FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
August 22, 1997
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Date of Report (Date of earliest event reported)
ILX Incorporated
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(Exact name of Registrant as specified in its charter)
ARIZONA
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(State or other
jurisdiction of
incorporation)
33-16122 86-0564171
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(Commission File (I.R.S. Employer
Number) Identification No.)
2111 E. Highland, Suite 210, Phoenix, AZ 85016
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(Address of principal executive offices) (Zip Code)
(602) 957-2777
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Registrant's telephone number, including area code
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Item 5. Other Events.
On August 29, 1997, ILX Incorporated ("ILX") and Alan R. Mishkin
("Mishkin") entered into an Agreement for Transfer of Limited Partnership
Interest (the "Mishkin Agreement").
Under the terms of the Mishkin Agreement, ILX is to purchase from
Mishkin all of Mishkin's Class B Limited Partnership Interest (the "Mishkin LAP
Interest") in Los Abrigados Partners Limited Partnership, an Arizona limited
partnership ("LAP"). For accounting certainty, the parties have agreed that the
transfer of the Mishkin LAP Interest shall have an effective date of January 1,
1997. In consideration for the transfer of the Mishkin LAP Interest, ILX shall
pay to Mishkin $720,000.00 upon closing, and shall deliver a promissory note in
the amount of $675,000.00 (the "Mishkin Note"). In addition, ILX shall issue to
Mishkin 100,000 shares of common stock of ILX. Closing under the Mishkin
Agreement is scheduled to occur on or before September 28, 1997.
When issued, the Mishkin Note will be payable in annual installments of
$100,000.00 (inclusive of principal and interest), payable on July 31 of each
year beginning July 31, 1998. The entire unpaid principal balance of the Mishkin
Note and accrued and unpaid interest, if any, is payable on July 31, 2002. ILX's
obligations under the Mishkin Note are secured by a Security Agreement covering
the Mishkin LAP Interest (the "Mishkin Security Agreement").
The above descriptions are qualified in their entirety by reference to
the Mishkin Agreement, Mishkin Note and Mishkin Security Agreement attached as
Exhibits 10A, 10B and 10C, respectively, of this Form 8-K.
On August 22, 1997, ILX purchased from Martori Enterprises Incorporated
("MEI"), all of MEI's Class B Limited Partnership Interest in LAP (the "MEI LAP
Interest"). The purchase was consummated pursuant to an Agreement for Transfer
of Limited Partnership Interest (the "MEI Agreement"). In consideration for
transfer of the MEI LAP Interest, ILX paid to MEI $100,000.00, and issued a
promissory note in the amount of $1,300,000.00 (the "MEI Note"). The MEI Note is
payable by an installment of $100,000 (inclusive of principal and interest) on
January 1, 1998, and by equal annual installments of $200,000.00 (inclusive of
principal and interest) payable on July 31 of each year, beginning July 31,
1998. The entire unpaid principal balance of the MEI Note and accrued and unpaid
interest, if any, is payable on July 31, 2002. ILX's obligations under the MEI
Note are secured by a Security Agreement covering the MEI LAP Interest (the "MEI
Security Agreement").
The MEI Agreement and the transactions contemplated thereby are subject
to rescission by ILX at any time prior to the close of business on October 15,
1997, if ILX has not acquired the Mishkin LAP Interest by that date. ILX
anticipates that it will not exercise this rescission right.
The above descriptions are qualified in their entirety by reference to
the MEI Agreement, the MEI Note and the MEI Security Agreement attached as
Exhibits 10D, 10E and 10F, respectively, of this Form 8-K.
<PAGE>
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.
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10A Mishkin Agreement 4
10B Form of Mishkin Note 14
10C Form of Mishkin Security Agreement 16
10D MEI Agreement 21
10E MEI Note 29
10F MEI Security Agreement 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ILX Incorporated,
an Arizona corporation
/s/ Nancy J. Stone
-----------------------------
Nancy J. Stone
President
Date: September 18, 1997
AGREEMENT FOR TRANSFER OF
LIMITED PARTNERSHIP INTEREST
THIS AGREEMENT FOR TRANSFER OF LIMITED PARTNERSHIP INTEREST is entered
into to be effective as of August 29, 1997, by and between ILX Incorporated, an
Arizona corporation ("ILX") and Alan R. Mishkin, husband of Carol Mishkin,
dealing with his sole and separate property, ("Mishkin").
RECITALS:
A. Mishkin desires to sell to ILX, and ILX desires to purchase from
Mishkin, all of his Class B Limited Partnership Interest (the "LAP Interest") in
Los Abrigados Partners Limited Partnership, an Arizona limited partnership
("LAP"), subject to the terms and conditions set forth in this Agreement.
B. The parties desire that the transfer of the LAP Interest be
effective as of January 1, 1997 (the "Effective Date").
AGREEMENTS:
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto agree as
follows:
1. Transfer of LAP Interest. Mishkin hereby sells to ILX and ILX hereby
purchases from Mishkin, all of Mishkin's right, title and interest in, to, and
under the LAP Interest, including without limitation all distributions payable
in respect of, and allocations attributable to, the LAP Interest from and after
the Effective Date.
2. Consideration. In consideration for Mishkin's transfer of the LAP
Interest, ILX shall, upon Closing (as defined herein):
a. Pay to Mishkin Seven Hundred Twenty Thousand Dollars
($720,000.00);
b. Execute and deliver to Mishkin a secured promissory
note (the "Note") in the form attached as Exhibit A,
in the original principal amount of Six Hundred
Seventy Five Thousand Dollars ($675,000.00);
c. Issue to Mishkin One Hundred Thousand (100,000)
shares of common stock of ILX, (the "ILX Shares").
3. Intent of LAP Transfer. Mishkin represents that the LAP Interest
constitutes all of his ownership interest in LAP and in the properties owned by
LAP. To the extent that, as of the Closing, Mishkin owns any other interest in
any such other properties, such interest shall be deemed transferred by this
Agreement except as otherwise agreed by the parties in writing. At the request
of ILX, Mishkin shall execute any additional documents to effect any intended
transfer not made by this Agreement or any document executed in connection
herewith.
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4. Closing; Manner of Transfer. The "Closing" of the transactions
contemplated hereby shall be held within five (5) days after notice to Mishkin
by ILX setting forth the exact time and place of Closing, and in any event
within thirty (30) days from the date of this Agreement. At the Closing, ILX
shall make the payments and deliver the documents referenced in this Agreement,
and Mishkin shall deliver the documents referenced in this Agreement, including
an assignment of the LAP Interest, in each case in a form satisfactory to all
parties.
5. Security Agreement. As security for the performance of ILX's
obligations under the Note, ILX shall grant to Mishkin a security interest in
the LAP Interest, evidenced by a security agreement in mutually satisfactory
form.
6. Valuation of ILX Shares. Having considered the price per share of
the ILX Shares as of the date of this Agreement, together with other pertinent
factors, the parties hereby agree that as of the date of this Agreement the
value of the ILX Shares being transferred by ILX to Mishkin is One Hundred
Twenty-five Thousand Dollars ($125,000), or One Dollar Twenty- five cents
($1.25) per share. Each party shall prepare its federal, state and local tax
returns in a manner consistent with the valuation set forth in this Agreement.
7. Representations and Warranties of Mishkin. Mishkin represents and
warrants to ILX as follows, as of the Effective Date and as of the Closing
hereunder:
7.1 Ownership of LAP Interest. Mishkin has good and marketable
title to the LAP Interest free of any lien, security interest, lease, or
encumbrance whatsoever. Upon delivery of appropriate instruments evidencing
transfer of the LAP Interest, ILX will own all right, title and interest in and
to the LAP Interest free and clear of any liens, encumbrances, equities or
claims.
