SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended September 30, 1996 Commission File Number 33-16122
------------------ --------
ILX INCORPORATED
----------------
(Exact name of registrant as specified in its charter)
ARIZONA 86-0564171
- ------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2777 East Camelback Road, Phoenix, AZ 85016
-------------------------------------------
(Address of principal executive offices)
602-957-2777
------------
Registrant's telephone number, including area code
Former name, former address, and former fiscal year, if changed since last
report:
N/A
---
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
Class Outstanding at September 30, 1996
- ------------------------------- ---------------------------------
Common Stock, without par value 12,999,426 shares
Preferred Stock, $10 par value 394,727 shares
1
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,635,346 $ 3,746,518
Notes receivable, net 11,449,467 8,785,487
Resort property held for timeshare sales 17,495,486 17,191,791
Resort property under development 1,184,349 1,119,080
Land held for sale 1,547,493 1,545,184
Deferred assets 329,146 451,496
Property and equipment, net 2,809,321 835,485
Deferred income taxes 1,151,871 1,887,021
Other assets 2,194,281 2,190,451
------------ ------------
$ 40,796,760 $ 37,752,513
============ ============
Liabilities and Shareholders' Equity
Accounts payable $ 2,171,881 $ 2,313,638
Accrued and other liabilities 3,295,213 3,293,160
Genesis funds certificates 1,191,672 1,366,843
Due to affiliates 99,766 440,629
Deferred income 26,461 2,869
Notes payable 14,944,464 11,689,945
Notes payable to affiliates 1,598,562 1,837,912
------------ ------------
23,328,019 20,944,996
------------ ------------
Minority Interests 2,482,287 3,032,415
------------ ------------
Shareholders' Equity
Preferred stock, $10 par value; 10,000,000 shares authorized; 394,727 and
411,483 shares issued and outstanding; liquidation preference of $3,947,270
and $4,114,830, respectively
1,464,941 1,515,134
Common stock, no par value: 40,000,000 shares authorized; 13,019,426 and
12,625,757 shares issued and outstanding
9,780,412 9,322,375
Treasury stock, at cost, 20,000 shares (25,032) (25,032)
Additional paid in capital 39,950 35,190
Retained earnings 3,726,183 2,927,435
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14,986,454 13,775,102
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$ 40,796,760 $ 37,752,513
============ ============
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Sales of timeshare interests $ 5,480,153 $ 5,930,648 $ 15,270,596 $ 16,548,152
Resort operating revenue 2,713,317 2,321,423 7,996,778 6,358,548
Sales of land and other 30,017 41,892 331,615 145,891
Interest income 248,532 161,562 712,628 446,511
---------------- ---------------- ---------------- ----------------
8,472,019 8,455,525 24,311,617 23,499,102
---------------- ---------------- ---------------- ----------------
Cost of sales and operating expenses
Cost of timeshare interests sold 1,566,106 2,286,937 4,960,098 6,089,296
Cost of resort operations 2,598,017 2,729,194 7,924,836 6,569,344
Cost of land sold and other 31,160 37,180 291,017 83,813
Advertising and promotion 1,980,278 1,771,411 5,168,565 4,737,935
General and administrative 723,990 795,356 2,157,287 2,281,762
Provision for doubtful accounts 36,410 347,598 459,143 950,917
---------------- ---------------- ---------------- ----------------
6,935,961 7,967,676 20,960,946 20,713,067
---------------- ---------------- ---------------- ----------------
Operating income 1,536,058 487,849 3,350,671 2,786,035
Interest expense 478,962 380,611 1,406,073 836,850
Income before minority interests and
income taxes 1,057,096 107,238 1,944,598 1,949,185
Minority interests (204,303) 948 (486,469) (345,686)
Income taxes (354,006) 384,727 (607,371) (63,399)
----------------- ---------------- ----------------- -----------------
Net income $ 498,787 $ 492,913 $ 850,758 $ 1,540,100
================ ================ ================ ================
Net income per common and equivalent share $ 0.03 $ 0.04 $ 0.06 $ 0.12
================ ================ ================ ================
Number of common and equivalent shares 13,013,372 13,009,355 12,890,033 12,699,419
================ ================ ================ ================
Net income per share assuming full dilution $ 0.03 $ 0.04 $ 0.06 $ 0.12
================ ================ ================ ================
Number of fully diluted shares 13,479,302 13,493,935 13,364,166 13,187,992
================ ================ ================ ================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 850,758 $ 1,540,100
Adjustments to reconcile net income to net cash used in operating activities:
Undistributed minority interest 239,258 345,686
Additions to notes receivable (9,204,197) (9,018,079)
Proceeds from sales of notes receivable 6,081,074 6,425,596
Provision for doubtful accounts 459,143 950,917
Depreciation and amortization 543,643 491,086
Increase in deferred income taxes 735,150 (203,667)
Amortization of guarantee fees 56,300 79,100
Change in assets and liabilities:
Decrease (increase) in resort property held for timeshare sales 304,567 (5,655,558)
Additions to resort property under development (65,269) (344,115)
(Increase) decrease in land held for sale (2,309) 1,000
Increase in other assets (198,852) (408,206)
(Increase) decrease in accounts payable (141,757) 193,879
(Decrease) increase in accrued and other liabilities (39,433) 1,141,607
Increase in income taxes payable -- 103,553
Decrease in Genesis funds certificates (175,171) (246,078)
Decrease in due to affiliates (240,863) (506,022)
Increase (decrease) in deferred income 23,592 (363,552)
----------- -----------
Net cash used in operating activities (774,366) (5,472,753)
----------- -----------
Cash flows from investing activities:
Decrease (increase) in deferred assets 66,050 (163,299)
Purchases of plant and equipment (61,651) (112,210)
----------- -----------
Net cash provided by (used in) investing activities 4,399 (275,509)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 4,526,139 7,715,212
Principal payments on notes payable (4,171,898) (4,059,256)
Proceeds from notes payable to affiliates -- 900,000
Principal payments on notes payable to affiliates (339,350) (461,827)
Distributions to minority partners (720,000) --
Proceeds from issuance of common stock 423,875 74,181
Acquisition of treasury stock -- (25,032)
Redemption of preferred stock (12,000) (185)
Redemption of common stock -- (185)
Preferred stock dividend payments (47,971) (24)
----------- -----------
Net cash (used in) provided by financing activities (341,205) 4,142,884
----------- -----------
Net decrease in cash and cash equivalents (1,111,172) (1,605,378)
Cash and cash equivalents at beginning of period 3,746,518 3,635,587
----------- -----------
Cash and cash equivalents at end of period $ 2,635,346 $ 2,030,209
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
ILX INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation and Business Activities
- ---------------------------------------------------
The Company's significant business activities include developing, operating,
marketing and financing ownership interests in resort properties located in
Arizona, Colorado, Florida, Indiana and Mexico. Effective in the third quarter
of 1994, the Company expanded its operations to include marketing of skin and
hair care products which are not considered significant to resort operations.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Registration S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of a normal recurring nature. Operating results for
the three and nine month periods ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. The accompanying financial statements should be read in conjunction with
the Company's most recent audited financial statements.
The consolidated financial statements include the accounts of ILX Incorporated
and its wholly-owned and majority-owned subsidiaries ("ILX" or the "Company").
All significant intercompany transactions and balances have been eliminated in
consolidation.
Revenue Recognition
- -------------------
Revenue from sales of timeshare interests is recognized in accordance with
Statement of Financial Accounting Standard No. 66, Accounting for Sales of Real
Estate ("SFAS No. 66"). No sales are recognized until such time as a minimum of
10% of the purchase price has been received in cash, the buyer is committed to
continued payments of the remaining purchase price and the Company has been
released of all future obligations for the timeshare interest. Revenue from
sales of timeshare interests in Varsity Clubs of America - Notre Dame was
recognized by the percentage of completion method as development and
construction proceeded and as the costs of development and profit could be
reasonably estimated through August 15, 1995, when the property was completed.
Resort operating revenue represents daily room rentals and revenues from food
and other resort services. Such revenues are recorded as the rooms are rented or
the services are performed.
Statements of Cash Flows
- ------------------------
Cash equivalents are highly liquid investments with an original maturity of
three months or less. During the three and nine month periods ended September
30, 1996 and 1995, the Company paid interest and income taxes and capitalized
interest to resort property under development as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Interest $ 497,975 $ 341,944 $ 1,376,891 $ 924,602
Income Taxes $ 2,000 $ 2,786 $ 2,000 $ 136,286
Interest Capitalized $ 19,859 $ 89,577 $ 53,958 $ 216,380
5
<PAGE>
Reclassifications
- -----------------
The financial statements for prior periods have been reclassified to be
consistent with the 1996 financial statement presentation.
Note 2 - Notes Payable
In February 1996, the Company borrowed an additional $1,760,000 from the first
mortgage holder on the Los Abrigados resort and extended the maturity date to
September 1998.
The mortgage on the Red Rock Collection building was repaid in January 1996 by
the affiliate who purchased the building in 1995. In this non-cash transaction
to the Company, both the note payable and the related receivable were reduced by
$180,000.
During the second quarter of 1996, the Company made its first borrowing of
$300,000 on its $6 million, 13% interest rate, construction financing commitment
for the Varsity Clubs of America - Tucson facility.
During the first nine months of 1996, the Company borrowed $1,850,782 against
consumer notes receivable.
Property and equipment of $339,924 was leased in the second quarter of 1996 and
a vehicle was financed for $23,741 in the third quarter of 1996.
Note 3 - Notes Payable to Affiliates
In January 1996, an affiliate of the Company agreed to accept a discounted
payment of $60,000 cash and $100,000 in a promissory note as full satisfaction
of a remaining obligation of the Company to such affiliate of $173,225 in
guarantee fees and $44,073 in holdbacks. The note bears interest at 10%, with
interest due quarterly and the principal due in full in December 1999.
Note 4 - Shareholders' Equity
During the first nine months of 1996, holders of 10,914 shares of Series C
Preferred Stock exchanged their shares for 18,190 shares of common stock. The
exchanges were recorded as a reduction in preferred stock and an increase in
common stock of $30,123. Shares of stock valued at $4,039 and cash of $20 were
issued in the first nine months of 1996 for the Dividend Arrearage due to the
holders of Series C Preferred Stock who converted their shares in the first nine
months of 1996.
During the first nine months of 1996, holders of 807 shares of Series A
Preferred Stock exchanged their shares for lodging certificates at Los Abrigados
and Kohl's Ranch. Preferred stock was reduced by $8,070, which is the
liquidation and par value of the shares surrendered and additional paid in
capital was increased by $4,760, which is the difference between the par value
of the preferred stock and the liability recorded related to the lodging
certificates.
In January 1996, 5,035 shares of Series A Preferred Stock were redeemed for
$12,000.
During the first quarter of 1996, the Company issued 72,500 shares of restricted
common stock, valued at $52,000, to employees in exchange for services provided.
In accordance with consulting agreements entered into in 1995, 50,000 shares of
restricted common stock, valued at $1.1875 per share, were issued in the first
quarter of 1996. In the second and third quarters of 1996, options for 100,000
and 150,000, respectively, of the total 500,000 option shares of restricted
common stock granted under the consulting agreements were exercised at $1.25 per
share. All such restricted shares were subsequently registered with the
Securities and Exchange Commission.
6
<PAGE>
Note 5 - Lomacasi Cottages
In March 1996, the Company, through a subsidiary, became the managing general
partner of the limited partnership which owns Lomacasi Cottages in Sedona,
Arizona, a 5.27 acre property approximately one mile from the Los Abrigados
resort. The Company acquired its partnership interest for a $25,000 capital
contribution and took the property subject to existing non-recourse deeds of
trust on the property and accrued liabilities. The balance sheet of the
partnership at March 1, 1996, was as follows:
Assets
Cash $ 20,000
Property and equipment 2,116,337
Other assets 9,928
-----------
$ 2,146,265
===========
Liabilities and Partners' Equity
Accounts payable $ 22,862
Accrued and other liabilities 15,315
Notes payable 2,152,474
-----------
2,190,651
-----------
Partners' capital (44,386)
-----------
$ 2,146,265
===========
The first mortgage of $549,625 bears interest at 12.5% with principal and
interest payable in monthly installments of $6,779 through November 2000. The
$1,534,849 note payable, secured by a second deed of trust, bears interest at 8%
through December 1996 and increases .5% annually through December 1999 when it
becomes fixed at 9.5%. Interest is accrued and added to principal through
December 1996 and, thereafter, is payable monthly with principal due November
2010. A note payable of $68,000, secured by a deed of trust, bears interest at
8% with principal and interest payments of $4,779 due monthly through May 1997
(interest payments are deducted from the capital account of a limited partner).
