Exhibit 10-3
BUSINESS AGREEMENT Among
ILX Resorts Incorporated, an Arizona Corporation ("ILX")
Premiere Vacation Club, an Arizona Nonprofit Corporation ("Club")
Premiere Development Incorporated, an Arizona Corporation ("Premiere")
Treasures of the Sea of Xxxxxx, an Arizona limited liability company, ("TSC"),
Promotora de Inversion Turistica, S.A. de C.V., a Mexican Corporation ("PIT"),
Immobiliaria y Hotelera Los Algodones, S.A. de C.V., a Mexican Corporation
("IHLA")
Immobiliaria Cerro Xxxxx, X.X. de C.V., a Mexican Corporation ("ICP")
R E C I T A L S:
A. Promotora de Inversion Turistica, S.A. de C. V. is a Mexican
corporation ("PIT") that owns certain real property located in San Xxxxxx,
Sonora, Mexico upon which PIT has begun construction of a 42 unit
condominium/timeshare project known as the Sea of Xxxxxx Beach Club, as such
property and proposed improvements are more particularly described in the legal
description and the construction plans and specifications attached hereto as
Exhibit A (the "Timeshare Project").
B. Immobiliaria y Hotelera Los Algodones, S.A. de C.V. is a Mexican
corporation ("IHLA") that owns certain real and personal property in San Xxxxxx,
Sonora, Mexico upon which IHLA has constructed and is operating a 173 room hotel
known as the San Xxxxxx Plaza Hotel, as such property and improvements are more
particularly described in attached Exhibit B (the "Hotel").
C. Immobiliaria Cerro Xxxxx, X.X. de C.V. is a Mexican corporation
("ICP") that owns certain real property located in San Xxxxxx, Sonora, Mexico
upon which ICP intends to construct future improvements, as such real property
is more particularly described in attached Exhibit C (the "Beach Property").
D. Treasures of the Sea of Xxxxxx, L.L.C. is an Arizona limited
liability company ("TSC") to which PIT has granted the exclusive right to market
and sell one week interval right-to-use interests in the Timeshare Project.
E. Premiere Vacation Club is an Arizona non-profit corporation (the
"Club") that provides each of its members with one week membership interests
that may be used at any one or more of the resort properties included in the
Club's inventory, which interest may, at each Member's option, be split into
multiple stays of a minimum two day duration and also may be exchanged for stays
at other resorts through a participating exchange network.
F. Premiere Development incorporated is an Arizona corporation
("Premiere") that is a wholly owned subsidiary of ILX Resorts Incorporated, a
leading developer, marketer and operator of timeshare resorts located primarily
in the Western United States ("ILX"). On May ___ 1998, Premiere contributed
5,000 one week interval, perpetual fee simple timeshare interests to the Club
and in exchange therefore became the exclusive marketer and seller of Club
memberships.
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G. TSC desires to contribute 1,500 one week interval, 25 year
right-to-use timeshare interests in the Timeshare Project (the "Weeks") to
Premiere with the understanding that Premiere will then transfer such Weeks to
the Club (subject to approval by the Arizona Department of Real Estate) in
exchange for the payment by Premiere to TSC of the consideration set forth in
this Agreement, and Premiere and the Club desire to accept such contribution and
payment obligations, pursuant to the terms and conditions set forth in this
Agreement.
H. PIT and TSC desire to grant Premiere the exclusive right to market
and Sell the Weeks in the Timeshare Project, and Premiere desires to provide
such services on an exclusive basis, subject to the terms and conditions set
forth below.
I. To facilitate sales of the Weeks and construction of the Timeshare
Project, IHLA desires to grant to the Club and its Members the right to use the
Hotel in the place and stead of the Timeshare Project until such time as the
Timeshare Project has been constructed in accordance with the plans and
specifications attached hereto as Exhibit A and is open to the public. The right
to use the Hotel will be coordinated through TSC and will be subject to space
availability at the Hotel.
For good and valuable consideration, the receipt and sufficiency of which the
parties acknowledge, and in reliance upon the recitals, representations,
warranties, covenants and conditions set forth herein, the parties agree as
follows:
A G R E E M E N T:
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings ascribed to them in this Section 1:
a. "Amenities Core" shall mean all of the amenities associated with the
Hotel, including but not limited to the Hotel pools, restaurants, lobbies, beach
club, tennis courts, palapas, bars and stores.
b. "Combined Club Weeks" shall mean the Weeks contributed by TSC and
PIT to Premiere and, upon approval of the Arizona Department of Real Estate,
transferred by Premiere to the Club, plus the 5,000 Existing Club Weeks, plus
any additional interval interests contributed to the Club from time to time.
"Combined Club Week" shall mean one of the Combined Club Weeks.
c. "Distributions" shall mean any and all payments of any nature made
by Premiere or the Club to TSC or PIT in accordance with the terms and
conditions of this Agreement.
d. "Existing Club Weeks" shall mean the 5,000 one week interval,
perpetual fee simple timeshare interests conveyed to the Club by Premiere on May
___, 1998.
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e. "Expenses" shall mean any and all costs, charges and expenses of any
nature directly or indirectly attributable to each Combined Club Week, including
but not limited to Product Costs (defined below), sales and marketing expenses,
general and administrative expenses, financing costs, collection costs, closing
costs, exchange fees, recording fees, loan servicing fees, home owner
association subsidies, interest expenses, bad debt reserves, and any period
expenses that are not typically allocated on a per Week basis, which Expenses,
if estimated, shall be adjusted on a quarterly basis to reflect actual Expenses
directly or indirectly attributable to each Combined Club Week. Premiere agrees
that the cost estimates set forth in the proforma financial statements attached
hereto as Exhibit G will not, during the three years commencing upon the
execution of this Agreement, increase by more than 10% of the projected costs
set forth in the attached proforma financial statements. During the three year
period, any costs increases in excess of 10% will be absorbed by Premiere.
f. "Net Sales Price" shall mean the actual purchase price paid by an
unaffiliated third party purchaser to Premiere for the purchase of a Combined
Club Week less any and all sales concessions. Premiere agrees that the average
minimum price to be charged per Club membership type to third party purchasers
will not be less than the prices established in attached Exhibit H.
g. "Percentage Interest" shall mean a fraction, the numerator of which
is the number of Weeks contributed to Premiere by TSC and the denominator of
which is the total number of Combined Club Weeks in the Club, as adjusted from
time to time.
h. "Product Cost" shall be deemed to mean U.S. $2,415.00 per Combined
Club Week.
i. "Timeshare Project" shall mean that certain 42 unit
timeshare/condominium project known as the Sea of Xxxxxx Beach Club to be
constructed by PIT in accordance with the plans and specifications attached
hereto as Exhibit A on that certain real property more particularly described in
attached Exhibit A.
j. "Week" shall mean a seven day period, consisting of one weekend and
five weekdays during each calendar year for a period of twenty-five (25) years
from the date of execution of this Agreement (or for a period of fifty (50)
years from the date hereof if the Extension Option referenced in Section 10 of
this Agreement is exercised by Premiere) during which period a Club member may
reserve and use a Unit in the Timeshare Project or, until completion of
construction of the Timeshare Project, a suite or room in the Hotel that is
equivalent to the use right purchased by such Club member.
k. "Weeks" shall mean the 1,500 Week interests in two-bedroom units in
the Timeshare Project contributed by TSC and PIT to Premiere in accordance with
Section 2 of this Agreement and, upon approval of the Arizona Department of Real
Estate, transferred by Premiere to the Club.
