THIRD MODIFICATION AGREEMENT
----------------------------
DATE: January 25, 1996
----
PARTIES: Borrower: LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona
------- limited partnership.
Bank: BANK ONE, ARIZONA, NA, a national banking association.
RECITALS:
---------
A. Bank has extended to Borrower credit ("Acquisition Loan") in the
principal amount of up to $5,000,000.00 pursuant to the Loan Agreement, dated
September 9, 1991 ("Acquisition Loan Agreement"), and evidenced by the Secured
Promissory Note, dated September 9, 1991 ("Acquisition Note"). The unpaid
principal of the Acquisition Loan as of the date hereof is $725,000.00. Bank and
Borrower have executed and delivered previously the Modification Agreement,
dated October 22, 1993 ("Modification") and the Second Modification Agreement,
dated October 4, 1994 ("Second Modification") modifying the terms of the
Acquisition Loan, the Acquisition Note, the Acquisition Loan Agreement, and/or
the Acquisition Security Documents (hereinafter defined).
B. The Acquisition Loan is secured by, among other things, (i) the Deed of
Trust (With Assignment of Rents and Security Agreement), dated September 9,
1991, by Borrower, as trustor, for the benefit of Bank, as beneficiary, recorded
on September 10, 1991, at Docket 1421, page 705, as Instrument No. 91-19146,
records of Coconino County, Arizona ("Deed of Trust"), as amended by that
certain First Amendment to Deed of Trust and Collateral Assignment, dated
October 4, 1994, recorded on October 7, 1994, at Docket 1714, page 561, as
Instrument No. 94-33675, (ii) the Collateral Assignment dated September 9, 1991,
by Borrower in favor of Bank, recorded on September 10, 1991 at Docket 1421,
page 758, as Instrument No. 91-19147, records of Coconino County, Arizona (the
"Collateral Assignment"), as amended by that certain First Amendment to Deed of
Trust and Collateral Assignment, dated October 4, 1994, recorded on October 7,
1994, at Docket 1714, page 561, as Instrument No. 94-33675, (iii) the Repayment
Guaranty of ILX Incorporated, an Arizona corporation, dated October 4, 1994 (the
"Acquisition Loan Guaranty"), (iv) the Security Agreement dated September 9,
1991, by Borrower in favor of Bank (the "Security Agreement"), and (v) the
Assignment of Management Agreement dated as of September 9, 1991, by and between
Borrower and Bank (the "Assignment") (the agreements, documents, and instruments
securing the Acquisition Loan and the Acquisition Note are referred to
individually and collectively as the "Acquisition Security Documents").
C. The Acquisition Note, the Acquisition Loan Agreement, the Acquisition
Security Documents, any arbitration resolution, any environmental certification
and indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Acquisition Loan, as modified
in the Modification, the Second Modification and the other modifications and
amendments referred to herein, are sometimes referred to individually and
collectively as the "Loan Documents". Hereinafter, "Acquisition Note",
"Acquisition Loan Agreement", "Acquisition Deed of Trust", and "Acquisition
Security Documents"
1
shall mean such documents as modified in the Modification, the Second
Modification and the other modifications and amendments referred to herein.
D. Borrower has requested that Bank further modify the Acquisition Loan and
the Loan Documents as provided herein in order to, among other things, provide
for the advancing of additional sums by Bank and an extension of the Maturity
Date. Bank is willing to so modify the Acquisition Loan and the Loan Documents,
subject to the terms and conditions herein.
AGREEMENT:
----------
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Acquisition Loan Agreement is modified as follows:
2.1.1 In order to provide for an increase of $1,760,000 in the amount
of the Acquisition Loan, the definition of "Loan Amount" set forth in the
Acquisition Loan Agreement is modified in its entirety to read as follows:
"Loan Amount" shall mean the amount of Two Million Four Hundred
Eighty-Five Thousand and No/100 Dollars ($2,485,000.00), plus any
sum in addition thereto advanced by Lender at its discretion in
accordance with the Loan Documents.
2.1.2 In order to provide for an extension of the Maturity Date, the
definition of "Maturity Date" set forth in the Acquisition Loan Agreement is
modified in its entirety to read as follows:
"Maturity Date" shall mean June 5, 1998.