The Company is using the resort to provide lodging accommodations to prospective
timeshare purchasers at the Company's Sedona Sales Office. The Company may offer
timeshare interests in the resort in the future. Until such time, the resort is
classified as property and equipment.
Note 6 - Acquisition of Additional Resort Property Held for Sale
In September 1996, the Company acquired approximately one-half acre of improved
property adjacent to the Los Abrigados resort for a purchase price of $750,000,
consisting of a $185,862 cash down payment and a $564,138 first deed of trust.
The Company intends to make improvements to the property in the amount of
approximately $300,000 and to offer approximately 468 timeshare intervals in the
property commencing in 1997. The first deed of trust bears interest at prime
plus 4% with interest payable monthly and principal payable through release fees
as intervals are sold.
Note 7 - Other
During the first quarter of 1996, the Company received an additional $700,000
pursuant to a management agreement with one of its timeshare lenders. At
September 30, 1996, approximately $1.2 million remains available under this
agreement; however, an affiliate of the lender filed for bankruptcy protection
in 1996. While the Company has been informed that said proceedings do not
involve the lender with which the Company conducts business, the lender has
failed to fund advances requested by the Company. It is the Company's position
that the management agreement, as previously amended, has been anticipatorily
breached by the lender and its affiliates. The Company is of the opinion that
while further advances under the management agreement may not occur, the
bankruptcy will have no additional material impact on the Company's ability to
obtain timeshare financing from the lender or alternate sources. Any future
payments under the management agreement received by the Company will be applied
to mitigate present and future damages sustained by the Company by virtue of the
breach by the lender and its affiliates of the management agreement and other
loan transactions between the Company, its subsidiaries and affiliates, and the
lender and its affiliates. The balance outstanding
7
<PAGE>
under the agreement of $2,185,519 at September 30, 1996 and $1,500,000 at
December 31, 1995, is included in accrued and other liabilities.
Note 8 - Subsequent Event
On October 30, 1996, the Company entered into a definitive agreement with Debbie
Reynolds Hotel & Casino, Inc., a Nevada corporation ("DRHC") and Debbie Reynolds
Resorts, Inc., a Nevada corporation, whereby the Company will acquire all the
assets constituting the Debbie Reynolds Hotel & Casino in Las Vegas, Nevada. The
purchase price of $16,800,000 includes 3,750,000 federally registered shares of
the Company's common stock valued for purposes of the transaction at $2.00 per
share, as well as $4,200,000 in cash and $5,100,000 in assumption of mortgage
indebtedness. The transaction is contingent upon approval by the shareholders of
DRHC, a standard due diligence investigation by the Company, and satisfaction of
various other conditions. The hotel consists of 193 rooms in a twelve story
structure situated on over six acres.
8
<PAGE>
ILX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales of timeshare interests for the three and nine months ended September 30,
1995 were greater than the same periods in 1996 due to the inclusion of 1994
sales of timeshare interests in Varsity Clubs of America - Notre Dame in 1995,
due to the operation of the Phoenix Sales Office in the first quarter of 1995,
and due to a program to sell upgraded intervals to existing timeshare owners of
Los Abrigados resort in 1995. 1996 sales include sales of timeshare interests in
Kohl's Ranch, which commenced in the third quarter of 1995, and second and third
quarter 1996 sales reflect reduced sales at the Sedona Sales Office.
1995 Varsity Clubs of America - Notre Dame sales of timeshare interests include
1994 sales of timeshare interests of approximately $23,000 for the third quarter
and $513,000 for the nine months ended September 30, 1995. Recognition had been
deferred in 1994 and recognized on the percentage of completion in 1995 when the
property was substantially complete. 1995 sales of timeshare interests from the
Varsity Clubs of America - Notre Dame Sales Office excluding these 1994 sales
exceeded 1996 sales by approximately $700,000 due to higher average prices and
higher closing rates in 1995. In response to lower 1996 closing rates, the
Company modified its sales approach in October 1996 and expects improvement in
both closing rate and average price in the fourth quarter.
On April 1, 1995, the Company closed the Phoenix Sales Office, which had sold
primarily interests in Los Abrigados, and began directing the customers who
would otherwise have attended a Phoenix Sales Office presentation to the Sedona
Sales Office, where closing rates had consistently exceeded those of the Phoenix
Sales Office. The Phoenix Sales Office generated approximately $771,000 in the
first quarter of 1995.
During the first quarter of 1995, the Company converted eight of its one-bedroom
business suites at Los Abrigados resort to two-bedroom suites with kitchens, and
invited its existing timeshare owners to exchange their one and two-bedroom
suites without kitchens to these upgraded units. Revenue of approximately
$525,000 from these upgrades is included in the first six months of 1995.
Sales of timeshare interests from the Kohl's Ranch Sales Office commenced in the
third quarter of 1995 and the Company then began directing its Phoenix-based
customers to the Kohl's Ranch Sales Office as well as its Sedona Sales Office.
While the number of customers generated to both offices increased in total,
customers directed to the Sedona Sales Office declined and, accordingly, Sedona
Sales Office sales of timeshare interests decreased by approximately $466,000
and $838,000 for the three and nine months ended September 30, 1996,
respectively. Kohl's Ranch Sales Office sales of timeshare interests were
approximately $803,000 and $2,400,000 for the same periods, respectively. Kohl's
Ranch sales were approximately $339,000 for the third quarter of 1995.
The decrease in cost of timeshare interests sold as a percentage of sales
between years reflects an adjustment to the estimated cost of Los Abrigados
interests in 1996.
The increases in resort operating revenue for both the third quarter and nine
months ended September 30, 1996, from the same periods in 1995 reflect revenue
from Varsity Clubs of America - Notre Dame which opened in mid-August 1995,
revenue from Kohl's Ranch, which was acquired on June 1, 1995 and an increase in
revenue from Los Abrigados resort as a result of an increase in occupancy and in
average daily rate.
The decrease in cost of resort operations as a percentage of resort operating
revenue in 1996 from 1995 reflects a change in estimated depreciation expense
and lower Los Abrigados costs as a percentage of revenue due to increased
occupancy and average daily rate and reductions in operating costs, net of the
costs of operations for Varsity Clubs of America - Notre Dame and Kohl's Ranch,
which began operations in 1995 and accordingly have lower occupancy than mature
resorts. In addition, the smaller, current size and reduced amenities offered at
these properties is likely to yield a higher cost of resort operations as a
percentage of resort operating revenue than that of the Los Abrigados resort.
9
<PAGE>
The increase in sales of land and other and the related cost of sales for the
nine months ended September 30, 1996, reflects the sale of a parcel of land held
by Genesis. Sales are comparable for the three month period ended September 30,
1996 and 1995. Sales of land and other and the associated cost of land sold and
other also include in 1995 and 1996 sales of Red Rock Collection products and in
1996 revenue and related costs from the Kohl's Ranch Water Company for services
provided.
The increase in interest income from 1995 to 1996 is a result of the increased
consumer paper retained by the Company as well as increased balances of invested
cash.
Advertising and promotion as a percentage of sales increased for both the third
quarter and first three quarters of 1996 from the same periods in 1995,
reflecting a promotional program in operation until November 1996 which offered
certain purchasers from the Varsity Clubs of America - Notre Dame Sales Office a
vacation experience (including airfare and car rental) in addition to their
timeshare interval. While the cost of the vacation experience was added to the
buyer's purchase price, it has the effect of increasing promotion costs as a
percentage of sales. In addition, in 1996, the Varsity Clubs of America - Notre
Dame Sales Office experienced a lower closing rate (number of timeshare sales
divided by timeshare tours) and the Varsity Clubs of America - Notre Dame and
Sedona Sales Offices experienced increased costs of generating tours.
General and administrative expenses are comparable between years for both the
third quarter and nine months ended September 30, 1996 and 1995.
The decreases in the provision for doubtful accounts for the third quarter and
nine months ended September 30, 1996 from the same periods in 1995 reflect the
expected performance of the portfolio of consumer paper, both sold and unsold.
The increase in interest expense for both the third quarter and nine months
ended September 30, 1996 from the same periods in 1995 reflects an increase in
notes payable, including the note payable for the construction of Varsity Clubs
of America - Notre Dame, the Kohl's Ranch and Lomacasi Cottages acquisition
notes and increased borrowings against consumer notes receivable.
The increases in minority interests for both the third quarter and nine months
ended September 30, 1996 reflect increases in Los Abrigados resort net income
between years due to adjustments in the estimated cost of sales of timeshare
intervals and estimated depreciation expense, the reduced provision for doubtful
accounts and increased hotel operating income, net of the minority interest in
operating losses of Lomacasi resort commencing March 1, 1996.
Income tax expense increased from a benefit for both the third quarter and first
three quarters of 1995 to a provision for both the third quarter and first three
quarters of 1996 because 1995 reflects the reduction in the valuation allowance
reflecting management's estimate of the future benefit to be derived from the
utilization of Genesis net operating loss carryovers and because 1996 includes
gross receipts tax on revenue generated in Indiana.
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 $5 million of credit issued by a financing company under which conforming
notes from sales of interval interests in Los Abrigados can be sold on a
recourse basis through March 1998. In addition, the Company has an open ended
arrangement with a finance company which is expected to provide financing of at
least $5 million through 1996. At September 30, 1996, approximately $4.8 million
is available under the fixed commitment line and approximately $2.3 million is
expected to be available on the open ended line. The Company also has financing
commitments whereby the Company may borrow up to $2 million against
non-conforming notes from sales of interval interests in Los Abrigados, Golden
Eagle Resort and Kohl's Ranch, and $2.2 million against non-conforming notes
from sales of interval interests in the Golden Eagle Resort through March 1998.
Approximately $2.6 million was available under these commitments at September
30, 1996.
10
<PAGE>
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 September 1, 1997.
Approximately $5.9 million was available under this commitment at September 30,
1996.
The Company has a financing commitment whereby it may borrow up to $10 million
against conforming notes received from sales of timeshare interests in Kohl's
Ranch through August 1997. Approximately $8.3 million was available on this
commitment at September 30, 1996.
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. $700,000 was available for working capital
under the lines at September 30, 1996.
In February 1996, the Company borrowed an additional $1,760,000 from the first
mortgage holder on the Los Abrigados resort. The Company used these funds for
improvements to the Los Abrigados resort and Kohl's Ranch and for working
capital.
Effective March 1, 1996, the Company, through a subsidiary, became the managing
general partner of the limited partnership which owns Lomacasi Cottages in
Sedona, Arizona, a 5.27 acre property approximately one mile from the Los
Abrigados resort. The Company acquired its partnership interest for a $25,000
capital contribution. The resort is encumbered by non-recourse deeds of trust on
the property totaling approximately $2.2 million. The Company is using the
resort to provide lodging accommodations to prospective timeshare purchasers at
the Company's Sedona Sales Office, thereby creating more availability of rooms
for resort guests at the Los Abrigados resort. The Company may offer timeshare
interests in the resort in the future.
During the first quarter of 1996, the Company received an additional $700,000
pursuant to a management agreement with one of its timeshare lenders. At
September 30, 1996, approximately $1.2 million remains available under this
agreement; however, an affiliate of the lender filed for bankruptcy protection
in 1996. While the Company has been informed that said proceedings do not
involve the lender with which the Company conducts business, the lender has
failed to fund advances requested by the Company. It is the Company's position
that the management agreement, as previously amended, has been anticipatorily
breached by the lender and its affiliates. The Company is of the opinion that
while further advances under the management agreement may not occur, the
bankruptcy will have no additional material impact on the Company's ability to
obtain timeshare financing from the lender or alternate sources. Any future
payments under the management agreement received by the Company will be applied
to mitigate present and future damages sustained by the Company by virtue of the
breach by the lender and its affiliates of the management agreement and other
loan transactions between the Company, its subsidiaries and affiliates, and the
lender and its affiliates.
During the second quarter of 1996, the Company made its first borrowing of
$300,000 on its $6 million, 13% interest rate, construction financing commitment
for the Varsity Clubs of America - Tucson facility.
In September 1996, the Company acquired approximately one-half acre of improved
property adjacent to the Los Abrigados resort for a $185,862 cash down payment
and a $564,138 first deed of trust. The Company intends to make improvements to
the property and to offer timeshare intervals in the property commencing in
1997.
Cash used in operating activities decreased from $5,472,753 in 1995 to $774,366
in 1996 because 1995 included additions to resort property held for timeshare
sales for Varsity Clubs of America - Notre Dame and improvements to Los
Abrigados.
The change from cash used in investing activities in 1995 of $275,509 to cash
provided by investing activities in 1996 of $4,399 reflects investments in
Varsity Clubs of America deferred assets in 1995 and the cancellation of the
Company's options on its Varsity Clubs of America sites near Penn State and
Auburn University in 1996.
