Exhibit 10-1
SECURED LINE OF CREDIT
LENDING AGREEMENT
(ILX Resorts Incorporated-Global Facility)
THIS SECURED LINE OF CREDIT LENDING AGREEMENT ("Agreement") is dated
this 12th day of June, 1998, and is entered into by and between ILX RESORTS
INCORPORATED, an Arizona corporation, LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership, and PREMIERE DEVELOPMENT
INCORPORATED, an Arizona corporation, having their principal places of business
at 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 (collectively,
"Borrower"), and LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
having its western division offices at 00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxx 00000 ("Lender"), under the following facts:
RECITALS:
WHEREAS, the Borrower is the owner, developer and marketer of that
certain timeshare development projects located in the states of Arizona,
Colorado and Indiana; and
WHEREAS, the Borrower owns and will subsequently be generating
portfolios of purchase money receivables originated from its timeshare sales
operations which it desires to pledge to Lender, along with other collateral as
is more fully described herein, which shall serve to secure Borrower's repayment
of a loan of even date herewith to be advanced by Lender; and
WHEREAS, the parties hereto desire to be legally bound by the terms and
conditions of this Agreement along with all exhibits attached hereto and related
contractual agreements referenced herein, the terms and conditions of which are
incorporated herein by this reference;
NOW, THEREFORE, for and in consideration of the foregoing Recitals, and
the covenants and agreements hereinafter set forth and other good and valuable
consideration, the legal adequacy and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree:
1. DEFINITIONS.
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In addition to the definitions set forth in the introductory
paragraphs, the following terms shall have the following meanings unless
otherwise agreed.
"Account" means each and every promissory note, installment land sales
contract, or other evidence of indebtedness, along with all security of whatever
nature securing the repayment of same including, without limitation, all deeds
of trust, mortgages and/or other debt securing instruments executed by any
Account Debtor, which is originated by Borrower in connection with its
development and sale of Timesharing Interests to Account Debtors within the
Project at retail and in Borrower's ordinary course of business.
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of an Account whether as the maker thereof
or as a guarantor thereto.
"Advance" means each and every advance of principal by Lender to
Borrower.
"Amortization Period" means that period of time which begins after the
expiration of the Borrowing Period during which all Obligations shall be repaid
in sixty (60) equal and fully amortizing monthly installments, with the first
such installment becoming due and payable one month after the expiration of the
Borrowing Period and with successive installments becoming due and payable
monthly thereafter until all Obligations hereunder are paid in full; provided,
however, that all Obligations owing hereunder, if not paid sooner, shall
immediately become due and payable in full on or before the Maturity Date.
"Borrowing Base" means an amount equal to ninety percent (90%) of the
then unpaid total aggregate outstanding principal balance of all Qualified
Pledged Accounts.
"Borrowing Period" means the forty-eight (48) month period following
the Closing Date.
"Business Day" means any day which is not a Saturday, Sunday or other
day on which national banks are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Club" means the Premiere Vacation Club, an Arizona nonprofit
corporation, which is the owner of certain Timesharing Interests located within
the Project and which allows for the use of said Timesharing Interests on a
first come, first served membership basis.
"Collateral" means the Pledged Accounts; the Credit Agreement;
Borrower's books and records as they pertain to the Pledged Accounts; all other
collateral referenced in the Credit Agreement; and the proceeds and products,
whether tangible or intangible, of any of the foregoing.
"Collateral Assignment of Management, Marketing and Exchange Contracts"
means that agreement executed by Borrower in favor of Lender in which Borrower
collaterally assigns to Lender all of the Borrower's rights, title and interest
in and to the management, marketing and exchange contracts which Borrower has
executed regarding the operation, management and administration of the Project.
"Collateral Assignment of Deeds of Trust" means that agreement executed
by Borrower in favor of Lender in which Borrower collaterally assigns to Lender
all of the Borrower's rights, title and interest in and to those deeds of trust,
mortgages or debt securing instruments which secure repayment of the Pledged
Accounts.