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2. Contribution of Weeks to Premiere and Transfer to the Club. TSC and PIT
hereby contribute 1,500 Weeks in the Timeshare Project to Premiere, each Week of
which includes a twenty-five (25) year right-to-use the Timeshare Project and
the Hotel in accordance with the terms and conditions set forth in this
Agreement. Upon receipt of the Weeks and receipt of approval of the Arizona
Department of Real Estate, Premiere shall transfer the Weeks to the Club, and in
exchange therefore Premiere shall retain the exclusive right to market and sell
the Weeks. TSC and PIT acknowledge and agree that the Weeks shall become a part
of the Club's membership inventory and that all Club members will be entitled to
use the Timeshare Project and the Hotel in accordance with the terms and
conditions set forth in this Agreement and in the Premiere Vacation Club
Membership Plan, a copy of which is attached hereto as Exhibit D. TSC and PIT
agree to execute any additional documents and take any additional actions
required to transfer the Weeks to Premiere. It is understood by the parties that
TSC and PIT may, from time to time contribute additional timeshare weeks to the
Club, subject to the advanced approval of ILX and Premiere. [Grant language
subject to revision based on advice of Mexican counsel]
3. Product Cost Distributions. For each Combined Club Week sold by Premiere, TSC
shall be entitled to receive an amount equal to the following:
a. Until such time as TSC has received aggregate Distributions from
Premiere pursuant to this Section 3 and Section 4 below in an amount equal to
U.S. $2.7 million, TSC shall be entitled to receive an amount equal to two times
(2x) the Product Cost multiplied by the then current Percentage Interest [2 x
(Product Cost x Percentage Interest)], one-half (1/2) of which shall be deemed
to be an advance by Premiere to TSC and PIT (the "Advance") for the purpose of
facilitating construction of the Timeshare Project, and 95% of which Advances
TSC and PIT hereby agree to use for constructing the Timeshare Project;
b. At and after such time as TSC has received aggregate Distributions
from Premiere pursuant to this Section 3 and Section 4 below in an amount equal
to U.S. $2.7 million, TSC shall be entitled to receive an amount equal to
one-half of the Product Cost multiplied by the then Current Percentage Interest
[1/2 x (Product Cost x Percentage Interest)] until such time as TSC has repaid
all of the Advances to the Premiere, together with interest on the Advances at
the rate of ten percent (10%) per annum. For each payment made by Premiere to
TSC pursuant to this Section 3(b), Premiere shall apply an amount equal to each
such payment toward the repayment of the Advance, all of which repayments shall
be applied first toward the repayment any interest then due and owing on the
Advance and then toward the repayment of the principal; and
c. At and after such time as TSC has repaid the Advances and interest
thereon to Premiere, TSC shall be entitled to receive an amount equal to the
Product Cost multiplied by the then current Percentage Interest [Product Cost x
Percentage Interest].
d. All Distributions required pursuant to this Section 3 shall be
estimated and paid on a monthly basis, and shall be adjusted to reflect actual
Distribution on a quarterly basis.
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4. Profit Distributions. In addition to the monies paid by Premiere to TSC
pursuant to Section 2 above, for each Combined Club Week sold by Premiere, TSC
shall be entitled to receive an amount equal to the following:
a. Until such time as TSC has received aggregate Distributions from
Premiere pursuant to Section 3 above, and this Section 4 in an amount equal to
U.S. $2.7 million, TSC shall be entitled to receive an amount equal to two times
(2x) the sum of the Net Sales Price less Expenses plus interest income,
multiplied by the then current Percentage Interest [2 x ((Net Sales Price -
Expenses) x Percentage Interest)], one-half (1/2) of which shall be deemed to be
an Advance to TSC and PIT for the purpose of facilitating construction of the
Timeshare Project, and 95% of which Advances TSC and PIT hereby agree to use for
constructing the Timeshare Project;
b. At and after such time as TSC has received aggregate Distributions
from Premiere pursuant to Section 3 above and this Section 4 in an amount equal
to U.S. $2.7 million, TSC shall be entitled to receive an amount equal to
one-half times (1/2x) the sum of the Net Sales Price less Expenses, multiplied
by the then current Percentage Interest [1/2 x ((Net Sales Price Expenses) x
Percentage Interest)] until such time as TSC has repaid the Advances to
Premiere, together with interest on the Advances at the rate of ton percent
(10%) per annum. For each payment made by Premiere to TSC pursuant to this
Section 4(b), Premiere shall apply an amount equal to each such payment toward
the repayment of the Advance, all of which repayments shall be applied first
toward the repayment of any interest then due and owing on the Advance and then
toward the repayment of the principal; and
c. At and after such time as TSC has repaid the Advances and interest
thereon to Premiere, TSC shall be entitled to receive an amount equal to the Net
Sales Price less Expenses, multiplied by the then current Percentage Interest
[(Net Sales Price - Expenses) x Percentage Interest].
d. All Distributions required pursuant to this Section 4 shall be
estimated and paid on a monthly basis, and shall be adjusted to reflect actual
Distributions on a quarterly basis.
e. If Premiere has not made aggregate Distributions to TSC and PIT in
an amount of not less than U.S. $2.7 million within three years after the date
of execution of this Agreement, and if PIT has not completed construction of the
Timeshare Project within such three year period, then Premiere or ILX or its
designee will loan to PIT an amount equal to the difference between U.S. $2.7
million and the aggregate Distributions paid by Premiere within the three year
period, which loan proceeds shall be used for the purpose of completing
construction of the Timeshare Project.
f. TSC shall be entitled to receive its prorata share of the income
earned from the difference in interest paid by Premiere and interest charged to
each Club member.
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5. Maintenance Fee Distributions. In addition to the monies paid by Premiere to
TSC pursuant to Sections 3 and 4 above, for each Combined Club Week sold by
Premiere, PIT shall be entitled to receive an amount annually to offset the
Maintenance Fees associated with such Combined Club Week equal to the total
Maintenance Fees received by the Club from its members during each year for
which the Maintenance Fees apply less administrative expenses associated with
operating the Club, multiplied by the Percentage Interest [(Maintenance Fees -
Club's administrative expenses) x Percentage Interest], which payments shall be
made by the Club to PIT in equal quarterly installments, commencing on January
10 of each year.
6. Term. The term of this Agreement shall be for a period of twenty-five (25)
years from the date of execution hereof, unless otherwise extended by Premiere's
exercise of the Extension Option (defined below) in accordance with Section 10
of this Agreement, whereupon the term of this Agreement shall be fifty (50)
years.
7. Representations and Warranties of TSC, PIT, IHLA and ICP. TSC, PIT, IHLA and
ICP each independently represent and warrant to the Club and Premiere as
follows:
a. Authority of TSC, PIT, IHLA and ICP. TSC, PIT, IHLA and ICP each
represent and warrant that this Agreement has been duly and validly executed and
delivered by each of TSC, PIT, IHLA and ICP and is a legal, valid and binding
obligation of each of TSC, PIT, IHLA and ICP, enforceable in accordance with its
terms. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby nor compliance by TSC, PIT, IHLA or ICP
with any of the provisions hereof will (i) result in any conflict with, breach
of, or default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture or warrant or any franchise, license, permit,
agreement or other instrument or obligation to which TSC, PIT, IHLA or ICP is a
party or by which any of TSC, PIT, IHLA or ICP or any of their respective
properties or assets may be bound, (ii) violate any order, writ, injunction,
judgment, decree, law, statute, rule or regulation applicable to TSC, PIT, IHLA
or ICP or any of their respective properties or assets, or (iii) violate any
provision of any of TSC's, PIT's, IHLA's or ICP's articles of incorporation,
bylaws or regulations. No action, consent or approval by, or filing with, any
federal, state, municipal, court or governmental or administrative body or
agency, or any other regulatory or self-regulatory body, is required in
connection with the execution and delivery by any of TSC, PIT, IHLA or ICP of
this Agreement or the consummation by TSC, PIT, IHLA or ICP of the transactions
contemplated hereby.
b. Corporate Existence. TSC, PIT, IHLA and ICP, respectively, each
represent and warrant that it: (i) is a corporation or company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) has the corporate power and authority to enter into and
perform all its obligations under this Agreement, including but not limited to
the power and authority to convey the Weeks to Premiere in accordance with
Section 2 of this Agreement, (iii) has the corporate power and authority to own
its property and carry on its business as presently conducted and possesses all
rights, privileges, franchises, licenses, permits, concessions, authorizations
and approvals, governmental or otherwise necessary
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to entitle it to use, own, lease or otherwise hold its properties and assets,
including but not limited to the Hotel, the Timeshare Project and the Weeks, as
applicable, and to carry on its business as presently conducted or as proposed
to be conducted, including business associated with the Hotel and the Timeshare
Project, as applicable, and (iv) has duly and validly granted all powers of
attorney required to execute this Agreement and all such powers of attorney are
in full force and effect.