2.1.3 The term "Timeshare Documents" as used in the Loan Documents
shall include all amendments, modifications, renewals, restatements and
supplements with respect to such Timeshare Documents. Borrower and Bank
acknowledge that the definition of "Timeshare Interval" currently contained in
the Loan Agreement refers to a "1/8925 fractional interest in the fee title of
the Premises" and that, as a result of certain amendments and modifications of
the Timeshare Documents, the fractional interest in the fee title to the
Premises with respect to Timeshare Intervals sold on and after January 11, 1995
is a 1/9325 interest in and to the Premises with respect to each "Every Year
Membership" (as defined in the Timeshare Documents) and a 1/18650 interest in
and to the Premises with respect to each "Every Other Year Membership" (as
defined in the Timeshare Documents).
2
2.1.4 Section 2.7 of the Acquisition Loan Agreement is modified in its
entirety to provide as follows:
2.7 Servicing Fee. On each of the Closing Date, September 1, 1992,
September 1, 1993, September 1, 1994, September 1, 1995, September 1,
1996, and September 1, 1997, Borrower shall pay to Lender the sum of
$12,000 for the Servicing Fee due for the succeeding year; provided
that the Servicing Fee due on September 1, 1997 shall be $9,000
(representing the full annual Servicing Fee prorated for the number of
months, or portions thereof, from September 1, 1997 to the Maturity
Date). The Servicing Fee represents compensation to Lender for its
administration and servicing of the Loan, including, without
limitation, preparation of Releases pursuant to Article VIII below. If
the Loan is fully paid prior to the Maturity Date (other than by reason
of Lender's exercise of any rights and remedies after an Event of
Default), any Servicing Fee paid by Borrower for the then current year
will be prorated and the portion of the Servicing Fee for the remainder
of such year will be refunded to Borrower.
2.1.5 Section 4.3(c) of the Acquisition Loan Agreement is modified in
its entirety to read as follows:
(c) Governmental and Private Approvals. All governmental or
regulatory orders, consents, permits, authorizations and approvals
required for the use, occupancy and operation of the Improvements and
the offering and sale of Timeshare Intervals pursuant to the Timeshare
Documents have been obtained and are in full force and effect. No
additional governmental or regulatory actions, filings or registrations
with respect to the Improvements, and no approvals, authorizations or
consents of any trustee or holder of any indebtedness or obligation of
Borrower or its general partner are required for the due execution,
delivery and performance by Borrower of the Loan Documents.
2.1.6 Section 5.16 of the Acquisition Loan Agreement is modified in its
entirety to read as follows:
5.16 Loan-to-Value. At all times during the term of the Loan, the
unpaid principal balance of the Loan shall not exceed fifty percent
(50%) of the value of the Project, as determined by Lender in its sole
discretion based on (i) the Appraisals obtained pursuant to Section
5.15 hereof or (ii) evaluations of the value of the Project prepared or
obtained by Lender's appraisal department in connection with any
modifications of the Loan Documents. If for any reason the
loan-to-value ratio exceeds said percentage, then Borrower shall, upon
Lender's demand, immediately reduce the unpaid principal balance of the
Loan, or deposit sufficient sums with Lender to reduce the
loan-to-value ratio to at or below said percentage. For the purposes of
determining the loan-to-value ratio, the value of the Project as
determined pursuant to any Appraisal or evaluation shall represent the
fractional interest in the Project encumbered by the Deed of Trust
(which may be adjusted by Lender from time to time in its sole
discretion as fractional interests are sold and released) and, unless
otherwise agreed or elected by Lender in its sole and absolute
discretion, shall not include the value of Timeshare Intervals that
have been sold or any amounts receivable in respect to the sale of such
Timeshare Intervals. Borrower acknowledges that in connection with the
Third Modification Agreement dated as of January 25, 1996, Lender,
through its appraisal department, has ordered and will obtain an
Appraisal or evaluation of the value of the Project and Borrower
agrees, without limiting this Section 5.16, that if the results of such
Appraisal/evaluation reflect a loan-to-value ratio of greater than 50%,
Borrower will comply with this Section 5.16.