7.2 Capacity. Mishkin has full power and authority to enter
into this Agreement and to carry out his obligations hereunder. This Agreement
constitutes a valid and legally binding obligation of Mishkin. Mishkin has no
legal obligation, absolute or contingent, to any person or firm to sell all or
any portion of the LAP Interest or with respect to the LAP Interest to effect
any merger, consolidation or other reorganization or to enter into any agreement
with respect thereto. To Mishkin's actual knowledge (as hereinafter defined),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by Mishkin with any of the
provisions hereof will (i) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with the giving of
notice or the lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon the LAP Interest, under any term, condition or provision of any agreement
or other instrument or obligation to which Mishkin is bound, or by which the LAP
Interest or LAP is bound or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Mishkin or LAP.
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7.3 No Breach of Statute, Decree or Order. To Mishkin's actual
knowledge no material claim, action or proceeding is pending or threatened
against Mishkin with respect to a default under, or a violation or breach in any
material respect of, any applicable statute, law, ordinance, decree, order, rule
or regulation of any governmental body, nor, to Mishkin's actual knowledge (as
hereinafter defined), is there any basis for such a claim, action or proceeding.
To Mishkin's actual knowledge (as hereinafter defined) the consummation of this
Agreement and the sale of the LAP Interest contemplated hereby will not
constitute or result in any such default, breach or violation.
7.4 Litigation. To Mishkin's actual knowledge (as hereinafter
defined) there is no material suit, claim, action, proceeding or governmental
investigation now pending or threatened against Mishkin ("Mishkin Third Party
Litigation"), nor to Mishkin's actual knowledge (as hereafter defined) is there
any condition or set of facts which could give rise to any material Mishkin
Third Party Litigation before any court, administrative or regulatory body or
governmental agency, concerning or affecting any of the transactions
contemplated by this Agreement. To Mishkin's actual knowledge (as hereinafter
defined), there is no decree, injunction or order of any court or governmental
department or agency outstanding against Mishkin relating to his ability to
transfer the LAP Interest.
7.5 Incorporation of Other Representations and Warranties. Any
representation, warranty or covenant set forth in any instrument transferring
any of the LAP Interest pursuant to this Agreement is incorporated herein by
this reference and made part hereof.
7.6 Survival. All representations, warranties and covenants
made by Mishkin in this Agreement are true and correct in all material respects
as of the Effective Date and as of the Closing, and shall survive the Closing of
the transactions contemplated hereby.
7.7 Definition of "Actual Knowledge". As used in this Section
7, "actual knowledge" means knowledge as of the date of this Agreement
irrespective of any inquiry or investigation into matters that may have been
known or should have been known prior to the date of this Agreement.
8. Representations and Warranties of ILX. ILX as to its assets and
activities, represents and warrants to Mishkin as follows, as of the Effective
Date and as of the Closing hereunder:
8.1 Capacity. ILX has full power to enter into this Agreement
and to carry out its obligations hereunder. This Agreement constitutes a valid
and legally binding obligation of ILX. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance by ILX with any of the provisions hereof will violate any order,
writ, injunction, decree, statute, rule or regulation applicable to ILX.
8.2 No Breach of Statute, Decree or Order. To the actual
knowledge of ILX (as hereinafter defined), no claim, action or proceeding is
pending or threatened against ILX
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4
with respect to a default under, or a violation or breach in any material
respect of, any applicable statute, law, ordinance, decree, order, rule or
regulation of any governmental body, nor, to the actual knowledge of ILX (as
defined herein), is there any basis for such a claim, action or proceeding. To
ILX's actual knowledge (as hereinafter defined), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby nor compliance by ILX with any of the provisions hereof will (i) violate,
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with the giving of notice or the lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon the ILX Shares, under any term,
condition or provision of any agreement or other instrument or obligation to
which ILX is bound, or by which the ILX Shares or ILX is bound or (ii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
ILX.
8.3 Litigation. To the actual knowledge of ILX (as hereinafter
defined), there is no material suit, claim, action, proceeding or governmental
investigation now pending or, threatened against ILX ("ILX Third Party
Litigation") before any court, administrative or regulatory body or governmental
agency, (i) arising out of or relating to any aspect of the business, or any of
the properties, of ILX or (ii) concerning or affecting any of the transactions
contemplated by this Agreement.
8.4 Survival. All representations, warranties and covenants
made by ILX in this Agreement are true and correct in all material respects as
of the Effective Date and as of the Closing, and shall survive the Closing of
the transactions contemplated hereby.
8.5 No Additional Warranties. ILX has made no representations
or warranties except as expressly set forth in this Agreement and Mishkin
acknowledges that he is relying on no representations or warranties of ILX other
than those expressly set forth herein.
8.6 Definition of "Actual Knowledge". As used in this Section
8, "actual knowledge" means knowledge as of the date of this Agreement of the
officer executing this Agreement on behalf of ILX, irrespective of any inquiry
or investigation into matters that may have been known or should have been known
prior to the date of this Agreement.
9. Agreements Regarding ILX Shares. With respect to the transfer of the
ILX Shares, the parties agree as follows:
9.1 Securities Filings. Each party shall be responsible and
shall timely file any documents or other items required to be filed with the
Securities and Exchange Commission and any state regulatory authority. If a
transaction by Mishkin requires any such filing, Mishkin shall notify ILX of the
occurrence of the transaction for purposes of permitting ILX to comply with its
reporting requirements.
9.2 Acknowledgement of Transfer Restrictions. Mishkin
acknowledges and understands that the ILX Shares have not been registered under
the Securities Act of 1933, as
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5
amended, or any applicable federal or state securities laws, that ILX is under
no obligation to do so, and that the ILX Shares are restricted securities as
defined in Rule 144 of the Securities Act of 1933, as amended (the Securities
Act"). Mishkin further understands that any sale or transfer of the ILX Shares
must be made in accordance with the Securities Act and any other applicable
federal or state securities laws or regulations. As used herein, "transfer"
shall mean a sale, exchange, pledge, hypothecation, gift, bequest, collateral
assignment, subordination to a security interest, attachment or any other
alienation, disposition or encumbrance of all or any part of the ILX Shares. Any
attempted transfer in violation of the provisions of this Agreement shall be
ineffective and void.
9.3 Investment Representation. Mishkin represents to ILX that
he is acquiring the ILX Shares pursuant to this Agreement for investment
purposes only, and without the intention to distribute or otherwise transfer all
or any portion of the ILX Shares. The ILX Shares are being offered and issued by
the Company in reliance upon the exemptions available pursuant to the Securities
Act and applicable state securities acts. Mishkin has been fully informed as to
the circumstances under which he is required to take and hold such ILX Shares,
pursuant to the requirements of the Securities Act, the rules and regulations
thereunder, and the applicable state securities laws. Mishkin has consulted with
his own counsel as to applicable limitations upon the resale of the ILX Shares,
and has not relied upon ILX to explain such limitations. An appropriate "stop
transfer" will be noted in the Company's records, and each certificate or other
instrument evidencing the ILX Shares shall bear a legend in recognition of the
foregoing.
9.4 Mishkin's Due Diligence. Mishkin represents and warrants
that he has been provided with access and the opportunity to obtain information
concerning the ILX Shares and the business of ILX, including ILX's public
filings, to address the principal officers of ILX with any and all questions
about LAP, including its financial position, and to evaluate the merits and
risks of an investment in ILX and of holding the ILX Shares. Mishkin further
represents and warrants that any questions raised by Mishkin concerning ILX or
the ILX Shares other than questions arising from ILX's representations and
warranties have been answered to the satisfaction of Mishkin.
9.5 Co-operation in Transfer. Subject in all instances to the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other applicable federal and state securities laws and
regulations, ILX agrees to reasonably co-operate with Mishkin in any transfer or
proposed transfer by Mishkin of the ILX Shares under Rule 144 of the Securities
Act.
