rights hereunder, under the Loan
Documents and under the Transactions. This power, being coupled with an
interest, is irrevocable while any Transactions remain unsatisfied.
7. EVENTS OF DEFAULT.
If any one or more of the following events shall occur or be
continuing, it shall be deemed to be an Event of Default entitling Tammac to
pursue each of the remedies as set forth herein, in the Loan Documents, or any
other agreements with Tammac or applicable statutes and laws:
(a) Developer's failure to keep, observe, perform, and/or carryout in
every particular the covenants, terms or provisions contained in this Agreement
or the other Loan Documents, and such default shall have remained uncured for a
period of fifteen (15) days after notice thereof to the Developer by Tammac;
(b) Developer's consent to the application for an appointment of a
receiver or trustee for it or for substantially all of its property, its
sufferance of any such appointment made without its consent to any proceedings
against it under any law relating to bankruptcy, insolvency, or the
reorganization or relief of debtors, which shall have continued unstayed and in
effect for a period of 30 consecutive days;
(c) Developer's admission in writing of its inability to pay its debts
as they mature, or commission of any act of bankruptcy; Developer's making of an
assignment for the benefit of creditors, or the filing of a voluntary petition
in bankruptcy by the Developer; or the application for a receiver by the
Developer;
(d) The entry of any judgment or execution or attachment order against
or affecting the Developer which, in the reasonable opinion of Tammac, adversely
and materially affects the credit standing of the Developer. (For purposes of
this subsection, "materially" shall be defined to mean an amount in excess of
ten percent (10%) of Developer's net worth, as shown on Developer's most
recently available financial statements, or $50,000.00, whichever is greater);
(e) Any statement, representation, or warranty by the Developer
contained in this Agreement, the other Loan Documents, the financial statements,
applications submitted for credit or any other agreement for the payment of
money with Tammac proving to be incorrect or misleading in any material respect,
or a breach in any of the terms and conditions of this Agreement, the other Loan
Documents or any other agreement with Tammac at any time when the Developer is
obligated to Tammac hereunder;
(f) The failure of the Developer to pay any principal or interest on
any other material borrowed money obligation when due, so that the holder of
such obligation declares, or may declare, such obligation due prior to its
stated maturity because of the Developer's default thereunder and the Developer
shall have failed to procure, within thirty (30) days after the declaration of
said default, a written statement cancelling said default and/or reinstating
said obligation. (For purposes of this subsection, "material" shall be defined
to mean an amount in excess of ten percent (10%) of Developer's net worth, as
shown on Developer's most recently available financial statements or $50,000.00,
whichever is greater);
(g) Any material and adverse change in the condition or affairs,
financial or otherwise, of the Developer, which in the reasonable opinion of
Tammac impairs Tammac's security or increases its risk so as to jeopardize the
repurchase obligations of the Developer hereunder or the obligations of the
Developer under any of the other Loan Documents;
(h) If at any time Tammac reasonably determines that an environmental
claim against the Project will have a material adverse effect on the financial
condition of the Developer;
(i) The failure of the Developer to provide financial statements and/or
annual tax returns to Tammac when required or requested to do so, together with
such financial information as may reasonably be requested by Tammac;
(j) The passing of title, legal or equitable, to the Project (except as
to the Transactions and Unit Weeks sold by Developer in the ordinary course of
Developer's business) without the written consent of Tammac;
(k) The failure to make payment of any tax, assessment, or municipal or
governmental charge against the Project or any Unit Week, when due or the
imposition of any lien thereon not paid and removed within 15 days from the date
thereof, except that no such tax, assessment or charge need be paid which is
being contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside, provided, however, any such payment must be
made if necessary to prevent the forfeiture or sale of the Project or any Unit
Week, as the case may be;
(l) The failure to pay any insurance premium when due on or relating to
the Project or any Unit Week;
(m) Any material change in the corporate structure or management of the
Developer without the prior written consent of Tammac, which consent shall not
be unreasonably withheld or delayed;
(n) Any suspension of the Developer's transaction of its usual
business;
(o) Liquidation and/or dissolution of the Developer;
(p) Developer terminates or breaches any management or marketing
agreement and/or engages the services of a different, substitute or subsequent
management or marketing firm, or materially modifies the management or marketing
agreement(s), without first obtaining the written consent of Tammac, which
consent shall not be unreasonably withheld or delayed; or
(q) The Project is partially or totally destroyed and the Developer,
the Association and/or owners of the Unit Weeks, as the case may be, if
permitted, elect not to rebuild the Project or the improvements at the Project
in substantially the same size, quality of construction, architecture and in all
other manner so as to conform with the improvements which existed prior to such
damage or destruction.
8. INDEMNIFICATION.
Developer hereby agrees to indemnify Tammac and to protect,
defend and hold Tammac harmless, from and against any and all loss, cost,
damage, liability, injury or expense, including without limitation, attorney's
fees and other legal expenses, which Tammac may incur as a result of or by
reason of the untruthfulness and/or breach of any of the agreements, warranties,
representations or covenants of Developer contained herein.
9. REPURCHASE.
9.1. If a Consumer becomes in excess of sixty (60) days delinquent on
any of the Consumer's obligations under the terms and conditions of his Contract
and Related Documents, then with respect to such delinquent Contract, Developer
shall, immediately upon Tammac's request, and in Tammac's sole discretion,
promptly (and in no event later than fifteen (15) days of written demand from
Tammac) replace the said delinquent Contract with an acceptable replacement
Contract ("Replacement Contract") or repurchase said delinquent Contract for an
amount equal to all sums due thereunder, including, but not limited to unpaid
principal, accrued interest, plus any expenses of collection incurred by Tammac
(including, but not limited to reasonable attorney's fees and court costs) as a
result of said default by a Consumer as aforesaid. The determination of what
constitutes an acceptable Replacement Contract shall be determined in Tammac's
sole discretion.
An acceptable Replacement Contract must: (i) meet Tammac's
lending guidelines and criteria; (ii) be current in payment and not in default
at the time of assignment and delivery to Tammac; (iii) be written at an
interest rate at least equal to the interest rate set forth in the delinquent
Contract; (iv) have a principal balance remaining due thereon at least equal to
the unpaid principal balance due on the delinquent Contract; and (v) must not be
in violation of any of the warranties, representations and covenants set forth
in Section 4 above. In the event that the unpaid principal balance of the
Replacement Contract is greater that the principal balance of the delinquent
Contract, Tammac shall fund any such excess, if any, to Developer provided,
Developer is in compliance with the terms, conditions and covenants of this
Agreement. By making such assignment and delivery of the Replacement Contract,
Developer warrants and represents, as of the date of such assignment, delivery
and acceptance by Tammac, that all warranties, representations and covenants
contained in this Agreement are true, correct and not misleading and each such
Replacement Contract shall be deemed to be a Contract subject to the terms and
conditions of this Agreement, including, without limitation, the obligation of
Developer to repurchase or replace any such delinquent Replacement Contract.
Notwithstanding anything contained herein to the contrary,
after September 7, 1996, or the purchase by Tammac of $3,000,000.00 of Contracts
pursuant to the Commitment Letter and this Agreement; whichever occurs first,
Developer shall not have the option of offering Replacement Contracts to Tammac
for delinquent Contracts and Tammac shall be under no obligation to accept any
Replacement Contracts as aforesaid. From and after September 7, 1996, or the
purchase by Tammac of $3,000,000.00 of Contracts pursuant to the Commitment
Letter and this Agreement, whichever occurs first, Developer must repurchase the
delinquent Contracts as aforesaid.
9.2. If any Event of Default (as hereinabove defined) shall occur or be
continuing and/or the Developer fails to repurchase or replace one or more
delinquent Contracts as provided in Section 9.1. above, Developer shall,
immediately upon Tammac's request and in Tammac's sole discretion, promptly (and
in no event later than fifteen (15) days of written demand from Tammac)
repurchase any one or more or all of the Contracts purchased by Tammac hereunder
(whether then delinquent or not) for an amount equal to all sums due thereunder,
including, but not limited to unpaid principal, interest, plus any expenses of
collection (including, but not limited to reasonable attorney's fees and court
costs), and other expenses incurred by Tammac as a result of said Event of
Default and/or said failure to repurchase or replace delinquent Contracts as
provided in Section 9.1. above.
9.3. All Transactions repurchased by Developer shall be reassigned to
Developer, at Developer's sole cost and expense, without recourse to Tammac, and
without any warranties, express or implied, and shall be delivered to Developer
against payment to Tammac in cash or by certified check at Tammac's principal
place of business, regardless of whether any collateral security relating to
said Transactions is then in existence or the condition thereof.
9.4. No delay on the part of Tammac or its assignees in exercising any
rights hereunder or under the Contracts and Related Documents, nor in taking any
action to collect or enforce payment of any Contract and/or Related Documents
shall operate as a waiver of any such rights or in any manner prejudice Tammac
or its assignee's rights against Developer hereunder. Tammac shall be under no
duty to notify Developer of any default by any Consumer under the terms and
conditions of the Contracts and Related Documents. Tammac may, without prejudice
to any claim against Developer hereunder, at any time, or from time to time, in
Tammac's sole discretion and without notice to the Developer: (a) extend or
change the time for payment, and the manner, place or terms of payment, of any
Contract and/or Related Documents; (b) exchange, release or surrender all or any
collateral security which Tammac may at any time hold in connection with any
Contract and/or Related Documents and/or this Agreement or the other Loan
Documents; (c) sell any collateral held by Tammac at public or private sale
and/or purchase said collateral at said sale; and (d) settle or compromise with
the Consumers, any Contracts, or subordinate to the payment of any such
Contracts of the Consumers or any other person, to the payment of any other debt
which may be owing to Tammac.
9.5. Until repurchased by Developer, Tammac may continue to collect all
sums due under the Contracts and/or Related Documents. Tammac shall at all times
have the right to realize upon any collateral security relating to a defaulted
Transaction and Developer's obligation to repurchase any such Transaction shall
survive any such sale of the said collateral, if any.
9.6 Upon the occurrence of an Event of Default, at Tammac's option,
Tammac shall have no further obligation under the terms of the Commitment Letter
and this Agreement, or otherwise, to purchase any new or additional Contracts
from Developer, anything contained herein to the contrary notwithstanding.
10. ADDITIONAL REQUIREMENTS.
In the event that any claim, counterclaim, cross-claim, or
defense is asserted against Tammac by a Consumer or any other person or entity,
whether in a judicial proceeding, bankruptcy, or by notice to Tammac of
non-payment of a Transaction as a result of such claim or defense, alleging
breach of warranty, breach of contract, violation of any federal, state or local
statute, rule or regulation, or any other claim, counterclaim, cross-claim or
defense relating to the Contract and/or Related Documents, or otherwise,
Developer agrees to repurchase any and all Transactions so affected for an
amount equal to all of the sums due thereunder, within fifteen (15) days of
written demand from Tammac. Developer shall continue to defend and indemnify
Tammac against any and all loss, cost, damage, injury or expense, including
without limitation, all attorney fees and litigation expenses, by reason of any
such claim, counterclaim, cross-claim or defense.
11. RESERVE ACCOUNT.
11.1. Tammac shall establish a reserve account for the benefit and
protection of the Developer and Tammac from a portion of the proceeds otherwise
payable by Tammac to the Developer on each Contract ("Reserve Account"). The
amount of money to be retained as aforesaid from each Contract shall be ten
(10%) of the amount financed on each Contract or at such amounts as the
Developer and Tammac shall mutually agree upon from time to time. The monies so
retained shall be credited to the Reserve Account which shall be maintained by
Tammac or by its assignee(s). From time to time, Tammac or its assignee shall
provide to Developer an itemized statement of all Transactions and the balance
in the Reserve Account. The Reserve Account shall be non-interest bearing.
Provided no Event of Default has occurred or is continuing under this Agreement
and/or the other Loan Documents, Tammac or its assignee will, periodically, but
not less than seim-annually, make payments to the Developer from the Reserve
Account of all monies in excess of ten (10%) percent of the unpaid principal
balance or unpaid rentals, as the case may be, of all Contracts sold or assigned
to Tammac, less the unpaid principal balance due on any Contract sixty (60) days
or more past due. Should Developer discontinue doing business with Tammac prior
to the Project being sold in full or should this Agreement be terminated, except
as a result of the Developer's default of any of its obligations to Tammac or
its assignees hereunder or under any other agreements between the Developer and
Tammac or Tammac's assignees, Tammac or its assignees shall have the right to
continue to maintain the Reserve Account in an amount not to exceed ten percent
(10%) of the principal balance of the Contracts assigned to Tammac plus the
outstanding balance of Contracts in excess of sixty (60) days. Should an Event
of Default occur or be continuing, then Tammac or its assignee shall have the
right to withhold all payments to Developer from the Reserve Account. Developer
agrees that each such statement furnished by Tammac or Tammac's assignees, and
each such payment made by Tammac or Tammac's assignee(s) to Developer in
connection with the Reserve Account, as aforesaid shall be deemed to be correct
and binding, unless Developer advises Tammac, or Tammac's assignee(s), otherwise
in writing within ten (10) days after receipt thereof.
11.2. Notwithstanding anything contained herein to the contrary, and
without limiting Tammac's rights hereunder, Tammac may, at its option, but is
not obligated to, charge or access the Reserve Account and withdraw all amounts
necessary to repurchase any Contracts that are in default, provided, Developer
shall have failed to repurchase any such delinquent Contracts pursuant to the
provisions of Section 9 hereof. Furthermore, Tammac shall have the right to
charge any amounts owed by Developer to Tammac, or Tammac's assignee(s), under
the Contracts, this Agreement and/or the other Loan Documents to the Reserve
Account at any time. It is expressly understood and agreed that Developer's
obligations to repurchase the Contracts hereunder, or pay any other sums due in
accordance with the provisions of this Agreement or the other Loan Documents,
shall not be limited to the amount in the Reserve Account established herein. In
the event that the Reserve Account balance falls below ten percent (10%) of the
unpaid principal balance of the Contracts assigned to Tammac, Tammac, and/or its
assigns, may require the Developer to make deposits into the Reserve Account to
replenish said account. If Tammac, or Tammac's assigns, requests the Developer
to replenish the Reserve Account, the Developer shall do so immediately upon
demand. The Reserve Account shall be maintained by Tammac, or Tammac's assigns,
until all of the Contracts held by Tammac or its assigns are paid in full and
all obligations of the Developer under the Loan Documents are completely
satisfied.
11.3. Anything herein contained notwithstanding to the contrary, it is
understood and agreed that in the event Tammac should assign the Contracts,
Related Documents and the Reserve Account or any portion thereof, Tammac shall
have no further responsibility to Developer for furnishing periodic statements
or accounting for the activity in the Reserve Account or for making any payments
from the Reserve Account provided however, that Tammac shall have required its
assignee to assume Tammac's obligations to Developer with respect to the Reserve
Account. Developer's only recourse for said accounting and payments from the
Reserve Account shall be solely to Tammac's assignee(s).
12. SECURITY AGREEMENT.
Without in any way limiting the force and effect of that
certain Loan and Security Agreement and the other Loan Documents executed by
Developer to Tammac contemporaneously herewith, the terms and conditions of
which are incorporated by reference herein as though set forth fully at length,
to further secure the payment and performance of the obligations of the
Developer as set forth in this Agreement and the other Loan Documents, as well
as any extensions, renewals or modifications thereof or substitutions therefore,
Developer hereby grants a security interest to Tammac in and to the Contracts,
the Related Documents and the Reserve Account. Developer agrees to join with
Tammac in the execution of any financing statements and to execute any other
instruments that may be required for the perfection or renewal of such security
interest under the Uniform Commercial Code. The granting of a security interest
in the Reserve Account as aforesaid is a material inducement to Tammac to enter
into this Agreement, and is necessary to provide Tammac with sufficient
collateral security for the adequate protection of the Developer's performance
of its obligations hereunder and under the other Loan Documents. It is
understood and agreed that no part of the Reserve Account shall be available to
the Developer as cash collateral, or otherwise, in the event of the filing of a
bankruptcy or other insolvency proceeding by or against the Developer.
13. RIGHT OF FIRST REFUSAL.
After Tammac has purchased Contracts from the Developer
equalling the funding limitation as set forth in the Commitment Letter, and
except as hereinafter set forth, it is further understood and agreed that Tammac
shall have the right of first refusal to purchase all Transactions from the
Project. Notwithstanding anything contained herein to the contrary, after Tammac
has purchased Contracts from the Developer equalling the funding limitation as
set forth in the Commitment Letter, if Developer receives a bona fide,
arms-length offer to purchase Contracts from a funding source other than Tammac,
the terms and conditions of which are acceptable to Developer, Developer agrees
to notify Tammac of Developer's desire to sell Contracts to that other funding
source, setting forth in said notice all of the terms and conditions thereof
pursuant to which Developer intends to sell said Contracts (the "Notice").
Within fifteen (15) days after the giving of the Notice by Developer to Tammac,
Tammac shall notify Developer whether Tammac elects to purchase the Contracts on
the same terms and conditions as set forth in the Notice. If Tammac notifies
Developer of Tammac's election to purchase the Contracts within said fifteen
(15) day period, Developer shall continue to offer to Tammac Contracts pursuant
to the terms and conditions of this Agreement, as same may be modified pursuant
to the terms of the Notice. If Tammac fails to notify Developer of Tammac's
election to purchase the Contracts, or in the event Tammac notifies Developer
that Tammac does not elect to purchase said Contracts within the aforesaid time
period, Developer shall then have the right to sell said Contracts to such other
funding source. The aforesaid right of first refusal shall not apply to Rejected
Contracts or Unacceptable Contracts.
14. ASSIGNMENT BY TAMMAC.
Developer understands and agrees that in order for Tammac to
induce any financial institution, person, corporation, partnership or other
entity with which Tammac transacts business to acquire an interest in the
Contracts and Related Documents referred to herein from Tammac, all of the terms
hereof and undertakings, warranties and guarantees contained herein (except as
to paragraph 13) shall also inure to the benefit of such financial institution,
person, corporation, partnership or other entity and shall give such financial
institution, person, corporation, partnership or other entity the same rights
and remedies as are conferred upon Tammac herein. Tammac may assign all or any
of its rights, title and interest in and to the Contracts and Related Documents
and/or offer participation interests in and to the Contracts and Related
Documents and/or this Agreement to any person or entity, in its sole discretion,
without the approval or consent of the Developer.
15. COSTS OF TAMMAC.
Developer shall pay to Tammac, or directly to such other
persons or entities, as the case may be, all costs and expenses incurred by
Developer and/or Tammac in the negotiation, administration and enforcement of
this Agreement and the other Loan Documents including, but not limited to,
Tammac's attorneys' fees in connection with the collection of any of the sums
due or the enforcement of the performance of the obligations, covenants and
agreements of this Agreement or the other Loan Documents, or to advise Tammac
with respect to its rights and remedies hereunder and under the other Loan
Documents, consultants or other professional fees, search fees, filing fees and
other out-of-pocket expenses. Notwithstanding anything contained herein to the
contrary, Developer's obligation to reimburse or pay Tammac's attorney's fee in
connection with the negotiation, preparation and execution of the Loan Documents
shall be limited pursuant to the Commitment Letter.
16. TERMINATION.
16.1. This Agreement shall continue in force until the occurrence or
continuation of an Event of Default and in such event, Tammac elects to
terminate this Agreement by written notice to Developer, which notice may be no
less than fifteen (15) days, provided, however, any such termination hereunder
shall not affect the rights, obligations and liabilities of the parties for any
Transaction purchased hereunder prior to the date of termination. The rights,
obligations and liabilities of the parties hereunder, other than: (x) Tammac's
obligation to purchase Contracts from the Developer under the terms of the
Commitment Letter or this Agreement or otherwise; and (y) Tammac's right of
first refusal set forth in Section 13 above, shall survive any termination of
this Agreement. Tammac may, in its sole discretion, upon written notice to
Developer, revoke any approvals to purchase any Transaction which has not been
funded by Tammac before the effective date of the termination.
16.2. It is further understood and agreed that in the event of
Termination of this Agreement, Developer shall not directly or indirectly
assign, transfer or negotiate any Contracts and/or Related Documents it holds or
which are thereafter generated by it, nor will it direct any other Consumers to
any financial institution, person, corporation, partnership or other entity
which has purchased or obtained an interest in the Contracts and/or Related
Documents under this Agreement through Tammac, for a period of one (1) year
after the last payment of the last Contract which the financial institution,
person, corporation, partnership or other entity acquired through the efforts of
Tammac. This provision shall not preclude Developer from assigning,
transferring, selling or negotiating Contracts with any other financial
institution, person, corporation, partnership or other entity which has not
purchased contracts from Tammac pursuant to this Agreement.
17. NO MARSHALLING.
Tammac shall be under no obligation whatsoever to proceed
against any collateral securing the obligations of the Developer pursuant to the
Loan Documents and/or to first proceed against any person or entity obligated
under the Loan Documents before proceeding against any particular collateral
available to Tammac or before proceeding against any person or entity obligated
under the Loan Documents.
18. CROSS DEFAULT/CROSS COLLATERAL.
All other agreements between Tammac and the Developer, whether
presently existing or hereafter arising, including, but not limited to the Loan
Documents, are hereby amended so that a default under this Agreement is a
default under all other agreements and a default under any of the other
agreements is a default under this Agreement. Further, such agreements are
amended so that the collateral securing the Developer's obligations hereunder
secures the obligations now or hereinafter outstanding under all other
agreements with Tammac and the collateral pledged as security for any other
agreements with Tammac secures the Developer's obligations hereunder.
19. INDEPENDENT CONTRACTOR.
Nothing in this Agreement shall be considered to create a
joint venture arrangement or the relationship of employer and employee between
the parties hereto, nor shall the Developer be construed to be the agent of
Tammac. Developer shall at all times be an independent contractor. Tammac shall
not be liable for any act of Developer or of Developer's employees, servants or
agents.
20. INTER CREDITOR AGREEMENT.
Notwithstanding anything contained herein to the contrary, in
the event Tammac elects not to exercise its rights of first refusal as set forth
in Paragraph 13 above, or in the event Tammac discontinues purchasing
Transactions under the terms and conditions of this Agreement (or the Commitment
Letter), other than as a result of the occurrence or continuation of an Event of
Default hereunder, Tammac hereby agrees that upon Developer's request, Tammac
shall enter into one or more inter-creditor agreements with one or more
financial institutions or funding sources (each being a "Funding Source") who
shall purchase Transactions from Developer and who has requested that Developer
execute and deliver a deed of trust covering the Project as collateral security
for Developer's obligations to the Funding Source. The inter-creditor agreement
shall be in such form and in such substance as is reasonably satisfactory to
Tammac and the Funding Source and will provide, among other things, that
Tammac's and the Funding Source's interest in and to the Project under their
respective deeds of trust shall enjoy the same priority lien position on the
Project in proportion to the amount of the unpaid principal balance remaining
due on all of the Transactions purchased by Tammac and the Funding Source, as
said proportion may vary from time to time. Said proportion shall be computed as
follows: the denominator of the fraction shall be the total remaining unpaid
principal balance of all Transactions purchased by Tammac and each Funding
Source as of the date of the computation, and the numerator shall be the total
remaining unpaid principal balance of the Transactions purchased by either
Tammac or each Funding Source, respectively, as of the date of the computation,
as the case may be.
21. NOTICES.
Any notice or demand in connection with this Agreement shall
be deemed sufficiently given or made, (i) immediately upon hand delivery; (ii)
the next business day after said notice or demand is deposited with a recognized
next day courier or express service; or (iii) if mailed, upon 3 business days
after said notice or demand is deposited with the United States Postal Service
by registered or certified mail, postage prepaid, to the other party for whom it
is intended at the address set forth in the heading of this Agreement, or such
other address as shall hereafter be given by written notice to the other party.
22. SURVIVAL OF REPRESENTATIONS, COVENANTS AND WARRANTIES.
The representations, warranties and covenants provided herein
shall survive the execution and delivery of this Agreement, the purchase of
Transactions hereunder and the termination of this Agreement.
23. SEVERABILITY.
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
24. HEADINGS.
The section headings used in this Agreement are for
convenience of reference only and are not to affect the construction of or to be
taken into consideration in interpreting this Agreement.
25. GENDER.
Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
26. ASSIGNMENT AND MODIFICATION.
This Agreement may not be assigned by Developer without the
express written consent of Tammac. No modification or other amendment to this
Agreement shall be effective unless in writing and signed by all parties.
27. NO WAIVER; RIGHTS AND REMEDIES CUMULATIVE.
Knowledge of any breach of any representation, warranty or
covenant hereunder shall not be deemed to constitute a consent thereto and no
provision hereof shall be deemed to be modified or amended except in writing. No
remedy referred to herein is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to herein or otherwise
available to Tammac under the other Loan Documents, at law or in equity. No
express or implied waiver by Tammac of any default or Event of Default hereunder
or under any of the other Loan Documents shall in any way be, or be construed to
be, a waiver of any future or subsequent default or Event of Default. The
failure or delay of Tammac in exercising any rights granted it hereunder upon
any occurrence of any of the contingencies set forth herein or in the other Loan
Documents shall not constitute a waiver of any such right upon the continuation
or recurrence of any such contingencies or similar contingencies and any single
or partial exercise of any particular right or remedy by Tammac shall not
exhaust the same or constitute a waiver of any other right or remedy provided
herein or in the other Loan Documents. No delay or failure by Tammac in the
exercise of any right or remedy under this Agreement or otherwise available to
it shall constitute a waiver thereof, and no single or partial exercise by
Tammac of any right or remedy shall preclude any other or further exercise
thereof or the exercise of any other right or remedy. To the extent there is any
conflict between the provisions of this Agreement and any other Loan Documents,
the terms of the agreement which affords the greater protection to Tammac shall
control.
28. CHOICE OF LAW.
Notwithstanding the place of the execution and/or delivery of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania, except where the laws of the
State of Colorado control with respect to the exercise of Tammac's remedies as
against the Project and/or the Unit Weeks.
The Developer hereby irrevocably submits to the jurisdiction
of any federal or state court sitting in the Commonwealth of Pennsylvania over
any suit, action or proceeding arising out of or relating to this Agreement.
29. AMENDED AND RESTATED FINANCING AGREEMENT.
This Amended and Restated Financing Agreement supersedes and
replaces that certain Financing Agreement dated September 11, 1991, entered into
between the parties hereto. This Amended and Restated Financing Agreement is in
no way to be construed as a discharge of the obligations, liabilities and rights
as set forth in the aforesaid Financing Agreement.
30. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which
shall be deemed an original. IN WITNESS WHEREOF, the undersigned have executed
this Agreement at Phoenix, Arizona, the 7th day of
September, 1994.
TAMMAC FINANCIAL CORP.,
a Delaware Corporation
By: Andy G. Roosa
-------------------------
ANDY G. ROOSA, President
Address:
--------
100 Commerce Boulevard
Wilkes-Barre, PA 18702
ATTEST: ILX INCORPORATED (f/k/a
ILX ENTERPRISES INCORPORATED),
an Arizona Corporation
Stephanie D. Castronova By: Joseph P. Martori, President
------------------------ -----------------------------
STEPHANIE D. CASTRANOVA, JOSEPH P. MARTORI, President
Secretary and Chief Executive Officer
Address:
--------
2777 East Camelback Road
Phoenix, Arizona 85016
SWORN AND SUBSCRIBED BEFORE ME, this 7th day of September, 1994.
Mia A. Green
---------------------------------
Notary Public
EXHIBIT A
PROJECT DESCRIPTION
EXHIBIT B
TAMMAC'S LENDING GUIDELINES AND CRITERIA
BENNETT FUNDING INTERNATIONAL, LTD.
August 18, 1994
Mr. Joseph P. Martori
Varsity Clubs of America
2777 E. Camelback Road
Phoenix, Arizona 85016
RE: VARSITY CLUBS: NOTRE DAME
Dear Mr. Martori:
This shall serve as a letter of commitment on the part of Bennett Funding
International, LTD. ("BFIL"), a wholly owned subsidiary of The Bennett Funding
Group, Inc. to (i) purchase from VCA South Bend Incorporated, an Arizona
corporation ("VARSITY"), certain eligible promissory notes and related mortgages
for the purchase of timeshare units ("Notes") at a project known as Varsity
Clubs at Notre Dame and (ii) provide a loan to VARSITY to construct 62 timeshare
units and amenities. This shall also constitute a letter of commitment on the
part of VARSITY to accept the loan and to sell the Notes to BFIL all under the
terms and conditions set forth below.
I. NOTE PURCHASE
1. Seller: The Seller of the Notes shall be VARSITY. No separate or
additional sales or asset ownership entities exist.
2. Purchase Price: BFIL shall purchase from VARSITY, on a continuing basis
for an eighteen (18) month period, the sum of up to
$10,000,000.00 representing the aggregate purchase price
of the Notes, exclusive of the construction Loan as
referenced below. At BFIL's sole discretion, the
commitment may be renewable for an additional eighteen
(18) month period and an additional $10,000,000.00 for a
total of $20,000,000.00 during the three (3) years from
the date of closing. For purposes of calculating the
purchase price of the Notes, a standard discount to
yield thirteen and one half percent (13.5%) for regular
pay Notes and twelve and one half (12.5%) for electronic
funds transfer pay Notes shall be applied.
3. Payment of Upon the acceptance of eligible Notes, BFIL shall pay
Purchase Price: VARSITY eight-five percent (85%) of the aggregate
purchase price of the Notes. The remaining fifteen
percent (15%) of the aggregate purchase price for each
Note shall be paid within thirty (30) days of BFIL's
receipt of full and final payment due under each sold
Note.
4. Notes: VARSITY shall warrant that the Notes sold to BFIL shall
be free and clear of all liens and encumbrances.
5. Expenses: The costs of acquiring title insurance, mortgage
recording and related taxes, UCC-1 filing fees, and all
other similar and necessary expenses shall be paid by
VARSITY. In addition VARSITY shall pay $5,000.00 to BFIL
as an analysis fee on the date of execution of this
letter.
6. Prepayment: In the event that VARSITY or a third party desires to
purchase the Notes on an aggregate portfolio basis, the
repurchase price of the Notes shall include the
principal, all interest accrued to the date of
repurchase, any fees or expenses payable to BFIL, and
premium consisting of the weighted average of the
outstanding principal of the Notes as follows:
Year 1: 7%
Year 2: 6%
Year 3: 5%
Year 4: 4%
Year 5: 3%
Year 6: 2%
Year 7: 1%
It is understood that Notes obligors may prepay their
obligation at any time without penalty.
7. Security: To secure VARSITY's payment and performance under its
recourse obligation, as described in paragraph 11 below:
(a) VARSITY shall execute a Collateral Security
Mortgage for the benefit of BFIL on the land and
property of Varsity Club of Notre Dame,
(b) Guaranty of ILX, Inc. ("Guarantor") shall be
required, said Guaranty shall be absolute and
unconditional and guaranty the full payment and
performance of VARSITY and the recourse obligations
hereunder; and,
(c) Each original promissory note and mortgage deed
shall be assigned, endorsed and delivered to BFIL.
8. Documentation: Primary loan documentation will be prepared by BFIL on
BFIL's standard forms. All documentation must be
satisfactory in all respects to BFIL and must contain
all provisions which it deems necessary to adequately
monitor the ownership and operations of VARSITY.
9. Brokerage Fees: VARSITY hereby acknowledges no brokerage fees are due.
10. Term: Subject to the renewal provisions set forth in paragraph
2 above, the obligation of BFIL to purchase Notes from
VARSITY shall, in no event, extend beyond eighteen (18)
months from the date of the closing.
11. Recourse: The purchase of the Notes shall be full recourse to
VARSITY. Accordingly, any Note that is ninety (90) days
past due or has a first payment default shall be charged
back to VARSITY which must either pay off the remaining
principal balance, at the original discount to yield
percentage, and accrued interest due on the charged-back
Note, or substitute the Note with a new Note of equal or
greater value. In the event that BFIL charges back a
Note to VARSITY, then BFIL agrees to reassign the Note
and related mortgage to VARSITY without warranty.
12. Taxes: All sales tax liability incurred by BFIL as a result of
the purchase of the Notes or upon the stream of payments
generated thereunder shall be paid by VARSITY upon
thirty (30) days notice.
II. CONSTRUCTION LOAN
13. Borrower: VARSITY
14. Loan Amount: $5,000,000.00 at thirteen percent (13%) per annum.
15. Loan Description: Proceeds from the loan shall be used exclusively to
construct 62 timeshare units and related amenities as
well as associated transaction costs. VARSITY certifies
that except for purchase money deeds of trust, which
will be released contemporaneous with the loan closing
no other mortgages, liens or encumbrances have been
filed or are contemplated to be filed against the
property, except as set forth in paragraph 20 (c) below.
The loan shall mature thirty-six (36) months from the
date of the distribution of the final loan proceeds.
During the term of the loan, VARSITY shall pay interest
only to BFIL on a monthly basis on the outstanding
balance of the loan.
16. Release Fees: VARSITY shall pay release fees in the amount of
$2,180.00 for each interval unit sold at VARSITY. The
release fees shall be applied to principal on a monthly
basis. Payment of interest during the term of the loan
shall be recalculated on a monthly basis based on the
principal reduction.
17. Loan Conversion: It is clearly understood that this letter of commitment
is being issued on the basis of VARSITY's intention to
sell timeshare intervals and that the projections and
forecasts provided by VARSITY were specifically relied
upon by BFIL as an inducement to execute this letter of
commitment. Accordingly, in the event VARSITY fails,
within one (1) year after the issuance of a certificate
of occupancy, to meet seventy-five percent (75%) of the
projections and forecasts relative to the sale of
timeshare intervals, BFIL reserves the right to convert
the loan to a conventional sixty (60) month amortized
mortgage at the interest rate set forth above.
18. Security: To secure VARSITY's payments and performance under the
construction loan:
(a) VARSITY shall execute a Mortgage for the benefit of
BFIL which shall be a first-priority position on the
land and property of VARSITY; and,
(b) The guaranty of ILX, Inc. shall be required, such
Guaranty shall be absolute and unconditional and
guaranty the full payment and performance of VARSITY
for the obligations hereunder.
III. GENERAL CONDITIONS
19. Closing Conditions: (a) BFIL must be satisfied that the financial
information delivered accurately represents the
business and financial condition of VARSITY and the
results of operations for the periods covered by
such information; and that there has been no
material adverse change in the business, assets or
financial condition of VARSITY since the date the
most recent financial information is delivered to
BFIL;
(b) The execution and delivery of documentation
satisfactory to BFIL containing representations and
warranties, conditions, covenants, and events of
default as reasonably required by BFIL;
(c) Evidence to BFIL of the receipt by VARSITY of all
necessary regulatory approvals and compliance with
all local, state and federal laws applicable to each
transaction;
(d) BFIL's receipt of satisfactory evidence of
appropriate partnership and corporate approval of
all proposed transactions as well as an opinion of
counsel satisfactory to BFIL, which opinion shall
opine as to the approval mechanism for timeshare
interval sales in Indiana;
(e) Delivery of satisfactory title insurance for the
mortgage provided to BFIL; and,
(f) One percent (1%) closing fee ($50,000.00), which
shall be disbursed from the loan proceeds at
closing.