3
2.2 The securing clause of the Security Agreement is modified in its
entirety to read as follows:
To secure performance of the covenants and agreements herein set forth
and payment of Debtor's promissory note dated January 25, 1996 in the
sum of Two Million Four Hundred Eighty-Five Thousand and no/100 Dollars
($2,485,000.00), which Note restates Debtor's promissory note dated
October 4, 1994, and interest as specified therein and any and all
extensions or renewals thereof in whole or in part.
2.3 Recital B of the Assignment is modified in its entirety to read as
follows:
B. Pursuant to the Loan Agreement, Lender has agreed to lend to
Borrower up to Two Million Four Hundred Eighty-Five Thousand and no/100
Dollars ($2,485,000) (the "Loan") for the purpose of, among other
things, financing the Premises and Improvements (collectively the
"Project").
2.4 Each reference to the "Loan" in any of the Loan Documents shall be
deemed to refer to the "Loan" as amended pursuant to this Agreement. Each of the
Loan Documents is modified to provide that it shall be a default or an event of
default thereunder if either (i) Borrower shall fail to comply with any of the
covenants of Borrower herein or if any representation or warranty by Borrower
herein is materially incomplete, incorrect, or misleading as of the date hereof
or (ii) any guarantor of the Acquisition Loan shall fail to comply with any
covenant of such guarantor in any guaranty or other loan document or if any
representation or warranty by such guarantor is materially incomplete, incorrect
or misleading as of the date hereof.
2.5 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
4.7 All Timeshare Documents (as defined in the Acquisition Loan Agreement)
remain in full force and effect and no amendments, modifications, restatements
or supplements have been entered into since the execution of the Acquisition
Loan Agreement, except as disclosed to Bank in writing concurrently herewith.
4.8 Borrower's fractional interest in the Project as of the date hereof is
3380.5/9325, less any fractional interests sold, in the normal course of
business, by Borrower during the period from December 31, 1995 through January
25, 1996.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Acquisition Note and
all amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the reasonable internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, inside and outside attorneys, appraisal, appraisal review,
processing, title, filing, and recording costs, expenses, and fees).
5.3.3 A fee for the increase in the Loan Amount in an amount equal to
Seventeen Thousand Six Hundred and No/100 Dollars ($17,600.00).
5
5.4 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused to be executed and delivered to Bank the Second Amendment to
Deed of Trust, dated of even date herewith, amending the Deed of Trust to secure
repayment of the restated promissory note delivered pursuant to Section 5.6
below.
5.5 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused to be delivered to Bank, at Borrower's sole cost and
expense, a new title insurance policy insuring the Deed of Trust, issued by a
title insurance company acceptable to Bank in its sole discretion, and subject
only to such exceptions as may be acceptable to Bank in its sole discretion.
Such policy shall reflect that the interest in the property encumbered by the
Deed of Trust is not less than a 3380.5/9325 fractional interest therein.
5.6 Contemporaneously with the execution and delivery of this Agreement,
Borrower has executed and delivered to Bank a restated promissory note
evidencing Borrower's indebtedness under or pursuant to the Acquisition Loan
Agreement, as modified hereby.
5.7 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused Guarantor to execute and deliver to Bank a Repayment
Guaranty in form and substance satisfactory to Bank.
5.8 Contemporaneously with the execution and delivery of this Agreement,
Borrower shall cause to be executed and delivered to Bank by Tammac Financial
Corp., a Delaware corporation, a Subordination Agreement in favor of Bank and in
form satisfactory to Bank, subordinating the lien and encumbrance of the Tammac
Deed of Trust (as defined in the Acquisition Loan Agreement) to the lien and
encumbrance of the Deed of Trust, as amended by the Second Amendment to Deed of
Trust executed and delivered pursuant to Section 5.4 above.
5.9 Contemporaneously with the execution and delivery of this Agreement,
Borrower shall cause to be executed and delivered to Bank by Resort Funding,
Inc., a Delaware corporation, a Subordination Agreement in favor of Bank and in
form satisfactory to Bank, subordinating the lien and encumbrance of the Deed of
Trust in favor of Resort Funding, Inc. to the lien and encumbrance of the Deed
of Trust, as amended by the Second Amendment to Deed of Trust executed and
delivered pursuant to Section 5.4 above.