10. Condition Precedent. As a condition precedent to ILX's obligations
to purchase the LAP Interest from Mishkin and to perform any of its obligations
under this Agreement, ILX shall consummate a financing transaction with Bank One
Arizona, N.A. for a loan to ILX of not less than $700,000.00, on terms
acceptable to ILX in its sole discretion. Mishkin agrees to cooperate with ILX,
including in his capacity as a limited partner of LAP, to facilitate the above
described loan.
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6
11. Mutual Releases. As part of the consideration for the execution and
performance by both parties of this Agreement, effective as of the Closing:
(a) ILX and Mishkin (including Carol Mishkin), for themselves
and their respective affiliated entities, successors, subsidiaries, agents,
employees, representatives, and assigns do hereby fully release and forever
discharge each other and their heirs, successors, devisees, agents, independent
contractors, employees, attorneys, shareholders, officers, directors,
subsidiaries, representatives and assigns, of and from any and all liability,
obligations, claims and causes of action, known or unknown, which either of them
may now have or may hereafter have, growing out of or connected in any way with
any agreement, fact or event occurring prior to the date of this Agreement,
except for the obligations of the parties undertaken in this Agreement and in
the Note, the Security Agreement, the Assignment, the Assignment and Transfer
Agreement, and other documents executed in connection with this Agreement.
(b) Each party represents and warrants to the other that it
has not assigned or otherwise transferred any rights or claims that, but for
such transfer, would be subject to the foregoing release.
12. Miscellaneous
12.1 No Broker. Each party represents and warrants to the
other that no person has acted in the capacity of broker or finder on their
behalf to bring about the negotiation or consummation of this Agreement. Each
party shall indemnify and hold harmless each other against every claim or
liability asserted against any of them by any person acting or claiming to act
as a broker or finder on behalf of each other.
12.2 Notices. Any notice or other communication required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by facsimile or by registered mail, postage prepaid, addressed to the
appropriate party as follows:
In the case of Mishkin:
Alan R. Mishkin
P.O. Box 44337
Phoenix, AZ 85064-4337
Fax (602) 954-9851
With a copy to:
Richard F. Ross, Esq.
Squire, Sanders & Dempsey
40 North Central, Suite 2700
Phoenix, AZ 85004-4440
Fax (602) 253-8129
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In the case of ILX:
ILX Incorporated
2111 East Highland, Suite 210
Phoenix, AZ 85016
Attention: Joseph P. Martori, Chairman
Fax (602) 957-2780
With a copy to:
Anthony A. Bonacci, Esq.
Colombo & Bonacci, P.C.
2525 East Camelback Road, Suite 840
Phoenix, Arizona 85016
Fax (602) 956-3322
or such substituted address as any party (or other party to whom a copy is to be
sent) shall have given notice to the other in writing. Such notice shall be
deemed given the earlier of (i) upon delivery if delivered, (ii) upon
confirmation of facsimile transmission if sent by facsimile, or (iii) the day
after deposit in the U.S. mail if given by mail.
11.3 Amendment. This Agreement may be amended or modified in
whole or in part only by an agreement in writing executed in the same manner as
this Agreement and making specific reference hereto.
12.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one instrument.
12.5 Binding on Successors and Assigns. This Agreement shall
be binding upon, inure to the benefit of and be enforceable by and against the
parties hereto and their respective successors, assigns, executors and personal
representatives.
12.6 Severability. If any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby; provided, however, that to the
extent permitted by applicable law, any invalid, illegal or nonenforceable
provision may be considered for the purpose of determining the intent of the
parties in connection with the other provisions of this Agreement.
12.7 Waivers. The parties may, solely by written agreement,
(a) extend the time for the performance of any of the obligations or other acts
of the parties hereto, (b) waive any inaccuracy in any of the representations
contained in this Agreement or in any document delivered pursuant to this
Agreement, (c) waive compliance with, or modify, any covenant or
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8
condition contained in this Agreement, and (d) waive or modify performance of
any of the obligations of any of the parties hereto; provided, that no such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall operate as a waiver of, or an estoppel
with respect to, any subsequent or other matter or failure.
12.8 Headings. The headings of the Articles and Sections of
this Agreement are inserted for convenience only and in no way alter, amend,
modify, limit or restrict the contractual obligations of the parties.
12.9 Expenses. Except to the extent provided herein to the
contrary, each party hereto shall bear its own expenses and no party shall be
responsible for any debt, liability or obligation, cost, expense or fee of any
nature whatsoever (including, without limitation, any and all legal, accounting
and other professional fees and expenses) incurred by any other party in
connection with the negotiation, execution or performance of this Agreement.
12.10 Attorney's Fees in Dispute. Notwithstanding the
foregoing, should either party hereto institute any action or proceeding against
the other to enforce any provision hereof, for injunction or for damages by
reason of any alleged breach of any provision of this Agreement or for a
declaration of such party's rights or obligations hereunder, or any judicial
remedy, the prevailing party shall be entitled to receive from the losing party
such amount as the court or arbiter may adjudge to be reasonable for attorneys'
fees, costs and expenses of the prevailing party. Should relief be awarded to
both parties, such attorneys' fees, costs and expenses shall be adjudged against
the parties in any manner the court or arbiter shall deem equitable.
12.11 Representation by Counsel. Each party acknowledges that
it has had the opportunity to consult with, and has consulted with, independent
counsel regarding this Agreement and the transactions contemplated hereby, and
that the fact that this Agreement or other document or instrument that is part
of this transaction was prepared by counsel for any one or more of them shall
not affect the interpretation of this Agreement, or such other document or
instrument.
12.12 Entire Agreement; Law Governing. All prior negotiations
and agreements between the parties hereto are superseded by this Agreement, and
there is no representation, warranty, understanding or agreement other than
those expressly set forth herein or in an Exhibit or Schedule delivered pursuant
hereto, except as modified in writing concurrently herewith or subsequent
hereto. This Agreement shall be governed by and construed and interpreted
according to the laws of the State of Arizona.
12.13 Recording Fees and Documentary Taxes. All transfer
taxes, documentary fees and other costs relating to the transfer of the ILX
Shares shall be paid by ILX.
12.14 Announcements. Mishkin shall not make any public
disclosure of the transactions contemplated hereby or in connection herewith
without the prior written consent of
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ILX. Mishkin acknowledges that ILX will be issuing a press release and filing
appropriate documents with the Securities and Exchange Commission regarding the
transactions contemplated herein. Any press release to be issued by ILX in
respect of the transactions contemplated hereby will first be submitted to
Mishkin in a manner constituting notice under this Agreement, and shall be
subject to Mishkin's approval, which shall not be unreasonably withheld. If
Mishkin does not object to such press release within one (1) business day from
the date Mishkin is deemed to have received such press release, the press
release will be deemed approved.
12.15 Further Assurances. After the Closing hereunder, each of
the parties hereto shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and documents and take
such action as may be necessary or advisable to carry out its obligations under
this Agreement and under any schedule, exhibit, document, agreement, certificate
or other instrument delivered pursuant hereto, and with respect to any filing or
other documentation required in connection with the LAP Interest.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the Effective Date.
"MISHKIN" "ILX"
/s/ Alan R. Mishkin By:/s/ Joseph P. Martori, Chairman
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Alan R. Mishkin Joseph P. Martori, Chairman
ACCEPTED AND APPROVED:
/s/ Carol Mishkin
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Carol Mishkin
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 28th day of
August, 1997, by Alan R. Mishkin and Carol Mishkin.