Cash provided by financing activities of $4,142,884 in 1995 decreased to cash
used in financing activities in 1996 of $341,205 because 1995 reflects increased
borrowings for construction of Varsity Clubs of America - Notre
11
<PAGE>
Dame and for improvements to the Los Abrigados resort, and 1996 reflects cash
distributions to LAP minority partners.
Although no assurances can be made, based on the prior success of the Company in
obtaining necessary financings for operations and for expansion, the Company
believes that with its existing financing commitments, its cash flow from
operations and the contemplated financings discussed above the Company will have
adequate capital resources for at least the next twelve to twenty-four months.
12
<PAGE>
Item 5. Other Information
On October 30, 1996, the Company entered into a definitive agreement with Debbie
Reynolds Hotel & Casino, Inc., a Nevada corporation ("DRHC") (OTC: DEBI) and
Debbie Reynolds Resorts, Inc., a Nevada corporation ("DRC"), whereby the Company
will acquire all the assets constituting the Debbie Reynolds Hotel & Casino in
Las Vegas, Nevada (the "Hotel"). The purchase price of $16,800,000 includes
3,750,000 federally registered shares of the Company's common stock valued for
purposes of the transaction at $2.00 per share, as well as $4,200,000 in cash
and $5,100,000 in assumption of mortgage indebtedness. The transaction is
contingent upon approval by the shareholders of DRHC, a standard due diligence
investigation by the Company, and satisfaction of various other conditions. The
Hotel consists of 193 rooms in a twelve story structure situated on over six
acres. Hotel amenities include the Debbie Reynolds Hollywood Movie Museum,
Debbie's Star Theater, space for a planned full-service casino, food and
beverage facilities, a pool and a spa. Forty-three of the hotel rooms have
recently been renovated and established as timeshare units. As part of the
agreement, Debbie Reynolds will continue to perform and make regularly scheduled
appearances at the Hotel.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits
- --------
(a) The Exhibit Index attached to this report is hereby incorporated by
reference.
Reports on Form 8-K
- -------------------
(b) On August 5, 1996, a report on Form 8-K was filed with the Securities
and Exchange Commission, which disclosed the following:
Item 5. Other Events.
Effective June 2, 1995, ILX Incorporated (" ILX ") entered into
Consulting Agreements with Investor Resource Services, Inc., a Florida
corporation, (" IRC ") and Universal Solutions, Inc., a Colorado
corporation, (" Universal ") pursuant to which IRC and Universal agreed
to provide certain investor relations, broker relations and public
relations services to ILX. The Consulting Agreements are Exhibits to
ILX's Form S-2 Registration Statement No. 33-61477. Under the terms of
the Consulting Agreements, as amended in the related Option Agreements
(which are attached as Exhibits to ILX's Form S-3 Registration
Statement No. 333-03151), each of IRC and Universal received from ILX a
total of 50,000 shares of ILX Common Stock (the " Shares ") plus
options to purchase an additional 250,000 shares of ILX Common Stock at
$1.25 per share (the " Option Shares "). ILX agreed that the Shares and
the Option Shares may be registered pursuant to the terms of the
Consulting Agreements.
The term of the Option Agreements originally was to terminate 30
days after the effective date of any registration described under
Section 7(b) of the Consulting Agreements (a " Registration ") or June
1, 1997, whichever occurred first. Pursuant to a letter agreement dated
June 10, 1996 (the " Letter Agreement "), a copy of which was attached
as Exhibit A to ILX's Current Report dated June 14, 1996 on Form 8K,
ILX agreed to extend the term of the Option Agreements so that those
Option Agreements would terminate 90 days after the effective date of
any such Registration or June 1, 1997, whichever occurs earlier.
Pursuant to a letter agreement dated August 5, 1996 (the " Second
Letter Agreement "), a copy of which is attached as Exhibit A hereto,
ILX agreed to extend the term of the Option Agreements so that those
Option Agreements would terminate 120 days after the effective date of
any such Registration or June 1, 1997, whichever occurs earlier. In
consideration for the extension, IRC and Universal agreed to exercise,
collectively and on or before August 15, 1996, options for 100,000 of
the Option Shares at a price of $1.25 per Option Share.
The above descriptions of the Consulting Agreements, the Option
Agreements, the Letter Agreement and the Second Letter Agreement are
qualified in their entirety by reference to the Consulting Agreements,
the Option Agreements, the Letter Agreement and the Second Letter
Agreement.
Item 7. Financial Statements and Exhibits.
The Exhibits required by Item 601 of Regulation S-K have been
supplied as follows:
Exhibit Numbers Description of Exhibit Page No.
-----------------------------------------------------------------------
10 IRS/Universal Second Letter Agreement 4
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ILX INCORPORATED
(Registrant)
/s/ Joseph P. Martori
------------------------------
Joseph P. Martori
Chief Executive Officer
/s/ Nancy J. Stone
------------------------------
Nancy J. Stone
President/
Chief Financial Officer
/s/ Denise L. Janda
------------------------------
Denise L. Janda
Vice President/Controller
Date: As of November 12, 1996
15
<PAGE>
EXHIBIT INDEX
No. Description
- ---- -----------
10-1 Fourth Amendment to Financing Agreement and Reaffirmation of Loan
Documents between Tammac Financial Corp. and Los Abrigados Partners
Limited Partnership and ILX Incorporated dated as of September 7, 1996.
10-2 First Amendment to Loan and Security Agreement between Tammac Financial
Corp. and ILX Incorporated dated as of September 7, 1996.
10-3 Amended and Restated Promissory Note to Tammac Financial Corp. by ILX
Incorporated dated as of September 7, 1996.
10-4 Agreement for Purchase and Sale of Debbie Reynolds Hotel & Casino
between Debbie Reynolds Hotel & Casino, Inc. and Debbie Reynolds
Resorts, Inc. and ILX Incorporated dated October 30, 1996.
FOURTH AMENDMENT TO
FINANCING AGREEMENT AND
REAFFIRMATION OF LOAN DOCUMENTS
This Fourth Amendment to Financing Agreement and Reaffirmation
of Loan Documents (the "Fourth Modification Agreement"), dated as of September
7, 1996, 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").
RECITALS:
---------
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 & Spa, also
known as the 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 "Deed of Trust"), 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. Contemporaneously with the execution and delivery of the
Financing Agreement, the Developer executed and delivered or caused to be
executed and delivered to TAMMAC various Uniform Commercial Code financing
statements, an Estoppel Certificate, an Incumbency Certificate and Partnership
Authorization, Incumbency Certificates, Corporate Resolutions, a Governmental
Regulation Compliance Affidavit and other related documentation.
E. 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").
F. TAMMAC and the Developer again amended and modified the
Financing Agreement as evidenced by that certain Amendment to Commitment Letter,
Financing
<PAGE>
Agreement, and Reaffirmation of Various Loan Documents dated as of March 31,
1993 (the "Second Modification Agreement").
G. In conjunction with the Second Modification Agreement, the
Developer executed and delivered a Modification to Deed of Trust, Assignment of
Rents and Security Agreement, modifying certain terms and conditions of the Deed
of Trust, which Modification to Deed of Trust, Assignment of Rents and Security
Agreement was recorded in the Coconino County Recorder's Office on May 17, 1993,
Docket 1562, page 974 (the "First Modification to Deed of Trust").
H. TAMMAC and the Developer again amended and modified the
Financing Agreement, as evidenced by that certain Third Amendment to Financing
Agreement dated as of September 7, 1994 (the "Third Modification Agreement").
I. In conjunction with the Third Modification Agreement, the
Developer executed and delivered or caused to be executed and delivered to
TAMMAC: (i) that certain Second Modification to Deed of Trust, Assignment of
Rents and Security Agreement dated as of September 7, 1994, recorded in the
Coconino County Recorder's Office on September 12, 1994, Docket No. 1705, page
897 (the "Second Modification of Deed of Trust"); (ii) an Environmental
Indemnity Agreement; and (iii) related documents including Uniform Commercial
Code financing statements, an Estoppel Certificate, Incumbency Certificate and
Partnership Authority, Incumbency Certificates, Corporate Resolutions and
related documents.
J. In conjunction with the Third Modification Agreement, the
Guarantor executed and delivered to TAMMAC an Amended and Restated Guaranty
Agreement (the "Guaranty Agreement").
K. 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, as said Commitment Letter was amended
and modified by the First Modification Agreement, the Second Modification
Agreement, and pursuant to that certain Commitment Letter dated July 20, 1994,
issued by TAMMAC to the Developer (the aforesaid Commitment Letters, as amended
and modified, are hereinafter collectively referred to as the "Commitment
Letter"), TAMMAC's obligations to purchase Contracts expires on September 7,
1996.
L. The Developer has requested that TAMMAC extend the term of
the Commitment Letter for an addition eighteen (18) months and purchase up to an
additional Five Million ($5,000,000.00) Dollars of new Contracts to be generated
by the Developer at the Project.
M. The parties' desire to amend the terms and conditions of
the Financing Agreement and to affirm the extent and validity of the various
Loan documents executed in conjunction therewith.
2
<PAGE>
N. 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 other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. 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 First Modification
Agreement, the Second Modification Agreement, the Third Modification Agreement,
the Deed of Trust, as modified by the First Modification to Deed of Trust and
the Second Modification to Deed of Trust, the Security Agreement and all of the
other Loan Documents.
2. 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.
3. Continuing Validity of Loan Documents. The Developer and
the Guarantor each, jointly and severally, hereby acknowledge, ratify, confirm
and affirm: (i) the extent and validity of the Loan Documents; (ii) that said
Loan Documents are and remain valid, enforceable in accordance with their
respective terms and are and remain in full force and effect as of the date
hereof; (iii) that the Loan Documents are not subject to any real or personal
defenses whatsoever; (iv) that pursuant to the security interests granted to
TAMMAC pursuant to the Loan Documents, the Loan Documents constitute a
continuing, valid mortgage lien upon the Project, a continuing, valid perfected
security interest and lien upon the property described in the Financing
Agreement, as modified, the Security Agreement and the various Uniform
Commercial Code financing statements relating thereto, which security interests
secure the payment and performance of the Obligations due and owing by the
Developer and the Guarantor pursuant to the Loan Documents. The Developer and
Guarantor each, jointly and severally, warrant and represent that all
representations and warranties 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 they are each in full compliance with all the terms
and conditions thereof, and have performed all obligations on their part to be
performed therein. Guarantor consents to the extension, modification and
amendment of the Loan Documents as contemplated herein, and waives all notice of
any such change in terms and further waives any right or remedy that TAMMAC may
have or may be required to pursue against the 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.
4. Representations, Warranties and Covenants. The Developer
and the Guarantor each, jointly and severally, hereby represent, warrant and
covenant as follows:
3
<PAGE>
A. The Developer and the Guarantor have each
disclosed their respective current financial conditions and circumstances to
TAMMAC. Any and all substantial and/or material adverse changes in their
financial conditions and circumstances which shall occur after the date of the
disclosure of their financial conditions shall be immediately brought to the
attention of TAMMAC by the Developer and the Guarantor and TAMMAC shall be
promptly notified in writing of same by the Developer and the Guarantor.
B. To the best of the Developer's and Guarantor's
knowledge, information and reasonable belief, their execution, delivery and
performance in accordance with the terms of this Fourth Modification Agreement
do not violate any applicable law, rule, regulation or order of any governmental
authority or in any way conflict with or result in a breach of any of the terms,
conditions or provisions of any other agreement or instrument to which they may
be bound.
C. The financial disclosures made by the Developer
and the Guarantor accurately and fairly present their respective financial
conditions and circumstances as of the date of this Fourth Modification
Agreement and there have been no further substantial and/or material adverse
changes in their financial conditions and circumstances as of the date of this
Fourth Modification Agreement.
D. There are no actions, suits or proceedings pending
(nor to the Developer's or the Guarantor's knowledge, any actions, suits or
proceedings threatened, nor is there any basis therefor), against or in any way
relating adversely to either one or both of them or their properties in any
court or before any arbitrator of any kind or before any governmental or
non-governmental body which, if adversely determined, would singly or in the
aggregate have a material adverse effect on their financial condition.
E. The Developer and the Guarantor have no knowledge
of any material violations of and have not received written notice from any
governmental authority concerning any environmental, health, fire, safety,
building, engineering, or zoning or code violations with respect to the Project
or any portion thereof.