20. Special Conditions: (a) VARSITY shall grant BFIL the right of first refusal
to purchase all Notes generated in connection with
VARSITY;
(b) VARSITY shall grant BFIL or its assigns the right to
solicit the obligors under the purchased Notes
concerning travel- related services offered by BFIL
or its assigns; and
21. Governing Law: All documents shall be governed by the laws of the State
of New York without regard to the principles of
conflicts of laws.
22. Indemnification: Except in instances of BFIL's gross negligence or
misconduct, VARSITY agrees to indemnify and hold BFIL
and its shareholders, directors, agents, officers,
subsidiaries and affiliates harmless from and against
any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of
action, and reasonable costs and expenses incurred,
suffered, sustained or required to be paid by an
indemnified party by reason of or resulting from the
transactions contemplated hereby.
VARSITY agrees that the contents of this letter are confidential and are
provided solely for the purpose described herein, subject to any requirements
relating to federal securities laws or regulation. This letter may not be relied
on by any third-party without BFIL's prior written consent and VARSITY shall not
deliver, display or otherwise disclose the contents of this letter to any
third-party without BFIL's prior written consent. Neither this letter nor the
proposals herein may be assigned by VARSITY. Pursuant to the opinion of counsel
as required in paragraph 19 (d) above, the proposals contained herein are
expressly contingent upon VARSITY receiving preliminary approval to sell
timeshares in the State of Indiana. This letter supersedes all previous
negotiations, proposals, and understandings of any nature whatsoever.
This letter may be executed in one or more counterparts (which may be originals
or copies sent by facsimile transmission), each of which counterparts shall be
an original, but all of which together shall constitute one and same document.
If the foregoing represents your concurrence with the proposed financing
structures, please so indicate by signing and delivering to BFIL at the above
address of BFIL an executed copy of this letter along with a check in the amount
of $5,000.00 on or before 5:00 P.M. (EST) September 2, 1994. Your failure to
return an executed copy of this letter within this time frame shall result in
the termination of BFIL's intent to lend.
Very truly yours,
BENNETT FUNDING
INTERNATIONAL, LTD.
MICHAEL A. BENNETT
Michael A. Bennett
Deputy Chief Executive Officer
Accepted and agreed to this
22nd day of August, 1994
ILX INCORPORATED AND
VARSITY CLUBS OF AMERICA, INC.
By: JOSEPH P. MARTORI
----------------------------
Title: CHAIRMAN
-------------------------
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT, dated October 4, 1994, is made by and
between Bennett Funding International, Ltd. ("Lender"), whose address is Two
Clinton Square, Syracuse, New York, 13202, and VCA South Bend Incorporated
("Borrower"), whose address is 2777 E. Camelback Road, Phoenix, Arizona 85016,
in respect of a loan in the principal sum of Five Million Dollars
($5,000,000.00) ("Loan Agreement"), for the project known as Varsity Clubs:
Notre Dame ("Project").
ARTICLE I - DEFINITIONS
For purposes of this Loan Agreement, the following terms shall have the
respective meanings assigned to them.
1.1 Advance. The term "Advance" shall mean a disbursement by Lender of
any of the proceeds of the Loan and/or the Borrower's Deposit.
1.2 Affidavit of Borrower. The term "Affidavit of Borrower" shall mean
a sworn affidavit of Borrower (and such other parties as Lender may require) to
the effect that all statements, invoices, bills, and other expenses incident to
the acquisition of the Property and the construction of the Improvements
incurred to a specified date, whether or not specified in the Approved Budget,
have been paid in full, except for (a) amounts retained pursuant to the
Construction Contract, and (b) items to be paid from the proceeds of an Advance
then being requested or in another manner satisfactory to Lender.
1.3 Application for Advance. The term "Application for Advance" shall
mean a written application on an AIA and other forms as set forth in Schedule
1.3, by Borrower (and such other parties as Lender may require) to Lender
specifying by name, current address, and amount all parties to whom Borrower is
obligated for labor, materials, or services supplied for the construction of the
Improvements and all other expenses incident to the Loan, the Property, and the
construction of the Improvements, whether or not specified in the Approved
Budget, requesting an Advance for the payment of such items, containing, if
requested by Lender, an Affidavit of Borrower, accompanied by such schedules,
affidavits, releases, waivers, statements, invoices, bills, and other documents
as Lender and Title Company may reasonably request.
1.4 Approved Budget. The Approved Budget is attached hereto as Schedule
1.4 and incorporated herein by reference.
1.5 Architect. The term "Architect" shall mean the Architect named on
Schedule 1.5 attached hereto and incorporated herein by reference.
1.6 Architectural Contract. The term "Architectural Contract" shall
mean all written agreements between Borrower and Architect for architectural
services pertaining to construction of the Improvements.
1.7 Borrower. The term "Borrower" shall mean all parties named Borrower
in the first paragraph of this Loan Agreement.
1.8 Borrower's Deposit. The term "Borrower's Deposit" shall mean such
cash sums as Lender may deem necessary, from time to time until the Loan is paid
in full, in addition to the Loan, for the payment of the costs of labor,
materials, and services required for the construction of the Improvements, other
costs and expenses specified in the Approved Budget, and other costs and
expenses required to be paid in connection with the construction of the
Improvements in accordance with the Plans, any Governmental Requirements, and
the requirements of any lessee, if applicable.
1.9 Code. The term "Code" shall mean the Uniform Commercial Code as in
force in the state in which the Property is located.
1.10 Completion Date. The term "Completion Date" shall mean the date
set forth on Schedule 1.5 attached hereto.
1.11 Construction Contract. The term "Construction Contract" shall mean
all construction contracts executed by Borrower for the construction of the
Improvements, including, without limitation, contracts between Borrower and
Contractor.
1.12 Contractor. The term "Contractor" shall mean the contractors,
whether one or more, named in Schedule 1.5 attached hereto.
1.13 Cure of Default. If Borrower shall fail (i) for a period of ten
(10) days after written notice to Borrower to observe or perform any of the
covenants or conditions to be performed under the terms of this Loan Agreement
concerning the payment of indebtedness; or (ii) for a period of thirty (30) days
after written notice to Borrower to observe or perform any non-monetary covenant
or condition, (provided, however, that if any such failure concerning a
non-monetary covenant or condition is reasonably susceptible of cure but not
within said thirty (30) day period, then no Event of Default shall be deemed to
exist hereunder so long as Borrower commences such cure within said thirty (30)
day period and diligently and in good faith pursues such cure to completion
within one hundred eighty (180) days of said written notice from Lender to
Borrower) then Lender shall have the right without further notice to pursue its
remedies hereunder.
1.14 Debtor Relief Laws. The term "Debtor Relief Laws" shall mean any
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization, or similar laws affecting the rights or remedies of
creditors generally, as in effect from time to time.
1.15 Event of Default. The term "Event of Default" shall mean the
occurrence of any one of the following:
(a) Any indebtedness evidenced, governed or secured by any of the
Loan Instruments is not paid when due, whether by acceleration
or otherwise.
(b) Any covenant in this Agreement or any of the other Loan
Instruments is not fully and timely performed, or the
occurrence of any default or event of default thereunder.
(c) Any statement, representation or warranty in the Loan
Instruments, any Financial Statements or any other writing
delivered to Lender in connection with the Loan is false,
misleading or erroneous in any material respect.
(d) Once construction has begun, ie: the foundation has been
poured, the cessation of the construction of the Improvements
for more than thirty (30) days without the written consent of
Lender.
(e) Failure of the construction of the Improvements for or any
materials for which an Advance has been requested to comply
with the Plans, any Governmental Requirements, or the
requirements of any lessee, if applicable.
(f) Failure of Borrower to satisfy any condition specified herein
as precedent to the obligation of Lender to make an Advance
after an Application for Advance has been submitted by
Borrower to Lender.
(g) Construction of the Improvements is not completed on the
Completion Date, or within a reasonable time thereafter.
(h) The Borrower or owner of the Property:
(1) does not pay its debts as they become due or admits
in writing its inability to pay its debts or makes a
general assignment for the benefit of creditors; or
(2) commences any case, proceeding or other action
seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its
debts under any Debtor Relief Laws; or
(3) in any involuntary case, proceeding or other action
commenced against it which seeks to have an order for
relief entered against it, as debtor, or seeks
reorganization, arrangement, liquidation, dissolution
or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or
relief of debtors, (i) fails to obtain a dismissal of
such case, proceeding or other action within sixty
(60) days of its commencement, or (ii) converts the
case from one chapter of the Federal Bankruptcy Code
to another chapter, or (iii) is the subject of an
order for relief; or
(4) conceals, removes, or permits to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud any or all of its creditors,
or makes or suffers a transfer of any of its property
which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or makes any
transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly
situated have not been paid; or suffers or permits,
while insolvent, any creditor to obtain a lien upon
any of its property through legal proceedings which
is not vacated within sixty (60) days from the date
thereof; or
(5) has a trustee, receiver, custodian or other similar
official appointed for or take possession of all or
any part of the Property or any other of its property
or has any court take jurisdiction of any other of
its property which continues for a period of sixty
(60) days except where a shorter period is specified
in the immediately following subparagraph (6); or
(6) fails to have discharged within a period of thirty
(30) days any attachment, sequestration, or similar
writ levied upon any property of such owner; or
(7) fails to pay immediately any final money judgment,
after appeal, in the amount of $10,000.00 or greater.
(i) Title to all or any part of the Property (other than obsolete
or worn personal property replaced by adequate substitutes of
equal or greater value than the replaced items when new) shall
become vested in any party other than the granting party named
in the Mortgage, whether by operation of law or otherwise,
with the following three exceptions; 1) any property VCA
leases at the Project, eg: T.V.'s and personal Computers; 2)
to the extent releases have been recorded for those Interval
Units sold, and; 3) the interest to be held by VCA South Bend
Chapter, a Arizona non-profit corporation.
1.16 Guaranty. The term "Guaranty" shall mean the Guaranty and
Subordination Agreement executed by Guarantor of the Borrower to the Lender.
1.17 Guarantor. The term "Guarantor" shall mean such individuals who
Guaranty the payment and performance of Borrower to Lender and who have also
executed a Guaranty and Subordination Agreement.
1.18 Improvements. The term "Improvements" shall mean the Improvements
identified on Schedule 1.5 attached hereto.
1.19 Inspecting Architects/Engineers. The term "Inspecting
Architects/Engineers" shall mean such employees, representatives and agents of
Lender or third parties, who may, from time to time, conduct inspections of the
Property or offer other services related thereto.
1.20 Insurance Policies. The term "Insurance Policies" shall mean:
(a) All-risk builder's risk insurance during the construction of
the Improvements, in an amount equal to 100% of the
replacement cost of the Improvements, providing all-risk
coverage on the Improvements and materials stored on the
Property and elsewhere, and including the perils of collapse,
water damage and, if requested by Lender, flood, business
interruption and other risks;
(b) All-risk insurance on the Property until the Loan is paid in
full, as determined by Lender, in the amount of at least 100%
of the replacement cost of such Improvements or in such
additional amounts as Lender may require, providing all-risk
coverage on the Improvements, and, if requested by Lender, to
include the perils of flood, business interruption and other
risks;
(c) Comprehensive General Liability Insurance for owners and
contractors, including blanket contractual liability, products
and completed operations, personal injury (including
employees), independent contractors, explosion, collapse and
underground hazards for not less than $2,000,000 arising out
of any one occurrence or in any increased amount required by
Lender;
(d) Comprehensive Automobile Liability Insurance for contractors
for not less than $500,000 for bodily injury and $100,000 for
property damage arising out of any one occurrence or in any
increased amount required by Lender;
(e) Workers' Compensation Insurance for contractors for statutory
limits; and
(f) Such other insurance as Lender may reasonably require.
All Insurance Policies shall be issued on forms and by companies
satisfactory to Lender and shall be delivered to Lender. All-risk Insurance
Policies shall have loss made payable to Lender as mortgagee together with the
standard mortgagee clause if such is required in Indiana in the form set forth
on Schedule 1.5 attached hereto. Comprehensive General Liability, Comprehensive
Automobile Liability and Workers' Compensation coverages shall have a provision
giving Lender thirty (30) days' prior notice of cancellation or material change
of the coverage.
1.21 Interval Release Fee. The term "Interval Release Fee" shall mean
mandatory payments from Borrower to Lender through Borrower's sale of interval
units at the Property such payments to be applied to the Construction Promissory
Note, upon payment of which Lender shall contemporaneously release the interval
unit from the Mortgage providing Borrower has forwarded the necessary release to
Lender for execution. The sale of interval units may be by (i) direct cash
payment to Borrower, (ii) installment purchase financed by Lender, or (iii)
installment purchase financed by Borrower.
1.22 Lender. The term "Lender" shall mean the Lender named in the first
paragraph of this Loan Agreement.
1.23 Loan. The term"Loan" shall mean the Loan by Lender to Borrower, in
an amount set forth in the introductory paragraph on page one (1) of this Loan
Agreement, not to exceed, in the aggregate, the payment of the costs of labor,
materials, and services supplied for the construction of the Improvements and
all other expenses incident to the acquisition and the construction of the
Property, all as specified in the Approved Budget.
1.24 Loan Instruments. The term "Loan Instruments" shall mean this Loan
Agreement, the Mortgage, the Note, the Guaranty, the Financing Statements, and
such other instruments evidencing, securing, or pertaining to the Loan as shall,
from time to time, be executed and delivered by Borrower, Guarantor, or any
other party to Lender pursuant to this Loan Agreement, including, without
limitation, each Affidavit of Borrower, each Application for Advance, and the
Approved Budget.
1.25 Mortgage. The term "Mortgage" shall mean the Mortgage and Security
Agreement securing the payment of the Note and the payment and performance of
all obligations specified in the Mortgage and this Loan Agreement, and
evidencing a valid and enforceable lien on, and direct assignment of, the
Property.
1.26 Note. The term "Note" shall mean the Construction Promissory Note
from Borrower to Lender dated of even date herewith in the amount of and
evidencing the Loan.
1.27 Plans. The term "Plans" shall mean the final working drawings and
specifications as amended from time to time for the construction of the
Improvements.
1.28 Property. The term "Property" shall mean the land described in
Schedule 1.28 attached hereto and incorporated herein by reference, together
with the Improvements and all other property constituting the "Mortgaged
Property," as described in the Mortgage, and the collateral described in the
Security Agreement.
1.29 Security Agreement. The term "Security Agreement" shall mean a
Security Agreement granting to Lender a security interest in collateral for the
Loan and shall be set forth in the Mortgage.
1.30 Survey. The term "Survey" shall mean a current certified survey of
the Property and/or a recorded plat or map of the Property, as required by
Lender, which such plat or map shall be approved and accepted by all
Governmental Authorities having jurisdiction of the Property.
1.31 Title Company. The term "Title Company" shall mean the Title
Company named on Schedule 1.5 attached hereto.
1.32 Title Insurance. The term "Title Insurance" shall mean a title
insurance commitment, binder, or policy, as Lender may require, in the amount of
the Loan, insuring or committing to insure that the Mortgage constitutes a valid
lien covering the Property having the priority required by Lender and subject
only to those exceptions and encumbrances which lender may approve, issued by
the Title Company.
ARTICLE 2 - ADVANCES OF THE LOAN
2.1 Commitment of Lender. Subject to the conditions hereof, and
provided that an Event of Default has not occurred, Lender will make Advances to
Borrower in accordance with this Loan Agreement. Lender represents that it has
or will have at the time of the Advance sufficient funds to provide Borrower
with each Advance required hereunder.
2.2 Interest on the Loan. Interest on the Loan, at the rate or rates
specified in the Note, shall be computed on the unpaid principal balance which
exists from time to time and shall be computed with respect to each Advance only
from the date of such Advance (as to the portion of each Advance not
constituting a portion of Borrower's Deposit).
2.3 Advances. After the initial Advance, Advances for the payment of
costs of labor, materials, and services supplied for the construction of the
Improvements and the other items shown in the Approved Budget shall be made by
Lender as specified on Schedule 1.5 attached hereto, upon compliance by Borrower
with this Loan Agreement, after actual commencement of construction of the
Improvements. From time to time, Borrower shall submit an Application for
Advance to Lender requesting an Advance for the payment of costs of labor,
materials, and services supplied for the construction of the Improvements or for
the payment of other costs and expenses incident to the Loan, the acquisition of
the Property, or the construction of the Improvements, and specified in the
Approved Budget. Lender may require an inspection of and acceptable report on
the Improvements by the Inspecting Architects/Engineers prior to making any
Advance. Advances for payment of costs of construction of the Improvements and
the other items shown in the Approved Budget shall be limited to the amounts
shown in the Approved Budget and not exceed the aggregate of (a) the costs of
labor, materials, and services incorporated into the Improvements in a manner
acceptable to Lender, plus (b) if approved by Lender, the purchase price of all
uninstalled materials to be utilized in the construction of the Improvements
stored on the Property or elsewhere with the written consent of, and in a manner
acceptable to, Lender, less (c) retainage, if any, as set forth on Schedule 1.5
attached hereto, and less (d) all prior Advances for payment of costs of labor,
materials, and services for the construction of the Improvements. Each
Application for Advance shall be submitted by Borrower to Lender a reasonable
time (but not less than seven (7) business days) prior to the date on which an
Advance is desired by Borrower. The final Advance will not be made until the
Lender has received the following (1) a completion certificate from the
Inspecting Architects/Engineers, (2) evidence that all Governmental Requirements
have been satisfied, including but not limited to, delivery to Lender of
Certificates of Occupancy if issued by municipality, permitting the Improvements
to be legally occupied, (3) evidence that no mechanic's or materialman's lien or
other encumbrance has been filed and remains in effect against the Property, (4)
final lien releases or waivers by Architect, Contractor, and all subcontractors,
materialmen, and other parties who have supplied labor, materials, or services
for the construction of the Improvements, or who otherwise might be entitled to
claim a contractual, statutory, or constitutional lien against the Property, and
(5) if available under local rules, the Title Insurance shall be endorsed and
extended to acknowledge completion of construction of the Improvements without
any encroachment and in compliance with all applicable matters of public record
and Governmental Requirements, with no additional exception objectionable to
Lender.
2.4 Conditions to the First Advance. As a condition precedent to the
initial Advance hereunder, Borrower must execute and deliver to, procure for and
deposit with, and pay to Lender and, if appropriate, record in the proper
records with all filing and recording fees paid the documents, certificates, and
other items that are noted by (x) described in Schedule 2.4 attached hereto and
incorporated herein by reference, together with such other documents,
instruments, and certificates as Lender or Title Company may reasonably require.
2.5 Conditions to Subsequent Advances. As a condition precedent to each
Advance other than the initial Advance, in addition to all other requirements
herein, Borrower must satisfy the following requirements and, if required by
Lender, deliver to Lender evidence of such satisfaction:
(a) All conditions precedent to the initial Advance shall have
been satisfied;
(b) There shall then exist no Event of Default which remains
uncured beyond any grace period;
(c) The representations and warranties made in this Loan Agreement
shall be true and correct on and as of the date of each
Advance, with the same effect as if made on that date;
(d) Borrower will procure and deliver to Lender, if required by
Lender, releases or waivers of mechanics' liens and receipted
bills showing payment of all parties who have furnished
materials or services or performed labor of any kind in
connection with the construction of any of the Improvements;
and
(e) The Title Insurance Policy provided for at the closing of this
Contract shall remain in effect and at the written request of
Lender, a search shall be conducted to insure no exception
which might otherwise be objectionable to Lender has been
recorded.
2.6 Reallocation of Approved Budget. Borrower may not reallocate items
of cost or change the Approved Budget without the prior written consent of
Lender which consent shall be not unreasonably withheld.
2.7 No Waiver. No Advance shall constitute a waiver of any condition
precedent to the obligation of Lender to make any further Advance or preclude
Lender from thereafter declaring the failure of Borrower to satisfy such
condition precedent to be an Event of Default.
2.8 Conditions Precedent for the Benefit of Lender. All conditions
precedent to the obligation of Lender to make any Advance are imposed hereby
solely for the benefit of Lender, and no other party may require satisfaction of
any such condition precedent or be entitled to assume that Lender will refuse to
make any Advance in the absence of strict compliance with such conditions
precedent. All requirements of this Loan Agreement may be waived by Lender, in
whole or in part, at any time.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF BORROWER
Borrower hereby represents and warrants as follows:
3.1 Financial Statements. The Financial Statements are true, correct,
and complete as of the dates specified therein and fully and accurately present
the financial condition of Borrower and, if required, of Guarantor (who are set
forth on page 30 of this Loan Agreement and shall Guaranty the Borrower's
payment and performance hereunder) as of the dates specified. No material
adverse change has occurred in the financial condition of Borrower or Guarantor
since the dates of the Financial Statements.
3.2 Suits, Actions, Etc.. There are no material actions, suits, or
proceedings pending or, to the knowledge of Borrower, threatened, in any court
or before or by any Governmental Authority against or affecting Borrower,
Guarantor, or the Property, or involving the validity, enforceability, or
priority of any of the Loan Instruments, at law or in equity. The consummation
of the transactions contemplated hereby, and the performance of any of the terms
and conditions hereof and of the other Loan Instruments, will not result in a
breach of, or constitute a default in, any mortgage, deed of trust, lease,
promissory note, loan agreement, credit agreement, partnership agreement, or
other agreement to which Borrower or Guarantor is a party or by which Borrower
or Guarantor may be bound or affected. Neither Borrower nor any Guarantor is in
default of any order of any court or any requirement of any Governmental
Authority.
3.3 Valid and Binding Obligation. All of the Loan Instruments, and all
other documents referred to herein to which Borrower or Guarantor is a party,
upon execution and delivery will constitute valid and binding obligations of
Borrower and Guarantor, enforceable in accordance with their terms except as
limited by Debtor Relief Laws.
3.4 Title to the Property. Borrower holds full legal and equitable
title to the Property, subject only to title exceptions set forth in the Title
Insurance.
3.5 Commencement of Construction. Other than as described in Schedule
3.5, and except for the clearing and grading of the property associated with the
Project, prior to the recordation of the Mortgage, no work of any kind
(including the destruction or removal of any existing improvements, site work,
draining, or fencing of the Property) shall have commenced or shall have been
performed on the Property, no equipment or material shall have been delivered to
or upon the Property for any purpose whatsoever, and no contract (or memorandum
or affidavit thereof) for the supplying of labor, materials, or services for the
construction of the Improvements shall have been recorded in the mechanic's lien
or other appropriate records in the county where the Property is located.
3.6 Disclosure. There is no fact of which Borrower is aware that
Borrower has not disclosed to Lender in writing that could materially adversely
affect the property, business or financial condition of Borrower, Guarantor or
the Property.
3.7 System Compliance. The storm and sanitary sewer system, water
system, all mechanical systems of the Property and other parts of the
Improvements do (or when constructed will) comply with all applicable
environmental, pollution control and ecological laws, ordinances, rules and
regulations, and all Governmental Authorities having jurisdiction of the
Property have issued or to the best of Borrower's knowledge will issue all
necessary permits, licenses or other authorizations for the construction of the
Improvements (specifically including the named systems).
3.8 Submittals. The Loan Instruments and all Financial Statements,
Plans, budgets, schedules, opinions, certificates, confirmations, Contractor's
statements, applications, rent rolls, affidavits, agreements, Construction
Contract, Architectural Contract and other materials submitted to the Lender in
connection with or in furtherance of the Loan Instruments by or on behalf of the
Borrower or any Guarantor fully and fairly state the matters with which they
purport to deal, and neither misstate any material fact, nor, separately or in
the aggregate, fail to state any material fact necessary to make the statements
made not misleading.
3.9 Utility Availability. Subject only to payment of fees to be paid
from the Approved Budget, all utility and municipal services required for the
construction, occupancy and operation of the Improvements, including, but not
limited to, water supply, storm and sanitary sewer systems, electric and
telephone facilities, are available for use and tap-on at the boundaries of the
Property and will be available in sufficient amounts for the normal and intended
use of the Improvements, and written permission has been or will be obtained
from the applicable utility companies or municipalities to connect the
Improvements into each of said services.
3.10 Inducement to Lender. The representations and warranties contained
in the Loan Instruments are made by Borrower as an inducement to Lender to make
the Loan and Borrower understands that Lender is relying on such representations
and warranties and that such representations and warranties shall survive any
(a) bankruptcy proceedings involving Borrower, Guarantor or the Property, or (b)
foreclosure of the Mortgage or (c) conveyance of title to the Property to the
Lender in lieu of foreclosure of the Mortgage. Acceptance of each Advance
constitutes reaffirmation, as of the date of such acceptance, of the
representations and warranties of Borrower in the Loan Instruments, on which
Lender shall rely in making such Advance.
ARTICLE 4 - COVENANTS AND AGREEMENTS
OF BORROWER
Borrower hereby covenants and agrees as follows:
4.1 Compliance With Governmental Requirements. Borrower shall timely
comply with all Governmental Requirements and deliver to Lender evidence
thereof. Borrower assumes full responsibility for the compliance of the Plans
and the Property with all Governmental Requirements and with sound building and
engineering practices, and, notwithstanding any approvals by Lender, Lender
shall have no obligation or responsibility whatsoever for the Plans or any other
matter incident to the Property or the construction of the Improvements.
Immediately upon Borrower's receipt of any notice from a Governmental Authority
of noncompliance with any Governmental Requirements, Borrower shall provide
Lender with written notice thereof.
4.2 Construction of the Improvements. Borrower shall commence, with the
pouring of the foundation, construction of the Improvements within a
commercially reasonable time and the construction of the Improvements shall be
executed with diligence and continuity, in a good and workmanlike manner, and in
accordance with sound building and engineering practices, all applicable
Governmental Requirements, the Plans, and the requirements of any lessee, if
applicable. Other than Acts of God, Borrower shall not permit cessation of work
for a period in excess of thirty (30) days without the prior written consent of
Lender and shall complete construction of the Improvements on or before the
Completion Date, free and clear of all liens (except those as to which Borrower
has furnished a bond or other security acceptable to Lender and otherwise
complied with the requirements of Section 4.20).
4.3 Correction of Defects. Borrower shall correct or cause to be
corrected (a) any material defect in the Improvements, (b) any material
departure in the construction of the Improvements from the Plans, Governmental
Requirements, or the requirements of any lessee, if applicable, or (c) any
encroachment by any part of the Improvements, or any structure located on the
Property, on any easement, property line, or restricted area, or any
encroachment by any such structure on any building line.
4.4 Storage of Materials. Borrower shall cause all materials supplied
for, or intended to be utilized in, the construction of the Improvements, but
not affixed to or incorporated into the Improvements or the Property, to be
stored on the Property or at such other location as may be approved by Lender in
writing, with adequate safeguards, as required by Lender, to prevent loss,
theft, damage, or commingling with other materials or projects.
4.5 Inspection of the Property. Borrower shall permit Lender, any
Governmental Authority, and their agents and representatives, to enter upon the
Property and any location where materials intended to be utilized in the
construction of the Improvements are stored, for the purpose of inspection of
the Property and such materials at all reasonable times.
4.6 Notices by Governmental Authority, Casualty, Condemnation. Borrower
shall timely comply with and promptly furnish to Lender true and complete copies
of any notice or claim by any Governmental Authority pertaining to the Property.
Borrower shall promptly notify Lender of any fire or other casualty or any
notice of taking or eminent domain action or proceeding affecting the Property,
or the threat of any such action or proceeding of which Borrower becomes aware.
4.7 Special Account. Borrower shall maintain a special account into
which all Advances (but no other funds), and excluding direct disbursements made
by Lender pursuant to Section 4.10 hereof, shall be deposited by Borrower, and
against which checks shall be drawn only for the payment of (a) costs of labor,
materials, and services supplied for the construction of the Improvements
specified in the Approved Budget, and (b) other costs and expenses incident to
the Loan, the Property, and the construction of the Improvements specified in
the Approved budget.
4.8 Application of Advances. Borrower shall disburse all Advances for
payment of costs and expenses specified in the Approved Budget, and for no other
purpose.
4.9 Borrower's Deposit. If Lender reasonably determines at any time
that the unadvanced portion of the Loan will be insufficient for payment in full
of (a) costs of labor, materials, and services required for the construction of
the Improvements, (b) other costs and expenses specified in the Approved Budget,
(c) interest from time to time owing or to become owing on the Loan, and (d)
other costs and expenses required to be paid in connection with the construction
of the Improvements in accordance with the Plans, any Governmental Requirements,
or the requirements of any lessee, if applicable, then Borrower shall, on
request of Lender, make the Borrower's Deposit with Lender in an interest
bearing account. Lender may advance all or a portion of the Borrower's Deposit
prior to any portion of the Loan proceeds. Borrower shall promptly notify Lender
in writing if and when the cost of the construction of the Improvements exceeds,
or appears likely to exceed, the amount of the unadvanced portion of the Loan
and the unadvanced portion of the Borrower's Deposit.
4.10 Direct Disbursement and Application by Lender. In the event of
default hereunder, Lender shall have the right, but not the obligation, to
disburse and directly apply the proceeds of any Advance to the satisfaction of
any of Borrower's obligations hereunder or under any of the other Loan
Instruments. Any Advance by Lender for such purpose, except Borrower's Deposit,
shall be part of the Loan and shall be secured by the Loan Instruments. Borrower
hereby authorizes Lender to hold, use, disburse, and apply the Loan and the
Borrower's Deposit for payment of costs of construction of the Improvements,
expenses incident to the Loan and the Property, and the payment or performance
of any obligation of Borrower hereunder or under any of the other Loan
Instruments. Borrower hereby assigns and pledges the proceeds of the Loan and
the Borrower's Deposit to Lender for such purposes. Lender may advance and incur
such expenses as Lender deems necessary for the completion of construction of
the Improvements and to preserve the Property, and any other security for the
Loan, and such expenses, even though in excess of the amount of the Loan, shall
be secured by the Loan Instruments and payable to Lender.
4.11 Costs and Expenses. Borrower shall pay when due all costs and
expenses required by this Loan Agreement, including, without limitation, (a) all
taxes and assessments applicable to the Property, (b) all fees for filing or
recording the Loan Instruments, (c) all fees lawfully due by Borrower's actions
in connection with the Loan, or the Property, (d) all title insurance and title
examination charges, including premiums for the Title Insurance, (e) all survey
costs and expenses, including the cost of the Survey, (f) all premiums for the
Insurance Policies, and (g) all other costs and expenses payable to third
parties incurred by Borrower in connection with the consummation of the
transactions contemplated by this Loan Agreement.
4.12 Additional Documents. Borrower shall execute and deliver to
Lender, from time to time as requested by Lender, such other documents as shall
reasonably be necessary to provide the rights and remedies to Lender granted or
provided for by the Loan Instruments.
4.13 Inspection of Books and Records. Borrower shall permit Lender at
all reasonable times, to examine and copy the books and records of Borrower
pertaining to the Loan and the Property, and all sales and marketing records,
contracts, statements, invoices, bills, and claims for labor, materials, and
services supplied for the construction of the Improvements.
4.14 No Liability of Lender. Lender shall have no liability,
obligation, or responsibility whatsoever with respect to the construction of the
Improvements except to advance the Loan and the Borrower's Deposit pursuant to
this Loan Agreement. Lender shall not be obligated to inspect the Property or
the construction of the Improvements, nor be liable or responsible for any
defect in the Property or the Improvements by reason of inspecting same, nor be
liable for the performance or default of Borrower, Architect, the Inspecting
Architects/Engineers, Contractor, or any other party, or for any failure to
construct, complete, protect, or insure the Improvements, or for the payment of
costs of labor, materials, or services supplied for the construction of the
Improvements, or for the performance of any obligation of Borrower whatsoever.
Nothing including without limitation any Advance or acceptance of any document
or instrument, shall be construed as a representation or warranty, express or
implied, to any party by Lender.
4.15 No Conditional Sale Contracts, Etc. No materials, equipment, or
fixtures shall be supplied, purchased, or installed for the construction of the
Improvements pursuant to security agreements, conditional sale contracts, lease
agreements, or other arrangements or understandings whereby a security interest
or title is retained by any party or the right is reserved or accrues to any
party to remove or repossess any materials, equipment, or fixtures intended to
be utilized in the construction or operation of the Improvements except for
those personal property leases relative to the Project.
4.16 Defense of Actions. Lender may (but shall not be obligated to)
commence, appear in, or defend any action or proceeding purporting to affect the
Loan, the Property, or the respective rights and obligations of Lender and
Borrower pursuant to this Loan Agreement. Lender may (but shall not be obligated
to) pay all necessary expenses, including attorneys' fees and expenses incurred
in connection with such proceedings or action, which Borrower agrees to repay to
Lender on demand.
4.17 Assignment of Construction Contract. As additional security for
the payment of the Loan, Borrower hereby transfers and assigns to Lender all of
Borrower's rights and interest, but not its obligations, in, under, and to the
Construction Contract, upon the following terms and conditions:
(a) Borrower represents and warrants that the copy of any
Construction Contract it has furnished to Lender is a true and
complete copy thereof and that Borrower's interest therein is
not subject to any claim, setoff, or encumbrance.
(b) Neither this assignment nor any action by Lender shall
constitute an assumption by Lender of any obligation under the
Construction Contract, and Borrower shall continue to be
liable for all obligations of Borrower thereunder, Borrower
hereby agreeing to perform all of its obligations under the
Construction Contract. Borrower indemnifies and holds Lender
harmless against and from any loss, cost, liability, or
expense (including, but not limited to, attorneys' fees and
expenses) resulting from any failure of Borrower to so
perform.
(c) Lender shall have the right at any time (but shall have no
obligation) to take in its name or in the name of Borrower
such action as Lender may at any time determine to be
necessary or advisable to cure any default under the
Construction Contract or to protect the rights of Borrower or
Lender thereunder. Lender shall incur no liability if any
action so taken by it or in its behalf shall prove to be
inadequate or invalid, and Borrower agrees to hold Lender free
and harmless against and from any loss, cost, liability or
expense (including, but not limited to, attorneys' fees and
expenses) incurred in connection with any such action.
(d) Borrower hereby irrevocably constitutes and appoints Lender as
Borrower's attorney-in-fact, in Borrower's name or in Lender's
name, to enforce all rights of Borrower under the Construction
Contract.
(e) Prior to an Event of Default, Borrower shall have the right to
exercise its rights as Owner under the Construction Contract,
provided that Borrower shall not cancel or amend the
Construction Contract or do or suffer to be done any act which
would impair the security constituted by this assignment
without the prior written consent of Lender.
(f) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon
foreclosure of the Mortgage, any receiver in possession of the
Property, and any corporation formed by or on behalf of Lender
which assumes Lender's rights and obligations under this Loan
Agreement.