c. Liabilities and Obligations. Except as disclosed in Exhibit E or in
this Agreement, PIT and IHLA have not, with respect to the Timeshare Project and
the Hotel, respectively, (i) sold, assigned, transferred, conveyed, leased or
otherwise disposed of or agreed to sell, assign, transfer, convey, lease or
otherwise dispose of any of the real property, improvements or other assets of
the Timeshare Project (including but not limited to the Weeks) or the Hotel, or
(ii) taken any action, or omitted to take any action, that resulted in a
material breach of or constituted a material default under (or would, with the
giving of notice or passage of time, result in a material breach of or
constitute a material default under) any note, bond, indenture, mortgage, (ease,
license, agreement or other instrument or obligation to which the Timeshare
Project, the Hotel or the Weeks are bound, or resulted in (or would, with the
giving of notice or the passage of time, result in) the creation or imposition
of any material lien, material charge or material encumbrance of any nature
whatsoever upon the Timeshare Project, the Hotel or the Weeks.
d. Taxes. TSC, PIT and IHLA each independently represent and warrant
that it has timely filed with all appropriate governmental authorities
(including tax, customs, social security, housing and retirement authorities)
all federal, state, local and foreign tax returns and reports required under
applicable law to be filed on or before the date hereof in respect of any fiscal
period ended on or before the date hereof and each such return or report is
complete and correct. All taxes, assessments and other governmental charges upon
each of TSC, PIT and IHLA or upon any of their assets, including but not limited
to the Timeshare Project or the Hotel that are due and payable have been paid in
full, other than those currently payable without penalty or interest. No tax
return of any of TSC, PIT or IHLA is currently under examination by the Ministry
of Finance or any other Mexican authority, nor is the Ministry of Finance or any
other authority (whether domestic or foreign and including customs, social
security, housing, and retirement authorities) asserting or, to the best
knowledge of any of TSC, PIT or IHLA, threatening to assert against any of TSC,
PIT or IHLA any adjustment, deficiency or claim for additional taxes, payments
or interest thereon or penalties in connection therewith.
e. Litigation. There has not been and there is not now pending or
threatened, any claim, action, suit, proceeding, arbitration, investigation or
inquiry before any federal, state, municipal, court or governmental or
administrative body or agency, other regulatory body or any private arbitration
tribunal, relating to or affecting any of TSC, PIT, IHLA or ICP or any director
or officer thereof in his capacity as such, or the Hotel or the Timeshare
Project. There are no orders, judgments or decrees of any court or governmental
or administrative body or agency, or any other regulatory body, affecting any of
TSC, PIT, IHLA or ICP or the Hotel or the Timeshare Project. Each of TSC, PIT
and IHLA independently represent and warrant that
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it is not in default under any order, writ, injunction or decree of any court or
governmental or administrative body or agency or any other regulatory body with
respect to, or any way affecting, the Hotel or the Timeshare Project.
f. Compliance with Law. Each of TSC, PIT, IHLA and ICP independently
represent and warrant that: (i) it has complied and is complying in all material
respects with all laws, regulations, rules, ordinances and orders of all
applicable governmental authorities or any other regulatory bodies applicable to
each of TSC, PIT, IHLA and ICP and each of their properties, assets and
businesses, including but not limited to those applicable to the Hotel, the
Timeshare Project and the, Weeks, as applicable, and (ii) it has all federal,
state, local and foreign governmental licenses, permits (including but not
limited to the federal permit necessary to create and sell timeshare interests
in Mexico, any permits, filings or registrations required by the State of Sonora
with respect to the creation and sale of interests in a timeshare project, the
local building permits required to construct the Timeshare Project, and any
other local or state licenses or permits required to create and convey a
timeshare interest in Mexico) and concessions (including but not limited to a
federal beach concession for that portion of the real property associated with
the Hotel, the Timeshare Project and the Beach Property that lies within
Mexico's federal zone), material or necessary to the conduct of its business and
all such licenses, permits and concessions are in full force and effect.
g. Accuracy of Information. The information contained in this Agreement
and the Exhibits and the written information provided by each of TSC, PIT, IHLA
and ICP and their respective agents to Premiere and the Club and their agents is
true, complete and correct in all material respects.
h. Brokers and Finders. None of TSC, PIT, IHLA or ICP, nor any officer,
director or employee thereof has employed any broker or finder, or incurred any
liability for any brokerage fees, commissions or finders' fees, in connection
with the transactions contemplated by this Agreement.
i. Environmental Matters. There has been no storage, disposal or
treatment of solid wastes or hazardous wastes at or on the Hotel, the Timeshare
Project or the Beach Property in violation of any applicable Mexican federal,
state or local law, regulation, order, or permit and none of TSC, PIT, IHLA or
ICP have received any notice of nor have any knowledge of or any reason to
believe that there exists any such violation. There has been no spill,
discharge, leak, emission, injection, escape, dumping or release of any kind
onto the Beach Property, the Hotel or the Timeshare Project or into the
environment surrounding any such property, of any toxic or hazardous substances
as defined under any Mexican federal, state or local regulations, laws or
statutes. None of TSC, PIT, IHLA or ICP have any obligation or liability,
absolute or contingent, with respect to the storage, treatment, cleanup or
disposal of any solid wastes, hazardous wastes or other toxic or hazardous
substances. Each of TSC, PIT, IHLA and ICP have complied with all laws,
regulations, rules, standards and other requirements imposed by governmental
authorities on environmental matters, including those relating to water
discharges, air emissions, and soil contamination.
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j. Real Property and Improvements. PIT, TSC and IHLA, respectively are
the owners of and possess good and marketable title to the Timeshare Project
(including but not limited to the Weeks to be conveyed to Premiere in accordance
with Section 2 of this Agreement) and the Hotel, respectively, and the
improvements constructed or proposed to be constructed thereon free and clear of
all mortgages, security interests, charges, claims, options, rights of first
refusal, easements, restrictions, liens, rights-of-way or other encumbrances of
any nature whatsoever, except for the liens and encumbrances identified in
Schedule B of the title insurance policies attached hereto as Exhibit E. The
Hotel and the Timeshare Project comply and, during and after completion of
construction of the Timeshare Project, will continue to comply, in all material
respects with all applicable building and zoning codes, ordinances and PIT and
IHLA have obtained all permits, concessions and contracts for the utilities
necessary to service the Timeshare Project and the Hotel, as applicable,
including but not limited to water, sewer, telephone and electricity, and that
all such permits, concessions and contracts are validly issued and fully paid.
k. No Bankruptcy. Except with respect to matters related to the
devaluation of the peso in 1994, each of TSC, PIT and IHLA independently
represent and warrant that there has not been filed any petition or application,
or any proceeding commenced, by or against any of TSC, PIT or IHLA under any
law, domestic or foreign, relating to bankruptcy, reorganization, compromise
arrangements, insolvency, readjustment of debt or creditors rights, and no
assignment for the benefit of creditors has been made by any of TSC, PIT or
IHLA.
1. Insurance. IHLA represents and warrants that the Hotel is insured in
an amount reasonably deemed adequate, against all risks usually insured against
by persons operating similar properties in the country of Mexico under policies
that are not void or voidable and that IHLA believes are enforceable in
accordance with their terms.
8. Representations and Warranties of ILX, Premiere and the Club. ILX, Premiere
and the Club each independently represent and warrant to TSC, PIT, IHLA and ICP
as follows:
a. Authority of Premiere and the Club. Each of ILX, Premiere and the
Club have full right, power and authority to enter into this Agreement, and to
consummate the transactions contemplated herein. This Agreement has been duly
and validly executed and delivered by ILX, Premiere and the Club and is a legal,
valid and binding obligation of ILX, Premiere and the Club enforceable in
accordance with its terms. Except as disclosed in this Agreement, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by ILX, Premiere and the Club
with any of the provisions hereof will (i) result in any conflict with, breach
of, or default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture or warrant or any franchise, license, permit,
agreement or other instrument or obligation to which ILX, Premiere or the Club
is a party or by which ILX, Premiere or the Club, or any of their respective
properties or assets may be bound, (ii) violate any order, writ, injunction,
judgment, decree, law, statute, rule or regulation applicable to ILX, Premiere
or the Club or any of their respective properties or assets or (iii) violate any
provision
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of ILX's, Premiere's or the Club's articles of incorporation, bylaws or
regulations. Except for the approval of the Arizona Department of Real Estate,
no action, consent or approval by, or filing with, any federal, state, local,
court or governmental or administrative body or agency, or any other regulatory
or self-regulatory body, is required in connection with the execution and
delivery by ILX, Premiere or the Club of this Agreement or the consummation by
ILX, Premiere or the Club of the transactions contemplated hereby.
b. Corporate Existence. ILX, Premiere and the Club each represent and
warrant that each of them are fully incorporated, validly existing and in good
standing under the laws of the State of Arizona and have the corporate power and
authority to enter into and perform their respective obligations under this
Agreement and to own property and carry on business as presently conducted and
possesses the rights, privileges, franchises, licenses, permits, authorizations
and approvals, governmental or otherwise necessary to carry on their business as
presently conducted.
c. Litigation. There has not been and there is not now pending or
threatened, any claim, action, suit, proceeding, arbitration, investigation or
inquiry before any federal, state, local, court or governmental or
administrative body or agency, other regulatory body or any private arbitration
tribunal, relating to or affecting ILX, Premiere, the Club, or any director or
officer thereof in his capacity as such. There are no orders, judgments or
decrees of any court or governmental or administrative body or agency, or any
other regulatory body, effecting, or with respect to, ILX, Premiere or the Club.