5.10 Contemporaneously with the execution and delivery of this Agreement,
Borrower has delivered to Bank all amendments, modifications, restatements, or
supplements to any or all of the Timeshare Documents (as defined in the
Acquisition Loan Agreement). All such amendments or supplements shall be in form
satisfactory to Bank in its sole discretion.
5.11 Contemporaneously with the execution and delivery of this Agreement,
Borrower has delivered to Bank a partnership certificate authorizing Borrower's
execution of this Agreement and all other documents and instruments referred to
herein and required by Bank in connection with the transaction contemplated
hereby.
5.12 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused Guarantor to deliver to Bank a resolution of Guarantor's
Board of Directors authorizing Guarantor's execution of the Repayment Guaranty
required pursuant to Section 5.7 above, together with copies of Guarantor's
Articles of Incorporation and Bylaws, and a good standing certificate issued by
Guarantor's state of incorporation.
6
5.13 Contemporaneously with the execution and delivery of this Agreement,
Borrower has caused to be delivered to Bank an opinion of Borrower's counsel
with respect to such matters as Bank may require and in form and substance
satisfactory to Bank in its sole discretion.
5.14 Contemporaneously with the execution and delivery of this Agreement,
Borrower has executed and delivered such other documents, and provided such
opinions of counsel, as Bank may reasonably request.
5.15 Within thirty (30) days after the execution and delivery of this
Agreement, Borrower shall cause to be delivered to Bank a "Phase I"
environmental study from an environmental engineer acceptable to Bank in its
sole and absolute discretion. The contents of such study shall be subject to
approval of Bank in its sole and absolute discretion. If Bank shall identify any
contamination or other violation of environmental laws affecting the Property,
Borrower shall take all action, at the sole cost and expense of Borrower, to
cause such contamination to be remediated and corrected and to cause compliance
with all such environmental laws within not more than ninety (90) days after
written notice of such contamination or violation, as applicable, from Bank, and
Borrower shall otherwise perform all of its duties and obligations with respect
to such contamination and violation in accordance with the Loan Documents,
including, without limitation, the Environmental Indemnity.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement and has satisfied any and all other
conditions precedent set forth herein, (iii) if requested by Bank, Borrower
shall have ordered, at its sole cost and expense, a "Phase I" Environmental
Study from an environmental engineer acceptable to Bank in its sole discretion,
and (iv) if required by Bank, Borrower and any guarantor(s) have executed and
delivered to Bank an arbitration resolution, an environmental questionnaire, and
an environmental certification and indemnity agreement. Until all of the
foregoing are satisfied, Bank shall be under no obligation to advance additional
proceeds under the Acquisition Loan or to release any collateral securing the
Acquisition Loan or the Additional Loan. If Borrower does not perform its
obligations hereunder and satisfy all conditions precedent herein as and when
required, Bank, at its option, may terminate its obligations hereunder, and the
Acquisition Loan and the Additional Loan shall continue to be payable in
accordance with their terms. If Borrower performs all obligations hereunder and
satisfies all conditions precedent herein as and when required (as determined by
Bank), the amendments to the Loan set forth herein shall become effective and
Bank shall make the disbursement of the Loan to Borrower. Borrower agrees that
the additional proceeds of the Loan shall be used by Borrower solely for the
purpose of making improvements to the Property and other permitted partnership
purposes of Borrower. Borrower represents and warrants to Bank that Borrower has
obtained all necessary consents in connection with this Agreement and the
disbursement of the Loan proceeds contemplated hereby and that Borrower is
authorized to execute, deliver and perform this Agreement and the other Loan
Documents.
7
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
-------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Acquisition Loan and supersede
all prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership
By: ILE Sedona Incorporated, an Arizona
corporation,
General Partner
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name: Xxxxx X. Xxxxx
-----------------------
Title: Vice President
-----------------------
8
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Name: Xxxxx X. Xxxxx
-------------------------------
Title: Assistant Vice President
-------------------------------
9