4.18 Assignment of Plans. As additional security for the payment of the
Loan, Borrower hereby transfers and assigns to lender all of Borrower's right,
title, and interest in and to the Architectural Contract and Plans and hereby
represents and warrants to and agrees with Lender as follows:
(a) The schedule of the Plans delivered to Lender is a complete
and accurate description of the Plans.
(b) The Plans are complete and adequate for the construction of
the Improvements and there have been no modifications thereof
except as described in such schedule. The Plans shall not be
modified in any material way without the prior written consent
of Lender and Permanent Lender, if any.
(c) Lender may use the Plans for any purpose relating to the
Improvements, including but not limited to inspections of
construction and the completion of the Improvements.
(d) Lender's acceptance of this assignment shall not constitute
approval of the Plans by Lender. Lender has no liability or
obligation whatsoever in connection with the Plans and no
responsibility for the adequacy thereof or for the
construction of the Improvements contemplated by the Plans.
Lender has no duty to inspect the Improvements, and, if Lender
should inspect the Improvements, Lender shall have no
liability or obligation to Borrower arising out of such
inspection. No such inspection nor any failure by Lender to
make objections after any such inspection shall constitute a
representation by Lender that the Improvements are in
accordance with the Plans or constitute a waiver of Lender's
right thereafter to insist that the Improvements be
constructed in accordance with the Plans.
(e) This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon
foreclosure of the mortgage, any receiver in possession of the
Property, and any corporation formed by or on behalf of Lender
which assumes Lender's rights and obligations under this Loan
Agreement.
4.19 Prohibition on Assignment of Borrower's Interest. Borrower shall
not assign or encumber any interest of Borrower hereunder without the prior
written consent of Lender.
4.20 Payment of Claims. Borrower shall promptly pay or cause to be paid
when due all costs and expenses incurred in connection with the Property and the
construction of the Improvements, and Borrower shall keep the Property free and
clear of any lien, charge, or claim other than the encumbrances of the Mortgage
and other liens approved in writing by Lender. Notwithstanding anything to the
contrary contained in this Loan Agreement, Borrower (a) may contest the validity
or amount of any claim of any contractor, consultant, architect, or other person
providing labor, materials, or services with respect to the Property, (b) may
contest any tax or special assessments levied by any Governmental Authority, and
(c) may contest the enforcement of or compliance with any Governmental
Requirements, and such contest on the part of Borrower shall not be a default
hereunder and shall not release Lender from its obligations to make Advances
hereunder; provided, however, that during the pendency of any such contest
Borrower shall furnish to Lender and Title Company an indemnity bond with
corporate surety satisfactory to Lender and Title Company or other security
acceptable to them in an amount equal to the amount being contested plus a
reasonable additional sum to cover possible costs, interest, and penalties, and
provided further that Borrower shall pay any amount adjudged by a court of
competent jurisdiction to be due, with all costs, interest, and penalties
thereon, before such judgment becomes a lien on the Property.
4.21 Restrictions and Annexation. Other than amending the, Membership
Plan Borrower shall not impose any restrictive covenants, easements or other
encumbrances upon the Property, execute or file any subdivision plat affecting
the Property, or consent to the annexation of the Property to any city without
the prior written consent of Lender.
4.22 Advertising by Lender. Borrower agrees that, during the term of
the Loan, Lender may erect and maintain on the Property one or more advertising
signs indicating that the construction financing for the Property has been
provided by Lender.
4.23 Current Financial Statements. Borrower shall, (1) on or before
one-hundred twenty (120) days after the end of each fiscal year of Borrower,
deliver to Lender then current Financial Statements of Borrower and any
Guarantors, and (2) if Borrower routinely prepares more frequent Financial
Statements for interim periods, provide copies of such Financial Statements to
Lender when they are prepared, and (3) from time to time, as Lender may request,
deliver to Lender additional Financial Statements of Borrower and Guarantor.
4.24 Tax Receipts. Borrower shall furnish Lender with receipts or tax
statements marked "Paid" to evidence the payment of all taxes levied on the
Property prior to the date such taxes become delinquent.
4.25 Loan Participations. Borrower acknowledges and agrees that Lender
may, from time to time, sell or offer to sell interests in the Loan and the Loan
Instruments to one or more participants. Borrower authorizes Lender to
disseminate any information it has pertaining to the Loan, including, without
limitation, complete and current credit information on Borrower, any of its
principals and any Guarantor, to any such participant or prospective participant
in the Loan. In any event, Lender shall not assign its obligations hereunder nor
shall the payment of Advances be subject to Lender obtaining Loan Participants.
4.26 Notice of Litigation, Claims, and Financial Change. Borrower shall
promptly inform Lender of (a) any litigation against Borrower or any Guarantor
or affecting the Property, which, if determined adversely, might have a material
adverse effect upon the financial condition of Borrower or any Guarantor or upon
the Property, or might cause an Event of Default, (b) any claim or controversy
which might become the subject of such litigation, and (c) any material adverse
change in the financial condition of Borrower or any Guarantor. For purposes
hereof, a material adverse change shall be deemed to have occurred when there
has been a decline of fifteen percent (15%) or more in the tangible net worth of
Borrower or and any Guarantor as shown on the Financial Statements delivered to
Lender in connection with the Loan.
4.27 No Occupancy, Contrary to Builder's Risk Policy. The Improvements
shall not be occupied until Borrower has obtained and furnished to Lender a
"permission to occupy" endorsement to the builder's risk insurance policy, which
endorsement is satisfactory to Lender, or Borrower has obtained replacement
coverage in the form of an all-risk insurance policy upon the completed
Improvements, which policy will not be impaired by the occupancy of the
Improvements and is satisfactory to Lender.
4.28 Hold Harmless. Except for Lender's acts or omissions, Borrower
shall defend, at its own cost and expense, and hold Lender harmless from, any
proceeding or claim in any way relating to the Property or the Loan Instruments.
All costs and expenses incurred by Lender in protecting its interests hereunder,
including all court costs and attorney's fees and expenses, shall be borne by
Borrower. The provisions of this Section shall survive the payment in full of
the Loan and all other indebtedness secured by the Mortgage and the release of
the Mortgage as to events occurring and causes of action arising before such
payment and release.
4.29 Cooperation with Permanent Lender. Borrower hereby covenants,
promises and agrees to cooperate with the Lender to supply whatever information
and to execute appropriate documents and instruments which may be required by a
new Permanent Lender or its indemnitee.
ARTICLE 5 - RIGHTS AND REMEDIES OF LENDER
5.1 Rights of Lender. Upon the occurrence of an Event of Default,
Lender shall have the right, in addition to any other right or remedy of Lender
as set forth in the Loan Instruments but not the obligation, in its own name or
in the name of Borrower, to enter into possession of the Property; to perform
all work necessary to complete the construction of the Improvements
substantially in accordance with the Plans, Governmental Requirements, and the
requirements of any lessee, if applicable; and to employ watchmen and other
safeguards to protect the Property. Borrower hereby appoints Lender as the
attorney-in-fact of Borrower, with full power of substitution, and in the name
of Borrower, if Lender elects to do so, upon the occurrence of an Event of
Default, to (a) use such sums as are necessary, including any proceeds of the
Loan and the Borrower's Deposit, make such changes or corrections in the Plans,
and employ such architects, engineers, and contractors as may be required for
the purpose of completing the construction of the Improvements substantially in
accordance with the Plans, Governmental Requirements, (b) execute all
applications and certificates in the name of Borrower which may be required for
completion of construction of the Improvements, (c) endorse the name of Borrower
on any checks or drafts representing proceeds of the Insurance Policies, or
other checks or instruments payable to Borrower with respect to the Property,
(d) do every act with respect to the construction of the Improvements which
Borrower may do, and (e) prosecute or defend any action or proceeding incident
to the Property. The power of attorney granted hereby is a power coupled with an
interest and irrevocable. Lender shall have no obligation to undertake any of
the foregoing actions, and, if Lender should do so, it shall have no liability
to Borrower for the sufficiency or adequacy of any such actions taken by Lender.
5.2 Acceleration. Upon the occurrence of an Event of Default, Lender
may, at its option, declare the Loan immediately due and payable subject to
Borrower's cure provision in 1.13.
5.3 Cessation of Advances. Upon the occurrence of an Event of Default,
the obligation of Lender to disburse the Loan and the Borrower's Deposit and all
other obligations of Lender hereunder shall, at Lender's option, immediately
terminate, subject to 1.13.
5.4 Funds of Lender. Any funds of Lender used for any purpose referred
to in this Article 5 shall constitute Advances secured by the Loan Instruments
and shall bear interest at the rate specified in the Note to be applicable after
default hereunder.
5.5 No Waiver or Exhaustion. No waiver by Lender of any of its rights
or remedies hereunder, in the other Loan Instruments, or otherwise, shall be
considered a waiver of any other or subsequent right or remedy of Lender; no
delay or omission in the exercise or enforcement by Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of Lender;
and no exercise or enforcement of any such rights or remedies shall ever be held
to exhaust any right or remedy of Lender.
5.6 Marshalling Waiver. Borrower waives any and all rights to require
the marshalling of assets in connection with the exercise of any of the remedies
hereunder.
ARTICLE 6 - GENERAL TERMS AND CONDITIONS
6.1 Notices. All notices, demands, requests, approvals and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when presented personally or deposited in a regularly
maintained mail receptacle of the United States Postal Service, postage prepaid,
registered or certified, return receipt requested, addressed to Borrower or
Lender, as the case may be, at the respective addresses set forth on the first
page of this Loan Agreement, or such other address as Borrower or Lender may
from time to time designate by written notice to the other as herein required.
6.2 Entire Agreement and Modifications. The Loan Instruments constitute
the entire understanding and agreement between the undersigned with respect to
the transactions arising in connection with the Loan and supersede all prior
written or oral understandings and agreements between the undersigned in
connection therewith. No provision of this Loan Agreement or the other Loan
Instruments may be modified, waived, terminated, supplemented, changed or
amended except by a written Instrument executed by both parties hereto.
6.3 Severability. In case any of the provisions of this Loan Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Loan Agreement shall be construed as if such invalid, illegal,
or unenforceable provision had never been contained herein.
6.4 Election of Remedies. Lender shall have all of the rights and
remedies granted in the Loan Instruments and available at law or in equity, and
these same rights and remedies shall be cumulative and may be pursued
separately, successively, or concurrently against Borrower, Guarantor, or any
property covered under the Loan Instruments, at the sole discretion of Lender.
The exercise or failure to exercise any of the same shall not constitute a
waiver or release thereof or of any other right or remedy, and the same shall be
nonexclusive.
6.5 Form and Substance. All documents, certificates, insurance
policies, evidence, and other items required under this Loan Agreement to be
executed and/or delivered to Lender shall be in form and substance satisfactory
to Lender.
6.6 Limitation on Interest. All agreements between Borrower and Lender,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of any indebtedness governed hereby or otherwise, shall the
interest contracted for, charged or received by Lender exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum lawful amount, the
interest payable to Lender shall be reduced to the maximum amount permitted
under applicable law; and, if from any circumstance the Lender shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal of the Loan and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of the Loan such excess shall be refunded to Borrower. All interest paid or
agreed to be paid to Lender shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full period until
payment in full of the principal of the Loan (including the period of any
renewal or extension thereof) so that interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the Borrower and Lender.
6.7 No Third Party Beneficiary. This Loan Agreement is for the sole
benefit of Lender and Borrower and is not for the benefit of any third party.
6.8 Borrower in Control. In no event shall Lender's rights and
interests under the Loan Instruments be construed to give Lender the right to,
or be deemed to indicate that Lender is in control of the business, management
or properties of Borrower or has power over the daily management functions and
operating decisions made by Borrower.
6.9 Number and Gender. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders. The duties, covenants, obligations, and warranties
of Borrower in this Loan Agreement shall be joint and several obligations of
Borrower and of each Borrower if more than one.
6.10 Captions. The captions, headings, and arrangements used in this
Loan Agreement are for convenience only and do not in any way affect, limit,
amplify, or modify the terms and provisions hereof.
6.11 Applicable Law. This Loan Agreement and the Loan Instruments shall
be governed by and construed in accordance with the laws of the State of New
York and the laws of the United States applicable to transactions within such
state.
6.12 Jurisdiction. In any action to enforce Lender's rights hereunder,
Borrower covenants to personal jurisdiction and venue in the Supreme Court of
the State of New York for the County of Onondaga.
6.13 Attorney's Fees. In any action hereunder, the prevailing party
shall be entitled to reasonable attorney's fees.
6.14 Release Fees. Payments received by Borrower for the purchase of
interval units shall be given to the Lender as set forth in the Note.
6.15 Escrow. It is understood that certain local requirements may
mandate that Borrower escrow all sales proceeds received from consumers for the
Sale of Interval Units at the Property during the pendency of construction of
the Improvements. In such event, the parties agree that an escrow agent ("Escrow
Agent") shall hold the sales proceeds during the pendency of construction and
release them as may be allowed by local law having jurisdiction over the
Property as set forth in provision 1.21 above and as set forth in the Note.
The parties further agree that the Escrow Agent must be
jointly approved by both Lender and Borrower.
6.16 Receivables Purchase. Borrower and Lender have entered into a
receivables purchase agreement ("Receivables Purchase Agreement") whereby
Borrower shall offer Lender creditworthy receivables representing installment
purchase obligations of consumers for interval units at the Property on a first
refusal and exclusive basis. In the event that the Construction Loan is
satisfied, either by the Borrower or by a new Permanent Lender, then the
Receivables Purchase Agreement shall survivee the satisfaction.
6.17 Closing Fee. At closing, the Borrower shall pay Lender the sum of
$50,000.00 representing a closing fee which shall be disbursed to Lender by
Borrower from the initial advance.
IN WITNESS WHEREOF, the parties set their hands the date above first
written.
VCA SOUTH BEND INCORPORATED BENNETT FUNDING
INTERNATIONAL, LTD.
By Joseph P. Martori By /S/
------------------------------- ---------------------------------
Title Chairman Title CEO
---------------------------- ------------------------------
GUARANTOR APPROVAL
ILX INCORPORATED
By Joseph P. Martori
-----------------------------
Title Chairman
--------------------------
CONSTRUCTION PROMISSORY NOTE
AMOUNT $5,000,000.00 DATE: OCTOBER 4, 1994
FOR VALUE RECEIVED, VCA South Bend Incorporated. an Arizona Corporation
("Maker"), promises to pay to Bennett Funding International, Ltd., a New York
corporation ("Lender"), or order, at Two Clinton Square, Syracuse, New York
13202, or at such other place as the holder of this Construction Promissory Note
("Holder") may from time to time designate in writing, in lawful money of the
United States of America, the principal sum of Five Million Dollars
($5,000,000.00) or so much thereof as has been disbursed and not repaid,
together with interest on the unpaid principal balance from time to time
outstanding until paid, as more fully provided for below ("Note").
Concurrently with the execution and delivery of this Note, Maker and
Lender executed and entered into a Construction Loan Agreement and Construction
Mortgage and Security Agreement (collectively the "Agreement"). As a condition
precedent to entering into the Agreement, and in consideration therefor, Maker
agreed to execute and deliver this Note with respect to the method and manner in
which the Construction Loan is to be repaid from and after the date hereof.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement, the applicable provisions of which
are incorporated herein by reference.
A. Interest.
Interest shall be due and payable monthly in arrears, shall accrue
daily on the basis of a 360-day year and actual days elapsed and shall accrue
from the date hereof. During the term of this Note, interest shall accrue at a
rate per annum equal to thirteen percent (13%). In no event shall any interest
rate to be charged exceed the maximum contract rate permitted under the
applicable Usury Law.
If all or any portion of any Interest Installment (as hereinafter
defined) is not actually received by Holder from Maker within ten (10) days
following the Installment Date that such Interest Installment is due, Maker
shall pay on demand to Holder a late charge of two percent (2%) of the amount of
such overdue payment.
B. Installment payments; Maturity.
Installments of interest only ("Interest Installment(s)") are due and
payable monthly in arrears in immediately available funds commencing (30) days
after the initial disbursement under the CONSTRUCTION LOAN AGREEMENT and
subsequent Interest Installments shall be due on the first business day of each
month thereafter for a period of thirty-six (36) months after the final
disbursement under the CONSTRUCTION LOAN AGREEMENT. Thirty (30) days thereafter,
("Maturity Date"), the entire unpaid principal balance plus all accrued and
unpaid interest and other charges due hereunder or under the Construction
Mortgage (as hereinafter defined) shall be paid in full. A date on which a
payment of interest is due is herein called an "Installment Date."
C. Security
This Note is to be secured by a Construction Mortgage of even date
herewith, the Continuing Guaranties and the Collateral.
D. Prepayment
Prepayment of this Note, without penalty or premium shall be permitted
to be made pursuant to the payment of release fees as described in section J
below or at any time.
E. Miscellaneous.
Every person or entity at any time liable for the payment of the
indebtedness or any other amounts due under this Note, hereby waives: diligence,
presentment for payment, protest and demand, notice of protest, demand, dishonor
and nonpayment of this Note. Every such person or entity further consents that
Holder may renew or extend the time of payment of any part or the whole of
indebtedness at any time and from time to time at the request of any other
person or entity liable therefor. Any such renewals or extensions may be made
without notice to any person or entity liable for the payment of the
indebtedness evidenced hereby.
This Note is given and accepted as evidence of indebtedness only and
not in payment or satisfaction of any indebtedness or obligation.
Time is of the essence with respect to all of Maker's obligations and
agreements under this Note.
This Note and all its provisions, conditions, promises and covenants
hereof shall be binding in accordance with the terms hereof upon Maker, its
successors and assigns, provided nothing herein shall be deemed consent to any
assignment restricted or prohibited by the terms of the Mortgage or the terms
hereof. If more that one person or other entity has executed this Note as Maker,
the obligations of such persons and entities shall be joint and several.
F. Default and Remedies.
The entire unpaid principal amount of this Note, together with all
accrued interest thereon, shall, at the option of the Holder exercised by
written notice to the Maker at its principal executive offices, become
immediately due and payable if any one or more of the following events (herein
called "Events of Default") shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and be continuing at the time of such
notice;
(a) if default shall be made in the due and punctual payment of
interest or principal of this Note when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, and such default
shall have continued for a period of ten (10) days after written notice thereof
to the Maker;
(b) if default shall be made in the performance or observance of any of
the other covenants, agreements or conditions of the Maker contained in this
Note, and such default shall have continued for a period of ten (10) days after
written notice thereof to the Maker, or for any longer period set forth in the
Construction Loan Agreement.
(c) if the Maker shall:
(i) admit in writing its inability to pay its debts generally
as they become due;
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act;
(iii) make any assignment for the benefit of creditors; (iv)
consent to the appointment of a receiver of itself or of the whole or any
substantial part of its property;
(v) on a petition in bankruptcy filed against it, be
adjudicated a bankrupt; or
(vi) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State, district or territory
thereof; or,
(d) if default shall be made in the performance or observance of any of
the conditions of other agreements as set forth above, and such default shall
have continued for a period of ten (10) days after written notice thereof to the
Maker or for any longer period set forth in the CONSTRUCTION LOAN AGREEMENT;
In case any one or more of the Events of Default shall have occurred
and be continuing, the Holder may proceed to protect and enforce its rights
either by suit in equity and/or by action of law, whether for the specific
performance of any covenant or agreement contained in this Note or in aid of the
exercise of any power granted in this Note, or the Holder may proceed to enforce
the payment of all sums due upon this Note or to enforce any other legal or
equitable right of the Holder.
No remedy herein conferred upon the Holder is intended to limit or
restrict any other remedy and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise.
No course of dealing between the Maker and the Holder or any delay on
the part of the Holder in exercising any rights hereunder shall operate as a
waiver of any rights or any Holder hereof.
Should any proceedings be instituted by the Holder to recover any
monies due hereunder, Maker agrees to pay all reasonable attorney's fees and
costs.
G. Severability
In the event that one or more of the provisions of this Note shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
H. Governing Law
This Note shall be deemed to have been made and executed at Syracuse,
New York regardless of the order in which the signatures of the parties shall be
affixed hereto, and this Note shall be interpreted, construed, and enforced in
accordance with the laws and public policies of the State of New York without
regard to the principles of conflicts of law.
In any action to enforce this Note, personal jurisdiction and venue
shall be at Holder's option in the Supreme Court of the State of New York,
County of Onondaga, or in the United States District Court for the Northern
District of New York.
I. Modification
This Note shall not be modified, amended, changed, terminated,
supplemented, or waived except in a` writing signed by Maker and Holder.
J. Release Fees
Maker shall pay release fees to Holder which are generated from the
sales of Interval Units at the Project in the amount of $2,180.00. The release
fees shall be applied by Holder to the principal balance due hereunder. On a
monthly basis, payment due on Interest Installments shall be re-calculated based
on the principal reduction.
K. Note Conversion
In the event Maker fails within one (1) year after the issuance of a
certificate of occupancy, to meet seventy-five percent (75%) of the projections
and forecasts relative to the sale of Interval Units, then Holder shall have the
option, upon sixty (60) days written notice, to convert this Note to a
conventional sixty (60) months amortized note with interest as set forth above.
IN WITNESS WHEREOF, the undersigned sets its hand the date above first
written.
VCA South Bend Incorporated
By Joseph P. Martori
----------------------------------
Title Chairman
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GUARANTY AND SUBORDINATION AGREEMENT
THIS GUARANTY AND SUBORDINATION AGREEMENT ("Guaranty") by and between
the undersigned signing as "Guarantor" at the end hereof ("Guarantors") and
Bennett Funding International, Ltd. ("Lender") is made the 4th day of October,
1994.
RECITALS
WHEREAS, Lender is entering into a Construction Loan Agreement and a
Construction Promissory Note - (collectively the "Agreement") with VCA South
Bend Incorporated ("Developer") bearing even date herewith; and,
WHEREAS, Lender is willing to enter into the Agreement with Developer
only if Guarantors agree to guaranty the full, timely, faithful performance of
and payment under and compliance with the Agreement and the instruments,
agreements and documents called for thereunder (collectively the "Documents").
NOW THEREFORE, in order to induce Lender to enter into the Agreement
with Developer and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Guarantors hereby unconditionally covenant and
agree with Lender as follows:
1. Each Guarantor hereby jointly, severally and
unconditionally guaranties to Lender (a) the full, complete and punctual
performance by Developer of all the terms, covenants and conditions contained in
the Documents ("Obligations") and (b) the due and punctual payment of all sums
at any time owed by the Developer under the Documents as and when the same shall
become due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Documents, and all losses, costs, expenses and
reasonable attorneys' fees incurred by reason of the occurrence of an Event of
Default under the Documents (herein collectively the "Indebtedness"). In case of
failure by the Developer punctually to pay the Indebtedness, each Guarantor
hereby jointly, severally and unconditionally agrees to make such payment
punctually as and when the same shall become due and payable, whether at
maturity or by acceleration or otherwise.
2. Each Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of (i) the validity, regularity or
enforceability of the Indebtedness, (ii) the absence of any attempt to collect
from the Developer or any other Guarantor, (iii) whether any other action has
been instituted or taken to enforce the same, (iv) the waiver or consent by
Lender with respect to any provisions of the Documents, (v) the validity or
enforceability of the Guaranty against one or more of any other Guarantors or
(vi) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor.
3. Each Guarantor hereby waives diligence, presentment, demand
for payment, filing of claims with a court in the event of receivership or
bankruptcy of the Developer, protest or notice with respect to the Indebtedness
and all demands whatsoever and covenants that its obligations under this
Guaranty will not be discharged except by complete performance of the
obligations of the Developer contained in the Documents. Upon any default of the
Developer, Lender may, at its option, proceed directly and at once, without
notice, against any one or more of the Guarantors to collect and recover the
full amount of its liability hereunder, or any portion thereof, without
proceeding against the Developer, any other Guarantor or any other person, or
foreclosing upon, selling, or otherwise disposing of or collecting or applying
any property, real or personal, Lender may then hold as security for such
Indebtedness.
4. The Guarantors authorize Lender, without notice or demand
and without affecting the liability of the Guarantors hereunder, from time to
time to (a) renew, extend, accelerate or otherwise change the time for payment
of, or otherwise change the terms of the Indebtedness or any part thereof; (b)
accept partial payments on the Indebtedness; (c) take and hold security for the
payment of this Guaranty or the Indebtedness and exchange, enforce, waive and
release any such security; (d) apply such security and direct the order or
manner of sale thereof as Lender in its discretion may determine; and (e)
settle, release, compromise, collect or otherwise liquidate any Indebtedness and
any security therefor in any manner, without affecting or impairing the
obligations of each Guarantor hereunder. Lender may without notice assign this
Guaranty in whole or in part.
5. From and after the occurrence of an event of default by
Developer and until all Indebtedness of the Developer to Lender shall have been
paid in full, each Guarantor shall have no right of subrogation, and each
Guarantor waives any right to enforce any remedy which Lender now has or may
hereafter have against the Developer and any benefit of, and any right to
participate in, any security at any time held by Lender. Each Guarantor waives
all set-offs and counterclaims and all presentments, demands for performance,
notices of non-performance, protests, notices of protest, notices of dishonor,
and notices of acceptance of the Guaranty and of the existence, creation, or
incurring of new or additional Indebtedness.
6. From and after the occurrence of an Event of Default by
Developer, ( as defined in the "Agreement" ), Guarantor subordinates all
Guarantor's liens, security interests, claims and rights of any kind that
Guarantor may now have or hereafter acquire against Developer and/or Developer's
assets and property ("Developer's Property") resulting from Developer's present
and future indebtedness to Guarantor ("Subordinated Indebtedness"), and agrees
that all liens, security interests, claims and rights of any kind that Guarantor
may now have or hereafter acquire against Developer and Developer's Property
resulting from the Subordinated Indebtedness shall be subordinate, inferior and
subject to the claims and rights of Lender against Developer and/or Developer's
Property under the terms of any of the documents whether direct or contingent or
whether now or hereafter created. Guarantor grants to Lender a security interest
in the Subordinated Indebtedness, which shall be collected, enforced and
received by the holder(s) thereof for Lender and be paid over to Lender on
account of the Obligations, but without reducing or affecting in any manner the
liability of Guarantor under any of the other provisions of this Guaranty;
provided, however, that unless an event of default has occurred and is
continuing, Guarantor may retain for its own account reasonable salaries or fees
for services actually rendered or monies due. Notwithstanding anything herein to
the contrary, if any portion of the Subordinated Indebtedness becomes due and
payable prior to its stated maturity, Lender shall be entitled to receive full
performance of the Obligations before the holder(s) thereof is/are entitled to
receive any payment on the Subordinated Indebtedness, except salaries, or for
services actually rendered.
7. Guarantor will not take any action which will either (i) force the
sale of Developer's Property in order to satisfy the Subordinated Indebtedness
or (ii) affect in any manner any and all of Lender's liens, security interests,
claims or rights of any kind that Lender may now have or hereafter acquire
against Developer and/or Developer's Property. Guarantor will refrain from
taking any action which is in any way inconsistent with or in derogation of this
subordination or of the rights of Lender hereunder and covenants to perform such
further acts as necessary or appropriate to giving effect to this subordination.
Without limiting the generality of the foregoing, Guarantor will not assign any
portion of the Subordinated Indebtedness, except expressly subject to the terms
of this Guaranty; and Guarantor shall cause all evidence of the Subordinated
Indebtedness to set forth the provisions hereof or to bear a legend that it is
subject hereto.
8. This Guaranty constitutes the entire understanding of the parties
with respect to the subject matter hereof and neither this Guaranty nor any
provision hereof may be amended, terminated, changed, waived or discharged
orally, but only by an instrument in writing signed by the party against which
enforcement of the amendment, termination, change, waiver or discharge is
sought.
9. This Guaranty may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
10. No failure or delay by Lender or the holder of the Construction
Promissory Note in exercising any right, power or privilege hereunder or
thereunder shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege.
11. This Guaranty shall be deemed to have been negotiated, made and
executed in Onondaga County, State of New York regardless of the order in which
the signatures of the parties shall be affixed hereto. This Guaranty and the
rights of the parties hereunder shall be interpreted, construed and enforced in
accordance with the laws and public policies of the State of New York, exclusive
of New York's Conflict of Laws rules and public policies. IN ANY ACTION TO
ENFORCE THE PROVISIONS OF THIS GUARANTY, PERSONAL JURISDICTION AND VENUE SHALL
BE IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK.
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
on this 4th day of October, 1994.
ILX Incorporated
By:
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Title:
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CONTRACT OF SALE OF TIMESHARE
RECEIVABLES WITH RECOURSE
This CONTRACT OF SALE OF TIMESHARE RECEIVABLES WITH RECOURSE is made
the 4th day of October, 1994, between Bennett Funding International, LTD.
("BFIL") at The Atrium, Two Clinton Square, Syracuse, New York, 13202, and VCA
South Bend Incorporated ("SELLER") at 2777 East Camelback Road, Phoenix, Arizona
85016
RECITALS
WHEREAS, SELLER is in the business of marketing a timeshare resort
known as Varsity Clubs of America, South Bend (the "Project") located at
Mishawaka, Indiana and conveying by Warranty Deed a clear and marketable title
with respect to the individual timeshare interests at the Project and all other
rights of usage and other appurtenances of and pertaining to each such timeshare
interest (collectively "Intervals");
WHEREAS, SELLER, in the course of conducting such business, shall
accept notes and mortgage deeds (collectively "Contracts") (also referred to as
"Receivables") from purchasers of Intervals ("Purchasers") in order to finance
the purchase of Intervals by Purchasers;
WHEREAS, BFIL is engaged, in addition to other activities, in the
business of purchasing Receivables; and,
WHEREAS, SELLER may from time to time offer to sell to and BFIL may
desire to buy Receivables from SELLER under the terms of this Agreement.
W I T N E S S E T H:
NOW, THEREFORE, for good and valuable consideration provided herein and
hereafter, the receipt of which is hereby acknowledged, and pursuant to the
mutual covenants and conditions contained herein, the parties agree as follows:
SECTION I
DEFINITIONS
1.1 In addition to the words and terms elsewhere defined herein, the
following words and terms as used herein shall have the following meanings
unless the context or use clearly indicates another or different meaning or
intent:
"Agreement" means this Contract Of Sale Of Timeshare
Receivables With Recourse and any modifications, changes, or additions hereto;
"Chargebacks" means defaulted Receivables which have been
debited against SELLER pursuant to paragraph 3.1;
"Default Receivables" means any eligible Receivable purchased
by BFIL for which a payment has not been made within ninety (90) days of its due
date:
"Eligible Receivables" means (a) the Receivable must provide
for consecutive monthly installments of principal and interest in U.S. funds
over a term not exceeding eighty-four (84) months from the date of its
execution; (b) the first payment due date must not exceed forty-five (45) days
from the date of offering to BFIL; (c) the Purchaser in all respects, including,
without limitation, its creditworthiness, is acceptable to BFIL in its sole
judgment, has obtained from SELLER an Interval and has not purchased more than
six (6) Intervals in the Project; (d) the Contract is in form and substance
satisfactory to BFIL and validly enforceable in accordance with its terms, upon
the obligor's default under the Receivable, subject only to notice and a
reasonable grace period, payment of the balance of the indebtedness owing under
the Receivable may be immediately accelerated; (e) all off-site improvements
which SELLER is obligated to install or are necessary in connection with the
uses to which SELLER has represented the Intervals may be put have been
completed and all necessary and promised utilities are available, and the uses
of the Intervals for which SELLER has represented it/they may be put and such
improvements conform to all applicable restrictions and laws, necessary
approvals having been obtained; and (f) the Receivable and the applicable sale
transaction comply with all applicable laws, SELLER has performed all its
obligations due to the Purchaser and there are no executory obligations to the
Purchaser to be performed by SELLER, and the Purchaser does not have any right
of rescission, set-off, abatement, counterclaim or the like.
"Financing Statements" means any and all U.C.C. financing
statements (including continuation statements) filed of record from time to time
as required under this Agreement;
"Mortgage" means the mortgage granted BFIL to secure SELLER's
Obligations to BFIL hereunder, including but not limited to the Promissory Note;
"Promissory Note" means the Promissory Note referred to in
Section 2.8 hereof, a copy of which is attached hereto.
"Purchaser" means an obligor under a Receivable and any person
who is obligated to make any payments pursuant to such Receivable;
"Obligation" shall mean any and all indebtedness, obligations,
liabilities, contracts, representations, warranties, and agreements of every
kind and nature between SELLER and BFIL now existing or hereinafter arising, and
now or hereinafter contemplated pursuant to this Agreement or otherwise;
"Receivable Payments" means those payments on the
Receivable(s) which have been sold, assigned, transferred, and set over to BFIL
pursuant to this Agreement;
"Receivables" (a) the Receivables which are, now or hereafter,
assigned, endorsed and delivered to BFIL pursuant hereto; (b) all Contracts,
notes, deeds, deeds of trust, guaranties and other documents or instruments
evidencing or securing the obligations of the Purchasers and/or any other person
primarily or secondarily liable on such Receivables; (c) all policies of
insurance if any related to such Receivables or delivered in connection
therewith; (d) if any, all rights under escrow agreements and all impound and/or
reserve accounts pertaining to the foregoing; (e) all files, books and records
of SELLER pertaining to any of the foregoing; and (f) the proceeds from the
foregoing;
"Recourse" means that SELLER is obligated to pay BFIL a sum
certain under a defaulted Receivable as subject to Section 3.1;
"Related Documents" means other documents and agreements
between SELLER and BFIL executed even date herewith which form the basis of the
transaction, together with any and all renewals, extensions, amendments,
restatements or replacements thereof, whether now or hereafter existing.
"U.C.C." means the Uniform Commercial Code as enacted in
Indiana and Arizona and as now or hereinafter amended.
SECTION II
SUBJECT MATTER OF SALE AND PAYMENT
2.1 SELLER shall, from time to time, offer to sell, transfer and assign
to BFIL Receivables arising out of the sale of Intervals at the Project. The
Contracts offered to BFIL shall be in the form of those attached as Exhibit A,
and no Contract in any other form shall be offered to BFIL unless such different
form has previously been approved by BFIL in writing. Concurrently with the
transfer of each Contract, SELLER shall transfer and assign to BFIL the
contract, note, mortgage, loan applications, financial statements,
truth-in-lending disclosure statement, the closing or settlement statement and
the receipt for timeshare sale documents.
2.2 All Contracts hereafter offered to BFIL shall be offered under and
pursuant to the terms, conditions, representations, covenants, provisions and
warranties set forth herein and in said Contracts, unless otherwise expressly
agreed to in writing at the time such Contracts shall be offered to BFIL. This
Agreement shall govern the sale, transfer, and assignment of all Contracts by
SELLER to BFIL arising out of the Project. BFIL shall be given a reasonable
opportunity, in each case, to investigate the credit of any and to qualify the
Purchaser obligated upon the Contract and shall not be deemed to have purchased
any Contract until credit therefor has been noted on BFIL's books and records to
an account of SELLER or until receipt of payment by SELLER, whichever occurs
first. BFIL will use its best efforts to disburse, within ten (10) business days
after the receipt of the Receivables (other than title insurance) the funds to
which SELLER would be entitled from any Receivable accepted by BFIL.