5. Modification of the Financing Agreement. Effective as of
the date of this Fourth Modification Agreement, the Financing Agreement is
hereby amended and modified as follows:
A. Section 2.1 is hereby amended in its entirety to
read as follows:
2.1. Subject to all of the terms
and conditions of the Financing Agreement,
as modified, from September 8, 1996, to
March 7, 1998, the Developer shall offer to
Tammac up to an additional $5,000,000.00 of
new Contracts to be generated by the
Developer at the Project, which shall
constitute "Phase II" funding. Developer
shall submit completed Credit Packages to
TAMMAC
4
<PAGE>
for review relating to said Transactions so
offered, which Credit Packages shall include
credit reports on each of the Consumers from
a nationally recognized credit reporting
service. Provided Developer has not
defaulted 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 and conditions of the Financing
Agreement, as modified, from September 8,
1996 to March 7, 1998, TAMMAC shall purchase
up to an additional $5,000,000 of new
Contracts which meet TAMMAC's lending
criteria and guidelines, as same shall be in
effect on the date that this Fourth
Modification Agreement is executed and
delivered by TAMMAC. A copy of TAMMAC's
current lending guidelines and criteria is
attached hereto and made a part hereof and
labeled as Exhibit "C". TAMMAC's lending
guidelines and criteria shall remain in
effect through March 7, 1998. 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.
B. 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 (5.25%) 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 Fourth
Modification 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
Fourth Modification Agreement ("Prime
Rate"). Thereafter, the Acceptable Contract
Rate is subject to change every six (6)
months following the execution and delivery
5
<PAGE>
of this Fourth Modification 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 and
Guarantor are not in default under the terms
of the Financing Agreement and/or any of the
other Loan Documents, TAMMAC shall continue
to purchase Contracts pursuant to the terms
hereof, provided TAMMAC's effective yield on
said Contracts (inclusive of any discounts
due to Tammac pursuant to Section 2.8
hereof) is at least fifteen (15%) percent
per annum. It is the intention of the
parties hereto that, in the event the Prime
Rate exceeds 9.75% per annum, the Developer
shall have the flexibility of offering
Contracts to Tammac written at less than 15%
per annum, provided said Contracts are
subject to the Developer's obligations to
equalize the yield as herein provided. In
that regard, this continuing obligation on
the part of TAMMAC shall not in any way
affect the definition of "Acceptable
Contract Rate," as it relates to the
Developer's obligations to equalize the
yield as herein provided. For so long as the
Prime Rate exceeds 9.75 percent, 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.
C. The third subparagraph of Section 9.1 is
hereby amended in its entirety to read as follows:
After March 7, 1998, or the
purchase by TAMMAC of an additional Five
Million ($5,000,000.00) Dollars of Contracts
pursuant to this Financing Agreement,
whichever occurs first, the 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 March 7, 1998, or
the purchase by TAMMAC of an additional Five
Million ($5,000,000.00) Dollars of
Contracts, whichever
6
<PAGE>
occurs first, the Developer must repurchase
the delinquent Contracts.
6. Documentation to be Furnished to TAMMAC. TAMMAC's Agreement
to enter into this Fourth Modification Agreement as herein set forth is
expressly conditioned upon TAMMAC's and its counsel's receipt, review and
acceptance, prior to the execution and delivery of this Fourth Modification
Agreement (unless otherwise noted), of the following documentation and
information:
A. Existing Consumer documentation, if same differs
from the Consumer documentation previously reviewed and approved by TAMMAC and
its counsel.
B. Certificates or Articles of Incorporation and
Bylaws as amended to date, for the Developer's corporate general partner
("General Partner") and the Guarantor, or a statement that the Certificates or
Articles of Incorporation and Bylaws for the General Partner and the Guarantor,
which are currently in TAMMAC's possession, have not been amended or modified in
any respect.
C. The names and titles of all officers and directors
of the General Partner and the Guarantor.
D. The names and percentage of ownership interest of
each of the shareholders of the General Partner and the names of all of the
general and limited partners of the Developer.
E. Certificates of good standing for the Developer,
the General Partner and the Guarantor in each jurisdiction in which said parties
are incorporated and/or authorized to do business.
F. Corporate franchise tax searches and/or
certificates from the Directors of Revenue, from all applicable jurisdictions
that no taxes are due thereto with respect to the Developer, the General Partner
and the Guarantor.
G. Continuation Uniform Commercial Code financing
searches with respect to the Developer from the Arizona Secretary of State's
office, the Coconino County Recording Office and the Maricopa County Recording
Office, and any other jurisdictions wherein the Developer is conducting
business.
H. An update of the existing title insurance policy
insuring TAMMAC's interest in the Project which shall confirm, inter alia, that
no liens or encumbrances affect the title to the Project and TAMMAC's security
interest therein, other than those liens and encumbrances which have been
approved in writing by TAMMAC and its counsel.
I. Federal tax lien, state tax lien and judgment
searches for the Developer, the General Partner and the Guarantor.
7
<PAGE>
J. Evidence of continuing compliance with all
applicable federal, state and local environmental laws, rules, regulations and
ordinances relating to the Resort and the Developer.
K. An updated listing and copy of all certificates,
permits and licenses required in connection with the use and operation of the
Project and the sale and financing of the Unit Weeks.
L. A listing and description of any pending lawsuits
or similar proceedings involving the Project, the Developer, the Guarantor or
the General Partner, in which the Project, the Developer, the Guarantor or the
General Partner are a defendant or otherwise defending any claim which is in
excess of $10,000.
M. Written authorizations, waivers and/or consents
authorizing or consenting to the transactions contemplated by this Fourth
Modification Agreement.
N. Evidence that all fees, dues, charges, assessments
and the like relating to that portion of the Project which is encumbered by the
Deed of Trust, as modified, due to the Association are current and that there
are no liens or encumbrances relating thereto.
O. A true copy of the Association's current and
proposed budget.
P. An updated Environmental Questionnaire.
Q. An opinion letter from the Developer's, the
General Partner's and the Guarantor's counsel.
R. All other documentation and information provided
for herein or which TAMMAC may request or require
7. Further Assurances. The Developer and the Guarantor each
hereby agree that they shall execute and/or deliver to TAMMAC any documents,
information or agreements as may be reasonably requested by TAMMAC or its
counsel at any time so long as any sums due or obligations to be performed under
the Loan Documents remain unpaid or unperformed.
8. Release and Discharge of TAMMAC. The Developer and the
Guarantor each, jointly and severally, hereby release and discharge TAMMAC of
and from all claims, causes of action, demands, damages or suits, at law and in
equity, which they may, as of the date of this Fourth Modification Agreement,
have or claim to have against TAMMAC relating to, arising out of or resulting
from their respective lending relationships with TAMMAC or with respect to the
Obligations due to TAMMAC as evidenced by the Loan Documents or with respect to
the Project or the other Collateral.
9. Governing Law. This Fourth Modification Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to the principles of conflicts of laws.
8
<PAGE>
10. Binding Effect. This Fourth Modification Agreement is
binding upon, inures to the benefit of, and is enforceable by the successors and
assigns of the parties hereto. This Fourth Modification Agreement is not
assignable by the Developer.
11. Nonwaiver. No failure or delay on the part of TAMMAC, or
its successors and assigns, in the exercise of any right, power or privilege
pursuant to the Loan Documents or this Fourth Modification Agreement is to be
construed to be or operate as a waiver. Partial exercise of any right, power or
privilege by TAMMAC is not to preclude any further right, power or privilege,
nor be deemed a waiver. Any waiver or modification of this Fourth Modification
Agreement or any other document, instrument or agreement executed by the
Developer or the Guarantor is to be in writing signed by the Developer and/or
Guarantor and TAMMAC. TAMMAC may, in its sole discretion, release, impair or
surrender all or any of the interests granted hereunder or under any other
agreement executed by the Developer and/or the Guarantor without waiving,
exhausting or impairing any of TAMMAC's rights and remedies available pursuant
to the Loan Documents, including this Fourth Modification Agreement.
12. Inconsistent Rights or Remedies. In the event that any of
the Loan Documents, including this Fourth Modification Agreement, 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, the
determination of which shall be left to the sole and exclusive discretion of
TAMMAC.
13. Representation by Counsel; Drafting of Agreement. The
Developer and the Guarantor acknowledge that they have had the opportunity to
consult independent counsel of their own selection in connection with the
matters covered by this Fourth Modification Agreement, and that they have
executed and delivered this Fourth Modification Agreement (and all other
documents referred to herein or in connection herewith) with the benefit of
counsel and of their own free will and volition. The Developer and the Guarantor
also acknowledge and agree that the terms of this Fourth Modification Agreement
have been negotiated in good faith by the parties, and that said term shall be
construed in a neutral fashion and without regard to the draftsmanship of this
Fourth Modification Agreement.
14. Severability. In the event that any portion of this Fourth
Modification Agreement is deemed unenforceable by a court of competent
jurisdiction, such provision declared to be unenforceable is to be deemed to
have been omitted from this Fourth Modification Agreement and all such remaining
terms and conditions of this Fourth Modification Agreement are to continue in
full force and effect.
15. Continued Effectiveness of Loan Documents. Except as
specifically modified or amended herein, all of the other terms and conditions
of the Loan Documents shall remain in full force and effect and the parties
hereto expressly confirm and ratify all of their respective liabilities,
obligations, duties and responsibilities under and pursuant to said Loan
Documents, as modified and amended. It is the intention of the parties hereto
that this Fourth Modification Agreement shall not constitute a novation and
shall in no way adversely affect or impair the lien priority of the Deed of
Trust, as modified, and the security interests granted pursuant to the Loan
Documents.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands and seals or caused this Fourth Modification Agreement to be duly executed
and delivered by their proper and duly authorized officers or representatives as
of the day and year first above written.
LOS ABRIGADOS PARTNERS
LIMITED PARTNERSHIP,
an Arizona limited partnership, Developer
ATTEST: By: ILE Sedona Incorporated,
an Arizona corporation,
Sole General Partner
/s/ Stephanie Castronova By: /s/ Joseph P. Martori
- -------------------------------- ------------------------------------
Stephanie Castronova, Secretary Joseph P. Martori, President
ATTEST: ILX INCORPORATED,
an Arizona corporation, Guarantor
/s/ Stephanie Castronova By: /s/ Nancy J. Stone
- -------------------------------- ------------------------------------
Stephanie Castronova, Secretary Nancy J. Stone, President
ATTEST/WITNESS: TAMMAC FINANCIAL CORP.
/s/ Joseph J. Lombardi By: /s/ Andy G. Roosa
- -------------------------------- ------------------------------------
Joseph J. Lombardi, Asst. Secretary Andy G. Roosa, President
10
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
This First Amendment to Loan and Security Agreement (hereinafter
referred to as the "First Modification Agreement") is made as of the 7th day of
September, 1996 by and among 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 S:
----------------
A. On or about September 7, 1994, Borrower entered into a certain Loan
and Security Agreement dated as of that date providing for Lender to advance
certain sums to Borrower on a secured basis up to a maximum principal sum of Two
Million ($2,000,000) Dollars (the "Loan Agreement").
B. The obligations of the Borrower as more particularly set forth in
the Loan Agreement, are evidenced by, among other documents, that certain
Promissory Note dated September 7, 1994 executed and delivered by Borrower to
TAMMAC in the principal sum of up to TWO MILLION ($2,000,000) DOLLARS (the
"Note").
C. To secure the payment and performance of the Borrower's obligations
pursuant to the Loan Agreement and the Note, the Borrower executed and delivered
to TAMMAC: (i) that certain Deed of Trust, Security Agreement and Financing
Statement made as of September 7, 1994, designating the Borrower as "Grantor",
the Public Trustee of Larimer County, Colorado as "Trustee", for the benefit of
TAMMAC, as "Beneficiary" (the "Deed of Trust"), which Deed of Trust was recorded
in the Larimer County recording office on September 13, 1994, as Reception
Number 94075818, covering the "Premises" and "Trust Property" more particularly
described therein; and (ii) that certain Collateral Assignment of Lease or
Leases dated September 7, 1994 executed and delivered by Borrower, as "Assignor"
in favor of Lender (the "Assignment of Leases"), which Assignment of Leases was
recorded in the Larimer County recording office on September 13, 1994 as
Reception Number 94075819, covering the Premises as more particularly described
therein.
D. In conjunction with the Loan, and to perfect the security interest
granted by the Borrower to Lender in and to the Collateral described in the Loan
Agreement, the Borrower executed and delivered to TAMMAC certain Uniform
Commercial Code Financing Statements ("UCCs"), which UCCs were filed or recorded
in the Offices of the Secretary of State of Arizona and the Larimer County,
Colorado recording office.
E. In conjunction with the Loan, the Borrower executed and delivered or
caused to be executed and delivered to TAMMAC an Environmental Indemnity
Agreement with respect to the Premises, Incumbency Certificates, Corporate
Resolutions, an Estoppel Certificate, a
<PAGE>
Governmental Regulation Compliance Affidavit and related documents (the "Other
Loan Documents").
F. The Loan Agreement, the Note, the Deed of Trust, the Assignment of
Leases, the UCC's and the Other Loan Documents, all as amended, modified,
renewed, substituted or replaced, whether contemporaneously herewith or at any
time hereafter, are hereinafter sometimes collectively referred to as the "Loan
Documents."