/s/ Laurie Schick
------------------------------------
Notary Public
My Commission Expires:
7-1-99
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OFFICIAL SEAL
LAURIE SCHICK
Notary Public - State of Arizona
MARICOPA COUNTY
My Commission Expires July 1, 1999
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10
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of
August, 1997, by Joseph P. Martori, as Chairman of ILX Incorporated, on behalf
of the corporation.
/s/ Stephanie D. Castronova
------------------------------------
Notary Public
My Commission Expires:
March 20, 1998
- ----------------------
INSTALLMENT PROMISSORY NOTE
$675,000.00 __________, 1997
Phoenix, Arizona
FOR VALUE RECEIVED, ILX INCORPORATED ("ILX"), promises to pay
to the order of ALAN R. MISHKIN, husband of Carol Mishkin, dealing with his sole
and separate property ("Mishkin"), at Phoenix, Arizona, or at such other place
as the holder hereof may from time to time designate, the principal sum of Six
Hundred Seventy-five Thousand Dollars ($675,000.00), together with interest
payable as follows:
(a) In successive annual installments of One Hundred Thousand
Dollars ($100,000) inclusive of principal and interest as set
forth below, payable on July 31 of each year beginning July
31, 1998; and
(b) The then unpaid principal balance, interest accrued and unpaid
thereon and other costs payable hereunder shall be paid on
July 31, 2002 (the "Maturity Date")
Interest shall be charged on the unpaid principal balance of
this Note from the date hereof to the Maturity Date on a daily basis for the
actual number of days any portion of the principal is outstanding, computed on
the basis of a 365-day year, at the per annum rate of eight percent (8%) (the
"Note Rate").
Each and every payment due under this Note shall be made in
lawful money of the United States of America and in good funds, and when made
shall be first applied to accrued costs, expenses and fees, if any, then to
interest due, and then to the reduction of the principal amount of this Note.
This Note may be prepaid, in whole or in part, without penalty or premium,
provided that each such payment shall be applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind
(except as specifically provided), all of which are hereby expressly waived: (i)
any sum owing hereunder to Mishkin is not paid as agreed within thirty (30)
business days after receipt by ILX of written notice that said sum is due; (ii)
any petition or application for any form of relief under any provision of Title
11, United States Code, as amended from time to time (the "Bankruptcy Code") or
any other law pertaining to reorganization, insolvency or readjustment of debts
is filed by or against ILX, its respective assets or affairs; (iii) ILX makes an
assignment for the benefit of creditors, is not paying material debts as they
become due, or is granted an order for relief under any chapter of the
Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of ILX; (v) garnishment, attachment, levy or execution is
issued against any material property or effects of ILX and such garnishment,
attachment, levy or execution is
<PAGE>
not quashed or otherwise rendered inoperative within 60 days of its issuance;
and (vi) ILX is in material default of that certain Security (Pledge) Agreement
of even date herewith, and such default continues for thirty (30) days after ILX
has received notice thereof specifying in reasonable detail the nature of the
default.
Upon an event of default, and for so long as such default is
continuing and has not been cured, interest shall occur on the unpaid principal
balance of this Note at a per annum rate equal to the Note Rate plus three
percent (3%).
ILX hereby agrees: (i) to any and all extensions (including
extensions beyond the original term hereof) and renewals hereof, from time to
time, without notice, and that no such extension or renewal shall constitute or
be deemed a release of any obligation of ILX to the holder hereof; (ii) that the
acceptance by the holder hereof of any performance which does not comply
strictly with the terms hereof shall not be deemed to be a waiver or bar of any
right of said holder, nor a release of any obligation of ILX to the holder
hereof; (iii) to offsets of any sums or property owed to ILX by the holder
hereof at any time; (iv) that this Note shall be governed by the laws of the
State of Arizona applicable to promissory notes made and to be paid in the State
of Arizona; and (v) to pay the holder hereof upon demand any and all costs,
expenses and fees (including reasonable attorneys' fees) incurred in enforcing
or attempting to recover payment of the amounts due under this Note, and
including costs, expenses and fees incurred before, after or irrespective of
whether suit is commenced, and in the event suit is brought to enforce payment
hereof, such costs, expenses and fees and all other issues in such suit shall be
determined by a court sitting without a jury.
Any notice required hereunder shall be deemed received upon
delivery or, if sent by mail, three days after deposit in the U.S. Mail, postage
prepaid, to the address of ILX set forth below.
This Note is secured by a Security (Pledge) Agreement of even
date herewith.
ILX Incorporated, an Arizona corporation
-------------------------------------
Joseph P. Martori, Chairman
2111 East Highland, Suite 210
Phoenix, AZ 85016
SECURITY (PLEDGE) AGREEMENT
THIS SECURITY (PLEDGE) AGREEMENT ("Pledge Agreement") is made to be
effective as of __________, 1997, by ILX Incorporated, ("ILX") to Alan R.
Mishkin, husband of Carol Mishkin, dealing with his sole and separate property
("Mishkin").
RECITALS:
To secure payment of any amounts owing under that certain Installment
Promissory Note of even date herewith and in the original principal amount of
$675,000.00 (the "Note"), Mishkin has requested that ILX grant Mishkin a
security interest in certain collateral, all as more particularly described
below.
AGREEMENT:
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and adequacy of
which are hereby acknowledged, and upon the representations, warranties and
covenants hereinafter set forth, ILX, as collateral security for the payment of
any unpaid amounts due under the Note, hereby grants to Mishkin a security
interest in all of ILX's right, title and interest, legal and equitable, in and
to a 11.5% Class B limited partnership interest in Los Abrigados Partners
Limited Partnership, an Arizona limited partnership ("LAP") inclusive of the
capital account related to such limited partnership interest (hereinafter
referred to as the "Collateral Security").
1. ILX Representations. ILX hereby represents and warrants to Mishkin
that:
(a) ILX is the owner of the Collateral Security free and clear
from any other pledge, encumbrance or charge whatsoever; and
(b) There is no restriction upon the right of ILX to transfer
the Collateral Security to Mishkin in accordance with this pledge, and the
execution and performance by ILX of this pledge will not violate any agreement
or other instrument to which ILX is a party or by which ILX is bound or be in
conflict with, result in a breach of or constitute a default under any such
agreement or instrument or result in the creation or imposition of any lien,
charge or encumbrance upon the Collateral Security except as provided herein,
and will not violate any order of any court or other agency.
2. ILX Covenants.
(a) ILX hereby covenants and warrants that, during
the term hereof, ILX will not make or suffer to be made any pledge,
hypothecation, mortgage, lien, charge or encumbrance of any kind on or affecting
the Collateral Security, except the lien and security interest of this Pledge
Agreement. This provision shall not restrict any pledge, hypothecation,
mortgage, lien, charge or encumbrance of any kind on or affecting assets owned
by LAP.
<PAGE>
2
(b) ILX will not vote to modify the governing
document of LAP in a manner that would by its terms materially and adversely
affect the value of the Collateral Security.
3. No Transfer. During the term hereof, ILX shall not sell, assign or
otherwise transfer all or any portion of the Collateral Security without the
prior consent of Mishkin, which shall not be unreasonably withheld with respect
to a transfer to an individual or entity affiliated with ILX, but which may be
withheld in Mishkin's discretion in all other instances.
4. Distributions and Exercise Rights of Class B Interest. For the
duration of this Pledge Agreement, ILX shall not be entitled to receive any
draw(s) made on and in respect to the Collateral Security except to the extent
necessary to pay taxes attributable to the Class B Interest that comprises the
Collateral Security. For the duration of this Pledge Agreement, and provided
that no default exists and is continuing hereunder or under the Note, ILX shall
be entitled to exercise any and all rights of ownership of the Collateral
Security, including without limitation the right to vote its interest or
exercise rights as a limited partner in its sole discretion in connection with
any action or transaction relating to LAP.