2.2(a) Total aggregate principal balance of all Contracts assigned to
BFIL in all phases of the Project shall not exceed Ten Million Dollars
($10,000,000.00), unless such Contract is renewed by BFIL in its sole
discretion.
2.3 All Contracts purchased by BFIL shall be secured by a purchase
money obligation pursuant to a mortgage deed given by the Purchaser of the
Interval to the SELLER and title insurance which shall be a first priority
position on the Interval more particularly described in the individual
Contracts.
2.4 BFIL shall pay SELLER a discounted purchase price for Eligible
Receivables calculated to yield a rate of interest equal to thirteen and
one-half percent (13.5%) or twelve and one-half percent (12.5%) for Contracts
paid by electronic funds transfer ("Purchase Price"). The present value of the
"interest spread," if any, shall be paid at the time of closing and calculated
or amortized based over the remaining term of the individual Receivable. The
"interest spread" is the difference payable on the Receivable compared to the
yield required to be paid to BFIL.
2.5 BFIL shall pay SELLER eighty-five percent (85%) of the Purchase
Price on closing of the Receivable subject to paragraphs 2.1, 2.2 and 2.6 above.
2.6 BFIL shall pay SELLER the remaining fifteen (15%) percent of the
Purchase Price upon BFIL's receipt of all payments due it under the purchased
Receivable from the Purchaser. SELLER acknowledges that it does not have the
right to receive the remaining fifteen (15%) percent payment until BFIL receives
all sums due it under the purchased Receivable.
2.7 Contracts offered to BFIL will evolve from valid purchase contracts
arising out of sales of Intervals at the Project. The Contracts shall call for
successive amortized monthly installments of principal and interest not more
than eight-four (84) months.
2.8 BFIL shall also provide SELLER a Construction Loan secured by a
first mortgage on all the real estate and personal property of SELLER including
but not limited to the proceeds of all presently unsold timeshare intervals and
the proceeds of the sale of timeshare intervals sold in the future. The release
payment for each interval shall be $2,180.00 and shall be applied to principal.
The Construction Loan shall be evidenced by a Promissory Note in a principal
amount not to exceed Five Million Dollars ($5,000,000.00). Interest shall be
paid in full on a monthly basis and any outstanding principal and interest shall
be payable in full 36 months after the last disbursement under the terms of the
Construction Loan Agreement.
2.9 The entire outstanding amount due under this Agreement may be
prepayable in whole but not in part at any time, upon not less than thirty (30)
days prior irrevocable written notice to BFIL. Any prepayment of aggregate
principal amounts due under the Contracts shall be accompanied by all interest
accrued to the date of prepayment, any fees or expenses payable and a premium
with respect to outstanding principal as follows:
Pre-Payment 7 Year Paper 5 Year Paper
Period Pre-Payment Penalty Pre-Payment Penalty
------ ------------------- -------------------
During 1st year 7% 5%
During 2nd year 6% 4%
During 3rd year 5% 3%
During 4th year 4% 2%
During 5th year 3% 1%
During 6th year 2%
During 7th year 1%
The aforementioned Pre-Payment Penalty does not apply to the individual obligors
should they elect to pre-pay or buyout their respective obligations.
SECTION III
RECOURSE
3.1 Upon the occurrence of an Event of Default as defined in Section IX
below, or if payment of any installment payable under a Contract has been in
default for a period of ninety (90) days or more, SELLER hereby unconditionally
agrees to repurchase said Contract from BFIL within ten (10) days after demand
or, if SELLER shall not be otherwise in material default (excepting timely cure
of defaulted Receivable by replacement), SELLER may, at its option, replace the
Contract within ten (10) days after demand with another Contract acceptable to
BFIL as above-described having a principal balance term and yield not less than
the Contract being replaced such replacement shall also be Recourse. The
repurchase price (the "Contract Repurchase Price") of any Contract which SELLER
is required to repurchase pursuant to this paragraph shall be a sum equal to the
principal balance of the defaulted Contract (calculated with the same discount,
if any, as the original Purchase Price) plus accrued interest less any balance
remaining of the purchase price not yet paid to SELLER pursuant to Section 2.6.
Upon payment to BFIL of the Contract Repurchase Price or
substitution of a replacement Contract, the Contract shall be transferred to
SELLER by assignment free and clear of any rights of any person claiming through
or under BFIL and without recourse. Transfer shall include endorsement without
recourse and delivery of the Notes to the SELLER, re-assignment of the mortgage
in recordable form and return of all Related Documents regarding the Receivable.
SECTION IV
WARRANTIES AND REPRESENTATIONS
4.1 In connection with the execution of this Agreement and the Related
Documents, SELLER represents and warrants and, so long as any balance is
outstanding on any purchased Receivable, shall be deemed to represent and
warrant continuously to BFIL as follows in paragraph 4.2 through and including
4.16 of this Section IV;
4.2 SELLER is a validly existing corporation under the laws of the
State of Arizona. SELLER is qualified to do business in Indiana and is in good
standing under the laws of such other jurisdictions as required to conduct its
business as presently conducted, and has all licenses and permits necessary to
conduct its business as and where presently conducted.
4.3 The SELLER has the power and authority to (a) own its property and
transact the business in which it is engaged or presently proposes to engage;
and (b) execute, deliver and perform this Agreement and Related Documents
requiring execution, delivery and performance by it. The execution, delivery and
performance of this Agreement and the Related Documents have been duly
authorized by all requisite action required by law and by its Articles of
Incorporation and By-Laws. The execution, delivery and performance of this
Agreement and the Related Documents by SELLER does not and will not constitute a
breach or violation of (a) Certificate of Incorporation and By-Laws, and (b) any
other instrument or contract between the parties or any other law,
administrative regulation or court decree by which the SELLER is bound. SELLER
is not in default under any indenture, mortgage, deed of trust, agreement or
other instrument to which it is a party.
4.4 This Agreement and each of the Related Documents are valid, binding
and enforceable in accordance with their terms and do not require the consent or
approval of any governmental body, agency or authority.
4.5 There are no actions, suits or proceedings served or to the
knowledge of SELLER pending or threatened, against or affecting SELLER before
any court, arbitrator or governmental or administrative body or agency which
might result in any material adverse change in the business, operations,
properties or assets or in the condition, financial or otherwise, of SELLER.
SELLER is not in default in any material respect under any applicable statute,
rule, order, decree or regulation of any court, arbitrator or governmental
agency having jurisdiction over it.
4.6 SELLER has filed tax returns, income or otherwise, which are
required to be filed by it and has paid or established adequate reserves for all
taxes which have become due pursuant to such returns or pursuant to any
assessment received by them. SELLER has no knowledge of any unassessed tax or
tax deficiency proposed or threatened against it.
4.7 The financial statements of SELLER delivered to BFIL are correct
and fairly present the financial condition of SELLER as of the date of such
statements. There has been no material adverse change in the condition,
financial or otherwise, of SELLER since the date of such statements.
4.8 No part of this Agreement or the Related Documents or any
certificate or statement furnished by SELLER to BFIL contains or will contain on
any closing date any untrue statement of a material fact necessary in order to
make the statements contained herein or therein with respect to SELLER not
misleading. To the best of SELLER's knowledge, there is no fact (other than
facts relating to general economic conditions) which materially adversely
affects the business, operations, affairs, conditions, properties or assets of
SELLER which has not been set forth in the documents, certificate or statement
furnished to BFIL.
4.9 The address of the chief executive officer and chief place of
business of the SELLER is 2777 East Camelback Road, Phoenix, AZ 85016. All
records (including computer records pertaining to the purchased Receivables,
collections thereon and contracts giving rise thereto) are kept at 2777 East
Camelback Road, Phoenix, AZ 85016.
4.10 Each Receivable purchased by BFIL shall comply with all attributes
of an installment loan obligation as described by Federal, and applicable State
statutes.
4.11 Each Receivable shall comply with all applicable Federal and State
requirements and regulations, including, without limitation, truth-in-lending
requirements, Federal and State disclosures requirements and regulations, and
other requirements pertaining to the enforcement or enforceability of the
Receivables.
4.12 The Receivables and assignments of the Receivables shall be fully
enforceable in accordance with their terms.
4.13 SELLER has complied in all respects with all Federal, State and
local laws, ordinances, regulations and orders applicable to its business.
SELLER has all Federal, State and local governmental licenses and permits
material to and necessary in the conduct of its business including, but not
limited to the origination, purchasing and sale of consumer Receivables and such
licenses are in full force and effect and no violations are or have been
recorded in respect to any such licenses or permits and no proceeding is pending
or threatened to revoke any thereof.
4.14 The Receivables are genuine and in all respects what they purport
to be and enforceable according to their terms; all statements contained in the
Receivables are true and that all unpaid balances shown therein are correct;
and, the Receivables, and each of the Receivable documents and the obligations
which they evidence are, and will continue to be, free and clear of all
defenses, setoffs, counterclaims, liens and encumbrances of every kind and
nature.
4.15 That at the time of the execution of this Agreement, SELLER had
good title to the Receivables and full right to enter into the Receivables;
services and facilities have been made available to the Purchaser in
satisfactory condition and have been accepted by the Purchaser under the terms
of the Receivables; all parties to the Receivables have full capacity to
contract; all filing and recording required by law have been completed and
complied with; and, that any requirement of new or further filing, recording or
renewals thereof shall be complied with by SELLER and that BFIL may undertake
same but shall be without any responsibility or obligations whatsoever for any
omission or invalid accomplishment thereof.
4.16 That SELLER shall have no authority to accept any collections of
any sums under the Receivables unless BFIL consents thereto, except for dues.
Upon default of a Receivable and without releasing the liability of SELLER, BFIL
may, in its own discretion, grant extensions of time of payment to and
compromise or release claims against the Purchaser who is in default on the
Receivables upon thirty (30) days notice to SELLER. During this thirty (30) day
period the SELLER shall have the right to cure the default with a Purchaser.
SECTION V
INDEMNIFICATION
5.1 SELLER agrees to indemnify and hold harmless BFIL against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), to which BFIL may become subject, under Federal or
State laws or regulations, at common law or otherwise, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
hereunder or in any Related Document or in the Receivables; and, upon notice,
will reimburse BFIL for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action.
5.2 This indemnity provision agreement shall be in addition to any
liability which the SELLER may have at common law or otherwise.
SECTION VI
ASSIGNMENT
6.1 As to the Receivables that have been sold to BFIL, SELLER shall not
assign, sublet, lend, transfer, pledge, or hypothecate any of such Receivables
or this Agreement. BFIL however may assign, transfer, pledge, or sell its
interest in any or all Receivables or this Agreement or the related documents.
Upon notification of such assignment, SELLER shall remit any payments due
hereunder from the SELLER directly to the address set forth on the notification.
In no event shall any collateral assignee of BFIL be obligated to perform any
duty, covenant, condition, or promise under this Agreement or the Related
Documents. It is understood and agreed that on any collateral assignment, BFIL
shall be obligated to perform its obligations hereunder.
SECTION VII
PROHIBITION AGAINST INDEBTEDNESS
7.1 That during the pendency of this Agreement and the Related
Documents, and, in any event, until BFIL is in receipt of all monies and other
sums due BFIL from SELLER hereunder, SELLER shall not do or cause to be done any
of the following without the prior written approval of BFIL, which approval
shall not be unreasonably withheld:
(a) Sell or lease all or substantially all of its assets out
of the ordinary course of its business or enter into any merger, consolidation
or other agreement for the sale of the business;
(b) Except as specifically provided hereunder, mortgage,
pledge, or voluntarily subject to any lien or encumber any Receivable;
(c) Change the type or character or the standard operation of
SELLER.
SECTION VIII
TAX
8.1 In the event that any sales tax is levied against BFIL pursuant to
the sale and purchase of the Receivables or upon the stream of payments
generated thereon, SELLER agrees to pay said sales tax upon sixty (60) days
notice.
SECTION IX
EVENT OF DEFAULT
9.1 The occurrence of any of the following events shall constitute an
"Event of Default" as such term is used herein:
(a) SELLER's failure to pay when due any amount payable under
this Agreement and said failure continues for a period of thirty (30) days from
written notice thereof;
(b) Any statement, representation or warranty made herein or
in any supporting financial statement by or on behalf of SELLER shall prove to
have been false when made or breached in any material respect the breach of
which deprives BFIL of any material economic value of its bargain;
(c) Failure to observe or perform any other covenant or
obligation contained in this Agreement or any Related Document, the breach of
which deprives BFIL of any material economic value of its bargain;
(d) The commission of any act of bankruptcy or the making of a
general assignment for the benefit of creditors, or the institution of any
proceeding by or against SELLER under Federal or State bankruptcy or insolvency
laws;
(e) Termination of contract or licensing agreement with
reciprocal use network organization unless a comparable contract or licensing
agreement is entered into;
(f) Termination or suspension of the operation or the SELLER;
(g) The aggregate of the stream of payments of chargeback
Receivables exceeds fifteen (15%) percent of the aggregate stream of payments on
all outstanding Receivables sold to BFIL to date hereunder;
(h) The number of defaulted Receivables exceeds fifteen (15%)
percent of all outstanding Receivables sold to BFIL to date hereunder; or,
(i) Any act of SELLER which materially and adversely limits
the rights of Interval Purchasers to use the common areas and recreational
facilities of the Project.
SECTION X
RIGHTS ON DEFAULT
10.1 SELLER agrees that when any Event of Default has occurred and is
continuing, BFIL may (1) proceed to exercise any rights, privileges and remedies
that SELLER would be entitled to exercise as payee under the Receivables either
in the name of BFIL or with the full power in the name of SELLER as its true and
lawful attorney-in-fact for the use and benefit of BFIL with respect to such
Receivables, (2) sue SELLER for all recourse obligations which remain unpaid,
and (3) sue SELLER for damages for breach of contract.
10.2 No delay or omission of BFIL to exercise any right or power
arising from any Event of Default shall exhaust or impair any such right or
power or prevent its exercise during the continuance of such default. No waiver
by BFIL of any such Event of Default, whether such waiver be full or partial,
shall extend to or be taken to affect any subsequent Event of Default, or to
impair the rights resulting therefrom except as may be otherwise provided
therein. No remedy hereunder is intended to be exclusive of any other remedy but
each and every remedy given hereunder or otherwise existing shall be cumulative;
nor shall the giving, taking or enforcement of any other or additional security,
collateral or guaranty, waive any rights, powers or remedies hereunder, nor
shall BFIL be required to look first to, enforce or exhaust such other or
additional security, collateral or guaranties.
SECTION XI
NOTICE
11. The parties agree that any notice required hereunder shall be sent
by certified mail, return receipt requested to the last known business address
of the respective parties and by forwarding a copy of the notice by regular
first-class U.S. mail, unless a specific notice requirement is set forth herein.
(i) VCA South Bend
Incorporated Mr. Joseph P. Martori
2777 East Camelback Road
Phoenix, Arizona 85016
and a copy to
Ms. Nancy J. Stone
VCA South Bend Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
(ii) Bennett Funding International, Ltd.
The Atrium
Two Clinton Square
Syracuse, New York 13202
ATTN: Francis Goffredo
and a copy to
Edward J. Gaudino, Esq.
Associate General Counsel
Two Clinton Square
Syracuse, New York 13202
SECTION XII
FINANCIAL STATEMENTS AND SALES REPORTS OF SELLER
12.1 So long as this Agreement is in effect, SELLER shall deliver to
BFIL, within one hundred twenty (120) days of the end of its respective fiscal
year, a copy of its annual financial statements which shall be prepared and
certified as complete and correct by the principal financial officer of SELLER.
Within forty-five (45) days after the end of each fiscal quarter, SELLER shall
deliver to BFIL a copy of its unaudited quarterly statements covering such
quarter. SELLER shall deliver to BFIL a full report of all completed sales and
all pending contracts each months.
SECTION XIII
SERVICING AND COLLECTION
13.1 SELLER shall furnish BFIL with an executed letter on SELLER's
letterhead advising Purchasers of the sale and assignment of the Receivables
hereunder to BFIL.
13.2 BFIL shall invoice Purchasers on a monthly basis. BFIL shall
employ collection efforts consisting solely of past-due letters and telephone
calls. Upon repurchase of chargeback Receivables by SELLER from BFIL, SELLER
shall bear all responsibility for collection and legal action.
13.3 BFIL shall provide SELLER with a monthly aging report of the
Receivables.
SECTION XIV
TERMINATION
14.1 This agreement will not terminate prior to March 31, 1996, unless
an Event of Default occurs as described herein, and may be extended another
eighteen (18) months at the discretion of BFIL. Upon the occurrence of any Event
of Default, BFIL may, with or without proceeding with such sale or foreclosure
or demanding payment of the obligations, without notice, terminate BFIL's
further performance under this Agreement to purchase Eligible Receivables,
without further liability or obligation by BFIL, and may also, at any time,
appropriate and apply on any Obligations and any and all reserves, or other
monies due or owing to the SELLER held by BFIL hereunder or under any other
financing agreement or otherwise, whether accrued or not. Neither such
termination, nor the termination of this Agreement by lapse of time, the giving
of notice or otherwise shall absolve, release or otherwise affect the liability
of the SELLER in respect of transactions prior to such termination, or affect
any of the liens, security interests, rights, powers and remedies of BFIL
hereunder, but they shall, in all events, continue until all of the Obligations
are satisfied.
SECTION XV
LEGAL
15.1 This Agreement and the Related Documents constitute the entire
agreement and understanding between the parties.
15.2 This Agreement and Related Documents may not be amended, changed,
modified, or supplemented except in writing executed by both parties herein.
15.3 In the event any provision of this Agreement or any Related
Document, including the remedies upon default, be declared invalid, such
provision or remedy shall be inapplicable and deemed omitted, but the remaining
provisions and remedies shall be given full force and effect.
15.4 This Agreement and the Related Documents shall be deemed to have
been negotiated, made and executed in Onondaga County, State of New York,
regardless of the order in which the signatures of the parties shall be affixed
hereto.
15.5 This Agreement and the Related Documents shall be interpreted,
construed, and enforced in accordance with the laws and public policies of the
State of New York, with regard to New York's Conflict of Laws Rules and Public
Policies.
15.6 In any action to enforce the provisions of this Agreement or the
Related Documents, personal jurisdiction and venue shall be in the United States
District Court for the Northern District of New York.
15.7 This Agreement and the Related Documents shall be binding upon and
inure to the benefit of the parties to it and their respective successors and
assigns.
15.8 The parties acknowledge that this Agreement and the Related
Documents a supersede all prior negotiations, understandings and agreements
between the parties and that this Agreement is the full and final expression of
the parties. Any statements made by representatives of each party shall not be
admissible to vary, change, modify or amend the terms and conditions of this
Agreement and the Related Documents except in conformity with paragraph 15.2.
SECTION XVI
SPECIAL PROVISIONS
16.1 In order to insure payment and performance hereunder by SELLER,
the guaranty and subordination of ILX Incorporated shall be required.
16.2 Upon closing SELLER shall pay BFIL the sum of Five Thousand
($5,000.00) Dollars for costs (already paid). 16.3 Closing is subject to receipt
and review to SELLER's and BFIL's mutual satisfaction of each document required
to be provided to SELLER and more particularly described in the Closing Letter
among SELLER and BFIL.
16.4 The parties shall use the services of St. Joseph Title
Corporation, an Escrow Agent for the matters addressed below.
(a) Receipt of the Receivables and other documents set forth
in 2.1 above.
(b) Recordation of applicable mortgages, assignments and
releases;
(c) Issuance of satisfactory title insurance to BFIL on the
property described in the Mortgage securing SELLER's Obligations to
BFIL under this Agreement and Related Documents; and
(d) Transmittal of remaining proceeds to SELLER.
16.5 SELLER shall grant to BFIL the right of first refusal to purchase
all Receivables generated in connection with VCA South Bend Incorporated
16.6 SELLER shall grant BFIL or its assigns the right to solicit the
obligors under the purchased Receivables concerning travel related services
offered by BFIL or its assigns; and
16.7 SELLER shall cause to be delivered to BFIL evidence that the
purported releases for Purchase Money Deeds of Trust have been duly filed and
recorded contemporaneous with this loan closing.
IN WITNESS WHEREOF, the parties set their hands the date above first
written.
Bennett Funding International, LTD. VCA South Bend Incorporated
By: /S/ By: Joseph P. Martori
-------------------------------- ---------------------------------
Title: CEO Title: Chairman
----------------------------- ------------------------------
GUARANTOR:
ILX Incorporated
By Joseph P. Martori
--------------------------------
Title Chairman
-----------------------------
GUARANTY AND SUBORDINATION AGREEMENT
THIS GUARANTY AND SUBORDINATION AGREEMENT ("Guaranty") by and between
the undersigned signing as "Guarantor" at the end hereof ("Guarantor") and
Bennett Funding International, Ltd. ("BFIL") is made the 4th day of October,
1994.
RECITALS
WHEREAS, BFIL is entering into a Contract of Sale of Timeshare
Receivables With Recourse ("Contract") with VCA South Bend Incorporated.
("Developer") bearing even date herewith; and,
WHEREAS, BFIL is willing to enter into the Contract with Developer only
if Guarantor agree to Guaranty the full, timely, faithful performance of and
payment under and compliance with the Contract and the instruments, promissory
notes, mortgages, agreements and documents called for thereunder (collectively
the "Documents").
NOW THEREFORE, in order to induce BFIL to enter into the Contract with
Developer and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, Guarantor hereby unconditionally covenants and
agrees with BFIL as follows:
1. The Guarantor hereby unconditionally Guaranties to BFIL (a)
the full, complete and punctual performance by Developer of all the terms,
covenants and conditions contained in the Documents ("Obligations") and (b) the
due and punctual payment of all sums at any time owed by the Developer under the
Documents as and when the same shall become due and payable, whether at
maturity, by acceleration or otherwise, according to the terms of the Documents,
and all losses, costs, expenses and reasonable attorneys' fees incurred by
reason of a default under the Documents (herein collectively the
"Indebtedness"). In case of failure by the Developer punctually to pay the
Indebtedness, the Guarantor hereby unconditionally agrees to immediately make
such payment as and when the same shall become due and payable, whether at
maturity or by acceleration or otherwise.
2. Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of (i) the validity, regularity or
enforceability of the Indebtedness, (ii) the absence of any attempt to collect
from the Developer or any Guarantor, (iii) whether any other action has been
instituted or taken to enforce the same, (iv) the waiver or consent by BFIL with
respect to any provisions of the Documents, (v) the validity or enforceability
of the Guaranty against any Guarantor, (vi) the validity or enforceability of
the Contract or the Documents, or (vii) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
3. Guarantor hereby waives diligence, presentment, demand for
payment, filing of claims with a court in the event of receivership or
bankruptcy of the Developer, protest or notice with respect to the Indebtedness
and all demands whatsoever and covenants that its Guaranty will not be
discharged except by complete performance of the obligations of the Developer
contained in the Documents. Upon any default of the Developer, BFIL may, at its
option, proceed directly and at once, without notice, against the Guarantor to
collect and recover the full amount of its liability hereunder, or any portion
thereof, without proceeding against the Developer, any other Guarantor or any
other person, or foreclosing upon, selling, or otherwise disposing of or
collecting or applying any property, real or personal, BFIL may then hold as
security for such Indebtedness.
4. Guarantor authorizes BFIL, without notice or demand and
without affecting the liability of the Guarantor hereunder, from time to time to
(a) renew, extend, accelerate or otherwise change the time for payment of, or
otherwise change the terms of the Indebtedness or any part thereof; (b) accept
partial payments on the Indebtedness; (c) take and hold security for the payment
of this Guaranty or the Indebtedness and exchange, enforce, waive and release
any such security; (d) apply such security and direct the order or manner of
sale thereof as BFIL in its discretion may determine; and (e) settle, release,
compromise, collect or otherwise liquidate any Indebtedness and any security
therefor in any manner, without affecting or impairing the obligations of
Guarantor hereunder. BFIL may without notice assign this Guaranty in whole or in
part.
5. Until all Indebtedness of the Developer to BFIL shall have
been paid in full, Guarantor shall have no right of subrogation, and Guarantor
waives any right to enforce any remedy which BFIL now has or may hereafter have
against the Developer and any benefit of, and any right to participate in, any
security at any time held by BFIL. Guarantor waives all set-offs and
counterclaims and all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor, and notices
of acceptance of the Guaranty and of the existence, creation, or incurring of
new or additional Indebtedness.
6. With the exception of any Timeshare Receivable which may be
pledged as collateral or sold to a third party lender, Guarantor subordinates
all Guarantor's liens, security interests, claims and rights of any kind that
Guarantor may now have or hereafter acquire against Developer and/or Developer's
assets and property ("Developer's Property") resulting from Developer's present
and future indebtedness to Guarantor ("Subordinated Indebtedness"), and agrees
that all liens, security interests, claims and rights of any kind that Guarantor
may now have or hereafter acquire against Developer and Developer's Property
resulting from the Subordinated Indebtedness shall be subordinate, inferior and
subject to the claims and rights of BFIL against Developer and/or Developer's
Property under the terms of any of the documents whether direct or contingent or
whether now or hereafter created. Guarantor grants to BFIL a security interest
in the Subordinated Indebtedness, which shall be collected, enforced and
received by the holder(s) thereof for BFIL and be paid over to BFIL on account
of the Obligations, but without reducing or affecting in any manner the
liability of Guarantor under any of the other provisions of this Guaranty;
provided, however, that unless an event of default has occurred and is
continuing, Guarantor may retain for his own account reasonable salaries or fees
for services in the annual amount presently paid. Notwithstanding anything
herein to the contrary, if any portion of the Subordinated Indebtedness becomes
due and payable prior to its stated maturity, BFIL shall be entitled to receive
full performance of the obligations before the holder(s) thereof is/are entitled
to receive any payment on the Subordinated Indebtedness.
7. Guarantor will not take any action which will either (i) force the
sale of Developer's Property in order to satisfy the Subordinated Indebtedness
or (ii) affect in any manner any and all of BFIL's liens, security interests,
claims or rights of any kind that BFIL may now have or hereafter acquire against
Developer and/or Developer's Property. Guarantor will refrain from taking any
action which is in any way inconsistent with or in derogation of this
subordination or of the rights of BFIL hereunder and covenants to perform such
further acts as necessary or appropriate to giving effect to this subordination.
Without limiting the generality of the foregoing, Guarantor will not assign any
portion of the Subordinated Indebtedness, except expressly subject to the terms
of this Guaranty; and Guarantor shall cause all evidence of the Subordinated
Indebtedness to set forth the provisions hereof or to bear a legend that it is
subject hereto.
8. This Guaranty constitutes the entire understanding of the parties
with respect to the subject matter hereof and neither this Guaranty nor any
provision hereof may be amended, terminated, changed, waived or discharged
orally, but only by an instrument in writing signed by the party against which
enforcement of the amendment, termination, change, waiver or discharge is
sought.
9. This Guaranty may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
10. No failure or delay by BFIL or the holder or assignee of any
Contract in exercising any right, power or privilege hereunder or thereunder
shall operate as a waiver thereof; nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
right, power or privilege.
11. This Guaranty shall be deemed to have been negotiated, made and
executed in Onondaga County, State of New York regardless of the order in which
the signatures of the parties shall be affixed hereto. This Guaranty and the
rights of the parties hereunder shall be interpreted, construed and enforced in
accordance with the laws and public policies of the State of New York, exclusive
of New York's Conflict of Laws rules and public policies. IN ANY ACTION TO
ENFORCE THE PROVISIONS OF THIS GUARANTY, PERSONAL JURISDICTION AND VENUE MAY, IN
BENNETT FUNDING INTERNATIONAL, LTD'S SOLE DISCRETION, BE IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK.
IN WITNESS WHEREOF, this Guaranty has been executed by the undersigned
on this 4th day of October, 1994.
GUARANTOR
ILX INCORPORATED.
BY
------------------------------------
TITLE
---------------------------------
DO NOT DESTROY THIS ORIGINAL NOTE: When paid, said original Note, together with
the Deed of Trust securing same, must be surrendered to Trustee for cancellation
and retention before reconveyance will be made.
ALL-INCLUSIVE PURCHASE MONEY PROMISSORY NOTE SECURED BY
ALL-INCLUSIVE PURCHASE MONEY DEED OF TRUST
$ 225,000.00 Phoenix , Arizona, January 18 , 19 94
----------- -------- ---------- --
In installments as herein stated, for value received, I/We ("Maker") promise to
pay to GPH PROPERTIES, INC., an Arizona corporation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
("Payee") or order, at Phoenix, Arizona
----------------------------------------------------------
the principal sum of TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS AND NO/100 * * *
----------------------------------------------------------
DOLLARS ($ 225,000.00 ).
------------------------------------------- ------------------------
PAYABLE AS FOLLOWS:
In annual installments of $45,000.00, due on the same day of each year,
beginning February 17, 1995. An in addition thereto, Maker herein agrees to pay
interest at the rate of 8% per annum from February 17, 1994, due on the same day
each year, beginning February 17, 1995. In the event the annual payments are not
received by the servicing agent within 5 days of the due date, the ENTIRE unpaid
principal balance plus accrued interest is all due and payable.
Maker has the right to prepay any portion of this Note without penalty, however,
accrued interest will be paid at the time of prepayment.
All principal payments due the Holder shall be used to satisfy any remaining
principal payments due under the First Deed of Trust (remaining the Holder's
obligation herein).
The parties herein understand and agree that the monthly payments due M&I
THUNDERBIRD BANK (and/or its assigns), shall be made by the holder herein,
direct and outside of the collection account servicing this note. It shall be
the holder's full responsibility to furnish the Maker proof of payment, should
the maker request the same. The parties herein acknowledge and accept
responsibility for any and all actions that may arise due to said payments being
made outside of the collection account.
The total principal amount of this Note includes the unpaid principal balance of
the Promissory Note(s) or Agreements for Sale ("Underlying Note(s)") secured by
Deed(s) of Trust and/or Mortgage(s) and/or such Agreement(s) for Sale, more
particularly described as follows:
1. PROMISSORY NOTE/AGREEMENT FOR SALE/DEED OF TRUST/MORTGAGE:
Maker/Purchaser: GPH PROPERTIES, INC., an Arizona corporation
-----------------------------------------------------------
Beneficiary/Mortgagee/Seller: M&I THUNDERBIRD BANK, an Arizona corporation
-----------------------------------------------
Original Amount: $ 100,000.00 Date: March 16, 1993
---------------------- ----------------------
Recordation Date: 4-1-93 Docket: Page: Recording No: 93-0194692
---------- ------ --- -----------
2. PROMISSORY NOTE/AGREEMENT FOR SALE/DEED OF TRUST/MORTGAGE:
Maker/Purchaser: N/A
-------------------------------------------------------------
Beneficiary/Mortgagee/Seller:
-------------------------------------------------
Original Amount: $ Date:
---------------------------- ----------------------
Recordation Date: Docket: Page: Recording No:
---------- ------ --- -----------
3. PROMISSORY NOTE/AGREEMENT FOR SALE/DEED OF TRUST/MORTGAGE:
Maker/Purchaser: N/A
-------------------------------------------------------------
Beneficiary/Mortgagee/Seller:
------------------------------------------------
Original Amount: $ Date :
---------------------- ----------------------
Recordation Date: Docket: Page: Recording No:
---------- ------ --- -----------
4. PROMISSORY NOTE/AGREEMENT FOR SALE/DEED OF TRUST/MORTGAGE :
Maker/Purchaser: N/A
-------------------------------------------------------------
Beneficiary/Mortgagee/Seller:
------------------------------------------------
Original Amount: $ Date:
---------------------- ----------------------
Recordation Date : Docket: Page: Recording No:
---------- ------ --- -----------
All recording data refers to records of Maricopa County, Arizona .
------------------
By Payee's acceptance of this Note, Payee covenants and agrees that, provided
Maker is not delinquent or in default under the terms of this Note, Payee shall
pay all installments of principal and interest which shall hereafter become due
pursuant to the provisions of the Underlying Note(s) as and when the same become
due and payable. In the event Maker shall be delinquent or in default under the
terms of this Note, Payee shall not be obligated to make any payments required
by the terms of the Underlying Note(s) until such delinquency or default is
cured. In the event Payee fails to timely pay any installment of principal or
interest on the Underlying Note(s) at the time when Maker is not delinquent or
in default hereunder, Maker may, at Maker's option, make such payments directly
to the holder of such Underlying Note(s), in which event Maker shall be entitled
to a credit against the next installment(s) of principal and interest due under
the terms of this Note equal to the amount so paid and including, without
limitation, any penalty, charges and expenses paid by maker to the holder of the
Underlying Note(s) on account of Payee failing to make such payment. The
obligations of Payee hereunder shall terminate upon the earlier of (i)
foreclosure of the lien of the All-Inclusive Purchase Money Deed of Trust
securing this Note, or (ii) cancellation of this Note and release and
reconveyance of the All-Inclusive Purchase Money Deed of Trust securing same.
Should Maker be delinquent or in default under the terms of this Note, and Payee
consequently incurs any penalties, charges or other expenses on account of the
Underlying Note(s) during the period of such delinquency or default, the amount
of such penalties, charges and expenses shall be immediately added to the
principal amount of this note and shall be immediately payable by Maker, to
Payee, and shall bear interest from date of expenditure at the interest rate set
forth in the manner of payment above until paid.
Notwithstanding anything to the contrary herein contained, the right of Maker to
prepay all or any portion of the principal of this Note is limited to the same
extent as any limitation exists in the right to prepay the principal of the
Underlying Note(s). If any prepayments of principal of this Note shall, by
reason of the application of any portion thereof by Payee to the prepayment of
principal of the Underlying Note(s), constitute such prepayment for which the
holders of the Underlying Note(s) are entitled to receive a prepayment penalty
or consideration, the amount of such prepayment penalty or consideration shall
be paid by Maker to Payee upon demand, and any such amount shall not reduce the
unpaid balance of principal or interest hereunder.
At any time when the total of the unpaid principal balance of this Note, accrued
interest thereon, all other sums due pursuant to the terms hereof, and all sums
advanced by Payee pursuant to the terms hereof, and all sums advanced by Payee
pursuant to the terms of the All-Inclusive Purchase Money Deed of Trust securing
this Note, is equal to or less than the unpaid balance of principal and interest
then due under the terms of the Underlying Note(s), Payee, at his option, shall
cancel this Note and deliver same to Maker and execute a request for full
reconveyance of the Deed of Trust securing this Note.
Should default be made by Maker in payment of any installments of principal,
interest, or any other sums due hereunder, the whole sum of principal, interest
and all other sums due from Maker hereunder, after first deducting therefrom all
sums then due under the terms of the Underlying Note(s), shall become
immediately due at the option of the holder of this Note.
Principal, interest and all other sums due hereunder payable in lawful money of
the United States of America.