G. Contemporaneously with the execution and delivery of the Loan
Documents, the Borrower amended that certain Financing Agreement dated September
11, 1991 (the "Financing Agreement") entered into by and among Borrower and
Lender, setting forth the terms and conditions regarding Borrower's sale and
Lender's purchase of certain consumer installment obligations generated at the
Premises.
H. Pursuant to the term of the Loan Agreement, the Draw Period expires
on September 7, 1996.
I. The Borrower has requested that Lender extend the Draw Period for an
additional eighteen (18) months, increase the Advance Limit and amend and modify
certain additional terms and conditions of the Loan Agreement.
J. The Lender has agreed, subject to the terms and conditions
hereinafter provided, to enter into this First Modification Agreement.
NOW, THEREFORE, in consideration of Lender's present agreement to
modify the Loan Documents as set forth herein, Borrower has agreed to execute
and deliver this First Modification Agreement and in consideration of the mutual
covenants, promises and agreements herein contained, it is agreed as follows:
1. Definitions:
------------
Unless otherwise defined herein, all capitalized and defined terms used
herein shall have the same meaning set forth in the Loan Documents.
2. Recitals:
---------
The recitals set forth above are hereby incorporated herein as if set
forth at length. The Borrower acknowledges and confirms that all of the
aforesaid recitals are true, accurate and correct in all respects.
3. Estoppel with Regard to Present Principal Balance Due.
------------------------------------------------------
Borrower acknowledges and agrees that the outstanding unpaid principal
balance remaining due to TAMMAC under the Loan, without offset, defense or
counterclaim, as of the date of this First Modification Agreement, is:
$1,193,627.46.
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<PAGE>
4. Continued Validity of Loan Documents:
-------------------------------------
Borrower hereby acknowledges, ratifies, confirms and affirms: (i) the
extent and validity of the Loan Documents; (ii) that said Loan Documents are and
remain valid, enforceable in accordance with their respective terms and are and
remain in full force and effect as of the date hereof; (iii) that the Loan
Documents are not subject to any real or personal defenses whatsoever; (iv) that
pursuant to the security interests granted to Lender pursuant to the Loan
Documents, the Loan Documents constitute a valid second mortgage lien upon the
Premises and a continuing valid first perfected lien upon the property described
in the UCC's, which security interest and liens secure the payment and
performance of the Obligations due and owing under the Loan Documents. The
Borrower warrants and represents that all representations 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 it is in full compliance
with all the terms and conditions thereof and has performed all obligations on
its part to be performed therein.
5. Representations, Warrants and Covenants:
----------------------------------------
The Borrower hereby represents, warrants and covenants as follows:
A. The Borrower has disclosed its current financial condition and
circumstances to Lender. Any and all substantial and/or material or adverse
changes in its financial condition and circumstances which shall occur after the
date of the disclosure of its financial condition shall be immediately brought
to the attention of Lender by Borrower and Lender shall be promptly notified in
writing of same by Borrower.
B. To the best of Borrower's knowledge, information and reasonable
belief, its execution, delivery and performance in accordance with the terms of
this First Modification Agreement does not violate any applicable law, rule,
regulation or order of any governmental authority or in any way conflict with or
result in a breach of any of the terms, conditions or provisions of any other
agreement or instrument to which it may be bound.
C. The financial disclosures made by the Borrower accurately and fairly
presents its financial condition and circumstances as of the date of this First
Modification Agreement and there had been no further substantial and/or material
adverse changes in its financial condition and circumstances as of the date of
this First Modification Agreement.
D. There are no actions, suits or proceedings pending (nor to the
Borrower's knowledge any actions, suits or proceedings threatened, nor is there
any basis therefore), against or in any way relating adversely to its properties
in any court or before any arbitrator of any kind or before any governmental or
non-government body which, if adversely determined, would singularly or in the
aggregate have a material adverse affect on its financial condition.
E. The Borrower has no knowledge of any material violations of and has
not received written notice from any governmental authority concerning any
environmental, health, fire, safety, building, engineering, or zoning or code
violations with respect to the Premises or any portion thereof.
-3-
<PAGE>
6. Modification to All of the Loan Documents:
A. Wherever the sum of TWO MILLION ($2,000,000.00) DOLLARS appears in
the Loan Documents, same shall be deleted and the sum of $2,193,627.46 shall be
inserted in lieu thereof.
B. Wherever the word or words "Note" or "Promissory Note" shall appear,
said term or terms shall be deemed to mean the Amended and Restated Promissory
Note executed contemporaneously with this First Modification Agreement.
7. Modification to the Loan Agreement. From and after the date of this
First Modification Agreement, the Loan Agreement is hereby modified as follows:
A. Section I.1 is deleted and replaced with the following:
1. 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 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 (if said Contract provides for the payment
of interest) is at least five (5) 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
-4-
<PAGE>
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
instrumentality's thereof; and (xiii) an Acceptable Contract shall not include a
contract where the Consumer shall have filed for protection under any bankruptcy
or insolvency laws or shall have been the subject of a prior or existing
judgment, repossession or foreclosure or any charge-off relating to any account;
(xiv) the Contract shall be valid, enforceable and legally binding upon the
Consumer.
B. Section I.4 is deleted and replaced with the following:
4. 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: (i) $2,193,627.46; or (ii) the product of eighty-five (85%)
percent multiplied by the aggregate remaining principal balance of the
Acceptable Contracts in which Lender is granted a security interest hereunder.
C. Section I.26 is deleted and replaced with the following:
26. Related Documents: "Related Documents" means, as
applicable to each Contract, the credit package, which shall include, but not be
limited to, a credit report relating to each of the Consumers executing said
Contract issued by a nationally recognized credit reporting agency or service,
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,
receipt of said prospectuses and public offering statements, truth-in-lending
disclosure statements, information, documents, records and 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.
D. Section 2.2(a) is deleted and replaced with the following:
2. Advance
(a) At Borrower's request, Advances will be made
by Lender during the period commencing from the date of this First Modification
Agreement and ending eighteen (18) months thereafter (the "Draw Period"),
provided, however, that 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.
E. Section II.9 is deleted and replaced with the following:
9. Mandatory Payments: Unless accelerated pursuant to
the terms and conditions of this Agreement, or paid before the scheduled
Maturity Date of the Loan, the
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<PAGE>
Borrower shall pay to Lender sixty-six (66) consecutive minimum monthly payments
each in an amount equal to ninety-two (92%) percent 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
herein above 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 October, 1996 and shall continue until such time as the full
principal sum, together with all amounts owing under the Loan had been paid in
full. 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 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.
F. The following Affirmative Covenant is added at the end of
Section V:
24. Conversion of Contracts: Borrower agrees to pay to Lender
a conversion fee equal to one hundred and twenty-five dollars ($125.00) for each
Contract constituting an Acceptable Contract hereunder and pledged to Lender as
security for the Borrower's Obligations, which Contract is converted,
transferred or exchanged to, for, or with an interest in that certain timeshare
condominium project, commonly known as Los Abrigados Resort & Spa, located at
160 Portal Lane, Sedona, Arizona, being developed by Los Abrigados Partners
Limited Partnership, an Arizona Limited Partnership ("LAP"), an affiliate of
Borrower (a "Conversion Contract"). Said fee shall be due and payable
contemporaneously with LAP's acceptance of the Conversion Contract
8. Documentation to be furnished to Lender: Lender's Agreement to enter
into this First Modification Agreement as herein set forth is expressly
conditioned upon Lender's and its counsel's receipt, review and acceptance,
prior to the execution and delivery of this First Modification Agreement (unless
otherwise noted), of the following documentation and information:
A. True copies of the existing Consumer documentation, if same
differs from the Consumer documentation previously approved by Lender and its
counsel or a statement to the effect that the existing Consumer Documentation
has not changed.
B. The filed Certificate or Articles of Incorporation and
By-Laws, as amended to date for the Borrower. This requirement may be satisfied
by a written certification that the Certificate or Articles of Incorporation and
By-Laws of the Borrower, which are currently in Lender's possession, have not
been amended or modified in any respect.
C. The names and titles of all officers and directors of the
Borrower.
-6-
<PAGE>
D. A certificate of good standing for the Borrower, or such other
documentation as is reasonably satisfactory to Lender, in all jurisdictions in
which Borrower is authorized or licensed to do business,
E. Corporate franchise tax searches and/or certificate from the
Director of Revenue, or such other documentation as is reasonably satisfactory
to Lender, that no taxes are due to the taxing authorities having jurisdiction
over the Borrower.
F Continuation Uniform Commercial Code financing searches for the
Borrower in all applicable jurisdictions where the Borrower is conducting
business.
G. An updated, completed and signed Environmental Questionnaire
relating to the Resort.
H. Federal tax lien, state tax lien, and judgment searches for
the Borrower.
I. Evidence of continuing compliance with all applicable federal,
state and local environmental laws, rules, regulations and ordinances relating
to the Resort and the Borrower.
J. An updated listing and copy of all certificates, permits and
licenses required in connection with the use and operation of the Resort and the
sale and financing of Timeshare Estates.
K. A listing and description of all pending lawsuits or similar
proceedings involving the Borrower or the Resort, in which the Borrower or the
Resort is a defendant or otherwise defending any claim which is in excess of ten
thousand ($10,000.00) dollars.
L. An opinion letter from Borrower's counsel.
M. An endorsement to the title insurance policy previously issued
to lender increasing the amount of the coverage of title insurance policy to
$2,193,627.46, and which confirms that the modification to the Deed of Trust has
been properly indexed and recorded in the Larimer County recording office and
that there are no exceptions, liens, mortgages, encumbrances, restrictions or
similar or dissimilar clouds on title, except for Permitted Liens or other
exceptions that are approved by its Lender and its counsel.
N. All other documentation and information provided for herein or
which Lender may request or require.
9. Further Assurances: Borrower agrees that it shall execute and/or
deliver to Lender any documents, information or agreements as may be reasonably
requested by Lender or its counsel at any time so long as any sums due or
obligations to be performed under the Loan Documents remain unpaid or
unperformed.
10. Release and Discharge of Lender: Borrower hereby releases and
discharges Lender of and from all claims, causes of action, demands, damages or
suits, at law or in equity, which it may, as of the date of this First
Modification Agreement, have or claim to have against the
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<PAGE>
Lender relating to, rising out of or resulting from its lending relationship
with the Lender, or with respect to the Obligations due to Lender as evidenced
by the Loan Documents or the Premises or the other Collateral.
11. Governing Law: This First Modification Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to the principles of conflicts of laws.
12. Binding Effect: This First Modification Agreement is binding upon,
inures to the benefit of and is enforceable by the successor and assigns of the
parties hereto. This First Modification Agreement is not assignable by Borrower.
13. Non-Waiver: No failure or delay on the part of Lender, or its
successors and assigns, in the exercise of any right, power or privilege
pursuant to the Loan Documents or this First Modification Agreement is to be
construed to be or operate as a waiver. Partial exercise of any right, power or
privilege by Lender is not to preclude any further right, or power or privilege
nor be deemed a waiver. Any waiver or modification of this First Modification
Agreement or any other document, instrument or agreement executed by Borrower is
to be in writing signed by the Borrower and Lender. Lender may, in its sole
discretion, release, impair or surrender all or any of the interest granted
hereunder or any other agreement executed by the Borrower without waiving,
exhausting or impairing any of Lender's rights and remedies available pursuant
to the Loan Documents, including this First Modification Agreement.
14. Inconsistent Rights or Remedies: In the event that any of the Loan
Documents, including this First Modification Agreement, contain any inconsistent
rights or remedies otherwise available to Lender, the rights and/or remedies
accorded to Lender giving the Lender the greatest protection and/or affording
Lender the greater rights and remedies shall control, the determination of which
shall be left to the sole and exclusive discretion of Lender.
15. Representation by Counsel; Drafting of Agreement: Borrower acknowledges
that it has had the opportunity to consult independent counsel of its own
selection in connection with the matters covered by this First Modification
Agreement and that it has executed and delivered this First Modification
Agreement (and any other documents referred to herein or in connection herewith)
with the benefit of counsel and of its own free will and volition. Borrower also
acknowledges and agrees that the terms of this First Modification Agreement had
been negotiated in good faith by the parties and that said terms shall be
construed in a neutral fashion without regard to the draftsmanship of this First
Modification Agreement.
16. Severability: In the event that any portion of this First Modification
Agreement is deemed unenforceable by a court of competent jurisdiction, such
provision declared to be unenforceable is to be deemed to have been omitted from
this First Modification Agreement and all such remaining terms and conditions of
this First Modification Agreement are to continue in full force and affect.