Neither ILX, Premiere nor the Club are in default under any order, writ,
injunction or decree of any court or governmental or administrative body or
agency or any other regulatory body.
d. Accuracy of Information. The information contained in this Agreement
and the Exhibits and the written information provided by ILX, Premiere and the
Club or their respective agents to TSC, PIT, IHLA and ICP or their agents is
true, complete and correct in all material respects.
e. Brokers and Finders. None of ILX, Premiere or the Club, nor any
officer, director or employee thereof has employed any broker or finder, or
incurred any liability for any brokerage fees, commissions or finders' fees, in
connection with the transactions contemplated by this Agreement.
f. Real Property and Improvements. Attached Exhibit F contains a
complete list, by deed reference or otherwise, of all real property and
interests in real property owned, leased or used in connection with the
operation of the Club (the "Club Assets"). The Club has good and marketable
title to the Club Assets free and clear of all mortgages, security interests,
charges, claims, options, rights of first refusal, easements, restrictions,
liens, rights-of-way or other encumbrances of any nature whatsoever, except for
the liens, encumbrances and security interests disclosed on attached Exhibit F.
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9. Covenants of TSC, PIT and IHLA. TSC, PIT and IHLA hereby covenant to the Club
and Premiere as follows:
a. Hotel Use Rights. IHLA hereby agrees that until such time as
construction of the Timeshare Project has been completed and the Timeshare
Project is open to the public, all Club members shall be entitled to use the
Hotel and the Amenities Core in lieu of the Timeshare Project and such use
rights shall be consistent with the use rights that would be granted to
purchasers of timeshare interests in the fully constructed Timeshare Project. In
addition, IHLA agrees that all Club members shall be entitled to use the
Amenities Core throughout the entire term of this Agreement, such use rights to
be consistent with the use rights granted to Hotel guests, except for the
convention facilities.
b. Recordation of Condominium Regime. Upon completion of construction
of the Timeshare Project, PIT immediately will prepare and record with the
public registry for the City of Guaymas a condominium regime for the Timeshare
Project, which condominium regime shall be subject to the prior review and
approval of Premiere, such approval not to be unreasonably withheld.
c. Monthly Financial Reports. TSC and PIT shall deliver to Premiere, by
the twentieth (20th) day of each month during the period of construction of the
Timeshare Project, a written financial report (the "Monthly Financial Report")
detailing the manner in which the Advances have been applied toward the
construction of the Timeshare Project, which Monthly Financial Report shall be
in a form acceptable to Premiere. Upon request by Premiere, PIT shall provide
Premiere with copies of invoices and evidence of payment for the items and
services referenced in the Monthly Financial Report.
d. No Liens or Encumbrances on the Weeks. Except as identified in
Schedule B of the title insurance policies attached hereto as Exhibit E, during
the term of this Agreement, PIT, IHLA and TSC shall not permit the creation of
any lien or encumbrance of any nature whatsoever, direct or indirect, affecting
the Weeks. PIT and TSC shall take any and all actions and execute and record any
and all documents reasonably deemed necessary by Premiere to provide public
notice of Premiere's and the Club's interest in the Weeks and in the right of
Club members to use the Hotel, including but not limited to recordation of such
interests in the Public Registry of the City of Guaymas.
e. Obligation to Build. PIT and TSC hereby agree to construct the
Timeshare Project in accordance with the plans and specifications attached
hereto as Exhibit A and in accordance with all applicable building codes and
regulations within a period of 3 years from the date of execution of this
Agreement. PIT also agrees promptly to obtain all licenses, permits and
concessions required to operate the Timeshare Project in accordance with all
applicable local, state and federal laws and regulations.
f. Obligation to Maintain. PIT and IHLA agree to maintain the Timeshare
Project and the Hotel, respectively, in good condition and repair throughout the
term of this Agreement.
12
g. Obligation to Operate. PIT, TSC and IHLA agree to operate the
Timeshare Project and the Hotel, as applicable, in a manner consistent with good
business practices and in accordance with the promises, terms and conditions set
forth in the timeshare documents distributed to purchasers of interests in the
Timeshare Project, including but not limited to the purchasers of the Combined
Club Weeks. PIT, TSC and IHLA hereby agree to provide to all Club members all of
the rights and privileges accorded under the Premiere Vacation Club Membership
Plan and to operate the Timeshare Project and the Hotel in a manner consistent
with the Premiere Vacation Club Membership Plan.
h. Insurance for the Timeshare Project. Prior to completion of
construction of the Timeshare Project, PIT agrees to obtain insurance for the
Timeshare Project in amounts reasonably deemed adequate, against all risks
usually insured against by persons operating similar properties in the Country
of Mexico. The insurance obtained by PIT shall name Premiere and the Club as
third party beneficiaries of the insurance policy.
10. Extension Option. PIT and TSC, jointly and severally grant to Premiere the
option to renew its interest in the Weeks for one additional twenty-five (25)
year period (the "Extension Option"), which Extension Option may be exercised by
Premiere anytime during the last five years of the initial 25 year term of this
Agreement, provided Premiere is not then in default of its payment obligations
as provided in Sections 3, 4 and 5 of this Agreement. Premiere shall provide PIT
and TSC with written notice of its election to exercise the Extension Option. If
Premiere exercises the Extension Option, then during the term of the Extension
Option (Year 26 through Year 50), TSC and PIT shall be entitled to receive the
Distributions referenced in Sections 3(c), 4(c) and 5 of this Agreement. The
prices to be charged for the Weeks during the term of the Extension Option will
be negotiated between the parties after written notice of Premiere's election to
exercise the Extension Option is deliver to PIT and TSC.
11. Right of First Refusal. ICP hereby grants the following rights and
privileges to Premiere with respect to the Beach Property, and agrees that
Premiere may assign such rights to a Mexican subsidiary corporation formed by
Premiere for the purpose of developing or acquiring real property in Mexico:
a. Joint Development. Prior to undertaking any development of the Beach
Property, ICP shall first provide Premiere with written notice of its
development plans and offer Premiere the right to participate as a partner in
any such development plans on terms and conditions that are agreed upon by the
parties. Premiere shall notify ICP, in writing, whether Premiere elects to
accept or reject the offer to joint venture within one hundred twenty (120) days
of delivery of such notice to Premiere. If Premiere accepts such offer, the
parties shall proceed in good faith to form the joint venture and develop the
Beach Property in accordance with the terms and conditions agreed between the
parties.
b. Sale or Transfer. Any sale or transfer of all or any portion of the
Beach Property to a third party purchaser ("Purchaser") must be pursuant to a
bona fide written offer (the "Bona Fide Offer") from a Purchaser with the
financial ability to perform. If ICP receives a Bona Fide
13
Offer from a Purchaser, and desires to sell all or any portion of the Beach
property, the following procedure shall apply:
i. ICP shall first offer the Beach Property to Premiere by
giving written notice of the Bona Fide Offer to Premiere. The notice shall be
deemed an offer (the "Offer") to sell the Beach Property to Premiere at a price
and on terms equal to the Bona Fide Offer. Premiere shall notify ICP, in
writing, whether Premiere elects to accept or reject the Offer within sixty (60)
days of delivery of the Offer to Premiere. If Premiere accepts the Offer, the
transaction shall close at the date determined by Premiere, but in no event more
than sixty (60) days after acceptance of the Offer by Premiere. Failure to send
such a notice of acceptance, within the time prescribed, shall be deemed a
rejection of the Offer.
ii. If Premiere rejects the Offer, ICP may sell the Beach
Property within a period of sixty (60) days from the rejection date to the
Purchaser at a purchase price and on terms no more favorable than those set
forth in the Bona Fide Offer. If ICP: (i) desires to sell the Beach Property to
the Purchaser on terms more favorable than the Bona Fide Offer; or (ii) if the
transaction is to be consummated more than sixty (60) days after the rejection
date, notice identifying the proposed Purchaser and all of the terms of sale
shall be given to Premiere and such notice shall constitute a new Offer subject
to this Section.