If action is instituted on this Note, I/we promise to pay such sums as the Court
may fix as attorney's fees.
This Note is secured by an ALL-INCLUSIVE PURCHASE MONEY DEED OF TRUST to
Where ever the word Holder appears herein, it shall also mean Payee. Maker
hereby requests written proof of all monthly payments made to M&I Thunderbird
Bank relating to the Underlying Note and Deed of Trust.
RED ROCK COLLECTION INCORPORATED,
an Arizona corporation (Maker)
(Maker)
BY: JOSEPH P. MARTORI
------------------------------------
ITS: CHAIRMAN (Maker)
-----------------------------------
(Maker)
The undersigned hereby accept(s) the foregoing All-Inclusive Purchase Money
Promissory Note and agree(s) to perform each and all of the terms thereof on the
part of Payee to be performed.
Executed as of the date and place first above written.
GPH PROPERTIES, INC., an Arizona corporation
(Payee) (Payee)
BY: ROGER E. PALMINBERG
------------------------------
ITS: VICE PRESIDENT (Payee)
(Payee)
NOTE: THIS NOTE IS FOR USE ONLY IN PURCHASE MONEY TRANSACTIONS. The parties are
cautioned that completing and executing this document, legal rights, duties and
obligations are created. By signing, the parties acknowledge that they have been
advised to seek and obtain independent legal counsel as to all matters contained
in the within document prior to signing same and that said parties have obtained
advice or choose to proceed without same.
DO NOT DESTROY THIS NOTE
OPTION AGREEMENT
THIS OPTION AGREEMENT entered into this 25th day of July, 1994, by and between:
IMPERIAL PROPERTIES, an Arizona
general partnership Hereinafter referred to
4455 East Camelback, Suite 136C as "Optionor"
Phoenix, Arizona 85018
Facsimile (602) 952-1791
and
ILX INCORPORATED, an Arizona
corporation, Hereinafter referred to
2777 East Camelback Road as "Optionee"
Phoenix, Arizona 85016
Facsimile (602) 957-2780
In consideration of the payment of the sum of Ten Thousand Dollars ($10,000.00)
(the "Initial Option Money") by the Optionee to the Optionor, by check payable
to the order of the Optionor, the receipt whereof acknowledges, and also in
consideration of the promises, covenants and conditions hereinafter contained,
the parties agree as follows:
1. Grant of Option. The Optionor hereby irrevocably grants to the Optionee the
option (the "Option") to acquire, subject to the terms and conditions
hereinafter set forth, all of Optionor's right, title and interest in
certain unimproved real property containing, approximately 15.37 acres
located in Sedona, Coconino County, Arizona, together with all appurtenances
thereto and all of Optionor's water rights therein, if any, which property
is described in Exhibit A hereto (the "Property").
2. Term and Extended Term of Option. This Option shall continue in effect until
5:00 P.M. Mountain Standard Time (MST) on October 1, 1994 and may be
exercised in accordance with its terms at any time on or before its
expiration; provided, however, that this Option shall automatically expire
(without any notice from the Optionor to the Optionee) at 5:00 P.M. (MST) on
October 1, 1994, unless extended as provided herein.
3. Rights to Extend Option. Optionee shall have the right to extend the term of
the Option until 5:00 P.M. MST for nine additional periods of one calendar
month each (the last such period ending July 1, 1995 at 5:00 P.M. MST) by
paying to the Title Company (as defined in paragraph 7 herein) by certified
check or wired funds before the expiration of the Option (in addition to the
Initial Option money paid on the execution of this Option) the sum of Ten
Thousand Dollars ($10,000.00) for each such extension through the extension
which terminated at 5:00 P.M. MST on March 1, 1995 and Fifty Thousand
Dollars ($50,000.00) for each such extension thereafter, (the "Option
Extension Money"). All Option Extension Money, upon receipt by Title
Company, shall be promptly paid to Optionor. This Option shall automatically
terminate (without any notice from the Optionor to the Optionee) if the
Optionee does not, prior to the expiration of
EXHIBIT "A" & "B"
the Option pay to the Title Company by certified check or wired funds the
amount of the Purchase Price (as defined in Section 8 hereof) minus the
amount of the Initial Option Money and the Option Extension Money, if any
("Closing Money").
4. Exercise of Option. Optionee may exercise the Option herein only by paying
the Closing Money to the Title Company as provided herein prior to
expiration of the Option or any extensions thereof.
5. Failure to Exercise Option. If prior to the expiration of this Option or any
extension thereof, the Optionee does not pay to the Title Company the
Closing Money described in paragraph 3, the Optionor shall retain absolutely
all of the Initial Option Money and Option Extension Money, if any, paid as
consideration for the granting of or the extension of this Option. If the
Optionee pays the Option Extension Money and the Closing Money in accordance
with paragraphs 3 and 4, then Optionee shall be deemed to have fully
exercised this Option and the Initial Option Money and the Option Extension
Money, if any, shall be applied to the payment of the Purchase Price.
6. Sale Upon Exercise of Option. If the Option is exercised (in accordance with
its terms) the, Optionor shall sell and convey the Property to the Optionee,
and the Optionee shall acquire the Property through purchase from the
Optionor, subject to the terms and conditions contained in this Agreement.
7. Conditions of Sale. The conveyance of the Property under this Option shall
be subject to the following:
a. Present and future laws, ordinances, regulations restrictions, or orders
of any federal, state, county or municipal government or of any public
authority, including, without limitation, zoning and any other
restrictions imposed by governmental authority.
b. Facts that would be disclosed by an accurate survey or inspection of the
Property.
c. Those exceptions (the "Permitted Exceptions") as shown on that certain
Title Insurance Report No. 106078 attached hereto as Exhibit B and
issued effective June 15, 1994 (the "Commitment") issued by First
American Title Insurance Company (the "Title Company"), which Optionee
acknowledges approving by execution of this Option Agreement, and the
Updated Commitment as defined in paragraph 9, hereof.
d. Taxes and assessments imposed or assessed on the Property or accruing
after Closing (as defined).
8. Purchase Price. The purchase price for the Property (the "Purchase Price")
shall be the amount of Four Million Five Hundred Thousand Dollars
($4,500,000.00) The Purchase Price shall be payable by the Optionee on the
closing of this transaction (the "Closing") as follows:
a. The Initial Option Money in the amount of Ten Thousand Dollars
($10,000.00) shall be deemed credited to the benefit of the Optionee as
part payment on account of the Purchase Price.
b. The total Option Extension Money, if any, paid by Optionee to Title
Company shall be deemed credited to the benefit of the Optionee as
payment on account of the Purchase Price.
c. The balance of the Purchase Price shall be paid to Title Company in
cash, certified check or wired funds at exercise of the Option as
provided and payable to Optionor at Closing
9. Title. Within thirty (30) days after delivery of the Survey (as defined in
paragraph 14 hereof) to Optionor, Optionor shall cause the Commitment to be
updated to reflect any changes ("Survey Exceptions") by reason of said
survey (the "Updated Commitment"). Optionee shall then have thirty (30) days
from the receipt thereof to examine the Updated Commitment. In the event
Optionee fails to disapprove the Survey Exceptions in writing within said
thirty (30) day period, the Updated Commitment shall be deemed approved. In
the event Optionee disapproves any of the Survey Exceptions in writing and
Optionor does not cause such Survey Exceptions to be removed from the
Updated Commitment within thirty (30) days thereafter, Optionee may elect to
either (i) waive the Survey Exceptions and purchase the Property subject to
the Survey Exceptions; or (ii) elect to terminate this Option Agreement. In
the event that Optionee elects to terminate this Option Agreement, this
Option Agreement shall have no further force or effect.
10. Optionee's Right to Conduct Studies. Prior to the expiration of the Option,
the Optionee shall have the right to conduct feasibility studies on the
Property, such as engineering, surveying, zoning, financial, utility and any
further studies deemed necessary by the Optionee. All such tests and
activities shall be at the sole expense of the Optionee. Optionee shall
leave the Property in the same condition as it presently exists and will
repair or restore any damage caused thereby. Optionee will further indemnify
and save Optionor harmless from all damage, losses, claims, liens,
liabilities and expenses arising out of the entry of Optionee upon the
Property or the activities undertaken or performed by or on behalf of the
Optionee on the Property, together with reasonable attorneys fees, court
costs and other expenses incurred in connection with such damage or claims.
Optionee's obligations contained in this paragraph shall survive the
termination of this Agreement.
11. Escrow. Upon execution of this Option Agreement, the parties shall open an
escrow withthe Title Company as escrow agent to effectuate the transactions
contemplated hereby. The obligations relating to the Option (with the
exception of the payment of the Initial Option Money) and the Closing of the
purchase and sale of the Property shall be effected through the escrow. The
cost of customary escrow and closing fees shall be borne equally by Optionee
and Optionor. This Option Agreement shall not be merged into the escrow
instructions, but the latter shall be deemed ancillary to this Option
Agreement and the provisions of this Option Agreement shall be controlling.
12. Closing and Obligations at Closing. Subject to the automatic expiration of
this Option Agreement by the Optionee by failing to pay any of the Option
Extension Money due hereunder, the Closing shall take place at the office of
the Title Company, or at such other place as is mutually agreed to by the
parties within five business days after the Optionee's exercise of the
Option (the "Closing Date"). On the Closing Date, the obligations of the
Optionee and Optionor shall be as follows:
a. Optionee shall have caused the balance of the Purchase Price and its
portion of the closing costs to be paid into escrow subject to the
prorations as herein specified.
b. Optionor shall execute and deliver to Optionee through Escrow a Special
Warranty Deed, in form attached hereto as Exhibit C, delivering title to
the Property to Optionee subject only to those matters set forth in
paragraph 7, hereof.
c. Real estate taxes shall be prorated (based upon the most current
ascertainable tax bill and in accordance with local custom for
commercial transactions) as of the Closing Date.
d. Optionor shall pay for a standard owner's title insurance policy in the
amount of the Purchase Price. Optionee shall pay for any additional
title insurance coverage or endorsements.
e. All other expenses of the Property, including but not limited to, public
utility charges and rents, if any, shall be prorated as of the Closing
Date.
In the event Optionor complies with all requirements of this paragraph, the
Title Company shall without further notice, record the pertinent closing
documents at which time title and possession shall pass to Optionee.
13. Optionor's Representations. Optionor hereby makes the following
representations:
a. Optionor is duly organized and validly existing under the laws of the
State of Arizona and Optionor has full authority to enter into and
perform this Option Agreement, and the person or persons signing this
Option Agreement and any documents executed pursuant hereto on
Optionor's behalf have full power and authority to bind Optionor.
b. Optionor represents that there are no liens or encumbrances against the
Property other than those matters set forth in paragraph 7 above, and to
the best of Optionor's knowledge, there are no persons who claim rights
in the Property as licensees or lessees except the City of Sedona as a
lessee of a portion of the Property for parking, which lease may be
terminated on sixty (60) days' notice.
c. Except for the warranties as to the title as specifically set forth
herein, Optionee agrees that the Property shall be purchased in an "AS
IS" condition, with no representation or warranty of any type or nature
being made by Optionor. Optionee acknowledges and agrees that it is
purchasing the Property solely upon the basis of its investigation
described above and not on the basis of any representation, express or
implied, written or oral, made by Optionor or its agents, or employees.
Without limiting the generality of the foregoing, Optionor makes no
warranty as to the sufficiency of the Property for Optionee's purposes,
the environmental status of the Property, the square footage or acreage
contained within the Property, the accuracy of information contained in
documents delivered to Optionee which have been prepared by third
parties, the sufficiency or completeness of any plans for the Property,
or the approval of any governmental agency of any plans, plats, zoning,
or other development matters relating to the Property.
14. Survey. By execution hereof, Optionee acknowledges receipt of a survey of
the Property dated September 30, 1988 prepared by Landmark Engineering &
Survey, Inc. Within ninety (90) days after execution hereof, Optionee, at
its cost, shall either cause that survey to be updated or shall cause a
boundary and topographical survey of the Property to be prepared, either of
which shall bear a current date and shall include the legal description of
the Property and such matters as may be required by the Title Company to
issue an extended coverage owner's title insurance policy insuring title to
the Property (the "Survey"). The legal description of the Property in the
Survey, if different than Exhibit A, and if approved in writing by both
parties, shall become the legal description for all purposes of this Option
Agreement and shall replace the legal description in Exhibit A.
15. Default.
a. In the event Optionor fails or refuses to comply with the terms of this
Option Agreement, for any reason other than Optionee's failure to
perform its obligations as provided herein or its failure to make
payments required hereunder, Optionee shall only be entitled to enforce
this Option Agreement by specific performance.
b. In the event Optionee does not make the payments required herein or does
not perform as described herein at Closing, then all monies paid by
Optionee including the Initial Option Money and the Option Extension
Money shall remain the property of the Optionor as and for the
consideration of this Option Agreement.
c. Any notices required under this Option Agreement shall be sent by
facsimile, private carrier, personally delivered or certified mail,
postage prepaid, return receipt requested, addressed to the parties at
their addresses set forth herein with a copy to the Title Company.
Notices shall be deemed to be effective when received or delivered or on
the second business day after mailing.
16. Other Acts. Optionee and Optionor each hereby agree to perform such other
acts, and to execute, acknowledge, and/or deliver such other instruments,
documents, and materials (including escrow instructions) as may be necessary
to effect consummation of the transaction contemplated hereby.
17. Attorneys Fees. In the event either party is required to file an action in
order to enforce the terms of this Option Agreement or for a declaration of
rights hereunder, the prevailing party, as determined by the court in such
action, in addition to whatever other remedies it may be entitled, shall be
entitled to recover all of its court costs and attorneys fees as a result
thereof from the losing party.
18. Amendments. All amendments and/or supplements to this Option Agreement must
be in writing and executed by each party, however, such documents may be
executed in counterparts which shall be deemed to constitute one document.
19. Entire Agreement. This written Agreement is the entire agreement between the
parties relating to the subject matter hereof, and any representations,
warranties, promises, or conditions not incorporated herein shall not be
binding upon either party. This Agreement supersedes all preexisting
agreements between the parties and there are no other promises or
agreements, written or oral; and no agent of either party had or has
authority to make representations or other agreements which add to, delete
from, alter, modify or vary the covenants, terms or conditions of this
Agreement; and there have not been and are no other representations,
covenants, promises or agreements which have induced either of the parties
to enter into this Agreement.
20. Documents. All documents necessary to close this transaction shall be
executed by both parties prior to Closing and delivered to the Title Company
as escrow agent with instructions to hold such documents pending the actual
close of escrow.
21. Recording. The parties agree that a notice of the existence of this Option
Agreement in the form attached hereto as Exhibit D shall be executed and by
the parties and acknowledged at the time of the execution of this Option
Agreement. That notice shall be deposited with the Title Company as escrow
Agent along with one originally executed original of this Agreement and the
notice shall be recorded by the Title Company within ten (10) days after
execution of this Option Agreement. At the time of the execution of this
Option Agreement, a notice of termination of this Option in the form
attached hereto as Exhibit E shall also be executed by both parties and
acknowledged and shall be deposited with the Title Company as escrow agent
upon execution of this Option Agreement. Upon expiration or termination of
the Optionor or Optionee's failure to exercise the Option as herein
provided, the Title Company as escrow agent is directed by Optionor and
Optionee to record the Notice of Termination of Option.
22. Time of Essence. Time is of the essence in this Agreement. Notwithstanding
any provision herein to the contrary (including the times and dates set
forth in paragraphs 2 and 3 hereof) if a date specified herein for
performance falls on a Saturday or Sunday or date on which the Title
Company's office is closed, then the date for compliance shall be extended
through the next date when such office is open.
23. Commissions. Each party represents to the other that there are no
commissions owing to any real estate broker as a result of each party's
respective actions relating to the purchase of the Property pursuant to this
Option Agreement except that the Optionor has agreed and shall be
responsible to pay a commission to John D. Miller Real Estate Investments.
If such a commission is claimed b any third party against either the
Optionor or the Optionee the parties whose action cause the claim shall pay
or defend itself without claim against the other party to this Agreement and
shall indemnify such other party against any costs, losses or damages
incurred by such party because of any such claim.
24. Optionee's Owners Are Licensed Real Estate Brokers/Agents. All parties to
this Agreement hereby acknowledge that certain officers and directors of
Optionee and G.M. Sollenberger, a partner of the Optionor, are licensed real
estate brokers or agents in the State of Arizona.
25. Reporting of Property Investigation. Optionee agrees to provide Optionor
copies of all reports, studies and plans relating to the Property which are
prepared by independent third parties and obtained by Optionee. All reports,
studies and plans shall be retained in strict confidence by Optionor unless
the Option is terminated or expires or unless the Optionee fails to exercise
its Option in which event all original copies thereof shall be delivered to
Optionor and shall become the Optionor's property.
26. Successors. This Option Agreement shall be binding on the heirs, successors,
assigns and personal representatives of the parties hereto.
IN WITNESS WHEREOF the parties execute this Option Agreement as of the date
first above written.
IMPERIAL PROPERTIES, an Arizona
general partnership
By G.M. SOLLENBERGER
-----------------------------
G.M. Sollenberger, Partner
By R. ELDON SECHLER
-----------------------------
R. Eldon Sechler, Partner
ILX INCORPOPATED, an Arizona
corporation
By JOSEPH P. MARTORI, CHAIRMAN
-----------------------------
ACCEPTED FOR ESCROW
This Option Agreement shall constitute Escrow Agent's Escrow Instruction.
Escrow Agent is hereby released of any and all liabilities, claims, demands,
charges or costs whatsoever kind or nature in connection with the
disbursement(s) of the option extension money prior to close of Escrow and the
Optionor and Optionee understand that Escrow Agent has no responsibility and/or
liability whatsoever relative to the return of said funds should this Escrow
fail to consummation for any reason, including but not limited to:
1. Non-compliance by Optionor or Optionee with any of the terms, provisions
and/or conditions of this Option Agreement.
2. Any intervening matters of record subsequent to the date of the title
commitment that adversely affects the Optionor's ability to comply with the
terms and conditions of this Option Agreement.
3 . Escrow Agent or Title Insurer's unwillingness or inability for whatsoever
reason to close this escrow.
FIRST AMERICAN TITLE INSURANCE AGENCY OF
YAVAPAI, INC.
BY RAYMOND B. MARTIN
-----------------------------
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made this 8th day of September, 1994, by
and between CHANEN DEVELOPMENT COMPANY, INC., an Arizona corporation ("Chanen")
and ILE SEDONA INCORPORATED, an Arizona corporation ("ILES").
RECITALS
A. ILX Incorporated, an Arizona corporation ("ILX"), the parent of ILES, is
the optionee under that certain Option Agreement dated July 25, 1994 (the
"Option") by and between ILX and Imperial Properties, an Arizona general
partnership ("Seller"). A true and correct copy of the Option is attached hereto
as Exhibit "A" and incorporated herein by reference. ILX is entitled, on certain
terms and conditions, to buy that certain real property located in Coconino
County, Arizona more particularly described on Exhibit "B" attached hereto and
incorporated herein by reference (the "Property").
B. The parties desire to hold the rights as optionee under the Option in a
joint venture entity between them, and to further provide for the rights and
obligations of the parties with respect to the Option and the acquisition and
development of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto covenant and agree with one
another as follows:
1. Formation of Joint Venture. The parties hereby form a joint venture for
acquiring the Property, and the development of the Property as a hotel/timeshare
of approximately 150 units in the approximate size of 150,000 square feet of
building area, along with a retail component consisting of approximately 30,000
- 60,000 square feet of building area. The Venture shall be owned 50% by Chanen
and 50% by ILES. The hotel/timeshare and retail project anticipated to be
developed on the Property is hereinafter referred to collectively as the
"Project". The name of the joint venture formed hereunder shall be The "Y"
Venture. (the "Venture").
2. Assignment of Option. ILX agrees to assign to the Venture, in the form
of Assignment attached hereto as Exhibit "C" and incorporated herein by
reference, all of its rights as optionee under the Option, such assignment to be
executed and delivered simultaneously with the Agreement.
3. Obligations of the Joint Venturers.
a. Bank Account. The parties shall establish a joint venture bank
account at a commercial institution acceptable to both parties, with each party
to contribute thereto upon execution of this Agreement $15,000. Withdrawals in
excess of $1,000 from the joint venture bank account shall not be made without
the signature of a representative of each of the venturers. Monies shall be
withdrawn from the joint venture bank account for the following purposes:
payment of monies due to Seller pursuant to the Option, reimbursement of the
venturers for third-party costs as described in paragraph 5 hereof, and other
payments as may be approved by both venturers. Each of the venturers shall
contribute equally to replenish the joint venture bank account from time to time
to maintain sufficient monies in such account as the venturers may deem
appropriate.
b. Due Diligence. Pursuant to the Option, the optionee is granted the
right to extend the term of the Option through July 1, 1995, and during the term
of the Option optionee may investigate the Property and the feasibility of the
Project. This investigation of the Property and feasibility of the Project is
hereinafter referred to as the "Due Diligence" regarding the Property. In
connection with such Due Diligence, the venturers agree to perform the Due
Diligence and related matters with an equal amount of the work to be performed
by each of the venturers. Without limitation, the parties acknowledge that
initial items of work to be performed include the following and shall be
generally performed as follows:
(i) ILES shall, directly or through its affiliates, (a) prepare
pro forma models for development and marketing of the hotel/timeshare component
and for the development and marketing of retail spaces in connection with the
Project, (b) explore and attempt to secure for the Venture financing options for
the Project, (c) prepare financial models with respect to the hotel/timeshare
portion of the Project, and (d) otherwise participate in the Due Diligence
process as the venturers deem necessary or appropriate;
(ii) Chanen shall, directly or through its affiliates, (a)
establish projections for development costs for both the hotel/timeshare and
retail aspects of the Project, including estimates and budgets for such
development costs, (b) prepare proforma models for the hotel portion of the
Project, including, but not limited to, development and construction budgets,
(c) explore and attempt to secure for the Venture financing options for the
Project, and (d) otherwise participate in the Due Diligence process as the
Venturers deem necessary.
4. Right of Termination and Forfeiture. At any time prior to closing of the
Venture's acquisition of the Property, either venturer may withdraw from the
Venture and thereby eliminate any further obligation with respect to the
Property, the Project or to the other joint venturer. In the event of such
withdrawal, the withdrawing joint venturer shall forfeit any contributions
previously made by it, and the remaining venturer may, but is not obligated to,
proceed without the withdrawing joint venturer to conclude the Due Diligence
investigation and acquire the Property and develop the Project. In the event
that the parties are unsuccessful in obtaining financing for the acquisition of
the Property, either venturer may elect to contribute in cash its share of the
monies necessary to close the acquisition of the Property. However, if either
venturer is unable or unwilling to contribute in cash its share of the amounts
necessary to close the acquisition of the Property, the party unable to provide
financing or cash to close the acquisition of the Property shall be deemed to
have withdrawn from the Venture and forfeited all monies previously contributed
to the Venture.
5. Reimbursement of Costs Incurred by Venturers. It is understood that
neither party shall be reimbursed by the Venture for any "in-house" expenses
incurred by such party, but that the amount of such "in-house" expenses shall be
recorded and records kept thereof for possible future reimbursement by the
Venture. Any third-party costs incurred by either venturer in connection with
the Option or investigation or acquisition of the Property and approved by the
other venturer, such approval not to be unreasonably withheld, shall be
reimbursed by the Venture to such venturer from the joint venture bank account
described in paragraph 3a. above.
6. Formation of New Entity. The parties agree that in the event the Venture
elects to purchase the Property pursuant to the Option, the parties shall enter
into a mutually acceptable agreement for the formation of a new entity to be
held in equal shares by the parties hereto, such entity to be formed at the time
of and for the purpose of acquisition and development of the Property.
7. Construction Contract. The parties acknowledge and agree that in the
event the Venture (or its successor entity pursuant to paragraph 6 hereof)
acquires the Property, construction of the Project shall be performed by an
affiliate of Chanen to be designated by Chanen, who shall be the sole general
contractor/construction manager for the Project. In such event, an agreement for
construction of the Project shall be executed by and between the Chanen
affiliate and the Venture (or its successor entity pursuant to paragraph 6
hereof) in the form of AIA Document A111, Standard Form of Agreement Between
Owner and Contractor (Cost of Work with a Guaranteed Maximum Price), together
with AIA Document A201, General Conditions for the Contract for Construction,
under which documents the Chanen affiliate shall receive a fee of five percent
(5%) of the Cost Of The Work. Such documents are attached hereto as Exhibit "D"
and incorporated herein by reference. This contract shall include a provision
wherein the Venture has the right to approve all the subcontractor bids, which
bids shall be obtained on a competitive basis. This provision shall be
inapplicable in the event Chanen has withdrawn from the Venture as set forth
above.
8. Hotel and Timeshare Management. The parties acknowledge and agree that
in the event the Venture (or its successor entity pursuant to paragraph 6
hereof) acquires the Property, the management of the hotel/timeshare component
of the Project shall be performed by ILES or an affiliate of ILES to be
designated by ILES, which shall be the sole hotel/timeshare manager of the
Project. The Venture shall pay to such manager a monthly management fee that is
agreed upon by the venturers. Subsequent to the Venture's acquisition of the
Property and the commencement of timeshare marketing at the Project, if Chanen
has not withdrawn from the Venture as set forth above, ILES and its parent, ILX
Incorporated, agree not to market timeshares in Sedona, Arizona other than at
Los Abrigados Resort and any property additions proximate or adjacent to Los
Abrigados Resort, without the prior written consent of Chanen. This paragraph 8
shall be inapplicable in the event ILES or Chanen has withdrawn from the Venture
as set forth above.
9. Miscellaneous. Headings in this Agreement are for convenience only and
shall not define or limit the provisions hereof. This Agreement shall be
construed according to its ordinary meaning and shall not be strictly construed
for or against any party hereto. This Agreement shall be construed in accordance
with the laws of the State of Arizona. All of the terms, covenants and
conditions herein contained shall inure to the benefit of and be binding upon
the parties hereto and their successors and assigns. Any modification or a
waiver of any term, this Agreement, including a modification or waiver of this
term, must be in writing signed by the party or parties against which
enforcement of the modification or waiver is sought. The parties hereto agree to
execute such additional documents and to perform such additional acts as may be
reasonably necessary to carry out the purpose and intent of this Agreement. If
any party shall bring suit to enforce the terms and provisions hereof, the
prevailing party shall be entitled to recover from the other party all costs,
expenses and reasonable attorneys' fees incurred in connection with the exercise
by the prevailing party of its rights and remedies hereunder. For purposes of
this paragraph, the term "prevailing party" shall mean, in the case of the
claimant, one who is successful in obtaining substantially all the relief
sought, and in the case of the defendant or respondent, one who is successful in
denying substantially all of the relief sought by the claimant. Any award of
attorneys' fees shall be set by the court and not by a jury. Should any term,
provision, covenant or condition of this Agreement be void, invalid or
inoperative, the same shall not affect any other term, provision, covenant or
condition of the Agreement but the remainder thereof shall be given effect as
though such void, invalid or inoperative term, provision, covenant or condition
had not been contained herein. This Agreement may be executed in counterpart and
each such counterpart, when taken together with all other counterparts, shall be
deemed one and same original document.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
CHANEN DEVELOPMENT COMPANY, INC.,
an Arizona corporation
By: Stephen Chanen
---------------------------
Its: President
---------------------------
As to Paragraphs 2 and 8 above: ILE SEDONA INCORPORATED,
ILX INCORPORATED, an Arizona corporation
an Arizona corporation
By: Joseph P. Martori, Chairman By: Joseph P. Martori, Chairman
--------------------------------- -----------------------------
Joseph P. Martori, Chairman Joseph P. Martori, Chairman
AIA Document A111
Standard Form of Agreement
Between Owner and Contractor
where the basis of payment is the
COST OF THE WORK PLUS A FEE
with or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH
AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION
The 1987 Edition of AIA Document A201, General Conditions of the
Contract for Construction, is adopted in this document by
reference. Do not use with other general conditions unless
this document is modified.
This document has been approved and endorsed by The Associated
General Contractors of America.
--------------------------------------------------------------------------------
AGREEMENT
made as of the Tenth day of October in the year of Nineteen Hundred and
ninety-four
BETWEEN the Owner: VCA South Bend Incorporated
Name and Address) 2777 E. Camelback Road
Phoenix, AZ 85016
and the Contractor: Walton Construction Company, Inc.
(Name and Address) 3252 Roanoke
Kansas City, Missouri 64111
the Project is: Varsity Clubs of America
(Name and Address) Corner of Main Street and Edison Lakes Parkway
Mishawaka, Indiana 46545
the Architect is: Balmer Architectural Group
(Name and Address) 5070 N. 40th Street
Suite 100
Phoenix, Arizona 85108
The Owner and Contractor agree as set forth below.
ARTICLE 1
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications, Addenda
issued prior to execution of this Agreement, other documents listed in this
Agreement and Modifications issued after execution of this Agreement; these form
the Contract, and are as fully a part of the Contract as if attached to this
Agreement or repeated herein. The Contract represents the entire and integrated
agreement between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of the
Contract Documents, other than Modifications appears in Article 16. If anything
in the other Contract Documents is inconsistent with this Agreement, this
Agreement shall govern.
See Addendum
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence established
by this Agreement and covenants with the Owner to cooperate with the Architect
and utilize the Contractor's best skill, efforts and judgment in furthering the
interests of the Owner; to furnish efficient business administration and
supervision; to make best efforts to furnish at all times an adequate supply of
workers and materials; and to perform the Work in the best way and most
expeditious and economical manner consistent with the interests of the Owner.
The Owner agrees to exercise best efforts to enable the Contractor to perform
the Work in the best way and most expeditious manner by furnishing and approving
in a timely way information required by the Contractor and making payments to
the Contractor in accordance with requirements of the Contract Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first
written above unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement, if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice to proceed.)
October 10, 1994 for the Main Building and the Alumni House.
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
4.2 The Contractor shall achieve Substantial Completion of the entire Work not
later than
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract Documents)
See Addendum
subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)
ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum, percentage of Cost of the Work or other provision for
determining the Contractor's Fee, and explain how the Contractor's Fee is to be
adjusted for changes in the Work.)
1. $150,000 fixed fee
2. No adjustments in fee for changes in the work directed by the owner,
unless such changes exceed 5% of original contract. Overhead directly
attributable to project is considered a job cost. See addendum.
3. The contractor shall receive a bonus of $20,000 upon completing the Main
Building by June 21, 1995 based on substantial completion.
5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed by
the Contractor not to exceed three-million-seven-hundred-twenty-one-thousand
Dollars ($3,721,000), subject to additions and deductions by Change Order as
provided in the Contract Documents. Such maximum sum is referred to in the
Contract Documents as the Guaranteed Maximum Price. Costs which would cause the
Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without
reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any savings.)
See Addendum
5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if
any, which are described in the Contract Documents and are hereby accepted by
the Owner:
(State the numbers or other identification of accepted alternates, but only if a
Guaranteed Maximum Price is inserted in Subparagraph 5.2.1. If decisions on
other alternates are to be made by the Owner subsequent to the execution of this
Agreement, attach a schedule of such other alternates showing the amount for
each and the date until which that amount is valid.)
None
5.2.3 The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1.)
Not applicable.
ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the
Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the
General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with the
Owner's prior consent on the basis of cost plus a fee), the terms "cost" and
"fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs"
and "a reasonable allowance for overhead and profit" as used in Subparagraph
7.3.6 of the General Conditions shall have the meanings assigned to them in the
General Conditions and shall not be modified by Articles 5, 7 and 8 of this
Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on
the basis of cost plus a fee shall be calculated in accordance with the terms of
those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and "costs"
as used in the above-referenced provisions of the General Conditions shall mean
the Cost of the Work as defined in Article 7 of this Agreement and the terms
"fee" and "a reasonable allowance for overhead and profit" shall mean the
Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
ARTICLE 7
COSTS TO BE REIMBURSED
7.1 The Term Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost of the Work shall include only the items set
forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's agreement,
at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory or administrative
personnel when stationed at the site with the Owner's agreement.
(If it is intended that the wages or salaries of certain personnel stationed at
the Contractor's principal or other offices shall be included in the Cost of the
Work, identify in Article 14 the personnel to be included and whether for all or
only part of their time.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits required by law or collective bargaining
agreements and, for personnel, not covered by such agreements, customary
benefits such as sick leave, medical and health benefits, holidays, vacations
and pensions provided such costs are based on wages and salaries included in the
Cost of the Work under clauses 7.1.1.1 through 7.1.1.3.
Cost under this Clause 7.1.1.4 shall equal twenty-six percent (26%) of the
wages and salaries referred to under Clauses 7.1.1.1 through 7.1.1.3.
7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the
requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs including transportation of and storage of materials and equipment
incorporated or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials, if any, shall be handed over to
the Owner at the completion of the Work or, at the Owner's option, shall be sold
by the Contractor; amounts realized, if any, from such sales shall be credited
to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site and fully consumed in the performance of
the Work; and cost less salvage value on such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items previously
used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof. Rates and quantities of equipment rented shall
be subject to the Owner's prior approval.
Cost related to hand tools under this Clause 7.1.4.2 shall equal five
percent (5%) of the total costs referenced to under Clauses 7.1.1.1 -
7.1.1.14 but not to exceed $5,000.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel
delivery charges, telephone service at the site and reasonable petty cash
expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the
Contractor's personnel while traveling in discharge of duties connected with the
Work.
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for
insurance and bonds.
7.1.5.2 Sales, use of similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.
7.1.5.4 Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of defending
suits or claims for infringement of patent rights arising from such requirement
by the Contract Documents; payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent; provided, however, that such costs of
legal defenses, judgment and settlements shall not be included in the
calculation of the Contractor's Fee or of a Guaranteed Maximum Price, if any,
and provided that such royalties, fees and costs are not excluded by the last
sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of
the Contract Documents.
7.1.5.6 Deposits lost for causes other than the Contractor's fault or
negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the extent
approved in advance in writing by the Owner.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor:
7.2.1 In taking action to prevent threatened damage, injury, or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault of negligence of the Contractor
or the Contractor's foreman, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph 7.2.2,
provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by a
Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault of neglect of the
Contractor or the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extent that the
cost of correcting the defecting or nonconforming Work is not recoverable by the
Contractor from the Subcontractor or material supplier.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.2 Expenses of the Contractor's principal office and offices other than the
site office.
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the Contractor's
capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically provided
in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and paragraph 13.5
of this Agreement, costs due to the fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of them, or for
whose acts any of them may be liable, including but not limited to costs for the
correction of damaged, defective or nonconforming Work, disposal and replacement
of materials and equipment incorrectly ordered or supplied, and making good
damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be
exceeded.
ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue to
the Owner if (1) before making the payment, the Contractor included them in an
Application for Payment and received payment therefor from the Owner, or (2) the
Owner has deposited funds with the Contractor with which to make payments;
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the
Work.
ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
10.1 Those portions of the Work that the Contractor does not customarily perform
with the Contractor's own personnel shall be performed under subcontracts or by
other appropriate agreements with the Contractor. The Contractor shall obtain
bids from Subcontractors and from suppliers of materials or equipment fabricated
especially for the Work and shall deliver such bids to the Architect. The Owner
will then determine, with the advice of the Contractor and subject to the
reasonable objection of the Architect, which bids will be accepted. The Owner
may designate specific persons or entities from whom the Contractor shall obtain
bids; however, if a Guaranteed Maximum Price has been established; the Owner may
not prohibit the Contractor from obtaining bids from others. The Contractor
shall not be required to contract with anyone to whom the Contractor has
reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may require
that a Change Order be issued to adjust the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment of Paragraphs
12.7 and 12.8, and shall not be awarded on the basis of cost plus a fee without
the prior consent of the Owner.
ARTICLE 11
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the Owner.
The Owner and the Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.
ARTICLE 12
PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Architect not later
than the twenty-fifth (25th) day of a month, the Owner shall make payment to the
Contractor not later than the tenth (10th) day of the month.
12.4 See Addendum
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent schedule
of values submitted by the Contractor in accordance with the Contract Documents.
The schedule of values shall allocate the entire Guaranteed Maximum Price among
the various portions of the Work, except that the Contractor's Fee shall be
shown as a single separate item. The schedule of values shall be prepared in
such form and supported by such data to substantiate its accuracy as the
Architect may require. this schedule, unless objected to by the Architect, shall
be used as a basis for reviewing the Contractor's Applications for Payment.
12.5.2 Applications for Payment shall show the percentage completion of each
portion of the Work as of the end of the period covered by the Application for
Payment. The percentage completion shall be the lesser of (1) the percentage of
that portion of the Work which has actually been completed or (2) the percentage
obtained by dividing (a) the expense which has actually been incurred by the
Contractor on account of that portion of the Work for which the Contractor has
made or intends to make actual payment prior to the next Application for Payment
by (b) the share of the Guaranteed Maximum Price allocated to that portion of
the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to
completed Work as determined by multiplying the percentage completion of each
portion of the Work by the share of the Guaranteed Maximum Price allocated to
that portion of the Work in the schedule of values. Pending final determination
of cost to the Owner of changes in the Work, amounts not in dispute may be
included as provided in Subparagraph 7.3.7 of the General Conditions, even
though the Guaranteed Maximum Price has not yet been adjusted by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee, less retainage of Five percent (5%). The
Contractor's Fee shall be computed upon the Cost of the Work described in the
two preceding Clauses at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount
which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the
two preceding Clauses bears to a reasonable estimate of the probably Cost of the
Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
12.5.4 Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause
12.5.3.3, (2) the retainage from Subcontractors provided in Paragraph 12.7
below, and (3) the retainage, if any, provided by other provisions of the
Contract, insert provision for such additional retainage here. Such provision,
if made, should also describe any arrangement for limiting or reducing the
amount retained after the Work reaches a certain state of completion.)
12.7 Except with the Owner's prior approval, payments to Subcontractors included
in the Contractor's Applications for Payment shall not exceed an amount for each
Subcontractor calculated as follows:
12.7.1 Take that portion of the Subcontract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Subcontractor's Work by the share of the total Subcontract Sum allocated to
that portion in the Subcontractor's schedule of values, less retainage of ten
percent (10%). Pending final determination of amounts to be paid to the
Subcontractor for changes in the Work, amounts not in dispute may be included as
provided in Subparagraph 7.3.7 of the General Conditions even though the
Subcontract Sum has not yet been adjusted by Change Order.
12.7.2 Add that portion of the Subcontract Sum properly allocable to materials
and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing, less retainage of ten
percent (10%).
12.7.3 Subtract the aggregate of previous payments made by the Contractor to the
Subcontractor.
12.7.4 Subtract amounts, if any, for which the architect has withheld or
nullified a Certificate for Payment by the Owner to the Contractor for reasons
which are the fault of the Subcontractor.
12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a
sum sufficient to increase the total payments to the Subcontractor to
ninety-five percent (95%) of the Subcontract Sum, less amounts, if any, for
incomplete Work and unsettled claims; and, if final completion of the entire
Work is thereafter materially delayed through no fault of the Subcontractor, add
any additional amounts payable on account of Work of the Subcontractor in
accordance with Subparagraph 9.10.3 of the General Conditions.
(If it is intended, prior to Substantial Completion of the entire Work of the
Contractor, to reduce or limit the retainage from Subcontractors resulting from
the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is
not explained elsewhere in the Contract Documents, insert here provisions for
such reduction or limitation.)
Upon satisfactory substantial completion of portions of work, a specific
subcontract sum retainage may be reduced to five percent (5%) of the original
sum.
The subcontract Sum is the total amount stipulated in the subcontract to be paid
by the Contractor to be paid by the Contractor to the Subcontractor for the
Subcontractor's performance of the subcontract.
12.8 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has made a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Paragraph 12.4 or
other supporting data; that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertain how
or for what purposes the Contractor has used amounts previously paid on account
of the Contract. Such examinations, audits, and verifications, if required by
the Owner, will be performed by the Owner's accountants acting in the sole
interest of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the Contractor except for the Contractor's
responsibility to correct defective of nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment.
See Addendum
13.2 The amount of the final payment shall be calculated as follows:
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.
13.2.2 Subtract amounts, if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the Work
as the Owner's accountants report to be substantiated by the Contractor's final
accounting, and provided the other conditions of Paragraph 13.1 have been met,
the Architect will, within seven days after receipt of the written report of the
Owner's accountants, either issue to the Owner a final Certificate for Payment
with a copy to the Contractor, or notify the Contractor and Owner in writing of
the Architect's reasons for withholding a certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General
Conditions.
13.4 If the Owner's accountants report the Cost of the Work as substantiated by
the Contractor's final accounting to be less than claimed by the Contractor, the
Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountants becoming binding on the Contractor. Pending
a final resolution by arbitration, the Owner shall pay the Contractor the amount
certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the Contractor
incurs costs described in Article 7 and not excluded by Article 8 to correct
defective or nonconforming Work, the Owner shall reimburse the Contractor such
costs and the Contractor's Fee applicable thereto on the same basis as if such
costs had been incurred prior to final payment, but not in excess of the
Guaranteed Maximum Price, if any. If the Contractor has participated in savings
as provided in Paragraph 5.2, the amount of such savings shall be recalculated
and appropriate credit given to the Owner in determining the net amount to be
paid by the Owner to the Contractor.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended of supplemented by other provisions of the Contract Documents.
14.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.
(Insert rate of interest agreed upon, if any.)
Annual Rate = 9.5%
14.3 Other provisions:
See addendum
ARTICLE 15
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article 14
of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under paragraph 15.3 below, except
that the Contractor's Fee shall be calculated as if the Work has been fully
completed by the Contractor, including a reasonable estimate of the Cost of the
Work not actually completed.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract may
be terminated by the Owner for cause as provided in Article 14 of the General
Conditions; however, the amount, if any, to be paid to the Contractor under
Subparagraph 14.2.4 of the General Conditions shall not cause the Guaranteed
Maximum Price to be exceeded, nor shall it exceed the amount the Contractor
would be entitled to receive under Paragraph 15.3 below. (Subject to additions
and deductions for changes in the work authorized by Owner.)
15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of
termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the date
of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee
is stated as a fixed sum in that Paragraph, an amount which bears the same ratio
to that fixed-sum Fee as the Cost of the Work at the time of termination bears
to a reasonable estimate of the probably Cost of the Work upon its completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or
rental at the election of the Owner, for any equipment owned by the Contractor
which the Owner elects to retain and which is not otherwise included in the Cost
of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to
take legal assignment of subcontracts and purchase orders (including rental
agreements), the Contractor shall, as a condition of receiving the payments
referred to in this Article 15, execute and deliver all such papers and take all
such steps, including the legal assignment of such subcontracts and other
contractual rights of the Contractor, as the Owner may require for the purpose
of fully vesting in the Owner the rights and benefits of the Contractor under
such subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be
increased as provided in Subparagraph 14.3.2 of the General Conditions except
that the term "cost of performance of the Contract" in that Subparagraph shall
be understood to mean the Cost of the Work and the term "profit" shall be
understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3
of this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A111, 1987 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 1987 Edition.
16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated , and are as follows:
--------------
Document Title Pages
-------- ----- -----
-See addendum-
16.1.4 The Specifications are those contained in the Project Manual dated as in
Paragraph 16.1.3, and are as follows:
(Either list the Specifications here or refer to an exhibit attached to this
Agreement.)
Section Title Pages
------- ----- -----
-See addendum-
16.1.5 The Drawings are as follows, and are dated unless a
--------------
different date is shown below:
(Either list the Drawings here or refer to an exhibit attached to this
Agreement.)
Number Title Date
------ ----- ----
-See addendum-
16.1.6 The Addenda, if any, are as follows:
Number Date Pages
------ ---- -----
1. Performance bond in the amount of Guaranteed Maximum Price
to be provided by contractor within one week of execution of
this agreement, the form of which is attached hereto.
2. See attached letter from Schaefer-Smith-Ankeney Insurance
Agency to ILK dated September 14, 1994 regarding required
coverages for the construction of Varsity Clubs projects.
All provisions of the letter shall be adhered except item
5.F.
3. See attached addendum.
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 16.
16.1.7 Other Documents, if any forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders, sample
forms and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the Contract Documents.)
See Addendum
This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER: CONTRACTOR:
VCA South Bend Incorporated Walton Construction Company, Inc.
By: Luis C. Acosta By: Donald F. Greenwood
----------------------------- ---------------------------
Luis C. Acosta, President Donald F. Greenwood, V.P. Estimating
-------------------------------- --------------------------------------
(Printed name and title) (Printed name and title)
ADDENDUM
This Addendum modifies the Standard Form of Agreement Between Owner and
Contractor (AIA Document A111, 1987 Edition), as filled-in and/or modified (the
"Agreement"), to which this Addendum is attached. In the event of any
inconsistency between the terms of the Agreement and the terms of this Addendum,
then the terms of this Addendum shall govern. Where a portion of the Agreement
is modified or deleted by this Addendum, the unaltered portions of the Agreement
shall remain in effect.
(1) Paragraph 1.1 is amended by adding the following after the last sentence:
The Drawings and the Specifications shall be those dated April 11, 1994 (as
updated without notation on August 6, 1994) as modified by Architect to
reflect those changes noted in the attached "Budget status report" dated
October 31, 1994, which embodies the final results of various discussions
among Owner, Contractor and Architect that commenced on or about October 4,
1994. Final Specifications incorporating these modifications are
anticipated to be provided by the Architect on or about November 7, 1994.
Final Drawings incorporating these modifications are anticipated to be
provided by the Architect on or about November 15, 1994.
(2) Paragraph 4.2 shall be amended in its entirety to read as follows:
4.2 The Contractor shall achieve Substantial Completion of the entire Work
as follows:
With respect to the Alumni House, six (6) months after receipt of
final building permits, or June 1, 1995, whichever is earlier.
Substantial Completion with respect to the Alumni House shall mean
receipt of a temporary certificate of occupancy and shall include safe
and comfortable accessibility for Owner and its guests and prospective
purchasers, including a graveled or paved driveway (from the public
street) and adjacent parking area.
With respect to the Main Building, eight (8) months after receipt of
final building permits, or August 1, 1995, whichever is earlier.
Final building permits are anticipated to be received in approximately
four weeks. Plans to be submitted 11-22-94
Contractor agrees to apply for and diligently pursue all permits, licenses
and inspections necessary in order to timely achieve Substantial
Completion.
In the event Substantial Completion of the entire Work is not timely
achieved, then Contractor shall be liable to Owner for liquidated damages
as described below, which shall either be paid to Owner upon demand, or
which shall be offset by Owner against any portion of the Contract Sum then
owing Contractor:
With respect to the Alumni House, $166 per day until Substantial
Completion is achieved.
With respect to the Main Building, $1,000 per day plus Owner's actual
cost of employee overhead for all scheduled on-site salaried employees
(estimated to be $20,000 per month) until Substantial Completion is
achieved.
(3) Paragraph 5.1, Section 2, is amended by adding the following after the last
sentence:
In the event Owner decides to add a swimming pool to the Project, there
shall be no adjustment in the Contractor's Fee, and the Cost of the Work
for such pool shall be considered part of the original contract for
purposes of this Agreement.
(4) Paragraph 5.2 is amended by adding the following after the last sentence:
In the event that upon Substantial Completion the Cost of the Work plus the
Contractor's Fee is less than the Guaranteed Maximum Price, the Contractor
shall be entitled to a bonus equal to 40% of such savings.
(5) Paragraph 12.4 shall be amended in its entirety to read as follows:
12.4 With each Application for Payment, the Contractor shall submit the
original schedule of values for work based on the negotiated Guaranteed
Maximum Price with line description totals. Such Application for Payment
shall be for an amount equal to:
(i) the percentages of costs of work for completed work
(ii) materials ordered and delivered to the site or incorporated into
the site
(iii) documented materials ordered and stored offsite in an insured
facility covering costs and expenses of such goods
(iv) downpayments or deposits for materials ordered or work in
progress (the foregoing items (i)- (iv) hereinafter in this Article
XII referred to as "Completed Work").
The Application for Payment shall be for an amount equal to the percentage
of completed work for all items in such schedule of values, less progress
payments already received by the contractor; and less retainage in the
amounts authorized in the Agreement, less any amounts subject to retention
which have previously been released or paid pursuant to mutual agreement
between Owner and Contractor, and/or any subcontractors or materialmen.
The Application for Payment shall be submitted on AIA Form G-702 to the
Architect for approval for payment. Attached to each application, in
addition to the items hereinbefore provided, shall be a waiver of lien
agreement from Contractor and copies of executed lien waivers from all
subcontractors and materialmen paid with proceeds from the preceding months
Application for Payment.
If any other provisions of this Article or the General Conditions are
inconsistent with the foregoing, all such provisions are hereby modified to
the extent necessary to be deemed consistent herewith.
(6) Paragraph 13.1, is amended by adding after subparagraph (1) the following:
(2) A final Application for Payment and a final accounting for the Cost of
the Work in the form of a detailed Job Cost Report have been submitted by
the Contractor and reviewed by the Owner's accountants; and (3) A final
Certificate for Payment has been issued by the Architect. Such final
payment shall be made by the Owner not more than 10 days after issuance of
the architect's final Certificate for Payment; provided, however, and
notwithstanding Clause 13.3, that Architect's final Certificate for Payment
shall not be issued until a final certificate of occupancy for the Project
has been issued.
(7) Subparagraph 14.3 is hereby added to read as follows:
14.3 Other Provisions:
14.3.1 The time for performance of any obligation of Contractor or Owner
shall be extended in the event and to the extent that performance was
delayed on account of a Force Majeure. For purposes of this Agreement, the
term "Force Majeure" shall mean events beyond the control of the parties,
including, without limitation, fire, flood, tornado, earthquake, war, riot,
insurrection, strike, lock-out, boycott, embargo, acts of God, unavoidable
casualties, labor disputes, unusual delays in transportation, unusual
unavailability of materials and adverse weather conditions not reasonably
anticipated. Any party who asserts the occurrence of Force Majeure shall
give written notice within five (5) working days after the commencement of
a delay caused by an event of Force Majeure, and any party making claim
therefor shall give a supplemental notice of the period of time such delay
caused by an event of Force Majeure is expected to last, otherwise any
right of claim therefor shall be deemed waived.
14.3.2 If at anytime Contractor hires an attorney to bring any action
(whether judicial or pursuant to the arbitration provisions hereof) under
this contract or consults with an attorney or places said contract or any
amount thereof with an attorney for collection of any sums due Contractor
hereunder, or if either party engages an attorney to bring any action for
enforcement of either party's rights hereunder, then the prevailing party
shall be entitled to recover in addition to any other sums recoverable
under this contract the amount of all reasonable attorney's fees incurred
by the prevailing party in either collecting sums owed hereunder or other
right hereunder enforced or if no amounts are found due, then such other
party in defending against such claim.
14.3.3 Contractor shall comply fully with all laws, orders, citations,
rules, regulations, standards and statutes, with respect to occupational
safety and health, accident prevention, safety equipment and practices,
including accident prevention and safety programs. Contractor shall conduct
inspections to determine that safe working conditions and equipment exist
and assumes sole responsibility for providing a safe place to work for its
employees and for employees of its Subcontractors and suppliers, for the
adequacy of and required use of all safety equipment and for full
compliance with the aforesaid laws, orders, citations, rules, regulations,
standards and statutes.
OWNER CONTRACTOR
VCA South Bend Incorporated Walton Construction Company, Inc.
By: Luis C. Acosta By: Donald F. Greenwood
--------------------------- ---------------------------------------
Luis C. Acosta Donald F. Greenwood
--------------------------- ---------------------------------------
Typed or printed name Typed or printed name
Its: President Its: Vice President/Estimating
--------------------------- ----------------------------------------
AGREEMENT FOR
PURCHASE AND SALE OF
KOHL'S RANCH
SELLER: KOHL'S RANCH ASSOCIATES
an Arizona general partnership
BUYER: ILX INCORPORATED
an Arizona corporation
or its nominee
DATE: March 10, 1995
TABLE OF CONTENTS
Sections
Section 1. Sale of Resort and Water Company
Section 2. Purchase Price, Apportionments, Escrow Agent
Section 3. Feasibility and Investigation
Section 4. Operations Prior to Closing
Section 5. The Closing
Section 6. Covenants, Representations and Warranties of Seller
Section 7. No Further Warranties By Seller
Section 8. Covenants, Representations and Warranties of Buyer
Section 9. Title Insurance
Section 10. Water Company
Section 11. Broker
Section 12. Notices
Section 13. Survival of Representations, Warranties, Covenants, and
Obligations
Section 14. Waiver of Bulk Sale Provisions
Section 15. Miscellaneous Provisions
Signatures and Receipt by Escrow Agent
Exhibits
Exhibit A Description of Property
Exhibit A-1 Schedules of Personal Property
Exhibit B Permitted Exceptions
Exhibit C Miscellaneous
Exhibit D Schedule of Leases
Exhibit E Schedule of Service Contracts
Exhibit F Existing Liabilities to be Assumed by Buyer
Exhibit G Promissory Note
Exhibit H Deed of Trust
Exhibit I Warranty Deed
Exhibit J Bill of Sale
Exhibit K Assignment of Leases, Contract Rights and Intangible Assets
Exhibit L License of Tradenames
Exhibit M Certificate of Non-foreign status
Exhibit N Suits, Proceedings, Investigations and Claims
Exhibit 0 Summary of Existing Zoning and Use Violations
Exhibit P Water Company Agreement
Exhibit P-1 Related Water Assets Land and Easements
Exhibit P-2 Related Water Assets Equipment and Improvements
Exhibit P-3 Related Water Assets Covenants, Conditions and Restrictions
Exhibit Q Summary of Actual or Potential Environmental Problems
Exhibit R Summary of Environmental Documents provided to Buyer prior to
Closing
Exhibit S Restricted Stock Letter
Exhibit T Loan Documents
Exhibit U Allocations
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: Joseph P. Martori
----------------------------------
Joseph P. Martori
Chairman
SELLER: KOHL'S RANCH ASSOCIATES, an
Arizona general partnership
Thomas L. Griffith By: Thomas L. Griffith
----------------------------- ----------------------------------
Thomas L. Griffith Thomas L. Griffith, partner
as shareholder in Water Company
Diane M. Griffith By: Diane M. Griffith
----------------------------- ---------------------------------
Diane M. Griffith Diane M. Griffith, his spouse, partner
as shareholder in Water Company
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
------------------------------------
Its
----------------------------------
MEMBERSHIP PLAN
FOR
SEDONA VACATION CLUB
AT LOS ABRIGADOS
TABLE OF CONTENTS
Page
PREAMBLE 1
ARTICLE I - DEFINITIONS...................................................... 2
Section 1.01. Articles.......................................... 2
Section 1.02. Assessments....................................... 2
Section 1.03. Board............................................. 2
Section 1.04. Bylaws............................................ 2
Section 1.05. Capital Assessment................................ 2
Section 1.06. Check-In-Time and Check-Out-Time.................. 2
Section 1.07. Club.............................................. 2
Section 1.08. Common Areas...................................... 3
Section 1.09. Common Expenses................................... 3
Section 1.10. Common Furnishings................................ 3
Section 1.11. CPI Dues Adjustment Percentage.................... 3
Section 1.12. Dedicated Percentage.............................. 3
Section 1.13. Deed.............................................. 3
Section 1.14. Deed of Trust..................................... 3
Section 1.15. Dues.............................................. 3
Section 1.16. Every Year Membership............................. 4
Section 1.17. Every Other Year Membership....................... 4
Section 1.18. Excepted Areas.................................... 4
Section 1.19. Exchange Program.................................. 4
Section 1.20. Exchange User..................................... 4
Section 1.21. Fiscal Year....................................... 4
Section 1.22. Lender............................................ 5
Section 1.23. Maintenance Period................................ 5
Section 1.24. Managing Agent.................................... 5
Section 1.25. Member............................................ 5
Section 1.26. Membership........................................ 5
Section 1.27. Membership Certificate............................ 5
Section 1.28. Occupancy Period.................................. 5
Section 1.29. Occupancy Right................................... 5
Section 1.30. Occupancy Year.................................... 5
Section 1.31. Permitted User.................................... 6
Section 1.32. Personal Charges.................................. 6
Section 1.33. Plan.............................................. 6
Section 1.34. Property.......................................... 6
Section 1.35. Purchase Agreement................................ 6
Section 1.36. Record Book of Members............................ 6
Section 1.37. Renter............................................ 6
Section 1.38. Resort............................................ 7
Section 1.39. Rules and Regulations............................. 7
Section 1.40. Seller............................................ 7
Section 1.41. Time Period....................................... 7
Section 1.42. Unit.............................................. 7
Section 1.43. Unoccupied Unit................................... 7
ARTICLE II - RESERVATION RIGHTS, OCCUPANCY RIGHTS AND RESTRICTIONS........... 7
Section 2.01. Type of Ownership................................. 7
Section 2.02. Reservation and Occupancy Rights of Members....... 8
Section 2.03. Member's Obligations During Occupancy............. 9
Section 2.04. Additional Membership Rights...................... 9
Section 2.05. Failure to Vacate.................................10
Section 2.06. Occupancy Restrictions............................10
Section 2.07. Easement for Sales, Customer Service and
Related Purposes..............................11
Section 2.08. Rental of Units by Seller.........................11
Section 2.09. Restrictions on Resale of Club Memberships........11
ARTICLE III - THE CLUB.......................................................12
Section 3.01. Club..............................................12
Section 3.02. Membership in the Club............................12
Section 3.03. Issuance and Transfer of Membership Certificates..13
Section 3.04. Membership Protection.............................13
Section 3.05. Voting............................................13
Section 3.06. Actions of the Club Requiring Membership Approval.14
Section 3.07. Counting of Votes.................................14
Section 3.08. Board of Directors................................14
Section 3.09. Dedicated Percentage of Expenses Payable
by the Club...................................14
ARTICLE IV - MANAGEMENT......................................................15
Section 4.01. Powers and Duties Generally.......................15
Section 4.02. Specific Powers and Duties of the Club............15
Section 4.03. Authority and Duty to Engage Managing Agent.......17
ARTICLE V - DUES AND ASSESSMENTS.............................................18
Section 5.01. Creation of Personal Obligations for Assessments..18
Section 5.02. Use of Assessments................................19
Section 5.03. Basis of Maximum Dues.............................19
Section 5.04. Commencement and Collection of Dues...............19
Section 5.05. Payment of Assessments............................19
Section 5.06. Capital Assessments...............................19
Section 5.07. Personal Charges..................................19
Section 5.08. Exchange Program..................................20
ARTICLE VI - ENFORCEMENT OF RESTRICTIONS.....................................20
Section 6.01. General...........................................20
Section 6.02. Suspension and Termination of Privileges..........20
ARTICLE VII - DAMAGE, DESTRUCTION, CONDEMNATION..............................21
Section 7.01. General...........................................21
Section 7.02. Extensive Damage or Destruction...................21
Section 7.03. Excess Insurance Proceeds.........................22
ARTICLE VIII - SELLER'S RIGHTS...............................................22
ARTICLE IX - MISCELLANEOUS PROVISIONS........................................22
Section 9.01. Amendment.........................................22
Section 9.02. Termination.......................................23
Section 9.03. Notices...........................................23
Section 9.04. Severability......................................24
Section 9.05. Successors........................................24
Section 9.06. Violation or Nuisance.............................24
Section 9.07. Interpretation....................................24
Section 9.08. No Waiver.........................................24
Section 9.09. Applicable Law....................................24
MEMBERSHIP PLAN FOR
SEDONA VACATION CLUB
AT LOS ABRIGADOS
This Membership Plan (the "Plan"), dated January 11, 1995, has been
developed by SEDONA VACATION CLUB INCORPORATED, an Arizona nonprofit corporation
(the "Club"), and LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona limited
partnership ("Seller"). This Plan amends and supercedes all other membership
plans previously recorded on behalf of the Club.
PREAMBLE:
A. The Club proposes to issue individual memberships in the Club
("Membership" or collectively the "Memberships") pursuant to which the person
purchasing the Membership ("Member") shall have certain defined rights to occupy
and use certain real property, described in Exhibit A attached hereto and made a
part hereof (the "Property") and to use the Common Areas and the Common
Furnishings as hereinafter defined during certain specified time periods and
reserving to Seller and its successors the exclusive right to occupy and use the
Property and to use the Common Areas and the Common Furnishings during all other
periods of time, subject to the limitations, covenants, and conditions set forth
in this Plan.
B. Seller is the owner of the Property and certain other areas situated
upon the Property (collectively referred to herein as the "Resort"). Seller
currently operates the Resort as a hotel and shall continue to operate the
Resort as a hotel to the extent of unsold or unused Memberships. See "Rental of
Units by Seller" at Sec. 2.08.
C. On October 18, 1988, the Club entered into a contractual agreement with
the predecessor-in-interest to Seller (the "Transfer Agreement"), whereby the
Club, on behalf of its future Members, acquired the right, in perpetuity, to use
the Property, subject to the terms and conditions set forth in the Transfer
Agreement, and the predecessor-in-interest to Seller acquired ownership of and
the exclusive right to market Club Membership interests.
D. Pursuant to an amendment to the Transfer Agreement dated September 10,
1991, as further amended by an Amendment of Amended Transfer Agreement dated
August 12, 1992, Seller has reserved the right to issue to each consenting
Member a Deed evidencing said Member's undivided fractional fee title interest
in and to the Property, to be held in common with all other Members, and all
Members receiving a Deed, except those who have paid in full for their
Membership, shall contemporaneously execute a Deed of Trust to Seller which
shall further secure the unpaid balance of each Member's Membership. The Deed
for Members who purchased an Every Year Membership prior to January 11, 1995
conveys a 1/8,925 interest in and to the Property. The Deed for Members who
purchased an Every Other Year Membership prior to January 11, 1995 conveys a
1/17,850 interest in and to the Property. On January 11, 1995, the Club and
Seller executed a Third Amendment of the Transfer Agreement that increased the
number of Memberships available for sale from 51 Memberships per Unit to 52
Memberships per Unit. Accordingly, the Deed for Members who purchase an Every
Year Membership on or after January 11, 1995 shall convey a 1/9,325 interest in
and to the Property. The Deed for Members who purchase an Every Other Year
Membership on or after January 11, 1995 shall convey a 1/18,650 interest in and
to the Property.
E. By this Plan, Seller and the Club intend to establish a common plan for
the use, enjoyment, repair, and improvement of the Property and the interests
therein and for the payment of taxes, assessments, insurance premiums and other
expenses. The Club and Seller intend to comply with the terms and conditions of
the Arizona Real Estate Time Shares Act (Arizona Revised Statutes Sec 32-2197 et
seq.).
F. In furtherance of such intent, Seller and the Club declare that the
Property is and shall be held, conveyed, mortgaged, leased, used, and improved
subject to the limitations, covenants and conditions set forth in this Plan, as
this Plan may be further amended, and in such other rules and regulations as are
instituted pursuant to this Plan or pursuant to the Bylaws of the Club. All such
limitations, covenants, conditions, rules and regulations shall be binding upon
and for the benefit of the Club and each Member thereof and any party having or
acquiring any right, title, interest or estate in the Property.
G. The Club shall be responsible for the payment of a percentage of the
costs of owning, operating, managing and maintaining the Property (such costs
being hereinafter referred to as the "Dedicated Percentage"). The Dedicated
Percentage of expenses payable by the Club shall be equal to the total expenses
incurred by Seller multiplied by a fraction, the numerator of which is the
number of Memberships then sold by Seller and the denominator of which is the
total number of authorized Membership interests in the Club (the "Total
Authorized Memberships"). See "Type of Ownership" at Sec. 2.01. Any expenses
related to the ownership, operation, management or maintenance of the "Excepted
Areas" as defined in Sec. 1.16 shall be the sole responsibility of Seller. See
"Dedicated Percentage of Expenses Payable by the Club" at Sec. 3.09.
ARTICLE I
DEFINITIONS
In addition to other definitions provided for herein, the following terms
shall have the following meanings:
Section 1.01. Articles. "Articles" means the Articles of Incorporation of
the Club as the same may be amended from time to time.
Section 1.02. Assessments. "Assessments" means that portion of Dues,
Personal Charges and Capital Assessments which a Member is required to pay.
Section 1.03. Board. "Board" means the Board of Directors of the Club.
Section 1.04. Bylaws. "Bylaws" means the Bylaws of the Club adopted by the
Board, as the same may be amended from time to time.
Section 1.05. Capital Assessment. "Capital Assessment" shall mean a charge
against each Member and his/her Membership, representing a portion of the cost
to the Club for installation or construction of any capital improvements on or
to, or for the benefit of, the Resort or for reconstruction of any capital
improvements on any of the Resort which the Board may approve from time to time.
Such charge shall be levied among all of the Memberships in the same proportions
as are Dues.
Section 1.06. Check-In-Time and Check-Out-Time. "Check-In-Time" and
"Check-Out- Time" mean the times designated as such in the Plan or in the then
current Rules and Regulations.
Section 1.07. Club. "Club" means Sedona Vacation Club Incorporated, an
Arizona nonprofit corporation, or any successor-in-interest by merger or express
assignment of the rights of the Club hereunder.
Section 1.08. Common Areas. "Common Areas" means all portions of the
Property other than (a) the interiors of the Units and, where applicable,
connected patio or balcony areas, and (b) the Excepted Areas.
Section 1.09. Common Expenses. "Common Expenses" shall mean a portion of
the actual and estimated costs of ownership, maintenance, management, operation,
repair and replacement of the Property, all improvements benefiting the Property
and the Common Furnishings including but not limited to taxes, insurance,
utilities, reserves, maintenance fees, legal and accounting fees.
Section 1.10. Common Furnishings. "Common Furnishings" means all furniture,
furnishings, appliances, fixtures and equipment, and all other personal property
from time to time owned, leased or held for use by the Club and which are
located in or upon the Property, except any furniture, furnishings, appliances,
fixtures, equipment and all other personal property located in the Excepted
Areas.
Section 1.11. CPI Dues Adjustment Percentage. "CPI Dues Adjustment
Percentage" means a percentage equal to the sum of the percentage increase
during the twelve (12) months ending on September 30th in the preceding calendar
year in the Consumer Price Index in the Metropolitan Phoenix Area as determined
by the United States Department of Labor, Bureau of Labor Statistics plus five
percent (5%). In the event the Consumer Price Index is discontinued, the Board
shall select an appropriate alternative economic indicator.
Section 1.12. Dedicated Percentage. "Dedicated Percentage" means that
portion of the expenses related to the ownership, operation, management and
maintenance of the Property required to be paid by the Club to Seller, which
Dedicated Percentage shall be equal to the total expenses incurred by Seller
multiplied by the total amount of the undivided fractional ownership interests
then held by Members to whom Seller sold a Membership. Any expenses related to
the ownership, operation, management or maintenance of the Excepted Areas shall
be the sole responsibility of Seller.
Section 1.13. Deed. "Deed" means a fee simple interest to an undivided
fractional interest in the Property, as evidenced by a recorded warranty deed
executed by Seller on behalf of a Member, which Deed shall be subject to the
terms and conditions of this Plan.
Section 1.14. Deed of Trust. "Deed of Trust" means a recorded deed of trust
executed by a Member on behalf of Seller which secures any unpaid balance of the
Member's Membership, as evidenced by the Member's Purchase Agreement and any
unpaid Dues or Common Assessments owed by such Member.
Section 1.15. Dues. "Dues" shall mean a charge against each Member and
his/her Membership, representing a portion of the annual costs of maintaining,
improving (including reserves), repairing and managing a portion of the Property
and all other Common Expenses which are to be paid by each Member to the Club as
provided herein.
Section 1.16. Every Year Membership. "Every Year Membership" means a
Membership that entitles the Member to reserve and use his or her Membership in
every year.
Section 1.17. Every Other Year Membership. "Every Other Year Membership"
means a Membership that entitles the Member to reserve and use his or her
Membership in either every Odd Year or every Even Year. If the Member has
purchased an Every Other Year Membership for every Odd Year, then he or she may
reserve and use the Property only during those Occupancy Years ending in an odd
number (for example, 1993, 1995, and so on). If the Member has purchased an
Every Other Year Membership for every Even Year, then he or she may reserve and
use the Property only during those Occupancy Years ending in an even number (for
example, 1992, 1994, and so on).
Section 1.18. Excepted Areas. "Excepted Areas" means the following areas
situated at the Resort:
(1) the On the Rocks Lounge and any and all other lounge or bar
facilities (except those bar facilities located in the Units) now or hereafter
existing on the Property,
(2) the Sedona Health Spa at Los Abrigados together with the
reception, business offices and patio areas on the second floor adjacent to the
Sedona Health Spa at Los Abrigados and any and all health or fitness related
facilities (except the swimming pool and the tennis courts) now or hereafter
existing on the Property,
(3) the Canyon Rose Dining Room and any and all other dining
facilities, snack bars, gift shops and stores now or hereafter existing on the
Property,
(4) all conference rooms including the Landmark Room, Coffee Pot Room,
Indian Gardens Room, Steamboat Rock Room, Snoopy Rock Room and any and all other
conference rooms (except those conference rooms located within the Units) now or
hereafter existing on the Property, and
(5) the entire first floor of the main hotel structure, which floor
contains the hotel registration desk and lobby areas.
Section 1.19. Exchange Program. "Exchange Program" means a service provided
by Resort Condominiums International, Inc. ("RCI") or such other independent
exchange company as may, from time to time, be selected by the Club, whereby
Members, for a fee, may exchange Occupancy Periods in the Property for
comparable use privileges in other projects in the RCI (or other exchange
company) network program.
