SECURITY (PLEDGE) AGREEMENT
THIS SECURITY (PLEDGE) AGREEMENT ("Pledge Agreement") is made to be
effective as of __________, 1997, by ILX Incorporated, ("ILX") to Xxxx X.
Xxxxxxx, husband of Xxxxx Xxxxxxx, 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 xxxxx Xxxxxxx 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.
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(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
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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:
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In the case of ILX:
ILX Incorporated
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Chairman
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Colombo & Xxxxxxx, P.C.
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
In the case of Mishkin:
Xxxx X. Xxxxxxx
--------------------------------
--------------------------------
With a copy to:
Xxxxxxx X. Xxxx, Esq.
Squire, Xxxxxxx & Xxxxxxx, LLP
00 Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
IN WITNESS WHEREOF, the parties have executed this instrument to be
effective as of the day and year first above written.
ILX INCORPORATED XXXX X. XXXXXXX
By:
---------------------------------- ------------------------------------
Xxxxxx X. Xxxxxxx Xxxx Xxxxxxx
Its:
--------------------------------- ------------------------------------
Xxxxx Xxxxxxx
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STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by Xxxx X. Xxxxxxx and Xxxxx Xxxxxxx.
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Notary Public
My Commission Expires:
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STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by Xxxxxx X. Xxxxxxx, as Chairman of ILX Incorporated,
on behalf of the corporation.
------------------------------------
Notary Public
My Commission Expires:
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