5. Default and Remedies. It shall be an event of default hereunder if
ILX shall be in default of its material obligations or covenants owing to
Mishkin under the Note, and such default continues for a thirty (30) calendar
day period following the date of written notice of default. After such thirty
(30) day period, Mishkin is entitled to foreclose the Security Interest granted
herein by sale, assignment, transfer and delivery of the whole or any part of
the Collateral Security or any rights or interests therein or pertaining
thereto, either at public or private sale, with or without advertisement or
notice of sale, or in any other manner, at such price or prices as Mishkin may
deem best, either for cash or credit or for future delivery at the option of
Mishkin, as to which, (i) in the event of any private sale, Mishkin is hereby
relieved from any liability or claim for inadequacy of price; (ii) at any sale
(public or private), Mishkin may itself purchase the whole or any part of the
Collateral Security or interest therein being sold; and (iii) if any sale be
made on credit or for future delivery, the Collateral Security so sold may be
retained by Mishkin until the selling price is paid by the purchaser without any
liability on the part of Mishkin in the event of failure of the purchaser to
take up and pay for the Collateral Security sold and with the right of Mishkin
to sell the Collateral Security again in the event of a default by purchaser.
All transfers of the Collateral Security shall be subject to the governing
documents of LAP. During such time as a default is continuing, and prior to any
transfer or foreclosure hereunder, Mishkin shall be entitled to vote the limited
partnership interest representing the Collateral Security on any matter
presented to the limited partners of LAP for a vote.
In the event of any sale of the Collateral Security or any
part thereof pursuant to this paragraph, Mishkin shall apply the net proceeds of
the sale or sales first to payment of all costs, expenses, fees and charges,
including attorneys' fees, incurred by Mishkin in connection with the
collection, sale, delivery or preservation of the Collateral Security or on
account of
<PAGE>
3
ILX's default, which sums also shall be deemed secured by the Collateral
Security, and next to all interest owing by ILX to Mishkin under the Note, and
then to all unpaid principal owing under the Note. In the event there be any
surplus after payment and satisfaction of such amounts, such surplus shall be
subject to order of ILX.
7. No Waiver. No delay or omission on the part of Mishkin in exercising
any power, right, or remedy hereunder shall operate as a waiver of any such
power or right nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power, right or remedy of Mishkin under this instrument or which may be
provided by law, it being understood that any extension or indulgence at any
time allowed by Mishkin to ILX shall be in reliance upon the understanding that
such shall not affect or prejudice the rights, powers and remedies of Mishkin
except to the extent specifically set forth in writing by Mishkin and, in that
regard, that even any waiver granted in writing shall not be construed as a
waiver of any other breach or default hereafter occurring.
8. Time of the Essence. In construing this Pledge Agreement, time shall
be deemed of the essence.
9. Binding Effect. This instrument shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
10. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Arizona.
11. Further Assurances. To further secure the security intended by this
instrument, ILX shall, upon request of Mishkin from time to time, execute and
deliver all further instruments or assurance, including without limitation UCC-1
financing statements, which may be required or appropriate to perfect the
security intended to be granted hereby or to further evidence such security.
12. Termination of Pledge. This Pledge Agreement shall terminate upon
ILX's payment of all amounts owing under the Note, upon which payment the
Collateral Security, to the extent not applied to the Note, shall be released
herefrom and returned to ILX.
13. Notice. Any notice required hereunder shall be deemed given upon
delivery or, if sent by mail, upon deposit in the U.S. Mail, postage prepaid, to
the address of the party receiving the notice as follows:
<PAGE>
4
In the case of ILX:
ILX Incorporated
2111 East Highland, Suite 210
Phoenix, AZ 85016
Attention: Joseph P. Martori, Chairman
With a copy to:
Anthony A. Bonacci, Esq.
Colombo & Bonacci, P.C.
2525 East Camelback Road, Suite 840
Phoenix, Arizona 85016
In the case of Mishkin:
Alan R. Mishkin
--------------------------------
--------------------------------
With a copy to:
Richard F. Ross, Esq.
Squire, Sanders & Dempsey, LLP
40 North Central, Suite 2700
Phoenix, AZ 85004-4440
IN WITNESS WHEREOF, the parties have executed this instrument to be
effective as of the day and year first above written.
ILX INCORPORATED ALAN R. MISHKIN
By:
---------------------------------- ------------------------------------
Joseph P. Martori Alan Mishkin
Its:
--------------------------------- ------------------------------------
Carol Mishkin
<PAGE>
5
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by Alan R. Mishkin and Carol Mishkin.
------------------------------------
Notary Public
My Commission Expires:
- ----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by Joseph P. Martori, as Chairman of ILX Incorporated,
on behalf of the corporation.
------------------------------------
Notary Public
My Commission Expires:
- ----------------------
AGREEMENT FOR TRANSFER OF
LIMITED PARTNERSHIP INTEREST
THIS AGREEMENT FOR TRANSFER OF LIMITED PARTNERSHIP INTEREST is entered
into as of August 8, 1997, by and between ILX Incorporated, an Arizona
corporation ("ILX") and Martori Enterprises Incorporated, an Arizona corporation
("MEI").
RECITALS:
A. MEI desires to sell to ILX, and ILX desires to purchase from MEI,
all of its Class B Limited Partnership Interest (the "LAP Interest") in Los
Abrigados Partners Limited Partnership, an Arizona limited partnership ("LAP"),
subject to the terms and conditions set forth in this Agreement.
B. The parties desire that the transfer of the LAP Interest be
effective as of January 1, 1997 (the "Effective Date").
AGREEMENTS:
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereto agree as
follows:
1. Transfer of LAP Interest. MEI hereby sells to ILX and ILX hereby
purchases from MEI, all of MEI's right, title and interest in, to, and under the
LAP Interest, including without limitation all distributions payable (other than
those paid prior to August 8, 1997) in respect of, and allocations attributable
to, the LAP Interest from and after the Effective Date.
2. Consideration. In consideration for MEI's transfer of the LAP
Interest, ILX shall, upon Closing (as defined herein):
a. Pay to MEI One Hundred Thousand Dollars
($100,000.00);
b. Execute and deliver to MEI a secured promissory note
(the "Note") in the form attached as Exhibit A, in
the original principal amount of One Million Three
Hundred Thousand Dollars ($1,300,000.00).
3. Intent of LAP Transfer. MEI represents that the LAP Interest
constitutes all of its ownership interest in LAP and in the properties owned by
LAP. To the extent that, as of the Closing, MEI owns any other interest in any
such other properties, such interest shall be deemed transferred by this
Agreement except as otherwise agreed by the parties in writing. At the request
of ILX, MEI shall execute any additional documents to effect any intended
transfer not made by this Agreement or any document executed in connection
herewith.
4. Closing: Manner of Transfer. The "Closing" of the transactions
contemplated
1
<PAGE>
hereby shall be held on or after August 15, 1997, but in no event later than
August 22, 1997. At the Closing, ILX shall make the payments and deliver the
documents referenced in this Agreement, and MEI shall deliver the documents
referenced in this Agreement, including an assignment of the LAP Interest, in
each case in a form satisfactory to all parties.
5. Security Agreement. As security for the performance of ILX's
obligations under the Note, ILX shall grant to MEI a security interest in the
LAP Interest, evidenced by a security agreement in mutually satisfactory form.
6. Representations and Warranties of MEI. MEI represents and warrants
to ILX as follows, as of the Effective Date and as of the Closing hereunder:
6.1 Ownership of LAP Interest. MEI has good and marketable
title to the LAP Interest free of any lien, security interest, lease, or
encumbrance whatsoever, except as otherwise provided in the LAP Limited
Partnership Agreement. Upon delivery of appropriate instruments evidencing
transfer of the LAP Interest, ILX will own all right, title and interest in and
to the LAP Interest free and clear of any liens, encumbrances, equities or
claims.