12. Indemnities. ILX, Premiere and the Club jointly and severally agree to
indemnify, defend and hold harmless each of PIT, TSC and IHLA and their
respective officers, directors, employees and agents from and against any and
all liabilities, obligations, losses, damages, claims, actions or expenses
(including court costs and attorneys' fees) of any nature whatsoever, imposed
on, incurred by or asserted against PIT, TSC or IHLA, occasioned or caused by,
resulting from or arising out of any inaccuracy in or breach of any of the
representations, warranties, covenants or conditions set forth in this Agreement
by Premiere or the Club.
PIT, TSC, IHLA and ICP jointly and severally agree to indemnify, defend and hold
harmless each of ILX, Premiere and the Club and their respective officers,
directors, employees and agents from and against any and all liabilities,
obligations, losses, damages, claims, actions or expenses (including court costs
and attorneys' fees) of any nature whatsoever, imposed on, incurred by or
asserted against any of ILX, Premiere or the Club, occasioned or caused by,
resulting from or arising out of any inaccuracy in or breach of any of the
representations, warranties, covenants or conditions set forth in this Agreement
by any of PIT, TSC, IHLA or ICP.
13. Mandatory Dispute Resolution Mechanism. Every dispute whatsoever that may
arise between the parties to this Agreement or their nominees, designees or
other representatives with respect to the subject matter of this Agreement shall
be resolved as follows:
a. Notice of Breach and Opportunity to Cure. If any party in good faith
concludes that another party has committed a breach of this Agreement, the party
so concluding shall notify the offending party in writing that it is in breach
hereof. Any party receiving notice under this
14
Section 10 shall have thirty (30) calendar days to cure its breach, if any, and
to notify the party sending such notice that such breach has been cured.
Following the applicable cure period, if the notifying party rejects the cure or
otherwise maintains that an uncured breach of this Agreement exists, the
disputed matter shall be thereupon subject to arbitration in accordance with the
terms and conditions of this Section 13.
b. Arbitration of Disputes. Any and all disputes, controversies, claims
and differences arising out of or relating to this Agreement, or any breach
thereof, shall be finally settled by arbitration in accordance with the
procedural rules established under the International Chamber of Commerce in
effect on the date of this Agreement, by one or more arbitrators selected in
accordance with such rules. If any conflict between the accepted rules of the
International Chamber of Commerce and the provisions of this Section 13 exists,
the rules shall govern.
c. Appointment of Arbitrator. Upon the written demand of either of the
parties concerned, the parties shall attempt to appoint a single arbitrator. If
they are unable to agree within ten (10) calendar days from such demand, then
each of the parties shall appoint one arbitrator and the two nominated
arbitrators shall in turn choose a third arbitrator. If the two arbitrators
chosen by the parties cannot agree on the choice of the third arbitrator within
a period of ten (10) calendar days after their nomination, then the third
arbitrator immediately shall be appointed in accordance with the rules of the
International Chamber of Commerce. The arbitrator or arbitrators shall commence
the arbitration proceeding within thirty (30) calendar days after his/her or
their appointment, as the case may be, (the "Commencement Date") and such
arbitration proceeding shall be concluded and a final and binding determination
shall be rendered by such arbitrator or arbitrators within forty-five (45)
calendar days after the Commencement Date.
d. Forum and Enforcement of Judgment. If Premiere or the Club initiate
an arbitration proceeding, then such proceeding shall be conducted in
Hermosillo, Sonora, Mexico. If TSC, IHLA or PIT initiate an arbitration
proceeding, then such proceeding shall be conducted in Phoenix, Arizona. The
decision of the arbitrator(s) shall be final and binding upon the parties
hereto, not subject to appeal and shall deal with the questions of costs of the
arbitration and all matters related thereto. The proceedings, all pleadings,
documents, correspondence and the arbitration award shall be written in English
if the arbitration is conducted in Phoenix, Arizona. If the arbitration is
conducted in Hermosillo, Sonora, Mexico, the proceedings shall be conducted in
Spanish, and all pleadings, documents, correspondence and the arbitration award
shall be written in Spanish. Judgment upon the award or decision rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof, or
application may be made to such court for a judicial recognition of the Award or
an order of enforcement thereof, as the case may be. TSC, PIT, IHLA and ICP
jointly and severally represent that an arbitration award reached pursuant to
this Agreement with respect to any dispute, controversy, claim or difference
arising out of or relating to this Agreement is enforceable under the laws of
Mexico, and Premiere and the Club represent that an arbitration award reached
pursuant to this Agreement with respect to any dispute, controversy, claim or
difference arising out of or relating to this Agreement is
15
enforceable under the laws of the State of Arizona.
14. Miscellaneous.
a. Entire Agreement. This Agreement represents the entire agreement
between the parties and supersedes all prior negotiations and agreements among
them, whether written or oral.
b. Amendments. This Agreement may only be amended or modified in a
written agreement that is signed by each and every party to this Agreement.
c. Successors and Assignees. This Agreement shall be binding upon each
party to it and each of such party's successors and assigns.
d. Severability. If any provision of this Agreement is deemed to be
invalid or unenforceable by a court or arbitral body of competent jurisdiction,
such provision of this Agreement shall be deemed deleted and the remaining
provisions shall be enforced to the fullest extent possible.
e. Remedies. A party may pursue any and all remedies that are available
to it in law and equity. If a party pursues one or more remedies and not others,
the party shall not be deemed to have elected its remedy or remedies, and the
party may, thereafter pursue other or different remedies. In addition to all
other rights and remedies available to Premiere and the Club, if any of TSC,
PIT, IHLA or ICP shall be in default of its obligations hereunder, and shall
have failed to cure such default within a period of ten (10) days after Premiere
or the Club's delivery of written notice to the defaulting party in accordance
with Section 14(f) of this Agreement, then Premiere and the Club shall be
entitled to suspend any Distributions otherwise due and owing to TSC and PIT
under this Agreement until such time as the defaulting party shall have cured
such default to Premiere's and the Club's reasonable satisfaction, and TSC and
PIT shall forfeit any Distributions that would have been made during the period
of such default. Premiere's and the Club's election not to pay Distributions to
TSC and PIT as a result of TSC's, PIT's, IHLA's or ICP's failure to perform in
accordance with the terms and conditions of this Agreement shall under no
conditions be deemed a default or breach of this Agreement on the part of
Premiere or the Club.
f. Notices. All notices and other communications which are required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given (i) when delivered personally, or (ii) when sent if by facsimile
transmitted on a business day prior to 5:00 p.m. local time at the place of
receipt, or on the following business day if sent after 5:00 p.m., or (iii) on
the day following delivery to a courier service if sent by next day delivery via
a recognized international courier service. All such notices of communications
shall be addressed to the parties as follows, or at such other address as shall
be specified by like notice:
16
If to PIT, IHLA same as below
or ICP:
if to TSC: Treasures of the Sea of Xxxxxx, LLC
0000 Xxxx Xxxxxx Xxxx
Xxxxxx 00 - 00
Xxxxxxx, Xxxxxxx 00000
If to the Club Premiere Development Incorporated
or Premiere: 0000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
g. Governing Language. PIT shall obtain a certified translation of this
Agreement into Spanish and the parties hereto shall execute both a Spanish and
English language version of this Agreement. If an arbitration proceeding is
conducted in Mexico, the Spanish language version of this Agreement shall
control the interpretation of this Agreement, provided, however, that if there
is any ambiguity between the Spanish and English language version of this
Agreement, the English language version of the ambiguous provision shall
control. If an arbitration is conducted in the United States, then the English
language version of this Agreement shall control the interpretation of this
Agreement.
h. Counterparts. This Agreement may be executed in any number of
counterparts and may be executed in both a Spanish and an English language
version, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same Agreement.
i. Governing Law. This Agreement shall be deemed to be a contract made
under, and for all purposes shall be construed in accordance with and governed
by, the laws of the Country of Mexico.
j. Construction. Wherever possible, this Agreement, and all documents
contemplated hereunder, shall be construed and interpreted so as to be effective
and valid under applicable law. If any provision of this Agreement, or any
document contemplated hereunder, for any reason shall be deemed invalid or
prohibited under applicable law, such provision shall be invalid or prohibited
only to the extent of such invalidity or prohibition, which shall not invalidate
the remainder of such provision or the remaining provisions of this Agreement.