Section 1.20. Exchange User. "Exchange User" means an owner of a time
period in an unrelated project who occupies a Unit in the Club and uses the
Club's Common Areas pursuant to an Exchange Program.
Section 1.21. Fiscal Year. "Fiscal Year" means the one year period
commencing on January 1 of each year.
Section 1.22. Lender. "Lender" means the financial institution or
institutions that shall from time to time finance on behalf of Seller the Resort
and/or the unpaid Membership contracts.
Section 1.23. Maintenance Period. "Maintenance Period" means, with respect
to each Unit, a period of not more than one (1) day and night during each
Occupancy Year, reserved by the Seller for maintenance and repair of a Unit and
the Common Furnishings therein. The Club shall determine which day and night
will comprise the Maintenance Period for each Unit, which determination may be
changed from time to time.
Section 1.24. Managing Agent. "Managing Agent" means ILX Incorporated, an
Arizona corporation, or such other agent engaged by the Board pursuant to and in
the manner provided in Section 4.03 hereof.
Section 1.25. Member. "Member" means the owner of a Membership in the Club
or Seller with respect to any Memberships held for sale by Seller.
Section 1.26. Membership. "Membership" means a Member's right to occupy a
Unit, the Common Areas and the Common Furnishings during an Occupancy Period
provided such occupancy is reserved and used in accordance with the applicable
provision of the Plan, Bylaws and Rules and Regulations. The Club shall issue
and sell no more than fifty-two (52) Memberships per Unit. For purposes of
calculating "Memberships Per Unit," each Every Year Membership shall count as
one Membership and each Every Other Year Membership shall count as one-half of a
Membership. Each Membership shall be evidenced by a Membership Certificate and
Deed. The Club shall offer five types of Memberships, which shall be identified
as Jerome Memberships, Sedona Memberships, Oak Creek Memberships, Flagstaff
Memberships and Stone House Memberships. Within each type of Membership, the
Club shall offer "Every Year Memberships" and "Every Other Year Memberships."
Every Other Year Memberships are further subdivided into Memberships for either
every even year or every odd year.
Section 1.27. Membership Certificate. "Membership Certificate" means a
certificate issued by the Club identifying the person to whom it is issued as a
Member and specifying the type of Membership purchased. The person to whom is
issued a Membership Certificate shall also be issued a Deed.
Section 1.28. Occupancy Period. "Occupancy Period" means seven (7) time
periods (as defined in Sec. 1.40) during each Occupancy Year (as defined in Sec.
1.30), not necessarily consecutive, during which a Member has reserved the use
of a Unit in accordance with the provisions of this Plan, the Bylaws and the
Rules and Regulations.
Section 1.29. Occupancy Right. "Occupancy Right" means the maximum number
of persons (either four (4) or six (6) specified in a Membership Certificate)
who may occupy a Unit at any one time during the Occupancy Period of the Member
owning such Membership Certificate.
Section 1.30. Occupancy Year. "Occupancy Year" means each thirteen (13)
month period commencing at Check-In-Time on the first Monday in January of each
calendar year (unless December 31 is a Monday in which event an Occupancy Year
shall commence at Check-In-Time on December 31) and concluding on January 31 of
the following year, provided, however, that for purposes of Members who own
Every Other Year Memberships for every odd year, the Occupancy Year shall
commence at Check-In-Time on the first Monday in January of each odd calendar
year, for example, January 1, 1993, 1995 and so on (unless December 31 is a
Monday in which event an Occupancy Year shall commence at Check-In-Time on
December 31) and conclude on January 31 of the following year; and for Members
who own Every Other Year Memberships for every even year, the Occupancy Year
shall commence at Check-In-Time on the first Monday in January of each even
calendar year, for example January 1, 1992, 1994, and so on (unless December 31
is a Monday in which event an Occupancy Year shall commence at Check-In-Time on
December 31) and conclude on January 31 of the following year. The Rules and
Regulations may designate another period as constituting the Occupancy Year. The
first Occupancy Year of each Every Year Membership shall be the Occupancy Year
in which the Member purchases his or her Membership. For purposes of the
Exchange Program described in Section 1.19 above, an exchange may be effected
only during each calendar year or for subsequent calendar years or as otherwise
administered by the exchange company from time to time conducting the Exchange
Program.
Section 1.31. Permitted User. "Permitted User" means any person, other than
an Exchange User or a Renter, occupying a Unit in the Property by or through any
Member, including, but not limited to, such Member's family, guests, licensees
or invitees (inclusive of those persons to whom the Member rents the Unit).
Section 1.32. Personal Charges. "Personal Charges" shall mean a charge
against a particular Member and his/her Membership, directly attributable to, or
reimbursable by, the Member, equal to the cost incurred by the Club for
corrective action performed pursuant to the provisions of this Plan, or a
reasonable fine or penalty assessed by the Club, plus interest and other charges
thereon as provided for in this Plan. Personal Charges shall also include any
and all charges attributable to or incurred by a Member or a Permitted User
during his/her use of the Property. Any act or omission by a Permitted User
shall be deemed the act or omission of the Member under whom such Permitted User
occupies the Property.
Section 1.33. Plan. "Plan" means this instrument, as may be amended from
time to time.
Section 1.34. Property. "Property" means that certain real property located
in Sedona, Arizona, as more particularly described in Exhibit A hereto, which
description does not include the Excepted Areas.
Section 1.35. Purchase Agreement. "Purchase Agreement" means a Purchase
Agreement between Seller and the person, firm or entity named therein as "Buyer"
providing for the sale by Seller and the purchase by Buyer of one or more
Memberships to be evidenced by one or more Membership Certificates and one or
more Deeds.
Section 1.36. Record Book of Members. "Record Book of Members" means the
official register of the then current Members of the Club, as kept by the
Secretary of the Club in accordance with the Bylaws.
Section 1.37. Renter. "Renter" means an individual, other than a Member,
Exchange User or Permitted User, who has obtained the right to occupy a Unit in
the Property on an overnight basis.
Section 1.38. Resort. "Resort" means the Property and the Excepted Areas.
Section 1.39. Rules and Regulations. "Rules and Regulations" means the
rules and regulations adopted by the Board as may be amended from time to time
pursuant to the Bylaws of the Club.
Section 1.40. Seller. "Seller" means LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership, and its successors and assigns, or
any designated affiliate or subsidiary thereof and their successors and assigns.
Seller is the owner of the Resort, the seller of Memberships under the Purchase
Agreements and the grantor of Deeds.
Section 1.41. Time Period. "Time period" means any single overnight period
of time during the Occupancy Year, commencing at Check-In-Time and terminating
at Check-Out-Time.
Section 1.42. Unit. "Unit" means any separate living unit located on the
Property which the Club, on behalf of its Members, has acquired the right to
occupy. Units are divided into five different types of suites, which are
identified as Jerome, Sedona, Flagstaff, Oak Creek and Stone House suites.
Section 1.43. Unoccupied Unit. For as long as the Seller or its successors
or assigns is operating the Resort as a hotel, an "Unoccupied Unit" shall be a
Unit with respect to which the Seller or any affiliate or subsidiary has the
right to rent pursuant to Section 2.08 of this Plan, subject to the Occupancy
Rights of Members as set forth in Section 2.06 of this Plan. Any Unit that has
not been reserved by a Member within six (6) days of its intended use shall be
deemed an Unoccupied Unit, provided, however, that during such six (6) day
period a Member shall have the right to reserve a Unit if Seller has not
otherwise rented it.
ARTICLE II
RESERVATION RIGHTS, OCCUPANCY RIGHTS
AND RESTRICTIONS
Section 2.01. Type of Ownership. The Club shall offer five types of
Memberships, which shall be identified as Jerome, Sedona, Flagstaff, Oak Creek
and Stone House Memberships. The names of these Memberships correspond to the
type of Unit that each Member has acquired the right to use. For example, the
owner of a Jerome Membership shall be entitled to reserve a type of Unit
identified as a Jerome Suite for one (1) Occupancy Period during each Occupancy
Year. In addition, Members may choose to purchase either an Every Year
Membership or an Every Other Year Membership. If a Member owns an Every Other
Year Membership, the Member is entitled to reserve and use the Property only
every other year. Members who own Every Other Year Memberships have the right to
designate, at the time such Member purchases his or her Membership, whether the
Every Other Year Membership will apply to every even year or every odd year.
Based upon the number of Units currently existing on the Property, the Club
shall have the right to generate 9,100 Memberships (the Total Authorized
Memberships) subject to the provisions set forth in Sec. 2.06 hereof. For
purposes of determining the Total Authorized Memberships, Every Year Memberships
shall count as one Membership, and Every Other Year Memberships shall count as
one-half (1/2) of a Membership. Based upon the types of Units currently existing
on the Property, the Total Authorized Memberships shall be divided as follows:
TYPE # UNITS # MEMBERSHIPS
Jerome ................................... 134 6,968
Sedona ................................... 20 1,040
Flagstaff ................................ 8 416
Oak Creek ................................ 12 624
Stone House .............................. 1 52
TOTAL .................................... 175 9,100
Members shall have the non-exclusive right to use the Property during their
reserved Occupancy Period. Such right shall exist forever ("in perpetuity"),
subject to compliance with the terms and conditions of such Member's Purchase
Agreement, this Plan, the Bylaws and the Rules and Regulations. All Member
reservations shall be made on an as-available basis. All reservations must be
made in accordance with the terms and conditions for reservation set forth in
the then current Rules and Regulations.
Membership in the Club shall be evidenced by a Membership Certificate, by a
Deed (for all Members who purchase their Membership after September 10, 1991,
and for all Members who purchase their Membership before September 10, 1991 and
elect pursuant to the terms and conditions of this Plan, to receive a Deed), by
recordation of the Member's name and address in the Record Book of Members, and
by a Deed of Partial Release and Reconveyance of Lender's underlying
encumbrances ("Deed of Partial Release and Reconveyance"), executed by Lender.
The Membership interest created pursuant to this Plan shall not be defined as a
lease or a rental agreement nor shall it be subject to the provisions of the
Residential Landlord and Tenant Act (Arizona Revised Statutes Sec. 33-1301 et
seq.) or to the Landlord and Tenant Act (Arizona Revised Statutes Sec. 33-301 et
seq.).
With respect to Members who purchased their Memberships before
September 10, 1991, Seller notified each such Member of their right to receive a
Deed evidencing said Member's undivided 1/8,925 fractional fee title interest in
and to the Property, to be held in common with all other Members. Those Members
who purchased, but have not finished paying, for their Memberships before
September 10, 1991, have the right to receive a Deed evidencing said Member's
undivided 1/8,925 fractional fee title interest in and to the Property to be
held in common with all other Members, provided the Member executes a Deed of
Trust which shall secure the unpaid balance of the Member's Membership. Each
Member who elects to receive a Deed will be required to pay administrative fees
relating to the recordation and processing of the Deed.
Except as otherwise set forth herein, Seller shall issue to each Member a
Deed evidencing said Member's undivided fractional fee title interest in and to
the Property, to be held in common with all other Members. If a Member purchased
an Every Year Membership before January 11, 1995, the Deed shall reflect a
1/8,925 interest. If a Member purchased an Every Other Year Membership before
January 11, 1995, the Deed shall reflect a 1/17,850 interest. If a Member
purchases an Every Year Membership on or after January 11, 1995, the Deed shall
reflect a 1/9,325 Membership interest. If a Member purchases an Every Other Year
Membership on or after January 11, 1995, the Deed shall reflect a 1/18,650
Membership interest. All Deeds shall be subject to the terms and conditions of
this Plan and no Member shall convey, transfer, sell or assign their Deed
separate from said Member's Membership, and all such conveyances, transfers,
sales or assignments of any nature shall be accomplished in accordance with the
terms and conditions set forth in Section 2.09 of this Plan. Any attempt to
effect a transfer prohibited by this Section 2.01 shall be void. Except as
otherwise set forth herein, contemporaneous with the delivery of a Deed to a
Member who has not paid in full for his/her Membership, such Member shall
execute and deliver to Seller a Deed of Trust, which Deed of Trust shall be
released by Seller upon payment in full of said Member's Membership. With
respect to those Members who purchase a Membership pursuant to an Agreement for
Sale, each such Member shall not be entitled to receive a Deed until such time
as he or she shall have paid for such Membership in full and shall have
otherwise complied with the terms and conditions of the Agreement for Sale
Addendum to the Purchase Agreement.
Section 2.02. Reservation and Occupancy Rights of Members. Subject to all
the terms and conditions contained elsewhere in this Plan, each Member or
his/her Permitted User shall have the right, for each Membership owned, to
occupy a Unit of a type corresponding to the type of Membership purchased by
such Member, and to use the Common Furnishings contained within such Unit, and
the non-exclusive right to use and enjoy the Common Areas for one (1) Occupancy
Period during each Occupancy Year, provided that such Member shall have reserved
such occupancy in accordance with the requirements and procedures for the making
of reservations set forth in the then current Rules and Regulations.
A Member may reserve seven consecutive time periods or may reserve any
combination aggregating seven time periods, subject to the restrictions
contained in this Plan and in the then current Rules and Regulations.
No use or occupancy by any Member will be permitted if such Member is not
registered in the Record Book of Members as a Member of the Club, does not
possess a Membership Certificate issued by the Club or is delinquent in the
payment of any amounts owed to the Club or owed to Seller or its assigns
pursuant to the Purchase Agreement for such Member's Membership at the time of
reservation or at the commencement of any time period falling within such
Member's Occupancy Period.
Section 2.03. Member's Obligations During Occupancy. Each Member shall keep
the Unit occupied by him/her and the Common Furnishings therein in good
condition during the Occupancy Period, vacate the Unit at the expiration of the
Occupancy Period, remove all persons and property therefrom, excluding only the
Common Furnishings, leave the Unit and the Common Furnishings therein in good
and sanitary condition and otherwise comply with such check-out and other
regulations as may be contained in the Rules and Regulations. Any Member may
permit a Permitted User to exercise such Member's Occupancy Right for the
purposes permitted by this Plan during his/her Occupancy Period, but such Member
shall be responsible for any loss, damage, or violation of this Plan or the
Rules and Regulations that occurs during such Occupancy Period as if such Member
were occupying the Unit.
Except as required to prevent damage or injury to persons or property in an
emergency, no Member shall make or authorize any alterations to a Unit or its
Common Furnishings; paint or otherwise refinish or redecorate the inner surfaces
of the walls, ceilings, floors, windows or doors bounding any Unit which such
Member may from time to time occupy; or remove, alter or replace any portion of
the Common Furnishings without the prior written consent of the Club. The right
to perform all of the foregoing acts has been retained by the Club and by Seller
unless otherwise expressly stated in this Plan. The foregoing prohibitions,
however, shall not modify or affect the obligation of each Member for the
prudent care and ordinary maintenance and upkeep of all property subject to
his/her use. No animals shall be allowed or kept in or upon any Unit.
Section 2.04. Additional Membership Rights. All Members shall have, in
addition to their occupancy and ownership rights, the opportunity to
participate, for a fee, in the Exchange Program. Members who purchase
Memberships directly from Seller shall also be entitled to: (a) reserve
discounted accommodations, on an as-available basis, at the Property; (b)
unlimited day use (365 days per year) of all the Resort facilities; (c) at no
extra fee, unlimited use of the Sedona Health Spa subject to the then current
Rules and Regulations. Day use of Resort facilities and use of the Sedona Health
Spa shall be limited to the number of persons described under "Occupancy Right"
in Section 1.29 above.
Section 2.05. Failure to Vacate. If any Member or any Permitted User fails
to vacate a Unit at the end of his/her Occupancy Period, or otherwise makes
unauthorized use or occupancy of a Unit during a period other than his/her
Occupancy Period or any reserved time period therein, or prevents another
Member, Permitted User or Exchange User (the "Detained Member" or "Detained
User") from using or occupying a Unit during such other Member's Occupancy
Period, such Member (the "Detaining Member") or Permitted User (the "Detaining
User") shall (a) be subject to immediate removal, eviction or ejection from the
Unit wrongfully used or occupied; (b) be deemed to have waived any notice
required by law with respect to any legal proceedings regarding removal,
eviction or ejection; (c) reimburse the Club and the Detained Member or Detained
User for all costs and expenses incurred by him/her as a result of such conduct,
including, but not limited to, costs of alternate accommodations, travel costs,
court costs and reasonable attorneys' fees incurred in connection with removing,
evicting or ejecting the Detaining Member or Detaining User from such Unit, and
costs (including reasonable attorneys' fees) incurred in collecting such
amounts; and (d) pay to the Detained Member or the Detained User entitled to use
and occupy the Unit during such wrongful occupancy, as liquidated damages (in
addition to the costs and expenses set forth in this Section 2.05), a sum equal
to two hundred percent (200%) of the fair rental value per day of the Unit for
each day or portion thereof, including the day of surrender, during which the
Detaining Member or Detaining User prevents use and occupancy of the Unit. "Fair
rental value" for a Unit shall be the then current market rental rate ("rack
rate") for comparable accommodations at the Property or in the event no such
accommodations shall be available at the Property, the then current market rate
for comparable accommodations in the Sedona area. The Club shall use reasonable
efforts to remove such Detaining Member or Detaining User from the Unit, to
assist the Detained Member or Detained User in finding alternate accommodations
during such holdover period, or to secure, at the expense of the Club, alternate
accommodations for any Detained Member or Detained User. Such alternate
accommodations shall be as near in value to the Detained Member's or Detained
User's Unit as possible and the cost thereof shall be assessed to the Detaining
Member as a Personal Charge. If the Club, in its sole discretion, deems it
necessary to contract for a period greater than the actual period for which the
use is prevented in order to secure alternate accommodations, the cost of the
entire period shall be assessed to the Detaining Member as a Personal Charge. By
accepting issuance of a Membership Certificate, each Member agrees that, in the
event of a wrongful occupancy or use by such Member, or such Member's Permitted
User, damages would be impracticable or extremely difficult to ascertain and
that the measure of liquidated damages provided for herein constitutes fair
compensation to those who are deprived of occupancy. If a Member or his/her
Permitted User by intentional or negligent act renders a Unit uninhabitable for
all or any portion of one or more successive Occupancy Periods, then (i) such
Member shall be deemed a Detaining Member, (ii) the foregoing provisions of this
Section 2.05 shall apply, (iii) such Member shall be liable to any Member or
Permitted User during any such successive Occupancy Period just as if such
Member had refused to vacate the Unit at the end of his/her Occupancy Period and
(iv) such Member shall additionally be responsible for all Personal Charges
related to his/her occupancy. For the purposes of this Section, the act or
negligence of a Permitted User shall be deemed to be the act of the Member
authorizing the Permitted User to use such Member's Membership rights.
Section 2.06. Occupancy Restrictions. Pursuant to certain agreements
between Seller and Lender and the Transfer Agreement between the Club and
Seller, certain restrictions and limitations may be imposed with respect to the
number of Units that may be occupied by Members at any given time. The type of
Units initially available for occupancy were as follows: 20 Jerome suites; 3
Sedona suites; 3 Flagstaff suites; 3 Oak Creek suites; and 1 Stone House suite.
Occupancy of thirty (30) Units at any given time shall be available to Members
until such time as 1,500 Memberships have been sold by Seller to third parties
unrelated to Seller. Thereafter, occupancy of ten (10) additional Units shall
become available to Members, at Seller's election, in the manner described
below. Seller shall have the right to designate the type of Units available for
occupancy. Additional Units, in increments of ten (10) Units, shall be added to
the existing pool of available Units each time Seller has sold at least 500
additional Memberships arising from the addition of the previous ten (10) Units.
Section 2.07. Easement for Sales, Customer Service and Related Purposes.
Without limitation thereto, the Club, Seller and Lender, respectively, on behalf
of themselves, their successors and assigns, and their respective agents,
employees, and other authorized personnel, retain the right to enter the Units,
the Common Areas for the purposes of: (1) marketing and selling Memberships, (2)
maintaining customer relations and providing post-sale services to Members; (3)
displaying signs and erecting, maintaining and operating, for sales and
administrative purposes, model Units and a customer relations, customer service
and sales office complex on the Property; (4) showing the Units and Common Areas
and arranging for the use of any recreational facilities within the Common Areas
by prospective purchasers; and Lender exercising its right of inspection under
the loan documents; and (5) performing administrative, maintenance and other
obligations under this Plan. The exercise of such rights shall not unreasonably
interfere with or diminish the rights of Members to occupy Units in accordance
with this Plan and the Rules and Regulations.
Section 2.08. Rental of Units by Seller. Seller shall operate the Resort as
a hotel. Seller or any affiliate or subsidiary thereof shall have the exclusive
right, during all times a Unit is unoccupied (see Section 1.43 above), to rent
said Unit as part of the hotel operation. Members shall not be entitled to
receive any proceeds resulting from or related to Seller's operation of the
Property as a hotel. No rental shall interfere with or diminish the rights of
Members to occupy Units in accordance with this Plan, the Bylaws and the Rules
and Regulations. The cost of repair or replacement incurred by reason of damage
or destruction (excluding normal wear and tear) to a Unit, or the Common
Furnishings therein, which damage or destruction occurs during the rental of
such Unit pursuant to this Section 2.08, shall be borne by Seller to the extent
not otherwise covered by insurance. Seller, on behalf of itself, its successors
and assigns, and its and their agents, employees and other authorized personnel,
reserves the right to enter the Units, the Common Areas and the Excepted Areas
for the purpose of conducting rental activities pursuant to this Section 2.08.
Section 2.09. Restrictions on Resale of Club Memberships. Seller, on behalf
of itself, its successors and assigns, has retained a right of first refusal on
all Memberships. Members seeking to sell their Membership must first submit a
written offer to sell the Membership to Seller. The offer must set forth a
price, not to exceed the purchase price agreed to between the Member and the
prospective third party purchaser, the type of Membership, and the date the
offer is to expire. Seller shall be entitled to repurchase the Membership on the
terms and conditions set forth in such written offer. In the event Seller does
not respond within 20 days after actual receipt of the written offer, then said
Member(s) may offer the Membership and Deed, to a third-party in accordance with
the terms and conditions set forth below. In no event may a Member offer or list
with a real estate broker a Membership for resale at a price less than the
average selling price for the same type of Membership established by Seller
during the sixty (60) days preceding the date of such Member's offer or listing.
(1) The buyer, transferee or assignee of the Membership and Deed
("Buying Member") must agree in writing ("Buyer's Agreement"), to the
following conditions (a) to abide by the Plan, the Bylaws and the Rules and
Regulations, and (b) to pay the balance, if any, due under the Selling
Member's Purchase Agreement. The Buyer's Agreement must also state the
name, address and telephone number of the Buying Member and the type of
Membership to be transferred. The Buyer's Agreement must be in a form
acceptable to Seller or its successor or assign and to the Club; and
(2) Selling Member must pay any and all amounts then due and owing to
Club and/or Seller or its successor or assign; and
(3) Selling Member must deliver to the Club his/her Membership
Certificate and a deed conveying Selling Member's ownership interest in the
Property (as evidenced by Selling Member's Deed); and
(4) Selling Member shall deliver to the Club a written affidavit which
states that said Selling Member is not seeking to sell, convey or encumber
less than all of his/her interest in any single Membership. Any sale,
conveyance or encumbrance by any Member of less than all of his/her
interest in a Membership and Deed shall be null, void and of no effect.
Upon satisfaction of the above terms and conditions, the Board, or its duly
authorized representatives, shall determine, in their sole discretion, whether
the Membership and Deed may be sold, transferred or assigned. The Club will not
arbitrarily withhold its approval of any proposed Membership sale, transfer or
assignment. In the event sale, transfer or assignment is approved, the Board
shall levy upon said Selling Member a reasonable transfer fee to cover the
actual costs of the transaction, which fee must be paid prior to issuance of the
Buying Member's Membership Certificate. Upon receipt of the transfer fee, the
Board shall instruct the Secretary of the Club to enter the Buying Member's name
in the Record Book of Members, and Seller shall issue a new Membership
Certificate and Deed to the Buying Member and cancel the Membership Certificate
and Deed of the Selling Member. At such time the ownership of such Membership
shall be deemed to be transferred. During the Occupancy Year in which the Buying
Member acquired his/her Membership, said Buying Member shall be entitled to the
occupancy of a Unit only to the extent of the time periods remaining in the
Selling Member's Occupancy Period for that Occupancy year.
In the event the sale, transfer or assignment of the Membership is
disapproved, the Club shall transmit written notice of such disapproval and the
reasons therefor to the Selling and Buying Members, and shall return to the
Selling Member his/her Membership Certificate and Deed, if previously delivered
to Seller. Membership in the Club shall not be limited by race, color, religion,
national origin, sex, marital status or age (provided the Buying Member has the
capacity to contract).
ARTICLE III
THE CLUB
Section 3.01. Club. Sedona Vacation Club Incorporated, an Arizona nonprofit
corporation, shall be the Club.
Section 3.02. Membership in the Club. Each owner of a Membership shall be a
Member of the Club and shall remain a Member thereof until he or she ceases to
own a Membership. The Membership of each Member of the Club is connected to and
inseparable from his/her ownership of a Membership Certificate and Deed.
Section 3.03. Issuance and Transfer of Membership Certificates. The Club is
empowered, pursuant to the Bylaws, to issue Membership Certificates, in such
form as determined by the Board. The Membership Certificate shall be signed by
the President and Secretary of the Club. MEMBERSHIP IN THE CLUB IS IN PERPETUITY
provided the Member abides by this Plan, the Bylaws, the Rules and Regulations
of the Club and such Member's Purchase Agreement. Memberships are transferable
by gift or by will or intestate succession. Additionally, such Memberships may
be resold subject to the restrictions set forth in Section 2.09 hereof.
Notwithstanding any statement on the Membership Certificate, the owner of a
Membership shall be determined by the Record Book of Members, as kept by the
Secretary of the Club in accordance with the Bylaws.
Section 3.04. Membership Protection. Seller holds fee simple title to the
Property. Seller has conveyed to the Club, on behalf of its Members and only to
the extent of the Memberships sold, the right to use the Property in perpetuity,
subject to the terms and conditions of that certain amended Transfer Agreement
between Seller and the Club dated April 1, 1991. Neither the Club nor Seller is
currently aware of any mortgage, deed of trust or other monetary encumbrance
affecting title to the Property, except for the mortgage held by Lender. Except
as otherwise set forth herein, Lender has agreed to issue on behalf of each
Member a Deed of Partial Release and Reconveyance upon such Member's purchase of
a Membership interest in the Club (or immediately with respect to Members
existing before September 10, 1991). When a Member is in full compliance with
the Purchase Agreement, this Plan, the Bylaws and the Rules and Regulations, the
Deed of Partial Release and Reconveyance will protect such Member's Membership
interest in the event Lender forecloses upon Seller's interest in the Property.
Except as otherwise set forth herein, promptly after the Member purchases his or
her Membership (or immediately with respect to Members existing before
September 10, 1991), the Deed of Partial Release and Reconveyance will be
recorded at the Office of the Coconino County Recorder. Seller or its agent will
retain possession of the recorded Deed of Partial Release and Reconveyance until
such time as the Member has fully paid for the Membership in accordance with the
terms and conditions of the Purchase Agreement, whereupon Seller shall promptly
transmit said Deed of Partial Release and Reconveyance to the Member. With
respect to those Members who purchase a Membership pursuant to an Agreement for
Sale, Lender will not issue or record a Deed of Partial Release and Reconveyance
for any such Member until such time as he or she shall have paid for such
Membership in full and shall have otherwise complied with the terms and
conditions of the Agreement for Sale Addendum to such Member's Purchase
Agreement. In the event a Member executes a Deed of Trust in favor of Seller to
secure the unpaid balance of said Member's Membership then, upon payment in full
for said Membership in accordance with the terms and conditions of the Member's
Purchase Agreement, Seller or its agent will promptly execute, record and
deliver to the Member a Deed of Release and Reconveyance of the Deed of Trust.
Section 3.05. Voting. In accordance with the provisions of the Bylaws, the
Club shall have two (2) classes of Membership.
Members owning Every Year Memberships (with the exception of Seller) shall
be entitled to two (2) votes for each Membership owned. Members owning Every
Other Year Memberships (with the exception of Seller) shall be entitled to one
(1) vote for each Membership owned. Until such time as 80% of the Total
Authorized Membership Interests in the Club have been sold by Seller or its
successor or assign, Seller shall be entitled to six (6) votes for each Every
Year Membership then held for sale by Seller and three (3) votes for each Every
Other Year Membership then held for sale by Seller. At such time as 80% of the
Total Authorized Memberships have been sold by Seller or its successor or
assign, then Seller shall be entitled to two (2) votes for each Every Year
Membership then held for sale by Seller and one (1) vote for each Every Other
Year Membership then held for sale by Seller. Where there is more than one (1)
record owner of a Membership ("co-owners"), all of those co-owners shall be
Members and may attend any meeting of the Club, but only one (1) of those
co-owners shall be entitled to exercise the vote to which the Membership is
entitled. Co-owners of a Membership shall from time to time designate in writing
one (1) of their number to vote. Fractional votes shall not be allowed, and the
vote for each Membership shall be exercised, if at all, as a unit. Where no
voting co-owner is designated or if the designation has been revoked, the vote
for the Membership shall be exercised as the co-owners owning the majority
interests in the Membership mutually agree. Unless the Board receives a written
objection in advance from a co-owner, it shall be conclusively presumed that the
corresponding voting co-owner is acting with the consent of the co-owners. No
vote shall be cast for any Membership if the co-owners present in person or by
proxy owning the majority interests in such Membership cannot agree to said vote
or other action. The nonvoting co-owner or co-owners shall be jointly and
severally responsible for all of the obligations imposed upon the jointly-owned
Membership and shall be entitled to all other benefits of ownership.
Section 3.06. Actions of the Club Requiring Membership Approval.
Notwithstanding other provisions of the Plan or the Bylaws, the following
actions of the Club shall require approval of the Membership as set forth below:
(a) Any action taken by the Club to fail to renew any existing
contract with Seller or its subsidiary or affiliate for the management and
maintenance of the Property shall require the consent of ninety percent
(90%) of the votes of all Members including the Seller.
(b) Ninety percent (90%) of the votes of all Members shall be required
to approve the dissolution of the Club at any time prior to the year 2040;
from the year 2040 and thereafter, seventy-five percent (75%) of the votes
of all Members shall be required to approve dissolution of the Club.
Section 3.07. Counting of Votes. All votes on any action taken shall be
counted by an independent organization or individual selected by the Board.
Section 3.08. Board of Directors. The Directors shall be elected annually
by a vote of the Members.
Section 3.09. Dedicated Percentage of Expenses Payable by the Club. During
each Fiscal Year the Club shall pay to Seller, or its successor or assign, the
Dedicated Percentage of the total costs and expenses related to the Property.
The Dues and Assessments paid by the Members to the Club shall provide the
source of funds for the Club's payment to Seller of the Dedicated Percentage.
The following example illustrates how the Dedicated Percentage shall be
calculated. Assume that Seller had sold the equivalent of 5,016 Every Year
Memberships prior to January 11, 1995, and the equivalent of 500 Every Year
Memberships subsequent to such date. As such, Seller would have sold 5,016/8,925
and 500/9,325 of undivided fractional interests in the Property. The percentage
equivalents (rounded) of these fractions are 56% and 5% respectively, or a total
of 61%. Assume that for a given year, the total costs and expenses related to
the Property were $1,000,000. The Dedicated Percentage of the expenses which
must be paid by the Club to Seller in such year would be determined by
multiplying $1,000,000 (total costs and expenses) by 61%, which would result in
a Dedicated Percentage for such year of $610,000.
$ 1,000,000 x 61% = $610,000
Assume instead that the Seller had sold 250 Every Year Memberships and 250 Every
Other Year Memberships subsequent to January 11, 1995. In that case, the
dedicated percentage would be
$1,000,000 x 5,016 + 250 + 250 =
(----- ----- ------ )
8,925 9,325 18,650
$1,000,000 x (56% +3% +1%) = $1,000,000 x 60% = $600,000
See "Creation of Personal Obligations for Assessments" at Sec. 5.01.
ARTICLE IV
MANAGEMENT
Section 4.01. Powers and Duties Generally. The Club, acting through its
Board, may, subject to the provisions of the Articles, the Bylaws and this Plan,
exercise any and all of its rights and, except as specifically limited herein,
all the rights and powers of a nonprofit corporation formed under the laws of
the State of Arizona.
Section 4.02. Specific Powers and Duties of the Club. The management and
operation of the Club including the use and occupancy of the Units by Members
and the payment of certain expenses and costs described in this Plan shall be
the duty of the Club, acting through its Board. The Board shall have the duty to
administer the Membership Plan and to levy, collect and enforce the Dues and
Assessments provided for in this Plan.
The Club and Seller shall have exclusive possession of each Unit during the
Maintenance Periods for maintenance and repairs on such Unit. The Club and
Seller shall have the power to do all things that are required to be done
pursuant to this Plan. Without limitation of the above powers and duties, the
Board is expressly authorized, in its discretion and on behalf of the Members,
to do any or all of the following:
(a) Maintenance and Repair. The Club shall be responsible for the
payment of the Dedicated Percentage of the total costs and expenses
associated with the repair, maintenance, repainting, furnishing or
refurnishing of the Property and the Common Furnishings and the
establishment of reserves in connection therewith. The Dedicated Percentage
of maintenance and repair expenses shall be a Common Expense of the
Members. Maintenance and repair expenses related to the Excepted Areas
shall be the sole responsibility of Seller.
(b) Taxes. The Club shall be responsible for payment of the Dedicated
Percentage of the total taxes and assessments, and other costs affecting or
relating to the Property or the Common Furnishings. The Dedicated
Percentage of taxes and assessments shall be a Common Expense of the
Members. Taxes and assessments attributable to the Excepted Areas shall be
the sole responsibility of Seller.
(c) Utilities. The Club shall be responsible for payment of the
Dedicated Percentage of the total expenses related to electrical,
telephone, gas and other utility services for the Property. The Dedicated
Percentage of utilities expenses shall be a Common Expense of the Members.
Utilities expenses attributable to the Excepted Areas shall be the sole
responsibility of Seller.
(d) Allocation to Excepted Areas. At no time shall maintenance and
repair expenses, taxes or utilities expenses, allocated to the Excepted
Areas exceed ten percent (10%) of the total (per category) maintenance and
repair expenses, taxes and utilities expenses incurred at the Resort.
(e) Rules and Regulations. The Club shall adopt, publish and enforce,
from time to time, Rules and Regulations relating to the possession, use
and enjoyment of the Property, which Rules and Regulations shall be
consistent with this Plan.
(f) Legal and Accounting. The Club shall obtain legal and accounting
services necessary or proper in the operation of the Club and the
enforcement of this Plan, the Bylaws and the Rules and Regulations. Legal
and accounting fees shall be a Common Expense of the Members.