6.2 Capacity. MEI has full power and authority to enter into
this Agreement and to carry out its obligations hereunder. This Agreement
constitutes a valid and legally binding obligation of MEI. MEI has no legal
obligation, absolute or contingent, to any person or firm to sell all or any
portion of the LAP Interest or with respect to the LAP Interest to effect any
merger, consolidation or other reorganization or to enter into any agreement
with respect thereto. To MEI's actual knowledge (as hereinafter defined),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by MEI with any of the
provisions hereof will (i) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with the giving of
notice or the lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon the LAP Interest, under any term, condition or provision of any agreement
or other instrument or obligation to which MEI is bound, or by which the LAP
Interest or LAP is bound or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to MEI or LAP, except as otherwise
provided in the LAP Limited Partnership Agreement.
6.3 No Breach of Statute, Decree or Order. To MEI's actual
knowledge no material claim, action or proceeding is pending or threatened
against MEI with respect to a default under, or a violation or breach in any
material respect of, any applicable statute, law, ordinance, decree, order, rule
or regulation of any governmental body, nor, to MEI's actual knowledge (as
hereinafter defined), is there any basis for such a claim, action or proceeding.
To MEI's actual knowledge (as hereinafter defined) the consummation of this
Agreement and the sale of the LAP Interest contemplated hereby will not
constitute or result in any such default, breach or violation.
6.4 Litigation. To MEI's actual knowledge (as hereinafter
defined) there is no material suit, claim, action, proceeding or governmental
investigation now pending or threatened
2
<PAGE>
against MEI ("MEI Third Party Litigation"), nor to MEI's actual knowledge (as
hereafter defined) is there any condition or set of facts which could give rise
to any material MEI Third Party Litigation before any court, administrative or
regulatory body or governmental agency, concerning or affecting any of the
transactions contemplated by this Agreement. To MEI's actual knowledge (as
hereinafter defined), there is no decree, injunction or order of any court or
governmental department or agency outstanding against MEI relating to its
ability to transfer the LAP Interest.
6.5 Incorporation of Other Representations and Warranties. Any
representation, warranty or covenant set forth in any instrument transferring
any of the LAP Interest is incorporated herein by this reference and made part
hereof.
6.6 Survival. All representations, warranties and covenants
made by MEI in this Agreement are true and correct in all material respects as
of the Effective Date and as of the Closing, and shall survive the Closing of
the transactions contemplated hereby.
6.7 Definition of "Actual Knowledge". As used in this Section
6, "actual knowledge" means knowledge as of the date of this Agreement
irrespective of any inquiry or investigation into matters that may have been
known or should have been known prior to the date of this Agreement.
7. Representations and Warranties of ILX. ILX as to its assets and
activities, represents and warrants to MEI as follows, as of the Effective Date
and as of the Closing hereunder:
7.1 Capacity. ILX has full power to enter into this Agreement
and to carry out its obligations hereunder. This Agreement constitutes a valid
and legally binding obligation of ILX. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance by ILX with any of the provisions hereof will violate any order,
writ, injunction, decree, statute, rule or regulation applicable to ILX.
7.2 No Breach of Statute, Decree or Order. To the actual
knowledge of ILX (as hereinafter defined), no claim, action or proceeding is
pending or threatened against ILX with respect to a default under, or a
violation or breach in any material respect of, any applicable statute, law,
ordinance, decree, order, rule or regulation of any governmental body, nor, to
the actual knowledge of ILX (as defined herein), is there any basis for such a
claim, action or proceeding.
7.3 Litigation. To the actual knowledge of ILX (as hereinafter
defined), there is no material suit, claim, action, proceeding or governmental
investigation now pending or, threatened against ILX ("ILX Third Party
Litigation") before any court, administrative or regulatory body or governmental
agency, (i) arising out of or relating to any aspect of the business, or any of
the properties, of ILX or (ii) concerning or affecting any of the transactions
contemplated by this Agreement.
3
<PAGE>
7.4 Survival. All representations, warranties and covenants
made by ILX in this Agreement are true and correct in all material respects as
of the Effective Date and as of the Closing, and shall survive the Closing of
the transactions contemplated hereby.
7.5 No Additional Warranties. ILX has made no representations
or warranties except as expressly set forth in this Agreement and MEI
acknowledges that it is relying on no representations or warranties of ILX other
than those expressly set forth herein.
7.6 Definition of "Actual Knowledge". As used in this Section
7, "actual knowledge" means knowledge as of the date of this Agreement
irrespective of any inquiry or investigation into matters that may have been
known or should have been known prior to the date of this Agreement.
8. Mutual Releases. As part of the consideration for the execution and
performance by both parties of this Agreement, effective as of the Closing:
(a) ILX and MEI, for themselves and their respective
affiliated entities, successors, subsidiaries, agents, employees,
representatives, and assigns do hereby fully release and forever discharge each
other and their heirs, successors, devisees, agents, independent contractors,
employees, attorneys, shareholders, officers, directors, subsidiaries,
representatives and assigns, of and from any and all liability, obligations,
claims and causes of action, known or unknown, which either of them may now have
or may hereafter have, growing out of or connected in any way with any
agreement, fact or event occurring prior to the date of this Agreement, except
for the obligations of the parties undertaken in this Agreement and in the Note
and the Security Agreement, and other documents executed in connection with this
Agreement.
(b) Each party represents and warrants to the other that it
has not assigned or otherwise transferred any rights or claims that, but for
such transfer, would be subject to the foregoing release.
9. Rescission. Notwithstanding any provision of this Agreement to the
contrary, either party hereto may rescind this Agreement in its entirety
(together with all documents and instruments related hereto) at any time prior
to the close of business on October 15, 1997, if, and, only if, ILX has not
acquired the interest of Alan M. Mishkin in Los Abrigados Partners Limited
Partnership on terms and conditions acceptable to ILX.
10. Miscellaneous
10.1 No Broker. Each Party represents and warrants to the
other that no person has acted in the capacity of broker or finder on their
behalf to bring about the negotiation or consummation of this Agreement. Each
party shall indemnify and hold harmless each other against every claim or
liability asserted against any of them by any person acting or claiming to act
as a broker or finder on behalf of each other.
4
<PAGE>
10.2 Notices. Any notice or other communication required or
permitted hereunder shall be sufficiently given if delivered in person or sent
by registered mail, postage prepaid, addressed to the appropriate party as
follows:
In the case of MEI:
Joseph P. and Edward J. Martori
2111 East Highland, Suite 210
Phoenix, Arizona 85016
In the case of ILX:
ILX Incorporated
2111 East Highland, Suite 210
Phoenix, Arizona 85016
Attention: Nancy J. Stone, President
or such substituted address as any party (or other party to whom a copy is to be
sent) shall have given notice to the other in writing.
10.3 Amendment. This Agreement may be amended or modified in
whole or in part only by an agreement in writing executed in the same manner as
this Agreement and making specific reference hereto.
10.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one instrument.
10.5 Binding on Successors and Assigns. This Agreement shall
be binding upon, inure to the benefit of and be enforceable by and against the
parties hereto and their respective successors, assigns, executors and personal
representatives.
10.6 Severability. If any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby; provided, however, that to the
extent permitted by applicable law, any invalid, illegal or nonenforceable
provision may be considered for the purpose of determining the intent of the
parties in connection with the other provisions of this Agreement.