In Witness Whereof, the undersigned parties have executed this Agreement as of
this 8th day of June, 1998.
Premiere Development Incorporated Premiere Vacation Club,
an Arizona corporation an Arizona non-profit corporation
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------- ----------------------------------
Its: Chairman Its: Chairman
--------------------------------- ---------------------------------
Treasures of the Sea of Xxxxxx, Promotora de Inversion Turistica,
an Arizona Corporation S.A. de C.V.,
a Mexican Corporation
By: /s/ Xxxxxxx Xxxxxxxxxx Xxxxxxx By: /s/ Xxxx X. Xxxxx
--------------------------------- ----------------------------------
Its: Statutory Agent Its: Administrator
--------------------------------- ---------------------------------
Immobiliaria y Hotelera Los Algodones, Immobiliaria Cerro Xxxxx,
X.X. de C.V., a Mexican Corporation S.A. de C.V., a Mexican Corporation
By: /s/ Xxxxxxx Xxxxxxxxxx By: /s/ Xxxxxxx Xxxxxxxxxx Xxxxxxx
--------------------------------- ----------------------------------
Its: Apoderado Legal Its: Apoderado Legal
--------------------------------- ---------------------------------
ILX Resorts Incorporated,
an Arizona Corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Its: Chairman
---------------------------------
- - - EL LICENCIADO XXXX XXXXXXXXX XXXXX XXXXX, XXXXXXX PUBLICO NUMERO TRECE, EN
EJERCICIO Y DE ESTA DEMARCACION NOTARIAL, C E R T I F I C A: QUE LAS FIRMAS QUE
APARECEN XX XXXXX DEL PRESENTE ESCRITO, OUE CONSTA DE 17 XXXXX UTILES Y 10
ANEXOS, FUERON PUESTAS EN MI PRESENCIA DE SU PUNO Y LETRA POR LOS SENORES:
XXXXXXX XXXXXXXXXX XXXXXXX, XXXX X. XXXXX Y XXXXXXX XXXXXXXXXX XXXXXX, BAJO SUS
RESPECTIVOS NOMBRES, QUIENES MANIFESTARON SER: MEXICANOS EL PRIMERO Y EL ULTIMO,
NORTEAMERICANO EL SEGUNDO, CASADOS, MAYORES DE EDAD, VECINOS DE ESTA CIUDAD, DE
MI PERSONAL CONOCIMIENTO Y HABILES A MI JUICIO PARA CONTRATAR Y OBLIGARSE.- Y
MANIFIESTAN QUE SON LAS MISMAS FIRMAS QUE ACOSTUMBRAN USAR EN TODOS SUS ACTOS Y
RATIFICAN EN TODO EL CONTENIDO Y TERMINO DEL MISMO.- EL SENOR XXXX X. XXXXX, SE
IDENTIFICO CON PASAPORTE NUMERO 000000000 EXPEDIDO EN ESTADOS UNIDOS DE
NORTEAMERICA Y ACREDITA SU LEGAL ESTANCIA EN EL PAIS CON VISA NUMERO 37734545
EXPEDIDA POR 180 XXXX CON FECHA 4 DE MARZO DE 1998 EN NOGALES, SONORA DOCUMENTOS
QUE DOY XX XXXXX A LA VISTA.- LOS COMPARECIENTES MANIFIESTAN QUE NO REQUIEREN DE
INTERPRETE POR CONOCER EL IDIOMA DEL PRESENTE DOCUMENTO.- EL SENOR XXXXXXX
XXXXXXXXXX XXXXXXX ACREDITA SU PERSONALIDAD DE APODERADO LEGAL DE LA EMPRESA
"TREASURES OF THE SEA OF XXXXXX", L.L.C., CON LOS ARTICULOS DE ORGANIZACION
EXPEDIDO EN EL ESTADO DE ARIZON DE LA OFICINA ENCARGADA DE LA COMISION DE
CORPORACIONES, CON FECHA JUNIO 6 DE 1994, CON XXXXX XX XXXXXXXXXX XX XXXXX 0 XXX
XXX 0000; EL SENOR XXXX X. XXXXX, ACREDITA SU PERSONALIDAD DE APODERADO LEGAL DE
LA SOCIEDAD MERCANTIL DENOMINADA "PROMOTORA DE INVERSION TURISTICA", S.A. DE
C.V., CON ESCRITURA PUBLICA NUMERO 7413, VOLUMEN 228, DE FECHA 9 DE XXXXX DE
1997, PASADA ANTE LA FE DEL SUSCRITO NOTARIO, E INSCRITA EN EL REGISTRO PUBLICO
DE ESTA CIUDAD, BAJO EL NUMERO 1657, SECCION COMERCIO, LIBRO I VOLUMEN 32, CON
FECHA 15 DE XXXXX DE 1997; EL SENOR XXXXXXX XXXXXXXXXX XXXXXX, ACREDITA SU
PERSONALIDAD DE APODERADO LEGAL DE LAS SOCIEDADES MERCANTILES DENOMINADAS
"INMOBILIARIA Y HOTELERA LOS ALGODONES", S.A. DE C.V. E "INMOBILIARIA CERRO
PELON", S.A. DE C.V., CON ESCRITURA PUBLICA NUMERO 8,861, VOLUMEN 233, DE FECHA
PRIMERO XX XXXXXX DE 1994, PASADA ANTE LA FE DEL SENOR LICENCIADO XXXXXX XXXXX
XXXXXXX, NOTARIO PUBLICO NUMERO 43, CON RESIDENCIA EN HERMOSILLO, SONORA, E
INSCRITA EN EL REGISTRO PUBLICO DE LA PROPIEDAD Y DE COMERCIO DE ESTA CIUDAD,
BAJO EL NUMERO 1559, SECCION COMERCIO, LIBRO 1, VOLUMEN 27, CON XXXXX 00 XX
XXXXX XX 0000; DOCUMENTOS QUE DOY XX XXXXX A LA VISTA Y DEVOLVI A SUS
PRESENTANTES.- DOY FE - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
GUAYMAS, SONORA., A 5 DE JUNIO DE 1998.
/s/ Lic. Xxxx Xxxxxxxxx Xxxxx Xxxxx
LIC. XXXX XXXXXXXXX XXXXX XXXXX,
NOTARIO PUBLICO NUMERO 13.-
STATE Of ARIZONA )
) ss.
County of Maricopa )
On June 8, 1998, before me, the undersigned Notary Public, personally
appeared Xxxxxx X. Xxxxxxx who acknowledged him/herself to be Chairman of
Premiere Development Inc., an Arizona corporation, and that he/she, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, on behalf of such corporation.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Xxxxxxx X. .Xxxxxx
---------------------------------
Notary Public
My Commission Expires: OFFICIAL SEAL
August 31, 1999 XXXXXXX X. XXXXXX
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 31, 1999
STATE OF ARIZONA )
) ss.
