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
Xxxxxxx 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 xxxxx XXX 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
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx, President
In the case of MEI:
Xxxxxx X. and Xxxxxx X. Xxxxxxx
Xxxxxxx Enterprises Incorporated
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
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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 XXXXXXX ENTERPRISES INCORPORATED
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------- ----------------------------------
Xxxxx X. Xxxxx Xxxxxx X. Xxxxxxx
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 Xxxxx X. Xxxxx, as President of ILX Incorporated, being duly
authorized to execute the foregoing instrument.
/s/ Xxxxxxxxx Xxxxxxxxxx
---------------------------------
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 Xxxxxx X. Xxxxxxx, as Chairman of Xxxxxxx Enterprises
Incorporated, being duly authorized to execute the foregoing instrument.
/s/ Xxxxxxxxx Xxxxxxxxxx
---------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 20, 1998
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