17. Continued Effectiveness of Loan Documents: Except as specifically
modified herein, all of the other terms and conditions of the Loan Documents
shall remain in full force and effect and
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<PAGE>
the parties hereto expressly confirm and ratify all of their respective
liabilities, obligations, duties and responsibilities under and pursuant to said
Loan Documents, as modified. It is the intention of the parties hereto that this
First Modification Agreement shall not constitute a novation and shall in no way
adversely affect or impair the lien priority of the Deed of Trust, as modified,
and the security interests granted pursuant to the Loan Documents.
IN WITNESS WHEREOF, the parties have executed and delivered this First
Modification Agreement or caused this First Modification Agreement to be duly
executed and delivered by their proper and duly authorized officers or
representatives as of the day and year first above written.
ATTEST: ILX INCORPORATED,
an Arizona Corporation, Borrower
/s/ Stephanie Castronova By:/s/ Nancy J. Stone
- ------------------------------------ ---------------------------------
Stephanie Castronova, Secretary Nancy J. Stone, President
WITNESS/ATTEST: TAMMAC FINANCIAL CORP.,
a Delaware corporation, Lender
/s/ Joseph J. Lombardi By:/s/ Andy G. Roosa
- ------------------------------------- ---------------------------------
Joseph J. Lombardi, Asst. Secretary Andy G. Roosa, President
-9-
AMENDED AND RESTATED
PROMISSORY NOTE
---------------
Phoenix, Arizona
As of September 7, 1996
$2,193,627.46
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 One Hundred-Ninety-Three Thousand Six Hundred
Twenty-Seven Dollars and 46/100 ($2,193,627.46) 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 previously entered into between the
undersigned and the Lender and amended contemporaneously herewith (the "Loan
Agreement"), and in the following manner and upon the following terms and
conditions:
1. 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 sixty-six (66) consecutive minimum monthly
payments each in an amount equal to ninety-two percent (92%) 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 pay the interest and/or principal insufficiency on the first of each month
as aforesaid.
<PAGE>
(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.
2. 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.
3. 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.
4. 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.
5. Collateral. As security for the payment and performance of the
obligations hereunder, the undersigned has granted a security interest to Lender
in and to the Collateral more particularly described in the Loan Agreement.
2
<PAGE>
6. 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.
7. 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
or Event of Default 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.
8. 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.
9. 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.
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10. 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. _________
Initial
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
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16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. Governing Law. The provisions of this Note shall be governed by the
laws of the Commonwealth of Pennsylvania.
22. 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.
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23. 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.
24. 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 though set forth at length.
25. 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.
26. 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.
27. 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.
28. 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.
29. Amended and Restated Note. This Amended and Restated Promissory
Note replaces and supersedes that certain Promissory Note dated September 7,
1994 executed and delivered by Borrower to
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Lender . This Amended and Restated Note shall in no way be construed as a new
note or obligation of the Borrower, nor a discharge or a novation of the
original obligation.
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
/s/ STEPHANIE CASTRONOVA By: /s/ NANCY J. STONE
- ------------------------------- ------------------------------
STEPHANIE CASTRONOVA, Secretary NANCY J. STONE, President
7
AGREEMENT FOR
PURCHASE AND SALE OF
DEBBIE REYNOLDS HOTEL & CASINO
LAS VEGAS, NEVADA
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.
a Nevada corporation
DEBBIE REYNOLDS RESORTS, INC.
a Nevada corporation
BUYER: ILX INCORPORATED
an Arizona corporation
or its nominee
DATE: October 30, 1996
<PAGE>
AGREEMENT FOR PURCHASE AND SALE
-------------------------------
THIS AGREEMENT FOR PURCHASE AND SALE ("Agreement") is made as of the 30th day of
October, 1996, by and between DEBBIE REYNOLDS HOTEL & CASINO, INC., a Nevada
corporation and its wholly owned subsidiary DEBBIE REYNOLDS RESORTS, INC., a
Nevada corporation (collectively "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 the city of
Las Vegas, Clark County, Nevada, comprised of a resort hotel and casino known as
Debbie Reynolds Hotel & Casino (a portion of which has been timeshared) 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 has agreed to sell, and Buyer has agreed to purchase, the
Resort 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
--------------
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 Clark, State
of Nevada, described on Exhibit "B" attached hereto and incorporated
herein, together will all rights, privileges, easements and
appurtenances thereto, including, without limitation, all of Seller's
right, title and interest in and to 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
presently located on, under or about the Property and any additional
items located thereon at the time of Closing (the "Improvements");
(c) All of the Resort, restaurant, lounge, museum, showroom,
casino, gift shop, back bar, 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 "C" attached hereto and
incorporated herein (the "Personal Property"), but specifically
excluding those items set forth on Exhibit "T" attached hereto and
incorporated herein;
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(d) All customer lists, timeshare leads, and 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: (i) any
leases affecting the Resort (the "Leases") that have not been paid as
of Closing and that Buyer specifically agrees to assume, if any, and
(ii) any management, service, concession, maintenance, utility and
other contracts and agreements with respect to the maintenance and
operation of the Resort (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 design or construction documents relating to the present or
future development of the Resort and construction of the Improvements
(the "Plans and Specifications");
(g) 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, with the exception of those claims
described on Exhibit "K-1" attached hereto and incorporated herein,
(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, to the extent
transferable,(iii) the goodwill associated with the Resort, (iv) all
designs, surveys, site plans, plats, operating materials, engineering
reports and other technical descriptions, (v) transferable 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");
(h) All of Seller's right, title and interest in and to any
transferable licenses and permits, including without limitation
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 (collectively "Miscellaneous
Items") ;
(i) All of Seller's right, title and interest in Resort
telephone numbers and marketing materials used in marketing the Resort,
whether located at the Resort or elsewhere, including existing
videotapes, photographs, brochures, film, copy and anything relating
thereto ("Advertising Materials"); and
(j) All of Seller's right, title and interest in the timeshare
operation on the Property and any OPC license or lease (the "Timeshare
Operation") and all "in-house" timeshare contracts, purchase agreements
and notes receivable resulting from sales of timeshare intervals at the
Resort prior to Closing and not sold to lenders (the "Timeshare
Paper"), as more particularly described on Exhibit "A".
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All of the items described in subparagraphs (a) through (j) above are referred
to in this Agreement collectively as the "Resort". Any items excluded from the
foregoing are set forth on Exhibit "T" attached hereto.
1.02 Seller shall convey and Buyer shall accept title to the Property and
Improvements in accordance with the terms of this Agreement by general warranty
deed (Exhibit "D"), subject to all matters of public record shown on the Owners
Title Policy, current taxes and current assessments, and any matter shown on the
A.L.T.A. survey of the Property described in paragraph 3.04 below and approved
by Buyer (collectively the "Permitted Exceptions"). The Personal Property and
Advertising Materials shall be conveyed to Buyer by Bill of Sale (Exhibit "E")
to be executed and delivered by Seller at Closing, free and clear of liens and
encumbrances except the First Lien (as described hereinafter). The Leases,
Service Contracts, Ledgers, , Plans and Specifications, Miscellaneous Items,
Timeshare Operation, Timeshare Paper, and Contract Rights and Intangible Assets
shall be conveyed by Seller pursuant to an Assignment of Leases, Contract Rights
and Intangible Assets (Exhibit "F") or other appropriate assignment or
conveyance document, free and clear of all liens except the First Lien, to be
executed and delivered by Seller and Buyer at Closing.
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 SIXTEEN MILLION EIGHT HUNDRED THOUSAND DOLLARS
($16,800,000.00), plus any additional sum for inventories existing as of
Closing, payable as follows:
(a) Four Million Two Hundred Thousand Dollars ($4,200,000.00) 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 and as
close thereto as practicable, all of which shall be used by Seller to
satisfy the obligations of Seller described on Exhibit "P";
(b) Five Million One Hundred Thousand Dollars ($5,100,000.00)
(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 or
mortgage, and other loan and security documents by Seller in favor of
Resort Funding, Inc., attached hereto as Exhibit "G" (the "First Lien"
or "Loan Documents"), or (ii) paying the loan evidenced by the Loan
Documents in full at Closing; and
(c) Seven Million Five Hundred Thousand Dollars ($7,500,000.00)
by issuance at Closing of three million seven hundred fifty thousand
(3,750,000) 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 included in a registration statement to be filed on
an appropriate form with the United States Securities and Exchange
Commission within thirty (30) days after the date of substantial
completion of those Exhibits to be attached hereto hereinafter that
provide material information or additional terms to the overall
transaction required to be disclosed in such registration statement.
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2.02 Except as set forth in paragraph 1.01 and 2.03, Seller shall retain
all the rights and all the obligations with respect to all obligations and
liabilities of the Resort and its operation arising from or relating to the
period on and prior to the date of Closing, including without limitation, all
accounts payable, employees and employee claims, salaries and wages payable,
vacation pay for vacation earned, and payroll taxes associated therewith,
unbooked accounts payable, accounts receivable, cash, cash equivalents, security
deposits, utility and telephone payments, utility deposits, bank deposits, bank
and operating accounts, and all other obligations for the Resort, existing as of
and on the Closing Date and for the period prior thereto, as well as for its
prorata share of current real property taxes and current 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 as Buyer may employ, shall receive
payments paid to the Resort on all Seller's accounts receivable existing as of
the Closing Date as Seller's agent and shall remit all amounts received to
Seller within thirty (30) days of receipt. Such receipt 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 other effort or
legal action to collect. Receipt of these accounts receivable as set forth above
shall be without cost to Seller. Any payment other than cash delivered for
Seller shall be transmitted in kind by Buyer without recourse to Buyer.
Adjustment for cash security deposits, prepaid or accrued expenses shall be made
as provided in paragraph 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 for any amounts actually
paid to (or to be paid to) and for any amounts actually paid by (or to be paid
by) one party, but otherwise under this Agreement belonging to the other party
or chargeable to the other party, as the case may be. The computations of the
Net Adjustment will be made as of the Closing Date and exclude the cash payment
described in paragraph 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 Buyer shall deduct such amount
from the Down Payment as of the Closing Date. If Buyer owes the Net Adjustment
to Seller, such amount shall be added to the Down Payment, as of the Closing
Date. The parties acknowledge that some items subject to adjustment may not be
received prior to the Adjustment Date, and wherever the context requires,
Adjustment Date shall also mean Supplemental Adjustment Date as defined below.
Accordingly, there shall be a supplemental adjustment determined thirty (30)
days after the Closing Date or such other date or dates as the parties may agree
or which may be necessary if all information has not been received (the
"Supplemental Adjustment Date(s)") for such items, with such supplemental
adjustments to be made as of the Closing Date and paid to the other party within
ten (10) days after the Supplemental Adjustment Date. Buyer and Seller agree
that adjustments will include, but not necessarily be limited to, the following:
(a) Sales and Other Taxes. Any sales, transaction privilege,
gaming or other periodic taxes (except Seller's corporate income tax)
based on pre-Closing Resort revenue, which taxes having been collected
and not paid, or which are due or to become due and the amount known or
determinable at Closing, shall be paid by Seller at Closing. All other
such amounts not so determinable on or before the Adjustment Date,
shall be an adjustment in favor of Buyer unless
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otherwise paid by Seller. Upon presentation by Buyer of a copy of the
sales or other tax return, with an allocation of Seller's
responsibility therefor, Seller shall reimburse Buyer for such amount
within ten (10) business days after the date of such presentation.
(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) Certain Payments. All Lease, Service Contracts, utility
and telephone payments shall be prorated as of the Closing Date.
(d) Customer Deposits and Prepayments. All unearned 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 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
as of the Closing Date, and shall be an adjustment in favor of Seller
on the Adjustment Date.
(g) Employees and Payroll Related Expenses. At Buyer's option,
Buyer may require that all or any part of the Resort's employees resign
as of the Closing Date. To the extent not so required by Buyer, any
Workmen's Compensation premium deposits to be utilized by Buyer shall
be prorated to the Closing Date, and shall be an adjustment in favor of
Seller on the Adjustment Date. Current wages, salaries, vacation and
sick leave accrued as of the Closing Date shall be an adjustment in
favor of Buyer on the Adjustment Date computed as if the vacation will
be taken and the sick leave used. For purposes of the foregoing, paid
vacation and sick leave shall be deemed paid on a first accrued-first
paid basis.
(h) Ledgers. All amounts receivable for lodging provided prior
to the Closing Date, as shown on the Ledgers, shall be receivables to
be received by Buyer on behalf of Seller as set forth above.
(i) To the extent the foregoing prorations and adjustments are
specifically dealt with in the Hotel Facilities Lease, they shall be
resolved herein in a manner consistent with that document.