County of Maricopa )
On June 8, 1998, before me, the undersigned Notary Public, personally
appeared Xxxxxx X. Xxxxxxx, who acknowledged him/herself to be Chairman of ILX
Resorts Incorporated, an Arizona corporation, and that he/she, being authorized
so to do, executed instrument for the purposes therein contained, on behalf of
such corporation.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Xxxxxxx X. .Xxxxxx
---------------------------------
Notary Public
My Commission Expires: OFFICIAL SEAL
August 31, 1999 XXXXXXX X. XXXXXX
Notary Public - State of Arizona
MARICOPA COUNTY
My Comm. Expires Aug. 31, 1999
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
INCOME STATEMENT
YEAR I YEAR 2 YEAR 3 TOTAL
----------- ----------- ----------- -----------
TIMESHARE REVENUE
TIMESHARE SALES $19,687,500 $22,500,000 $22,500,000 $64,687,500
INTEREST INCOME 1,126,913 3,450,445 5,746,759 10,324,117
----------- ----------- ----------- -----------
TOTAL TIMESHARE REVENUE 20,814,413 25,950,445 28,246,759 75,011,617
----------- ----------- ----------- -----------
COST OF TIMESHARE SALES
PRODUCT COST 3,803,625 4,347,000 4,347,000 12,497,625
SALES AND MARKETING 52.00% 10,237,500 11,700,000 11,700,000 33,637,500
LOAN PROCESSING/G&A 2.50% 492,188 562,500 562,500 1,617,188
BAD DEBT 3.00% 590,625 675,000 675,000 1,940,625
CLOSING COSTS 3.00% 590,625 675,000 675,000 1,940,625
----------- ----------- ----------- -----------
15,714,563 17,959,500 17,959,500 51,633,563
----------- ----------- ----------- -----------
OPERATING EXPENSES
LEGAL/ACCOUNTING/PROF FEES 100,000 100,000 100,000 300,000
0
----------- ----------- ----------- -----------
100,000 100,000 100,000 300,000
----------- ----------- ----------- -----------
INTEREST EXPENSE 542,321 1,544,329 2,293,686 4,380,336
----------- ----------- ----------- -----------
NET INCOME BEFORE TAXES $ 4,457,529 $ 6,346,617 $ 7,893,573 $18,697,718
=========== =========== =========== ===========
NOTE 1: MODEL DOES NOT INCLUDE THE INTEREST INCOME ARBITRAGE IN YEARS 4-10 WHICH
WILL BE GENERATED FROM SALES MADE DURING THE THREE YEAR SALES PERIOD SHOWN.
EXAMPLE: ARBITRAGE FOR YEAR 3 IS: $3,453,073 ARBITRAGE WILL CONTINUE IN FACT TO
BE EARNED FOR SEVEN YEARS FROM THE LAST YEAR OF SALES (IE. YEAR 10 FOR SALES
MADE IN YEAR
NOTE 2: MODEL ASSUMES ONLY THREE YEARS OF TIMESHARE SALES. AT END OF MODEL
PERIOD 1325 INTERVALS REMAIN AVAILABLE FOR SALE OF THE 6500 WEEKS OF INITIAL
INVENTORY, MEANING 20% REMAINS AVAILABLE TO SELL.
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
BALANCE SHEET
YEAR 1 YEAR 2 YEAR 3
----------- ----------- -----------
CASH $ 1,632,881 $ 4,922,907 $ 6,381,408
NOTES RECEIVABLE 13,600,913 28,043,139 41,315,544
PROPERTY HELD FOR SALE 11,893,875 7,546,875 3,199,875
OTHER ASSETS
----------- ----------- -----------
$27,127,669 $40,512,920 $50,896,828
=========== =========== ===========
NOTES PAYABLE - CONSTRUCTION DEBT 0 0 0
NOTES PAYABLE - HYPO BORROWINGS 9,950,850 18,385,453 23,700,535
----------- ----------- -----------
9,950,850 18,385,453 23,700,535
EQUITY 17,176,819 22,127,468 27,196,293
----------- ----------- -----------
$27,127,669 $40,512,920 $50,896,828
=========== =========== ===========
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
NOTES RECEIVABLE
YEAR 1 YEAR 2 YEAR 3
----------- ----------- -----------
BEGINNING BALANCE 0 13,600,913 28,043,139
NOTES GENERATED (A) 14,175,000 16,200,000 16,200,000
PRINCIPAL COLLECTIONS (574,088) (1,757,774) (2,927,594)
----------- ----------- -----------
ENDING BALANCE 13,600,913 28,043,139 41,315,544
=========== =========== ===========
COLLECTIONS 1,701,000 5,208,219 8,674,353
LESS: INTEREST INCOME PORTION 1,126,913 3,450,445 5,746,759
15.90%
PRINCIPAL COLLECTIONS 574,088 1,757,774 2,927,594
=========== =========== ===========
(A) ASSUMES 20% CASH SALES, 80% FINANCED SALES WITH 10% DOWN PAYMENT
INTEREST EXPENSE
NOTES RECEIVABLE BEG BALANCE 0 13,600,913 28,043,139 0
NOTES RECEIVABLE ENDING BALANCE 13,600,913 28,043,139 41,315,544 0
----------- ----------- ----------- -----------
13,600,913 41,644,051 69,358,683 0
2 2 2 2
----------- ----------- ----------- -----------
AVERAGE BALANCE 6,800,456 20,822,026 34,679,341 0
PORTION BORROWED AGAINST 90.00% 90.00% 90.00% 90.00%
ADVANCE RATE 90.00% 90.00% 90.00% 90.00%
----------- ----------- ----------- -----------
AVERAGE ADVANCE AMOUNT 5,508,370 16,865,841 28,090,267 0
BEGINNING BORROWING BALANCE 0 9,950,850 18,385,453 23,700,535
CURRENT YEAR ADVANCES 11,481,750 13,122,000 13,122,000 0
CUSTOMER REPAYMENTS (1,530,900) (4,687,397) (7,806,918) 0
(EXCLUDES IN HOUSE) 10%
----------- ----------- ----------- -----------
ENDING BALANCE 9,950,850 18,385,453 23,700,535 23,700,535
INTEREST RATE 10.90% 10.90% 10.90% 10.90%
----------- ----------- ----------- -----------
INTEREST EXPENSE 542,321 1,544,329 2,293,686 2,583,358
=========== =========== =========== ===========
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
FINANCING
YEAR 1 YEAR 2 YEAR 3
---------- ---------- ----------
PARTNER DISTRIBUTIONS
SAN XXXXXX PARTNERS:
ANNUAL EQUIVALENTS SOLD (TOTAL) 1,575 1,800 1,800
SAN XXXXXX PERCENTAGE INTEREST 23.00% 23.08% 23.08%
PRODUCT COST 2,415 2,415 2,415
NET INCOME 4,457,529 6,346,617 7,893,573
PRODUCT COST DISTRIBUTION (ANNUAL) 877,760 1,003,154 1,003,154
PRODUCT COST DISTRIBUTION X2 1,755,519 2,006,308 2,006,308
PRODUCT COST DISTRIBUTION x l/2 438,880 501,577 501,577
PRODUCT COST DIST/INTERVAL 557 557 557
PRODUCT COST DIST/INTERVAL X2 1,115 1,113 1,115
PRODUCT COST DIST/INTERVAL X1/2 279 279 279
PROFIT DISTRIBUTION (ANNUAL) 1,026,660 1,464,604 1,821,594
PROFIT DISTRIBUTION X 2 2,057,321 2,929,208 3,643,187
PROFIT DISTRIBUTION X l/2 514,330 732,302 910,707
BEGINNING CUMULATIVE DISTRIBUTION 0 2,978,210 4,374,178 0
CURRENT YEAR DISTRIBUTIONS (ASSUMES SALES AND PROFITS
EARNED RATABLY OVER YEAR):
PRODUCT COST DISTRIBUTION X 2 1,243,142 0 0 1,243,142
PROFIT DISTRIBUTION X 2 1,456,858 0 0 1,456,858
---------- ---------- ---------- ----------
2,700,000 0 0 2,700,000
70.81% 0.00% 0.00%
PRODUCT COST DISTRIBUTION X l/2 128,094 435,687 0 563,781
PROFIT DISTRIBUTION X 1/2 150,116 636,103 0 786,219
---------- ---------- ---------- ----------
278,210 1,071,790 0 1,350,000
86.86% 0.00%
PRODUCT COST DISTRIBUTION 0 131,780 1,003,154 1,134,933
PROFIT DISTRIBUTION 0 192,398 1,821,594 2,013,992
---------- ---------- ---------- ----------
0 324,178 2,824,748 3,148,925
---------- ---------- ---------- ----------
ENDING CUMULATIVE DISTRIBUTIONS 2,978,210 4,374,178 7,198,925 7,198,925
---------- ---------- ---------- ----------
NOTE 1: MODEL DOES NOT REFLECT THE INTEREST PAYABLE BY SAN XXXXXX PARTNERS ON OUTSTANDING ADVANCES.
NOTE 2: MODEL DOES NOT REFLECT INTEREST ARBITRAGE OR SALES BEYOND THE THREE YEAR MODEL PERIOD.
NOTE 3: MODEL DOES NOT REFLECT THE MAINTENANCE FEE DISTRIBUTIONS PAYABLE TO SAN XXXXXX PARTNERS.