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"Collateral Assignment of Promissory Notes" means that agreement
executed by Borrower in favor of Lender in which Borrower collaterally assigns
to Lender all of the Borrower's rights, title and interest in and to the Pledged
Accounts.
"Credit Agreement" collectively means all agreements executed by and
between Lender and Borrower pertaining to the establishment of the lending
relationship described herein, including, without limitation, the Secured Line
of Credit Lending Agreement, Line of Credit Note, Pledge and Security Agreement,
Collateral Assignment of Promissory Notes, Collateral Assignment of Deeds of
Trust, Collateral Assignment of Management, Marketing and Exchange Contract,
Custodial Agreement, Servicing Agreement, and Escrow Agreement.
"Custodial Agreement" means that agreement of even date herewith which
has been executed by the Borrower and the Lender and the Custodian.
"Custodian" means that party designated as such in the Custodial
Agreement.
"Cut-Off Date" means ________________________ , 1998.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"Delinquent Account" means any Pledged Account which is eighty-nine
(89) days or more contractually delinquent.
"End-Loan Documents" means those documents executed by Account Debtors
in connection with their purchase of Timesharing Interests at the Project and
their financing of the purchase prices thereof which include: (a) original
promissory note or contract for deed; (b) original deed of trust, mortgage or
debt securing instrument, if applicable; (c) copy of original public report
receipt; (d) proof of down payment; (e) servicing and delinquency accounting
records; (f) along with all other documents which Lender may reasonably request.
"Event of Default" means the occurrence of those events as are more
fully described in Paragraph 24, hereof.
"GAAP" mean generally accepted accounting principals as in effect from
time to time in the United States, consistently applied.
"Hazardous Materials" means (a) those substances as defined as
"hazardous substances," "hazardous materials," "toxic substances," or "solid
waste" in CERCLA, RCRA, and the Hazardous Materials, Transportation Act, 49
U.S.C. Section 1801 et. seq., and in the regulations promulgated pursuant
thereto; (b) those substances designated as a "hazard substance" under or
pursuant to the Federal Water Pollution Control Act, 33 U.S.C. ss. 1257, et
seq., and in the regulations promulgated pursuant thereto; (c) those substances
listed in the United States Department of Transportation Table (40 CFR 172.101
and amendments thereto) or by the Environmental Protection Agency (or any
successor agency) as hazardous substances (40 CFR Part 302 and amendments
thereto); and (d) such
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other substances and materials which are classified as hazardous or toxic under
any local, state or federal statute, rule or regulation of any nature.
"Lender Expenses" means costs or expenses (including taxes,
photocopying, notarization, telecommunication and insurance premiums) required
to be paid by Borrower under the Credit Agreement that are paid or advanced by
Lender; documentation, filing, recording, publication, appraisal, lock box,
custodial, loan servicing fees paid to Servicer; costs and expenses incurred by
Lender in the disbursement of funds or incurred by Lender resulting from the
dishonor of checks; costs and expenses paid or incurred by Lender to correct any
default or enforce any provision of the Credit Agreement, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising the Collateral for sale, regardless of
whether a sale is consummated; costs incurred by Lender in connection with
work-out, restructuring or related discussions or litigation incurred in
connection with the enforcement of Lender's rights hereunder and the protection
and liquidation of the Collateral; costs and expenses paid or expenses of third
party claims or any other suit paid or incurred by Lender in enforcing or
defending the Credit Agreement; and Lender's reasonable attorney's fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorney's fees and expenses
incurred in connection with a "workout," a restructuring, or an insolvency
proceedings concerning Borrower or any guarantor of the Obligations), defending,
or concerning the Credit Agreement, irrespective of whether suit is brought.
Provided, however, in all instances, Lender Expenses shall be limited to
reasonable expenses which are reasonably necessitated by Lender's transactions
with Borrowers or as may otherwise be required in order to protect Lender's
rights in and to the Collateral.