(j)For all purposes of proration and allocation of responsibility and liability
as described in this Agreement, the Closing Date and the period prior thereto
are allocated to the Seller, and the period after the Closing Date is allocated
to the Buyer. The words "as of" or "on" the Closing or Closing Date or similar
wording, as well as the words "Closing" or "Closing Date" where appropriate in
the context, shall be interpreted accordingly.
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2.04 The items below shall be paid as follows:
(a) Seller shall pay all of the obligations described on Exhibit
"P" from the Closing funds through the Escrow Agent.
(b) Seller and Buyer shall each pay one-half (1/2) of the
standard escrow charges in connection with this Agreement.
(c) The cost of the owners title policy provided for in
Paragraph 8.01 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.
(d) The cost of any extended lender's title insurance policy
shall be paid in full by Buyer.
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 attached hereto as
Exhibit "H".
2.06 First American Title Insurance Company, Las Vegas, Nevada 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 8, 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. The parties agree, if
required by Escrow Agent, to execute and enter into Escrow Agent's standard form
of escrow 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 (or as other terms of this Agreement may specifically extend such
period) (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
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hereunder or by reason hereof except for those provisions hereof which 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 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 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 any "Phase I" environmental
report and any testing in connection therewith. 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 a Nevada 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. As soon as practicable after execution hereof,
Seller shall provide Buyer with copies of all existing surveys, 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.
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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 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 following are
subsequently prepared, agrees 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 procedure, Buyer 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 the date of delivery 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 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 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 or eliminated (or
insured over with Buyer's consent), Seller shall have until five (5)
business days prior to the Closing (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
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hereof causing such disability) to convey title to the Property subject
to and in accordance with the provisions of this Agreement at the
Closing, 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 the Closing. Buyer's failure to give written notice as
required by the preceding sentence 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 the provisions hereof which 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 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 and including the
date of Closing, except as otherwise specifically treated in the adjustment
provisions of this Agreement. Not prepay any material item after the date of
this Agreement without the prior written consent of Buyer.
4.05 Except for daily room rental agreements in the ordinary course of
business which are not discounted more than twenty-five percent (25%) from the
full "rack" rate, not enter into any new material agreement, nor renew, amend,
modify or terminate any existing material agreement relating to the Resort
without having obtained the prior written consent of Buyer in each such
instance, which will not be
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unreasonably withheld or delayed. Material agreements will include, without
limitation, airline and travel agent commitments, automobile leases, or room or
other facility commitments which are discounted more than twenty-five percent
(25%) from their full rates.
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 compliance with governmental requirements applicable
to the Resort.
4.08 Promptly advise Buyer of any threatened or actual litigation or
governmental investigation or proceeding affecting the Resort, its licenses, its
operation, or those persons materially involved in its operation. It shall be a
condition precedent to Buyer's obligation to close that there shall be no such
matters threatened or pending at Closing having a potential significant and
material adverse effect on the Resort or upon Seller's ability to convey the
Resort to Buyer.
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 daily room rental agreements in the ordinary course of
business, not create (or agree to create) any contract, 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 consummation of this transaction by recording the General
Warranty Deed in accordance with the provisions of the Agreement 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 date of such recording is referred to in this
Agreement as the "Closing" or 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 General Warranty Deed in the form attached as
Exhibit "D";
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(2) Any documents or affidavits required to be filed or
recorded therewith in connection with Nevada Law;
(3) A Bill of Sale in the form attached as Exhibit "E",
assigning and transferring to Buyer all of Seller's right, title and
interest in and to the Personal Property, Advertising Materials,
Ledgers, and the Plans and Specifications, including without limitation
those items shown on Exhibit "C", free and clear of all claims, liens,
security interests, encumbrances and other charges, except for the
First Lien;
(4) An Assignment of Leases, Contract Rights and
Intangible Assets in the form attached as Exhibit "F", free and clear
of all claims, liens, security interests, and other charges, except for
the First Lien. The schedules to this assignment shall include the
Leases, Service Contracts, Ledgers, Plans and Specifications, Contract
Rights, Intangible Assets, Timeshare Operation items, Timeshare Paper
and related security agreements, and Miscellaneous Items;
(5) Assignments of Seller's interest in all automobiles
and equipment lease-purchase contracts, and appropriate title transfer
documentation properly executed by Seller for all such items owned by
Seller and used for the Resort, free and clear of all claims, liens,
security interests, encumbrances and other charges, except for the
First Lien;
(6) Certificate of Non-Foreign Status in the form attached
hereto as Exhibit "I";
(7) If requested by Buyer, the resignations of all
officers and directors of the Timeshare Operation owners association
who are controlled by Seller, and corresponding replacement with
persons controlled by Buyer;
(8) If requested by Buyer, an assignment of all the
developer's and "declarant's" rights in the governing documents of the
Timeshare Operations, in the form of Exhibit "J" attached hereto;
(9) Such other documents required by this Agreement or 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; and
(10) An opinion of Seller's counsel.
(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 assumption of the Loan Documents, if required;
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<PAGE>
(3) Such other documents required by this Agreement or as
may be reasonably required by Seller, its counsel, or Escrow Agent, to
consummate the transactions which are the subject matter of this
Agreement; and
(4) An opinion of Buyer's counsel.
(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 following, as of
the date hereof and as of the Closing:
6.01 Seller are corporations, duly organized and validly existing under
the laws of the State of Nevada.
6.02 Seller has the full right and authority to enter into and fully
perform its obligations under this Agreement, subject to obtaining shareholder
approval of the transaction contemplated hereby.
6.03 The persons signing this Agreement on behalf of Seller are authorized
to do so and to bind Seller to the terms hereof.
6.04 At the Closing, Seller is the sole owner of the Resort, subject only
to the First Lien.
6.05 The schedule of Leases set forth in Exhibit "M" 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 will be provided to Buyer during the Feasibility Period 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, oral or written (indicating
which), is attached hereto as Exhibit "N" ("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. Copies
of all Service Contracts will be provided to Buyer during the Feasibility Period
and the originals shall be delivered to Buyer at Closing. Except as stated on
the Exhibit, all Service Contracts may be canceled immediately upon notice of
same, without penalty or charge.
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<PAGE>
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 located within the boundaries of the City of Las Vegas, Nevada.
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 applicable governmental entities. Seller
has received no correspondence or formal notice from any governmental authority
of any existing violation, which has not been cured, or of any circumstances
that with the passage of time or failure to act, or both, would constitute a
violation of any applicable zoning or use requirement.
6.09 To the best of Seller's knowledge, 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, alley or roadway adjoining the
Property which would affect access to or use of the Property.
6.10 To the best of Seller's knowledge, and except as qualified by Exhibit
"P" attached hereto, and in related documents set forth on the Exhibit and
provided to Buyer at least ten (10) days prior to the end of the Feasibility
Period, sewage and waste disposal systems and utility and telephone 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 "P" attached hereto, and in related
documents set forth on the Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, Seller has not received notice of
any uncured violations or infringements of any laws (including without
limitation gaming laws and laws related to the Timeshare Operation), rules,
regulations, ordinances, fire or safety codes, life safety requirements,
insurance requirements, covenants, conditions, restrictions (including without
limitation those relating to the Timeshare Operation on the Property),
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 "P" attached hereto, and in related
documents set forth on this Exhibit and provided to Buyer at least ten (10) days
prior to the end of the Feasibility Period, 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.
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(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 Resort.
(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) The Resort is not a state or federal "superfund" site or
study site pursuant to Environmental Law.
(g) 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 by act or omission
to act of Seller or any person on the Resort property during the period
on and prior to the Closing Date. This indemnity does not limit any
statutory or other legal rights available to Buyer. Buyer agrees to
defend, indemnify and hold Seller 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 by act or omission to act of Buyer or any
person on the Resort property during the period after the Closing Date.
(h) "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, regulation,
code, ordinance, or decree relating to health, environment, air, water,
soil, improvements and facilities, the protection of same, and the
contamination and cleanup thereof.
(i) "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
"K" attached hereto, no claims, actions, suits, proceedings or investigations by
governmental authorities, employees or former employees or other third parties
are pending or threatened against or relating to the Resort or its operation in
writing or in any court or before any federal, state, municipal or other
governmental department, agency, commission, board or bureau.
6.14 Except as may be set forth on the Title Report, and further except
for current property taxes and current assessments, not delinquent, Seller has
no knowledge of any delinquent tax, assessment, or other obligation affecting
the Resort which is, or may become, a lien on the Resort.
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6.15 Seller has delivered to Buyer financial statements, including
statements of income and expenses dated _______________________________(the
"Financial Statements") for Seller prepared by KPMG Peat Marwick. To the best of
Seller's knowledge the Financial Statements are true, correct, and complete as
of the date thereof and fairly present the financial operations of the Resort
for the periods stated. Seller makes no representation as to the future
financial performance of the 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 "L" ("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 defend, indemnify and hold Buyer harmless from any sums owing on
liabilities of the Seller existing on the Closing Date not set forth as an
Existing Liability on Exhibit "L".
6.17 Seller is not prohibited from consummating the transaction
contemplated by this Agreement or from conveying the Resort 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 (other than that of Seller's
shareholders) is required in order for Seller to convey the Resort 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, except for the
First Lien.
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 and interest due on the Loan Documents does not exceed Five
Million One Hundred Thousand Dollars ($5,100,000.00). 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 legally be discharged without cause at
any time, including immediately before Closing, without liability to the Buyer
or liability to the Resort. If requested by Buyer, Seller will, in writing, give
notice to and discharge all employees of the Resort, effective immediately prior
to Closing, and not do anything to interfere with any immediate rehire after
Closing of same or all of such employees. Prior to any such events, Seller will
not encourage, support or entice in any way, any satisfactory employee to leave
the employ of the Resort.
6.21 Except as set forth on Exhibit "P" attached hereto and for normal
wear and tear, the Resort, including the buildings, systems, furniture, fixtures
and equipment, are in good condition and repair.
6.22 All licenses and permits necessary to the operation of the Resort are
current and in good standing.
6.23 Seller holds, in good standing, current alcoholic beverage license(s)
from the appropriate governmental liquor authorities in connection with the
operation of the Resort.
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6.24 Up to the Closing Date, the Resort's equipment and facilities have
been adequate to serve its customers during peak demand periods.
6.25 Except as set forth on Exhibit "P" attached hereto, there are no
delinquent taxes, assessments, salaries, wages, contract payments, supplier
payments, or any other delinquent payments of any kind or nature owing from
Seller or the Resort and relating to the Resort, its employees, contractors,
governmental authorities, or any other person or entity dealing with the Resort
and its operation. Any such delinquent payments listed on Exhibit "P" will be
paid by Seller at Closing from the Closing funds through the Escrow Agent.
6.26 Attached hereto as Exhibit "U" is a schedule of all commitments and
reservations for "free" rooms and rooms or other facilities discounted more than
twenty-five percent (25%) from the full rate therefor, for any period after the
sixtieth (60th) day following the date of this Agreement.
6.27 The Timeshare Operation has been operated continuously from its
inception to the present in compliance with all laws, rules and regulations
applicable thereto, including without limitation the sales connected therewith,
and there has been no misrepresentation to purchasers or failure of performance
in connection with any representation or written obligation to any purchaser,
except for tenth (10th) floor (of the Resort) furnishings represented to the
timeshare purchasers. An accurate list of (i) those furnishings, (ii) their
brand and purchase source, and (iii) their cost is set forth on Exhibit "V"
attached hereto, and such furnishings will properly fulfill the obligations to,
and representations made to, the timeshare purchasers. Also shown on Exhibit "V"
is an accurate schedule of all Resort timeshare purchasers (i) whose owners
association dues have been waived and the period of such waiver or (ii) who are
delinquent in the payment of such dues, for how long and the amount of each such
delinquency.
6.28 Seller agrees to inform Buyer in writing immediately upon obtaining
actual knowledge that any of Seller's representations or warranties are
inaccurate.
6.29 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, and that
the lender will allow Buyer to assume the First Lien without material
modification thereof and without any substantial charge or fee to Buyer.
6.30 "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: Todd Fisher; the general managers of each of the Resort's: hotel
operation, casino operation, maintenance operation, food and beverage operation,
entertainment/museum operation and housekeeping operation; David Crabtree and
Debbie Reynolds.
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,
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expense and liability to third parties arising out of the Resort, its condition
and operation (including without limitation the Timeshare Operation), and acts
or omissions by Seller, on or prior to the Closing Date.
6.32 No investigation by, or knowledge of Buyer, shall diminish Seller's
indemnities herein or Seller's covenants, representations and warranties.
Section 7. Covenants, Representations and Warranties of Buyer
--------------------------------------------------
Buyer covenants, represents and warrants to Seller as follows:
7.01 Buyer is a corporation duly organized and in good standing under the
laws of the State of Arizona.
7.02 Buyer has the full right and authority to enter into and fully
perform its obligations under this Agreement.