PROOF:
STRAIGHT PERCENTAGE DISTRIBUTION 1,906,420 2,467,758 2,824,748 7,198,925
OVER (UNDER) ADVANCED 1,071,790 (1,071,790) 0 0
BEGINNING ADVANCES 0 1,071,790 0 0
CURRENT YEAR ADVANCES
PRODUCT COST DISTRIBUTION X 2 621,571 621,571
PROFIT DISTRIBUTION X 2 726,429 726,429
CURRENT YEAR REPAYMENTS
PRODUCT COST DISTRIBUTION X 1/2 (126,094) (435,687) (563,781)
PROFIT DISTRIBUTION X 1/2 (150,116) (636,103) (786,219)
---------- ---------- ---------- ----------
ENDING ADVANCES 1,071,790 0 0 0
========== ========== ========== ==========
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
TIMESHARE INVENTORY
TOTAL
------------
NUMBER VALUE
ILX RESORTS INTERVALS 5,000 $ 2,415 $ 12,075,000
SAN XXXXXX INTERVALS 1,500 $ 2,415 3,622,500
------------
6,500
------------
TOTAL INVENTORY (PRODUCT) COST 15,697,500
------------
PROPERTY HELD FOR SALE
------------
BEG BALANCE 0 11,893,875 7,546,875
ACQUISITIONS 15,697,500
COST OF SALES TIMESHARE (3,803,625) (4,347,000) (4,347,000)
------------ ------------ ------------
ENDING BALANCE 11,893,875 7,546,875 3,199,875
============ ============ ============
COST OF SALES
-------------
TOTAL COST $ 15,697,500
COS AS % OF REVENUE 19.32%
28-May-98 PREMIERE VACATION CLUB Exhibit B
PRO FORMA FINANCIAL STATEMENTS
TIMESHARE REVENUE AND PRODUCT COST
YEAR 1 YEAR 2 YEAR 3
----------- ----------- -----------
TIMESHARE SALES - PRICES
ANNUAL EQUIVALENTS $ 12,500 $ 12,500 $ 12,500
=========== =========== ===========
NUMBER OF SALES PER MONTH
MONTH 1 100 150 150
MONTH 2 100 150 150
MONTH 3 100 150 150
MONTH 4 125 150 150
MONTH 5 125 150 150
MONTH 6 125 150 150
MONTH 7 150 150 150
MONTH 8 150 150 150
MONTH 9 150 150 150
MONTH 10 150 150 150
MONTH 11 150 150 150
MONTH 12 150 150 150
----------- ----------- -----------
1,575 1,800 1,800
=========== =========== ===========
TIMESHARE REVENUE $19,687,500 $22,500,000 $22,500,000
(PRICE TIMES NUMBER OF SALES) =========== =========== ===========
PRODUCT COST $ 3,803,626 $ 4,347,000 $ 4,347,000
2,415 PER WEEK =========== =========== ===========
INVENTORY AVAILABLE END OF YEAR 4,925 3,125 1,325
=========== =========== ===========
Exhibit C
PREMIERE VACATION CLUB
Prime Season High Season
Program Unit Type Annual $ Biennial $ Annual $ Biennial $
------- --------- -------- ---------- -------- ----------
Platinum Penthouse 24,900 16,400
Gold Two Bedroom 18,900 12,900 15,900 10,400
Silver One Bedroom 12,900 8,400 9,900 6,900
Copper Studio 9,900 6,400 7,900 5,400
Maintenance fees
----------------
Platinum $525.00 $262.50
Gold $425.00 $212.50
Silver $375.00 $187.50
Copper $325.00 $162.50
Exhibit D
PREMIERE VACATION CLUB
1996 BUDGET
TOTAL BY MEMBERSHIP TYPE
------------- -------------------------------------------------------------
SALARY RELATED EXPENSES COPPER SILVER GOLD PLATINUM
----------------------- ------------- ------------- ------------- -------------
HOUSEKEEPING/MAIDS/LAUNDRY $215,000 33.89 42.36 50.64 63.55
FRONT DESK/RESERVATIONS/PBX 112,500 22.50 22.50 22.50 22.50
REPAIRS AND MAINTENANCE 125,000 19.70 24.63 29.56 36.95
MANAGEMENT/ACCOUNTING/HUMAN RESOURCES 250,000 50.00 50.00 50.00 50.00
PAYROLL TAXES AND BENEFITS 112,400 22.70 25.11 27.52 31.14
------------- ------------- ------------- ------------- -------------
TOTAL SALARY RELATED EXPENSE 814,900 148.79 164.60 180.42 204.13
------------- ------------- ------------- ------------- -------------
GENERAL EXPENSES
----------------
UTILITIES/TELEPHONE 250,000 39.41 49.26 59.11 73.89
REPAIRS AND MAINTENANCE 125,000 19.70 24.63 29.56 36.95
INSURANCE 55,000 8.67 10.84 13.00 16.26
PROPERTY TAXES 125,000 19.70 24.63 29.56 35.95
OPERATING SUPPLIES 90,000 14.19 17.73 21.28 26.60
GUEST SUPPLIES/LINENS 100,000 15.76 19.70 23.65 29.56
ALL OTHER 145,000 22.86 28.57 34.29 42.86
------------- ------------- ------------- ------------- -------------
TOTAL GENERAL EXPENSES 890,000 140.30 175.37 210.44 263.05
------------- ------------- ------------- ------------- -------------
RESERVES 225,000 35.47 44.33 53.20 66.50
------------- ------------- ------------- ------------- -------------
MANAGEMENT FEE 214,433 36.06 42.70 49.34 59.30
------------- ------------- ------------- ------------- -------------
$ 2,144,333
=============
TOTAL PER INTERVAL 360.62 427.01 493.40 592.99
DEVELOPER SUBSIDY 35.62 52.01 68.40 67.99
------------- ------------- ------------- -------------
EVERY YEAR OWNER DUES $ 325.00 $ 375.00 $ 425.00 $ 525.00
============= ============= ============= =============
ALTERNATE YEAR OWNER DUES (i) $ 187.50 $ 212.50 $ 237.50 $ 287.50
============= ============= ============= =============
(1) Alternate year owners pay this amount every year. Thus, when their year of
use arrives, they will have paid the full dues amount for their year of use.
28-May-98 PREMIERE VACATION CLUB
PRO FORMA FINANCIAL STATEMENTS
CASH FLOW STATEMENT
YEAR 1 YEAR 2 YEAR 3 TOTAL
------------ ------------ ------------ ------------
CASH FLOW FROM OPERATIONS
NET INCOME $ 4,457,529 $ 6,346,617 $ 7,893,573 $ 18,697,718
ADD NON CASH:
COST OF SALES - TIMESHARE 3,803,625 4,347,000 4,347,000 12,497,625
------------ ------------ ------------ ------------
CASH FLOW FROM OPERATIONS 8,261,154 10,693,617 12,240,573 31,195,343
------------ ------------ ------------ ------------
CASH FLOW FROM FINANCING
CONSTRUCTION BORROWING 0 0 0 0
RELEASE PAYMENTS 0 0 0 0
TIMESHARE PAPER GENERATED (14,175,000) (16,200,000) (16,200,000) (46,575,000)
BORROWING AGAINST TIMESHARE PAP 11,481,750 13,122,000 13,122,000 37,725,750
PRINC COLL ON CUST NOTES 574,088 1,757,774 2,927,594 5,259,456
APP OF CUSTOMER PYMTS (1,530,900) (4,687,397) (7,806,918) (14,025,215)
------------ ------------ ------------ ------------
CASH FLOW FROM FINANCING (3,650,063) (6,007,623) (7,957,324) (17,615,009)
------------ ------------ ------------ ------------
CASH FLOW FROM INVESTING
DISTRIBUTIONS TO SAN XXXXXX (2,978,210) (1,395,968) (2,824,748) (7,198,925)
PARTNERS 0
0
0
0
------------ ------------ ------------ ------------
CASH FLOW FROM INVESTING (2,978,210) (1,395,968) (2,824,748) (7,198,925)
------------ ------------ ------------ ------------
NET CASH FLOW 1,632,881 3,290,026 1,458,501 6,381,408
------------ ------------ ------------ ------------
BEGINNING CASH 0 1,632,881 4,922,907 0
------------ ------------ ------------ ------------
ENDING CASH AVAILABLE TO OTHER PARTN $ 1,632,881 $ 4,922,907 $ 6,381,408 $ 6,381,408
============ ============ ============ ============