10.7 Waivers. The parties may, solely by written agreement,
(a) extend the time for the performance of any of the obligations or other acts
of the parties hereto, (b) waive any inaccuracy in any of the representations
contained in this Agreement or in any document delivered pursuant to this
Agreement, (c) waive compliance with, or modify, any covenant or condition
contained in this Agreement, and (d) waive or modify performance of any of the
obligations of
5
<PAGE>
any of the parties hereto; provided, that no such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall operate as a waiver of, or an estoppel with respect to, any subsequent or
other matter or failure.
10.8 Headings. The headings of the Articles and Sections of
this Agreement are inserted for convenience only and in no way alter, amend,
modify, limit or restrict the contractual obligations of the parties.
10.9 Documentation Expenses. Each party shall share equally in
the costs and legal fees associated with the documentation of the transactions
contemplated hereby.
10.10 Expenses. Except to the extent provided herein to the
contrary, each party hereto shall bear its own expenses and no party shall be
responsible for any debt, liability or obligation, cost, expense or fee of any
nature whatsoever (including, without limitation, any and all legal, accounting
and other professional fees and expenses) incurred by any other party in
connection with the negotiation, execution or performance of this Agreement.
10.11 Attorney's Fees in Dispute. Notwithstanding the
foregoing, should either party hereto institute any action or proceeding against
the other to enforce any provision hereof, for injunction or for damages by
reason of any alleged breach of any provision of this Agreement or for a
declaration of such party's rights or obligations hereunder, or any judicial
remedy, the prevailing party shall be entitled to receive from the losing party
such amount as the court or arbiter may adjudge to be reasonable for attorneys'
fees, costs and expenses of the prevailing party. Should relief be awarded to
both parties, such attorneys' fees, costs and expenses shall be adjudged against
the parties in any manner the court or arbiter shall deem equitable.
10.12 Representation by Counsel. Each party acknowledges that
it has had the opportunity to consult with, and has consulted with, independent
counsel regarding this Agreement and the transactions contemplated hereby, and
that the fact that this Agreement or other document or instrument that is part
of this transaction was prepared by counsel for any one or more of them shall
not affect the interpretation of this Agreement, or such other document or
instrument.
10.13 Entire Agreement; Law Governing. All prior negotiations
and agreements between the parties hereto are superseded by this Agreement, and
there is no representation, warranty, understanding or agreement other than
those expressly set forth herein or in an Exhibit or Schedule delivered pursuant
hereto, except as modified in writing concurrently herewith or subsequent
hereto. This Agreement shall be governed by and construed and interpreted
according to the laws of the State of Arizona.
10.14 Announcements. MEI shall not make any public disclosure
of the transactions contemplated hereby or in connection herewith without the
prior written consent of ILX. MEI acknowledges that ILX will be issuing a press
release and filing appropriate documents with the Securities and Exchange
Commission regarding the transactions contemplated herein.
6
<PAGE>
10.15 Further Assurances. After the Closing hereunder, each of
the parties hereto shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and documents and take
such action as may be necessary or advisable to carry out its obligations under
this Agreement and under any schedule, exhibit, document, agreement, certificate
or other instrument delivered pursuant hereto, and with respect to any filing or
other documentation required in connection with the LAP Interest.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the Effective Date.
ILX INCORPORATED MARTORI ENTERPRISES INCORPORATED
By: /s/ Nancy J. Stone By: /s/ Joseph P. Martori
------------------------------- -----------------------------------
Nancy J. Stone Joseph P. Martori
Its: President Its: Chairman
------------------------------- -----------------------------------
President Chairman
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 15th day of
August 1997, by Joseph P. Martori, as Chairman of Martori Enterprises
Incorporated, on behalf of the corporation.
/s/ Stephanie D. Castronova
--------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 20, 1998
7
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 15th day of
August 1997, by Nancy J. Stone, as President of ILX Incorporated, on behalf of
the corporation.
/s/ Stephanie D. Castronova
--------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 20, 1998
8
INSTALLMENT PROMISSORY NOTE
$1,300,000.00 August 8, 1997
Phoenix, Arizona
FOR VALUE RECEIVED, ILX INCORPORATED, an Arizona corporation ("ILX"),
promises to pay to the order of MARTORI ENTERPRISES INCORPORATED, an Arizona
corporation ("MEI"), at Phoenix, Arizona, or at such other place as the holder
hereof may from time to time designate, the principal sum of One Million Three
Hundred Thousand Dollars ($1,300,000.00), together with interest payable as
follows:
(a) One Hundred Thousand Dollars ($100,000) in principal payable
on or before January 1, 1998;
(b) In successive annual installments of Two Hundred Thousand
Dollars ($200,000) inclusive of principal and interest as set
forth below, payable on July 31 of each year beginning July
31, 1998;
(c) Interest from August 8, 1997, through and including January 1,
1998, shall be accrued and added to principal on December 31,
1997; and
(d) The then unpaid principal balance, interest accrued and unpaid
thereon and other costs payable hereunder shall be paid on
July 31, 2002 (the "Maturity Date").
Interest shall be charged on the unpaid principal balance of this Note
from August 8, 1997 to the Maturity Date on a daily basis for the actual number
of days any portion of the principal is outstanding, computed on the basis of a
365-day year, at the per annum rate of eight percent (8%) (the "Note Rate").
Each and every payment due under this Note shall be made in lawful
money of the United States of America and in good funds, and when made shall,
except as otherwise provided in this Note, be first applied to accrued costs,
expenses and fees, if any, then to interest due, and then to the reduction of
the principal amount of this Note. This Note may be prepaid, in whole or in
part, without penalty or premium, provided that each such payment shall be
applied as set forth above.
At the option of the holder hereof, any of the following shall
constitute a "default" hereunder, and, upon the occurrence of any of the
following, all obligations hereunder shall, at the option of the holder hereof,
become immediately due and payable, without presentment for payment, diligence,
grace, exhibition of this Note, protest, further demand or notice of any kind
(except as specifically provided), all of which are hereby expressly waived: (1)
any sum owing hereunder or under any other indebtedness of ILX to MEI is not
paid as agreed within thirty (30) business days after receipt by ILX of written
notice that said sum is due; (ii) any petition or application for any form of
relief under any provision of Title II, United States Code, as amended from time
to time (the "Bankruptcy Code") or any other law pertaining to reorganization,
insolvency or readjustment of debts is filed by or against ILX, its respective
assets or affairs; (iii) ILX makes an assignment for the benefit of creditors,
is not paying material debts as they
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become due, or is granted an order for relief under any chapter of the
Bankruptcy Code; (iv) a custodian, as defined by the Bankruptcy Code, takes
charge of any property of ILX, and (v) garnishment, attachment, levy,
receivership or execution is issued against any material property or effects of
ILX and/or any of its subsidiaries and/or affiliates and such garnishment,
attachment, levy, receivership or execution is not quashed or otherwise rendered
inoperative within 60 days of its issuance.
ILX hereby agrees: (i) to any and all extensions (including extensions
beyond the original term hereof) and renewals hereof, from time to time, without
notice, and that no such extension or renewal shall constitute or be deemed a
release of any obligation of ILX to the holder hereof; (ii) that the acceptance
by the holder hereof of any performance which does not comply strictly with the
terms hereof shall not be deemed to be a waiver or bar of any right of said
holder, nor a release of any obligation of ILX to the holder hereof, (iii) to
offsets of any sums or property owed to either of ILX by the holder hereof at
any time; (iv) that this Note shall be governed by the laws of the State of
Arizona applicable to promissory notes made and to be paid in the State of
Arizona; and (v) to pay the holder hereof upon demand any and all costs,
expenses and fees (including reasonable attorneys' fees) incurred in enforcing
or attempting to recover payment of the amounts due under this Note, and
including costs, expenses and fees incurred before, after or irrespective of
whether suit is commenced, and in the event suit is brought to enforce payment
hereof, such costs, expenses and fees and all other issues in such suit shall be
determined by a court sitting without a jury.