7.03 The persons signing this Agreement on behalf of Buyer are authorized
to do so, and to bind Buyer to the terms hereof.
7.04 Buyer shall assume all of the Existing Liabilities, as shown on
Exhibit "L" attached hereto, and shall pay when due all items appearing thereon.
7.05 Buyer shall defend, 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, its condition or the operation thereof, provided however,
that such indemnification shall not (except as may be otherwise herein
specifically provided) extend to any cost, expense or liability arising out of
Seller's indemnifications and warranties or any omission or act of Seller on or
prior to the Closing Date.
7.06 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, except
for the express covenants, representations and warranties of Seller contained in
this Agreement.
7.07 Buyer accepts Seller's assignment to it of all Leases, Service
Contracts and Contract Rights contained in Exhibit "F" related to the Resort and
assumes all obligations of Seller thereunder arising after the Closing Date.
7.08 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.
7.09 Buyer agrees to inform Seller in writing immediately upon obtaining
actual knowledge that any of Buyer's representations or warranties herein are
inaccurate.
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7.10 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.
7.11 The Shares of common stock described in paragraph 2.01(c) above are
authorized but unissued stock of Buyer, and 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) and fully paid and
non-assessable.
7.12 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.
7.13 To the best of Buyer's knowledge, there is no suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or threatened 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.
7.14 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 8 Title Insurance
---------------
8.01 Seller agrees to cause Escrow Agent to deliver to Buyer, at the
Closing, an ALTA extended coverage owners title insurance policy or a binding
commitment to issue the same as soon after the Closing 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 owners title insurance policy. If Buyer
shall desire any additional endorsements, the cost and responsibility for the
acquisition thereof shall be the responsibility of the Buyer.
8.02 Any lender's title policy required by the First Lien lender at
Closing shall be Buyer's responsibility.
Section 9 Hotel Facilities Lease
----------------------
9.01 Immediately after Closing, Buyer will lease certain of the Resort
facilities to Debbie Reynolds and/or her nominee ("Lessee") pursuant to the
lease to be attached hereto as Exhibit "Q"( the "Hotel Facilities Lease"), which
will be executed and delivered by said at Closing.
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9.02 In general, the lease will be for a period of
ninety-nine (99) years with an approximate monthly lease payment of
$150,000 and will include the following facilities: showroom, museum,
gift shop, casino, back bar and certain joint use areas. Lessee will
maintain such facilities, plus the marquis sign and the portable
display signs around the Resort, and Lessee will share prorata the
Resort's utilities, security and engineering. In addition, the lease
will provide for a license of the tradename "Debbie Reynolds Hotel &
Casino" and all derivatives thereof, and all other logos, trademarks,
tradedress and tradenames used in connection with the Resort
(collectively "Names and Marks"). Said license will be transferable
with the Resort if approved by Debbie Reynolds, which approval will not
be unreasonably withheld so long as the transferee meets certain
conditions to be defined in the lease. In the event said approval is
not given, then the lease of facilities may be terminated by Seller;
9.03 The above is illustrative only, and the final terms of the Hotel
Facilities Lease shall be controlling.
Section 10 Certain Other Agreements
------------------------
10.01 In consideration for the use of her name and likeness and associated
goodwill and other services, Debbie Reynolds will personally receive a
percentage of the net profit of any timeshare project at the Resort, as set
forth in the "Timeshare Profit Agreement" attached hereto as Exhibit "R", to be
executed and delivered at Closing.
10.02 A life insurance policy acceptable to Buyer on Debbie Reynolds' life
in the amount of $10,000,000 will be assigned by Seller to Buyer and made
payable to Buyer and delivered to Buyer at Closing.
10.03 On a per project basis, timely, good faith negotiations will take
place at either party's request to place Debbie Reynolds memorabilia and/or
Debbie Reynolds museum displays at other ILX Incorporated locations.
10.04 Seller will cause the "Debbie Reynolds Participation Agreement",
attached hereto as Exhibit "S", wherein Ms. Reynolds agrees to personally be
present, cooperate in and participate in the future activities of the Resort
(including without limitation the hotel and casino) and other ILX Incorporated
business activities (including without limitation Red Rock Collection
Incorporated) and allow for the use of her name and likeness, to be personally
executed by Ms. Reynolds and delivered to Buyer at Closing.
10.05 As additional consideration to Buyer and as a condition to Buyer's
obligations to consummate the transactions hereunder, Debbie Reynolds shall have
entered into a merger agreement and related promotional agreements with Buyer's
wholly-owned subsidiary, Red Rock Collection Incorporated.
10.06 With reference to this Agreement and the specific terms of paragraph
17.13 concerning the timing of exhibit preparation, both parties will commence
immediately, diligently and continuously to complete all remaining due
diligence, complete any and all necessary corporate action, procure any
-19-
<PAGE>
necessary government approvals, and negotiate the definitive exhibits to be
attached hereto, with the goal of Closing prior to the end of 1996.
10.07 Without modifying any other term of this Agreement, Closing shall be
conditional on the procurement of all required governmental approvals for the
transactions and activities contemplated by this Agreement and its exhibits and
the consummation to Buyer's sole and exclusive satisfaction of the matters
described in Section 9 above and this Section 10.
10.08 If Seller is unable to procure the required governmental approvals
for its activities contemplated pursuant to the Hotel Facilities Lease
(including without limitation the appropriate gaming licenses for the casino
operation) within six (6) months after the date of Closing, then Buyer shall
have no further obligations under the Hotel Facilities Lease with respect to the
casino operation and Buyer shall have the right to operate the casino in its
name.
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 or other 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
-------
12.01 All notices under this Agreement shall be in writing and shall be
effective when addressed to the person(s) and address(es) as set forth below,
and either:
(a) Delivered to the address(es) by United States Mail or an
established, reputable overnight courier such as Federal Express or
UPS;
(b) Delivered by other messenger to an appropriate employee at
such address(es); or
(c) Received at the telefacsimile number(s) shown below.
12.02 Proof of delivery or receipt is the obligation of the sender. Refusal
of delivery shall constitute delivery.
12.03 Addresses and telephone numbers:
If to Buyer:
------------
Joseph P. Martori, Chairman
ILX Incorporated
2777 East Camelback Road
-20-
<PAGE>
Phoenix, Arizona 85016
Telefacsimile: 602-957-2780
Telephone: 602-957-2777
with a required copy to:
--------
Samuel L. Ciatu, General Counsel
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Telefacsimile: 602-957-2780
Telephone: 602-957-2777
and with a required copy to:
--------
Elliot R. Eisner, Esq.
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Pkwy.
Suite 700
Las Vegas, NV 89109
Telefacsimile: 702-796-7181
Telephone: 702-792-7000
If to Seller:
-------------
Todd Fisher, Chief Executive Officer
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
with a required copy to:
--------
David Crabtree,
Debbie Reynolds Hotel & Casino, Inc.
305 Convention Center Drive
Las Vegas, Nevada 89109
Telefacsimile: 702-734-2954
Telephone: 702-734-0711
-21-
<PAGE>
with a required copy to:
--------
Matthew Q. Callister
Callister & Reynolds
823 Las Vegas Blvd. South
Las Vegas, Nevada 89101
Telefacsimile: 702-385-7743
Telephone: 702-385-3343
If to Escrow Agent:
-------------------
------------------------------
------------------------------
------------------------------
------------------------------
Telefacsimile:
------------------------------
Telephone:
------------------------------
with a required copy to:
--------
------------------------------
------------------------------
------------------------------
------------------------------
Telefacsimile:
------------------------------
Telephone:
------------------------------
Section 13 Survival of Representations, Warranties, Covenants, and
----------------------------------------------------------------
Obligations
-----------
Except as may be otherwise specifically 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 a period of three (3) years.
-22-
<PAGE>
Section 14 Uniform Commercial Code - Bulk Transfer
---------------------------------------
14.01 The parties believe that this sale is exempt from the application of
the Uniform Commercial Code bulk sale law 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, unless otherwise requested
by a party prior to the end of the Feasibility Period, Buyer and Seller agree to
waive compliance, as between themselves, with the Bulk Sale provisions of the
Uniform Commercial Code as it may be in force in the State of Nevada.
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, 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 or 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).
-23-
<PAGE>
16.03 If Seller shall breach or fail to perform or fulfill any of its
pre-Closing or 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 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).
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 Nevada.
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., Las Vegas,
Nevada 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 of Arizona, State of Nevada 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,
timeliness is the essence of this Agreement and of every term and provision
hereof.
-24-
<PAGE>
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.
17.10 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 attorney's fees, expenses, discovery costs and court costs as the court
sitting without a jury shall determine. Any party seeking to be indemnified or
held harmless by the other under the terms of this Agreement shall provide
notice to the indemnifying party of receipt of any indemnified claim or cause of
action, and the indemnifying party shall have the option of joining in the
defense of such claim or cause of action.
17.11 Buyer and Seller shall each provide the other prior to the end of the
Feasibility Period 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.
17.12 Neither Buyer nor Seller will make any public announcement concerning
the transactions contemplated hereby without the review, comment and approval of
the other, which review and comment will be promptly provided and which approval
will not ultimately be withheld so long as no securities law violation would
occur as a result of such announcement.
17.13 Set forth in Exhibit "A" is a list of any and all amendments,
schedules, riders, and other items which are attached hereto but which are not
listed elsewhere herein. All exhibits, schedules, riders or other items attached
to this Agreement are a part of and incorporated by reference into this
Agreement with the same effect as if they were recited at length in the body of
this Agreement. Exhibits C, G, K, L, M, N, O, P, T, U, V and the schedules to
Exhibit F are to be prepared initially by Seller. Seller will use its best
reasonable efforts to prepare, complete and deliver same to Buyer prior to the
end of the thirtieth (30th) day after the date of this Agreement, failing which,
the Feasibility Period shall be extended to the date thirty (30) days after the
date the last of the foregoing completed exhibits is delivered to Buyer. The
parties will use their best good faith, reasonable efforts to agree upon the
form of the remaining exhibits to this Agreement as soon as reasonably
practicable, and in no event later than ten (10) 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
any 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.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER: ILX INCORPORATED, an Arizona corporation
By: /s/ Joseph P. Martori
-------------------------------------
Joseph P. Martori, Chairman
SELLER: DEBBIE REYNOLDS HOTEL & CASINO, INC.,
a Nevada corporation
By: /s/ Todd Fisher
-------------------------------------
Todd Fisher, Chief Executive Officer
DEBBIE REYNOLDS RESORTS, INC.,
a Nevada corporation
By: /s/ Todd Fisher
-------------------------------------
Todd Fisher, Chief Executive Officer
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 limited to, the
reports required pursuant to Section 6045 of the Code.
ESCROW AGENT:
-----------------------------------
By:
-----------------------------------
Its:
-------------------------------
-26-
<PAGE>
TABLE OF EXHIBITS
Exhibit Title
- ------- -----
A Riders, Amendments and Miscellaneous Items
B Description of Real Property
C Schedules of Personal Property
D Deed
E Bill of Sale
F Assignment of Leases, Contract Rights and Intangible Assets
G Loan Documents - First Lien
H Allocations
I Certificate of Non-Foreign Status
J Assignment of Declarant's Rights
K Suits, Proceedings, Investigations and Claims
K-1 Claims Not Assigned
L Existing Liabilities to be Assumed by Buyer
M Schedule of Leases
N Schedule of Service Contracts
O Summary of Existing Zoning and Use Violations
P Summary of Certain Problems
Q Hotel Facilities Lease
R Timeshare Profit Agreement
S Debbie Reynolds Participation Agreement
T Items Excluded from the Sale
U Discounted Room and Facility Commitments
V Timeshare Operation Items
-27-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS THIRD QUARTER 1996 CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,635,346
<SECURITIES> 0
<RECEIVABLES> 14,250,491
<ALLOWANCES> 2,801,024
<INVENTORY> 20,227,328
<CURRENT-ASSETS> 34,312,141
<PP&E> 3,634,040
<DEPRECIATION> 824,719
<TOTAL-ASSETS> 40,796,760
<CURRENT-LIABILITIES> 5,467,094
<BONDS> 16,543,026
0
1,464,941
<COMMON> 9,755,380
<OTHER-SE> 39,950
<TOTAL-LIABILITY-AND-EQUITY> 40,796,760
<SALES> 15,602,211
<TOTAL-REVENUES> 24,311,617
<CGS> 5,251,115
<TOTAL-COSTS> 18,344,516
<OTHER-EXPENSES> 2,157,287
<LOSS-PROVISION> 459,143
<INTEREST-EXPENSE> 1,406,073
<INCOME-PRETAX> 1,944,598
<INCOME-TAX> 607,371
<INCOME-CONTINUING> 850,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 850,758
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