(g) Insurance. Seller or its agent shall obtain (i) insurance covering
the Property and the Common Furnishings against loss or damage by fire and
other hazards customarily covered by fire insurance policies written with
extended coverage; (ii) public liability insurance, insuring against
liability for personal injury or property damage resulting from an
occurrence in, on or about the Property and (iii) any other insurance,
including, but not limited to workers' compensation insurance, deemed
necessary or desirable by Seller. The policies of insurance shall cover
such risks, be written by such insurers and be in such amounts as Seller
shall deem proper under the circumstances. The Club shall be responsible
for payment of the Dedicated Percentage of the total insurance expenses
related to the Property. The Dedicated Percentage of insurance expenses
shall be a Common Expense of the Members. Insurance expenses attributable
to the Excepted Areas shall be the sole responsibility of Seller, provided
that the insurance expense allocated to the Excepted Areas shall not exceed
ten percent (10%) of the total insurance expenses.
(h) Levy and Collection of Assessments. The Club shall levy, collect
and enforce Assessments against the Members in the manner provided in
Articles V and VI hereof in order to pay the expenses of operation,
including the fee of the Managing Agent, and to enforce each Member's
obligations.
(i) Financial Statements and Accounting. The Club shall cause to be
prepared regularly and distributed to all Members an annual report, which
shall be distributed, within one hundred twenty (120) days after the end of
each Fiscal Year, consisting of the following (1) a balance sheet as of the
last day of each Fiscal Year, (2) an operating statement for such Fiscal
Year, (3) a statement of changes in financial position for the Fiscal Year,
and (4) a list of the names and mailing addresses of the members of the
Board. In the event the annual report is not prepared by an independent
accountant, the annual report shall be accompanied by the certificate of an
authorized officer of the Club that the statements were prepared without
audit from the books and records of the Club. Any Member may, upon ten (10)
days written notice to the Club, request the opportunity to inspect the
Club's books and records during normal business hours.
(j) Maintenance Fund. The Club shall establish at least one (1)
account (the "Maintenance Fund"), into which shall be deposited all monies
paid to the Club, and from which disbursements shall be made, as provided
herein, in the performance of functions by the Club under this Plan. The
Maintenance Fund may be established as a trust account, a money market
mutual fund or as any other type of account deemed appropriate by the
Board. The Maintenance Fund shall include at least: (1) an operating fund
for current Common Expenses of the Club, and (2) a reserve fund for capital
improvements, replacements, painting and repairs of the Resort and the
Common Furnishings.
(k) Statement of Status. The Club shall upon the request of any
Member, purchaser or other prospective transferee of a Membership
Certificate, issue a written statement setting forth any amounts unpaid
with respect to the Membership Certificate, the use entitlement for the
remainder of the Occupancy Year and the reservation status respecting such
Membership Certificate. Such statement, for which a reasonable fee may be
charged, shall be binding upon the Club in favor of any person who may rely
on it in good faith.
(l) Cleaning and Maid Service. The Club shall provide for cleaning and
maid service.
(m) Rights of Entry. The Club and Seller shall have a right of entry
in and upon the Property and the interior of all Units for the purpose of
inspecting the Property, the Units and the Common Furnishings, and taking
whatever corrective action may be deemed necessary or proper by the Board
of Directors, consistent with the provisions of the Plan. Without limiting
the generality of the foregoing, the Club shall have a right of entry into
any Unit occupied by a Member, a Permitted User, or Exchange User upon
reasonable notice to such occupant for any purpose reasonably related to
the Club's performance of its duties hereunder. The Club's right of entry
shall be exercised so as to avoid any unreasonable interference with the
enjoyment or occupancy of a Unit by any Member, Permitted User, or Exchange
User.
(n) Other Necessary Acts. The Club, acting through the Board or other
duly authorized representatives, shall do all other things or acts deemed
by the Club to be necessary or proper for the operation and maintenance of
the Property pursuant to this Plan.
(o) Delegation. The Club may delegate the authority and
responsibilities of the Club to one or more agents, including, without
limitation, the Managing Agent provided for in Section 4.03 below.
Section 4.03. Authority and Duty to Engage Managing Agent. Seller and the
Club shall use its best efforts to engage and maintain a reputable firm as the
Managing Agent for the Property pursuant to a written agreement (the "Management
Agreement") meeting the requirements of this Section 4.03. Such Management
Agreement shall:
(a) Obligate the Managing Agent to perform all the duties of the Club
specified in Section 4.02 above, provided that the Managing Agent may
delegate its authority and responsibilities to one or more subsidiaries or
affiliates for such periods and upon such terms as the Managing Agent deems
necessary or proper, subject to the limitations set forth below.
(b) Provide for a term of not more than five (5) years, except that
the Management Agreement may provide that the term will be automatically
renewed for successive five (5) year terms unless notice of non-renewal is
given no later than ninety (90) days prior to the end of any term by either
party, provided the Club may not give notice of non-renewal unless
authorized by the vote or written consent of ninety percent (90%) of the
voting power of the Club.
(c) Provide that the Managing Agent may resign only after it has given
at least ninety (90) days prior written notice to the Club.
(1) On or before the effective date of the Managing Agent's
resignation, the Managing Agent shall turn over all books and records
relating to the management and operation of the Property to the
successor Managing Agent.
(d) Provide for a management fee to be paid to the Managing Agent, or
a subsidiary or affiliate thereof, not to exceed ten percent (10%) of the
total Dues (exclusive of such management fee) assessed upon the Members in
each Fiscal Year. Such compensation may be increased if authorized by the
vote or written consent of a majority of the Board or if the Club is unable
to induce a reputable and experienced real estate management firm to act as
Managing Agent without increasing such compensation.
As of April 1, 1991, the Managing Agent shall be ILX Incorporated, an
Arizona corporation, or its successors or assigns.
ARTICLE V
DUES AND ASSESSMENTS
Section 5.01. Creation of Personal Obligations for Assessments. For
purposes of this Article V and to the extent provided for in Section 3.05,
Seller shall be considered to be the owner of all Memberships then held for sale
by Seller pursuant to Paragraph 4 of the Transfer Agreement, as amended. Each
Member, by acceptance of a Membership Certificate, hereby promises to pay to the
Club, for each Membership owned, the Dues, Capital Assessments and Personal
Charges respectively (all of which are sometimes individually and collectively
referred to as "Assessments"). Seller shall have the obligation to pay to or for
the benefit of the Club Assessments relating to each Membership owned by Seller.
Seller is further obligated to pay all other operating expenses related to the
ongoing operation and maintenance of the Property. The Assessments, together
with interest, costs of collection and reasonable attorneys' fees, shall be the
personal obligation of each Member at the time the Assessments become due and
payable, shall bind such Member's successors and assigns, and shall be a lien
and charge upon the Membership and Deed against which the Assessments are made.
No Member may waive or otherwise avoid liability for the Assessments by non-use
or abandonment of his/her Membership or any part thereof.
Section 5.02. Use of Assessments. Assessments shall be used exclusively to
promote the recreation, health, safety and welfare of the Members, the operation
and maintenance of the Resort, and to reimburse the Club for expenses incurred
by the Club in the performance of the duties of the Club as set forth in this
Plan.
Section 5.03. Basis of Maximum Dues. Annual Club Dues for Members owning an
Every Year Membership are currently $266 per Jerome Membership, $277 per Sedona
Membership, $299 per Oak Creek Membership, $310 per Flagstaff Membership, and
$375 per Stone House Membership. Annual Club Dues for Members owning an Every
Other Year Membership are currently $133 per Jerome Membership, $138.50 per
Sedona Membership, $149.50 per Oak Creek Membership, $155 per Flagstaff
Membership, and $187.50 per Stone House Membership. The maximum Dues under this
Article V shall be determined in accordance with the budget of the Club adopted
by the Board.
The Board may, in its sole discretion, determine that the Dues are
insufficient to meet the Common Expenses of the Club and the Board may, by
majority vote, increase such Dues, provided, however, that the Board shall not
be authorized to increase the Dues in an amount in excess of the CPI Dues
Adjustment Percentage. Written notice of any change in the amount of Dues levied
by the Club through the Board shall be given to all Members not less than thirty
(30) days prior to the effective date of such change. Any proposed increase in
annual Dues in excess of the CPI Dues Adjustment Percentage for any type of
Membership must be approved by the majority vote of the Total Authorized
Memberships of that type. For example, the annual Dues payable for Jerome
Memberships in 1992 shall not be increased in an amount greater than the CPI
Dues Adjustment Percentage unless 51% of the Jerome Memberships are voted in
favor of the Dues increase.
Section 5.04. Commencement and Collection of Dues. The Board shall
authorize and levy Dues upon each Membership, as provided herein, by majority
vote of the Board.
Section 5.05. Payment of Assessments. Dues shall be due and payable in
January of each Fiscal Year. Annual dues with respect to Memberships sold during
any Fiscal Year will be payable in the entire amount, without proration, within
thirty (30) days after the sale of such Membership. From time to time the Board
may determine that all excess funds be retained by the Club and used to reduce
the following year's Dues.
Section 5.06. Capital Assessments. Should the Board of Directors or Seller,
with the approval of the Board of Directors, determine the need for installation
or construction of any capital improvement or for reconstruction of any existing
capital improvements or other such addition to the Resort, the Board may levy a
Capital Assessment to cover the cost of such expenditure. Such charge shall be
levied among all of the Memberships in the same proportions as are Dues.
Section 5.07. Personal Charges. Personal Charges shall be paid by each
Member as follows:
(a) If the Club or Seller is able to determine the amount of Personal
Charges at Check-Out-Time, such Personal Charges shall be payable at the
termination of the Member's Occupancy Period.
(b) Personal Charges which are not ascertainable at Check-Out-Time
shall be payable within ten (10) days after receipt of a statement
therefor.
Section 5.08. Exchange Program. A member wishing to exchange his/her
Occupancy Period in the Property for use privileges in another project through
an Exchange Program must, at the time of deposit to the Exchange Program, have
paid in full all Assessments for the year in which the Occupancy Period falls,
as well as all prior Assessments. In the event the Occupancy Period being
deposited is in a future year for which the Assessments are not yet known, the
Member shall pay the equivalent of the current year Assessment for each such
unknown year through and including the year of the Occupancy Period.
ARTICLE VI
ENFORCEMENT OF RESTRICTIONS
Section 6.01. General. If any Member or his/her Permitted User fails to
comply with any of the terms of this Plan, the Bylaws and the Rules and
Regulations, the Board, acting on behalf of the Club, shall have full power and
authority to enforce compliance with the Plan, the Bylaws and the Rules and
Regulations in any manner provided for by law or in equity, including without
limitation, the right to bring an action for damages, an action to prohibit the
violation or to specifically enforce the terms of, this Plan, the Bylaws and the
Rules and Regulations. If the Club shall employ an attorney to enforce the terms
of this Plan, the Bylaws or the Rules and Regulations against any Member, the
Club shall be entitled to recover from the Member violating any such terms
reasonable attorneys' fees and costs in addition to any other amounts due. All
sums payable by a Member hereunder shall bear interest at the rate of eighteen
percent (18%) per annum, from the due date, or, if advanced or incurred by the
Club or any other Member pursuant to authorization contained in this Plan, from
the date of such expenditure. All enforcement powers of the Club shall be
cumulative. Each Member by acceptance of a Membership Certificate shall have
promised and agreed that the Club shall have all of the rights, powers and
remedies set forth in this Article VI and elsewhere in this Plan. The Board
shall take necessary steps to enforce this Plan against any Member.
Section 6.02. Suspension and Termination of Privileges. If any Member or
his/her Permitted User violates this Plan, the Bylaws or the Rules and
Regulations, the Board, or a duly authorized representative thereof, may suspend
the right of such Member and his/her Permitted User to reserve or occupy any
Unit and the right of such Member to participate in any vote or other
determination provided for herein. No such suspension, except for the failure of
such Member to pay any Assessments or other amount owed to the Club or owed to
Seller under the Purchase Agreement for such Member's Membership on or before
the due date therefor, shall be made except after a meeting of the Board, or a
meeting of duly authorized representatives thereof, at which a quorum of the
Board or a quorum of its representatives are present, duly called and held as
provided in the Bylaws for the noticing, calling and holding of a meeting of the
Board. Written notice of such meeting and its purpose, including the reasons for
the suspension sought, shall be given to the Member whose privileges are sought
to be suspended at least fifteen (15) days prior to the holding of such meeting.
Such notice shall be given as provided at Section 9.03 below. Such Member shall
be entitled to appear at such meeting and present his/her position as to why
privileges should not be suspended. The decision as to whether such privileges
should be suspended shall be made by a majority of the members of the Board. A
Member's right to occupy a Unit in the Property shall be automatically suspended
without any notice or hearing during any period in which such Member is
delinquent in the payment of amounts due the Club or amounts due Seller under
the Purchase Agreement for such Member's Membership. Written notice of
suspension, the reasons therefor and the length thereof shall be given to the
suspended Member and the suspension shall become effective on the date such
notice is given. In the event such suspension is based on the failure of a
Member to pay Assessments or any other amount owed to the Club, then such
Member's Membership in the Club shall be terminated, in accordance with the
terms and conditions set forth in the Bylaws, if said Member fails to cure the
payment delinquency within ninety (90) days. In the event said Member cures the
payment delinquency within the above stated ninety (90) day period, the
suspended privileges of such Member shall be reinstated automatically at such
time as the Member shall have paid, in cash or by cashier's or certified check,
all amounts past due as of the date of such payment together with any late
charges and interest thereon. If such suspension of privileges is based on the
failure of a Member to pay amounts owed to Seller, or its successors, pursuant
to such Member's Purchase Agreement, then such Member's Membership in the Club
shall be terminated, in accordance with the terms and conditions set forth in
the Purchase Agreement, if said Member fails to cure the payment delinquency
within 30 days of the mailing of a Notice of Default. In the event said Member
cures the payment delinquency within the above stated 30 day period, the
suspended privileges of such Member shall be reinstated automatically at such
time as the Member shall have paid, in cash or by cashier's or certified check,
all amounts past due as of the date of such payment together with any late
charges and interest thereon. If such suspension of privileges is based on any
other act or omission of a Member, the suspended privileges shall be
automatically reinstated upon the expiration of the suspension period stated in
the suspension notice. Nothing herein shall be deemed to limit, or restrict any
of Seller's remedies under such Member's Deed of Trust in accordance with
Arizona law.
ARTICLE VII
DAMAGE, DESTRUCTION, CONDEMNATION
Section 7.01. General. In the event of any damage or destruction of,
whether resulting from an insured or uninsured casualty, or a partial taking in
condemnation proceedings relating to, the Property or the Common Furnishings,
the Club and Seller shall, subject to the provisions of this Article, cause such
damage or destruction to be repaired or replaced, as the case may be, and shall
use any available insurance or condemnation proceeds for such purpose. If the
damage or taking is not covered by insurance proceeds or by condemnation
proceeds, or if the available funds are insufficient, the Board shall, subject
to the provisions of this Article, levy a Capital Assessment at a uniform rate
against all Members for the amount required to meet the cost of such repair or
restoration. If the damage or destruction was caused by the act or omission of
any Member or his/her Permitted User, the cost of such repair or the amount of
such deficiency shall be a Personal Charge and shall be paid by such Member as
provided in Section 5.07 above. To the extent the Club is unable, after
reasonable effort, to collect the cost of the repair or the amount of the
deficiency from such Member, said cost or deficiency shall become a Common
Expense of the Members. Except, however, expenses related to any damage or
destruction caused by a Renter shall, subject to normal wear and tear and to the
extent not covered by insurance, be the sole responsibility of Seller.
Section 7.02. Extensive Damage or Destruction. If the amount of the Capital
Assessment which is required under Section 7.01 above, shall exceed One Hundred
Thousand Dollars ($100,000), such Capital Assessment must be approved in advance
by the vote or written consent of a majority of the Members of the Club. If such
Capital Assessment is not so approved within one hundred eighty (180) days
following the date of such damage, destruction or condemnation judgment, such
Capital Assessment shall be deemed disapproved. Such disapproval shall
constitute an election to terminate this Plan with respect to the portion of the
Property damaged, destroyed or taken by condemnation. With respect to the
portion of the Property so damaged, destroyed or taken, termination of the Plan
shall occur in accordance with Section 9.02 below, and the recordation of an
amendment stating that the Plan, with respect to such portion of the Property,
has been so terminated. Any insurance proceeds or condemnation proceeds received
as a result of such damage, destruction or taking, shall be (i) used by Seller
to purchase an additional number of Units equal to the number of Units destroyed
or rendered unfit for occupancy ("Destroyed Units"), or (ii) paid to Members to
redeem and cancel a number of Memberships and the Deeds relating to such
Memberships equal to the number of Destroyed Units multiplied by the number of
Occupancy Periods in each such Unit, provided that no payment shall be made to
any Member to redeem such Member's Membership until any amounts due Seller under
the Purchase Agreement for such Membership and any amounts due to the Club from
such Member have been paid.
Section 7.03. Excess Insurance Proceeds. Any excess insurance or
condemnation proceeds over the cost of repair or restoration shall be
distributed to Seller and the Club, pro rata.
ARTICLE VIII
SELLER'S RIGHTS
Nothing in the Plan shall limit, and no Member or the Club shall do
anything to interfere with, the right of Seller to complete improvements to and
on the Property or any portion of the Property or to alter the foregoing or its
construction plans and designs, or to construct such additional improvements as
Seller deems advisable in the course of development of the Property. Such right
shall include, but shall not be limited to, the right to hook up to the sewer
system being constructed by the City of Sedona and to install and maintain such
structures, displays, signs, billboards, flags and sales offices as may be
reasonably necessary for the conduct of its business as owner and operator of
the Resort and selling Memberships in the Club. Each Member by accepting a
Membership Certificate acknowledges that certain activities of Seller may
temporarily impair the view of such Member and may constitute an inconvenience
or nuisance to the Members and consents to such impairment, inconvenience or
nuisance. Seller may use any Units in the Property as model complexes or real
estate sales or leasing offices. Seller need not seek or obtain Club approval of
any improvement constructed or placed by Seller on any portion of the Property.
The right of Seller hereunder and elsewhere in this Plan may be assigned by
Seller to any successor in interest by a written assignment. Notwithstanding any
other provision of the Plan, the prior written approval of Seller, as developer
of the Property, will be required before any amendment to this Article VIII
shall be effective.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Amendment. This Plan may be amended as follows:
(a) By the vote or written consent of a majority of the Board, acting
on behalf of the Club, in its discretion at any time, in order that the
provisions of this Plan shall comply with the regulatory requirements of
any jurisdiction in which the Club plans to issue Membership Certificates
or have Members;
(b) By the vote or written consent of seventy-five percent (75%) of
all of the Members (including Seller) of the Club; or,
(c) By the vote or written consent of the Board, acting on behalf of
the Club, in its discretion at any time.
Any amendment shall be binding upon every Member. Any amendment authorized
hereby shall be evidenced by an instrument in writing, signed and acknowledged
by a majority of the Board which amendment shall be effective upon filing with
the Secretary of the Club.
Section 9.02. Termination. This Plan shall terminate with respect to any
portion of the Property upon satisfaction of the conditions set forth in Section
7.02 and upon the registration or recordation of an amendment stating that this
Plan is terminated pursuant to this Section 9.02. Each Member, by acceptance of
a Membership Certificate, whether or not it shall be so expressed in the
Purchase Agreement, hereby appoints the Club as his/her attorney-in-fact for
his/her use and benefit, to execute, acknowledge and deliver on behalf of each
Member any instrument or document which is required in order to effect a sale,
conveyance or transfer of any Membership, Deed, or, if applicable, the Property,
pursuant to this Section 9.02. Each Member does further give and grant unto the
Club, as his/her attorney-in-fact, full power and authority to do any act
necessary and proper to be done in the exercise of the foregoing power as fully
as each Member might or could do. The special power of attorney is coupled with
an interest, irrevocable and binding on the successors and assigns of each
Member. In the event of termination, the proceeds of any sale of the
Memberships, Deeds, or, if applicable, the Property, after satisfaction of any
debt owed to Lender, shall be distributed to each Member (subject to the rights
of any Lender) in the same proportion as the number of Memberships owned by each
Member as of the date of termination of the Plan bears to the Total Authorized
Memberships, provided that no payment shall be made to any Member until any
amounts due Seller under the Purchase Agreement for such Membership and any
amounts due to the Club from such Member have been paid from such Member's
share.
Section 9.03. Notices. Notices provided for in this Plan shall be in
writing and shall be deemed given when hand delivered at the appropriate address
set forth below (in which event such notice shall be deemed effective upon
delivery) or the earlier of actual receipt of any notice or seventy-two (72)
hours after deposit of same in any authorized mailbox, postage prepaid,
addressed as set forth below. Any notice to a Member required under this Plan
shall be addressed to the Member at the last address for such Member appearing
in the records of the Club or, if there be none, at the address of the Property.
Notices to the Club shall be addressed to Sedona Vacation Club Incorporated,
2777 E. Camelback Road, Phoenix, Arizona 85016. Notices to the Managing Agent
shall be addressed to LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, 2777 E.
Camelback Road, Phoenix, Arizona 85016. The addresses for purposes of this
Section 9.03 may be changed by giving written notice in the manner herein
provided for giving notice. Unless and until such written notice is received,
the last address as stated by written notice shall be deemed to continue in
effect for all purposes hereunder.
Section 9.04. Severability. If any provision of this Plan or the
application thereof in any circumstances, shall be held invalid, the validity of
the remainder of this Plan and the application of such provision or part under
any other circumstances shall not be affected hereby.
Section 9.05. Successors. The provisions of this Plan shall be binding upon
all parties having or acquiring any Membership, Deed, or any right, title or
interest therein and shall be for the benefit of each Member and his/her heirs,
successors and assigns. Each Member (including Seller) shall be fully discharged
and relieved of liability on the covenants herein as such covenants relate to
each Membership upon ceasing to own such Membership and paying all sums and
performing all obligations relating to each Membership up to the time his/her
Membership interest terminated.
Section 9.06. Violation or Nuisance. Every act or omission whereby any
provision of this Plan, the Bylaws or the Rules and Regulations is violated, in
whole or in part, is hereby declared to be a nuisance and may be enjoined or
reduced whether or not the relief sought is for negative or affirmative action,
by the Club or any Member.
Section 9.07. Interpretation. The captions of the Articles and Sections are
for convenience only and shall not be considered to expand, modify or aid in the
interpretation of this Plan. As used herein the singular shall include the
plural, the masculine shall include the feminine and visa versa.
Section 9.08. No Waiver. The failure to enforce any provision of this Plan
shall not constitute a waiver thereof or of the right to later enforce such
provision.
Section 9.09. Applicable Law. This Plan is to be enforced and interpreted
according to the laws of the State of Arizona.
The Club and Seller have executed this Plan to be effective as of the date
first written on page one above.
SEDONA VACATION CLUB INCORPORATED,
an Arizona nonprofit corporation
By Alan J. Tucker
--------------------------------
Its President
--------------------------------
"Club"
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
an Arizona limited partnership
By: ILE Sedona Incorporated,
its managing general partner
By Joseph P. Martori
--------------------------------
Its President
--------------------------------
"Seller"
STATE OF ARIZONA )
) ss.
COUNTY OF Maricopa )
This instrument was acknowledged before me this 11th day of January, 1995
by Alan J. Tucker, as President of SEDONA VACATION CLUB INCORPORATED, an Arizona
non-profit corporation, on behalf of the Corporation.
Stephanie D. Castronova
-------------------------------------
Notary Public
My Commission Expires:
March 20, 1998
--------------------------
STATE OF ARIZONA )
) ss.
COUNTY OF Maricopa )
This instrument was acknowledged before me this 11th day of January, 1995
by Joseph P. Martori, as President of LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership, on behalf of the Partnership.
Stephanie D. Castronova
-------------------------------------
Notary Public
My Commission Expires:
March 20, 1998
--------------------------
EXHIBIT A
SEDONA VACATION CLUB AT LOS ABRIGADOS
LEGAL DESCRIPTION
A parcel of land situated in the Southeast quarter of the Southeast quarter of
Section 7 and the Northeast quarter of Section 18, Township 17 North, Range 6
East of the Gila and Salt River Meridian in Coconino County, Arizona, including
a portion of Lots 1 and 10, and all of Lot 11 in Block I, and a portion of Lot
4, and all of Lots 1, 2 and 3 in Block II of HART'S VILLAGE SUBDIVISION,
according to the plat thereof recorded in Book 2 of Maps, Page 54 of the
Coconino County Recorder's Office, together with portions of Forest Drive, Black
Road and Orchard Drive, abandoned by Order recorded July 25, 1955 in Book 78 of
Official Records, Page 23 and 24, all being more particularly described as
follows:
Commencing at the Northeast corner of said Section 18 as marked by a B.L.M.
brass capped pipe;
thence S 89d 51m 39s W (S 89d 48m W rec.) a distance of 261.99 (262.00 rec.)
feet along the North line of said Section 18 to the Westerly right-of-way line
of Arizona State Highway 179, being the TRUE POINT OF BEGINNING;
thence S 17d 50m 29s W (S 18d 17m W rec.) a distance of 452.29 (452.23 rec.)
feet along said Westerly right-of-way line of Arizona State Highway 179 to a
Point of Curvature;
thence Southwesterly along said Westerly right-of-way line of Arizona State
Highway 179, being a curve concave to the Northwest having a central angle of
10d 48m 11s, chord bearing of S 23d 14m 34.5s W and radius of 921.93 feet a
distance of 173.83 (173.78 rec.) feet to a point;
thence N 61d 21m 20s W (N 60d 55m W rec.) a distance of 100.00 (100.00 rec.)
feet to a point in Oak Creek;
thence S 38d 21m 31s W (S 38d 48m W rec.) a distance of 315.70 (315.71 rec.)
feet to a point in Oak Creek;
thence S 46d 56m 20s E (S 46d 30m E rec.) a distance of 100.00 (100.00 rec.)
feet to a point on said Westerly right-of-way line of Arizona State Highway 179;
thence S 43d 03m 40s W (S 43d 30m W rec.) a distance of 121.37 (121.40 rec.)
feet along said Westerly right-of-way line of Arizona State Highway 179 to a
Point of Curvature;
thence Southwesterly along said Westerly right-of-way line of Arizona State
Highway 179 being a curve concave to the Southeast having a central angle of 18d
10m 54s, chord bearing of S 33d 58m 13s W and radius of 605.96 feet a distance
of 192.29 (201.40 rec.) feet to a point on the following described line;
thence S 89d 42m 41s W (West rec.) a distance of 108.01 (115 rec.) feet along a
line lying 200.00 feet North of and parallel with the South line of the
Northeast quarter of the Northeast quarter of said Section 18 to a point in Oak
Creek; then N 31d 30m 00s E (N 31d 30m E rec.) a distance of 436.04 (430.00
rec.) feet to a point in Oak Creek;
then S 83d 00m 00s W (S 83d W rec.) a distance of 130.00 (125 rec.) feet to a
point in Oak Creek;
then S 78d 00m 00s W a distance of 160.00 (160.5 +or- rec.) feet to a point in
Oak Creek;
then S 44d 25m 00s W a distance of 24.36 (16.33 rec.) feet to a point in Oak
Creek;
then N 11d 53m 00s W a distance of 122.98 (120.59 rec.) feet to a point;
thence N 04d 30m 00s W a distance of 180.60 feet to a point;
thence N 77d 27m 00s W (N 77d 44m W rec.) a distance of 564.08 feet to a Point
of Curvature;
thence Northwesterly along a curve concave to the Northeast having a central
angle of 27d 43m 44s (27d 43m 40s rec.), chord bearing of N 63d 35m 08s W and
radius of 261.07 (261.07 rec.) feet, a distance of 126.35 (126.3 rec.) feet to a
point of non-tangency;
thence West (West rec.) a distance of 51.84 (41.85 rec.) feet to a point;
thence N 05d 20m 14s E (N 05d 17m E rec.) a distance of 54.50 (61.7 rec.) feet
to a point;
thence N 34d 13m 46s W (N 34d 17m W rec.) a distance of 27.64 (26.3 rec.) feet
to a point on the Southeasterly right-of-way line of Brewer Highway according to
the plat thereof recorded in Book 2 of Maps, Page 139 of the Coconino County
Recorder's Office;
thence N 58d 03m 46s E (N 57d 28m E rec.) a distance of 48.71 (44.3 rec.) feet
along said Southeasterly right-of-way line of Brewer Highway to a Point of
Curvature;
thence Northeasterly along said Southeasterly right-of-way line of Brewer
Highway, being a curve concave to the Northwest having a central angle of 43d
33m 43s (43d 57m rec.), chord bearing of N 36d 16m 54.5s E and radius of 176.24
(176.24 rec.) feet, a distance of 134.00 (135.19 rec.) feet to a Point of
Tangency;
thence N 14d 30m 03s E (N 13d 31m E rec.) a distance of 113.94 (109.18 rec.)
feet along said Southeasterly right-of-way line of Brewer Highway to a point on
the North line of said Section 18;
thence N 89d 51m 39s E a distance of 352.42 feet along said North line of
Section 18 to the Southwest corner of the Southeast quarter of the Southeast
quarter of said Section 7;
thence N Old 04m 02s W (N Old 40m 30s W rec.) a distance of 158.79 feet along
the West line of said Southeast quarter of the Southeast quarter of Section 7 to
a point; thence S 83d 17m 23s E a distance of 65.58 feet to a point;
thence S 02d 32m 25s W a distance of 23.84 feet to a point;
thence N 89d 16m 39s E a distance of 15.50 feet to a point on the East line of
said Lot 1 of Block I of the HART'S VILLAGE SUBDIVISION lying N 05d 45m 06s W a
distance of 8.20 feet from a 1/2" pipe found at the Southwest corner of Lot 10
of said Block I;
thence S 89d 48m 35s E (S 89d 22m E rec.) a distance of 176.73 feet to a point;
thence N 00d 11m 34s W a distance of 52.03 feet to a point;
thence N 89d 51m 39s E a distance of 1.50 feet to a point on the center line of
Orchard Drive (presently abandoned) of said HART'S VILLAGE SUBDIVISION;
thence N 89d 51m 39s E a distance of 23.04 feet along the North line (and its
Westerly extension) of Lot 1 of Block II of said HART'S VILLAGE SUBDIVISION to a
point;
thence N 00d 08m 21s W (N 00d 43m 2 rec.) a distance of 112.73 feet to a point
on the center line of a private road easement described in Docket 930, Page 406
of the Coconino County Recorder's Office;
thence N 88d 39m 39s E (N 88d 05m E rec.) a distance of 46.79 feet along said
center line of private road easement to a point;
thence N 58d 01m 39s E (N 57d 27m E rec.) a distance of 11.83 (13.52 rec.) feet
along said center line of private road easement to the East line of Lot 4 of
Block II of said HART'S VILLAGE SUBDIVISION;
thence S 41d 22m 21s E (S 41d 21m E rec.) a distance of 159.50 (159.22 rec.)
feet to the North corner of Lot 3 of Block II of said HART'S VILLAGE
SUBDIVISION;
thence S 47d 58m 21s E a distance of 75.00 (75 rec.) feet to an angle point in
the Northeasterly line of said Lot 3;
thence S 32d 50m 18s E (S 32d 50m E rec.) a distance of 154.77 feet along the
Northeasterly line (and its Southeasterly extension) of said Lot 3 to a point on
the North line of said Section 18;
thence N 89d 51m 39s E a distance of 0.31 feet along said North line of Section
18 to a point;
thence S 34d 46m 21s E (S 34d 50m E rec.) a distance of 160.69 feet to a point;
thence S 63d 10m 57s W a distance of 198.38 feet to a point;
thence S 00d 03m 39s W (South rec.) a distance of 71.38 feet to a point;
thence N 89d 51m 39s E (N 89d 48m E rec.) a distance of 322.58 feet to a point;
thence N 16d 01m 39s E (N 15d 58m E rec.) a distance of 304.70 (304.70 rec.)
feet to a point on the North line of said Section 18;
thence N 89d 51m 39s E (N 89d 48m E rec.) a distance of 154.01 (153.93 rec.)
feet to the TRUE POINT OF BEGINNING.
EXCEPT THE FOLLOWING AREAS SITUATED UPON SUCH REAL PROPERTY:
(1) the On the Rocks Lounge and any and all other lounge or bar facilities
(except those bar facilities located within the Units) now or hereafter existing
on the Property,
(2) the Sedona Health Spa at Los Abrigados together with the patio area on the
second floor adjacent to the Sedona Health Spa at Los Abrigados and any and all
health or fitness related facilities (except the swimming pool and the tennis
courts) now or hereafter existing on the Property,
(3) the Canyon Rose Dining Room and any and all other dining facilities, snack
bars, gift shops and stores now or hereafter existing on the Property,
(4) all conference rooms including the Landmark Room, Coffee Pot Room, Indian
Gardens Room, Steamboat Rock Room, Snoopy Rock Room and any and all other
conference rooms (except those conference rooms located within the Units) now or
hereafter existing on the Property, and
(5) the entire first floor of the main hotel structure, which floor contains the
hotel registration desk and lobby areas.
LIST OF SUBSIDIARIES OF ILX INCORPORATED
1. Los Abrigados Partners Limited Partnership, an Arizona limited
partnership
2. ILE Sedona Incorporated, an Arizona corporation
3. Golden Eagle Resort, Inc., an Arizona corporation
4. Golden Eagle Realty, Inc., a Colorado corporation
5. ILE Florida, Inc., an Arizona corporation
6. Southern Vacations, Inc., a Florida corporation
7. Genesis Investment Group, Inc., an Arizona corporation
8. Red Rock Collection Incorporated, an Arizona corporation
9. Red Rock Worldwide Incorporated, an Arizona corporation
10. Varsity Clubs of America Incorporated, an Arizona corporation
11. VCA Management Incorporated, an Arizona corporation
12. VCA South Bend Incorporated, an Arizona corporation
13. VCA Iowa Incorporated, an Arizona corporation
14. SHI Health Institute Incorporated, an Arizona corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ILX Incorporated
Financial Data Schedule
December 31, 1994
Article 5 of Regulation S-X
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATED EXTRACTED FROM THE
REGISTRANT'S 1994 CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 3635587
<SECURITIES> 0
<RECEIVABLES> 8014184
<ALLOWANCES> 1263288
<INVENTORY> 12816493
<CURRENT-ASSETS> 23202976
<PP&E> 1806795
<DEPRECIATION> 369568
<TOTAL-ASSETS> 28621887
<CURRENT-LIABILITIES> 3070475
<BONDS> 6882445
<COMMON> 8972969
0
1648755
<OTHER-SE> 30000
<TOTAL-LIABILITY-AND-EQUITY> 28621887
<SALES> 21186111
<TOTAL-REVENUES> 29950669
<CGS> 8548315
<TOTAL-COSTS> 22297933
<OTHER-EXPENSES> 2834466
<LOSS-PROVISION> 764065
<INTEREST-EXPENSE> 661141
<INCOME-PRETAX> 3790660
<INCOME-TAX> (16144)
<INCOME-CONTINUING> 2366770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2366770
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