Any notice required hereunder shall be deemed received upon delivery
or, if sent by mail, three days after deposit in the U.S. Mail, postage prepaid,
to the address of ILX set forth below.
This Note is secured by a Security (Pledge) Agreement of even date
herewith.
ILX Incorporated, an Arizona corporation
/s/ Nancy J. Stone
--------------------------------------------
Nancy J. Stone, President
2111 East Highland, Suite 210
Phoenix, Arizona 85016
2
SECURITY (PLEDGE) AGREEMENT
THIS SECURITY (PLEDGE) AGREEMENT ("Pledge Agreement") is entered into
as of August 8, 1997, by ILX Incorporated, an Arizona corporation ("ILX") and
Martori Enterprises Incorporated, an Arizona corporation ("MEI").
RECITALS:
To secure payment of any amounts owing under that certain Installment
Promissory Note of even date herewith and in the original principal amount of
$1,300,000.00 (the "Note"), MEI has requested that ILX grant MEI a security
interest in certain collateral, all as more particularly described below.
AGREEMENT:
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and adequacy of
which are hereby acknowledged, and upon the representations, warranties and
covenants hereinafter set forth, ILX, as collateral security for the payment of
any unpaid amounts due under the Note, hereby grants to MEI a security interest
in all of ILX's right, title and interest, legal and equitable, in and to a 10%
Class B limited partnership interest in Los Abrigados Partners Limited
Partnership, an Arizona limited partnership ("LAP") inclusive of the capital
account related to such limited partnership interest (hereinafter referred to as
the "Collateral Security").
1. ILX Representations. ILX hereby represents and warrants to MEI that:
(a) ILX is the owner of the Collateral Security free and clear
from any other pledge, encumbrance or charge whatsoever; and
(b) Other than any provisions contained in the LAP Limited
Partnership Agreement, there is no restriction upon the right of ILX to transfer
the Collateral Security to MEI in accordance with this pledge, and the execution
and performance by ILX of this pledge will not violate any agreement or other
instrument to which ILX is a party or by which ILX is bound or be in conflict
with, result in a breach of or constitute a default under any such agreement or
instrument or result in the creation or imposition of any lien, charge or
encumbrance upon the Collateral Security except as provided herein, and will not
violate any order of any court or other agency.
2. ILX Covenants. ILX hereby covenants and warrants that, during the
term hereof, ILX will not make or suffer to be made any pledge, hypothecation,
mortgage, lien, charge or encumbrance of any kind on or affecting the Collateral
Security, except the lien and security interest of this Pledge Agreement. This
provision shall not restrict any pledge, hypothecation, mortgage, lien, charge
or encumbrance of any kind on or affecting assets owned by LAP.
3. No Transfer. During the term hereof, ILX shall not sell, assign or
otherwise transfer all or any portion of the Collateral Security without the
prior consent of MEI, which shall
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not be unreasonably withheld.
4. Distributions and Exercise Rights of Class B Interest. For the
duration of this Pledge Agreement, ILX shall not be entitled to receive any
draw(s) made on and in respect to the Collateral Security except to the extent
necessary to pay taxes attributable to the Class B Interest that comprises the
Collateral Security. For the duration of this Pledge Agreement, and provided
that no default exists and is continuing hereunder or under the Note, ILX shall
be entitled to exercise any and all rights of ownership of the Collateral
Security, including without limitation the right to vote its interest or
exercise rights as a limited partner in connection with any action or
transaction entered into by the partnership.
5. Default and Remedies. It shall be an event of default hereunder if
ILX shall be in default of its material obligations or covenants owing to MEI
under the Note, and such default continues for a thirty (30) calendar day period
following the date of written notice of default. After such thirty (30) day
period, MEI is entitled to foreclose the Security Interest granted herein by
sale, assignment, transfer and delivery of the whole or any part of the
Collateral Security or any rights or interests therein or pertaining thereto,
either at public or private sale, with or without advertisement or notice of
sale, or in any other manner, at such price or prices as MEI may deem best,
either for cash or credit or for future delivery at the option of MEI, as to
which, (i) in the event of any private sale, MEI is hereby relieved from any
liability or claim for inadequacy of price; (ii) at any sale (public or
private), MEI may itself purchase the whole or any part of the Collateral
Security or interest therein being sold; and (iii) if any sale be made on credit
or for future delivery, the Collateral Security so sold may be retained by MEI
until the selling price is paid by the purchaser without any liability on the
part of MEI in the event of failure of the purchaser to take up and pay for the
Collateral Security sold and with the right of MEI to sell the Collateral
Security again in the event of a default by purchaser. All transfers of the
Collateral Security shall be subject to the governing documents of LAP.
In the event of any sale of the Collateral Security or any
part thereof pursuant to this paragraph, MEI shall apply the net proceeds of the
sale or sales first to payment of all costs, expenses, fees and charges,
including attorneys' fees, incurred by MEI in connection with the collection,
sale, delivery or preservation of the Collateral Security or on account of ILX's
default, which sums also shall be deemed secured by the Collateral Security, and
next to all interest owing by ILX to MEI under the Note, and then to all unpaid
principal owing under the Note. In the event there be any surplus after payment
and satisfaction of such amounts, such surplus shall be subject to order of ILX.
6. No Waiver. No delay or omission on the part of MEI in exercising any
power, right, or remedy hereunder shall operate as a waiver of any such power or
right nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power, right or remedy of MEI under this instrument or which may be provided by
law, it being understood that any extension or indulgence at any time allowed by
MEI to ILX shall be in reliance upon the understanding that such shall not
affect or prejudice the rights, powers and remedies of MEI except to the extent
specifically set forth in writing by MEI and, in that regard, that even any
waiver granted in writing shall not be construed as a waiver of
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any other breach, or default hereafter occurring.
7. Time of the Essence. In construing this Pledge Agreement, time shall
be deemed of the essence.
8. Binding Effect. This instrument shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
9. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Arizona.
10. Further Assurances. To further secure the security intended by this
instrument, ILX shall, upon request of MEI from time to time, execute and
deliver all further instruments or assurance, including without limitation UCC-1
financing statements, which may be required or appropriate to perfect the
security intended to be granted hereby or to further evidence such security.
11. Termination of Pledge. This Pledge Agreement shall terminate upon
ILX's payment of all amounts owing under the Note, upon which payment the
Collateral Security, to the extent not applied to the Note, shall be released
herefrom and returned to ILX.
12. Notice. Any notice required hereunder shall be deemed given upon
delivery or, if sent by mail, upon deposit in the U.S. Mail, postage prepaid, to
the address of the party receiving the notice as follows:
In the case of ILX:
ILX Incorporated
2111 East Highland, Suite 210
Phoenix, Arizona 85016
Attention: Nancy J. Stone, President
In the case of MEI:
Joseph P. and Edward J. Martori
Martori Enterprises Incorporated
2111 East Highland, Suite 210
Phoenix, Arizona 85016
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IN WITNESS WHEREOF, the parties have executed this instrument to be
effective as of the day and year first above written.
ILX INCORPORATED MARTORI ENTERPRISES INCORPORATED
By: /s/ Nancy J. Stone By: /s/ Joseph P. Martori
--------------------------------- ----------------------------------
Nancy J. Stone Joseph P. Martori
Its: President Its: Chairman
--------------------------------- ----------------------------------
President Chairman
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 15th day of
August 1997, by Nancy J. Stone, as President of ILX Incorporated, being duly
authorized to execute the foregoing instrument.
/s/ Stephanie Castronova
---------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 20, 1998
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 15th day of
August 1997, by Joseph P. Martori, as Chairman of Martori Enterprises
Incorporated, being duly authorized to execute the foregoing instrument.
/s/ Stephanie Castronova
---------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 20, 1998
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