"Line of Credit Note" means that promissory note in the original face
amount of Forty Million Dollars ($40,000,000) of even date herewith which
evidences certain of the Obligations associated with the Credit Agreement and
which provides for the manner of the repayment of the principal, interest, fees
and other sums evidenced thereby.
"Maturity Date" means that date which is one hundred and eight (108)
months from and after the date of the Line of Credit Note.
"Maximum Line Amount" means the sum of Forty Million Dollars
($40,000,000).
"Obligations" means all loans, advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), premiums, liabilities (including all amounts charged to
Borrower's loan account pursuant to any agreement authorizing Lender to charge
Borrower's loan account), obligations, fees (including pre-payment
entitlements), lease payments, guarantees, covenants, and duties owing by
Borrower to Lender of any kind and description (whether pursuant to or evidenced
by the Credit Agreement, Line of Credit Note, or by any instrument, or pursuant
to any other agreement between Lender and Borrower, and irrespective of whether
for the payment of money), whether direct of indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to third parties that Lender may
have obtained by assignment or otherwise, and
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further including all interest not paid when due and all Lender Expenses that
Borrower is required to pay or reimburse pursuant to the Line of Credit Note,
the Credit Agreement, by law, or otherwise.
"Person" means and includes natural persons, limited liability
companies, corporations, limited partnership, general partnership, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Pledge and Security Agreement" means that agreement executed by the
Borrower in favor of the Lender pursuant to which the Borrower shall grant to
Lender a first and priority security interest in and to the Pledged Accounts and
the Collateral.
"Pledged Accounts" means each and every Account which is delivered to
Lender pursuant to the terms of this Agreement.
"Project" collectively means Los Abrigados Resort & Spa in Sedona,
Arizona, The Inn at Los Abrigados in Sedona, Arizona, Xxxx'x Ranch Lodge in
Payson, Arizona, Golden Eagle Resort in Xxxxx Park, Colorado, Roundhouse Resort
in Pinetop/Lakeside, Arizona, Varsity Clubs of America -- South Bend and Varsity
Clubs of America -- Tucson, along with all Timesharing Interests which are
deeded to the Club and which form the basis of the Premiere Vacation Club
Membership Plan dated January 5, 1998, along with those other resort and Varsity
Clubs of America sites which Borrower may develop during the Borrowing Period
and which may be approved by Lender from time to time by means of subsequent
written agreement.
"Qualified Pledged Account" means those Pledged Accounts that meet the
criteria set forth in Paragraph 8, hereof.
"Reference Rate" shall mean that rate of interest which is designated
by the Wall Street Journal, Eastern Edition, as the nation's average "prime
interest" rate on corporate loans at large U.S. money center commercial banks.
If more than one rate is published by the Wall Street Journal as the "prime
rate," the highest of the published rates shall be used. Should the Wall Street
Journal cease reporting said rate of interest, then the Reference Rate shall be
deemed that rate of interest designated by Citibank, N.A. or its successors as
its "prime rate" of interest.
"Servicer" means Concord Servicing Corporation.
"Servicing Agreement" means any loan servicing agreement entered into
between Servicer, Borrower, and Lender respecting the agreement of Servicer to
serve as servicing agent for the Pledged Accounts.
"Timesharing Interest" means a legally identifiable undivided interest
in real property which is located within the Project, which is sold in a fee
simple manner to an Account Debtor or which has been subjected to those use
rights as set forth in the Club constituent documents and has been subjected to
a timeshare form of ownership and which vests in the Account Debtor the right to
use the overnight lodging and common area facilities of the Project for at least
seven (7) nights including
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a weekend on either an annual or biennial basis or which otherwise vests in the
Account Debtor overnight lodging and common area use rights for an alternative
period of time which Lender shall deem acceptable in Lender's sole discretion.
"Timesharing Interest Purchaser" means the purchaser of a Timesharing
Interest at the Project.
2. THE LOAN AND TERMS OF PAYMENT.
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A. Line of Credit Note. Upon Borrower's compliance with all
conditions precedent and terms and conditions as are set forth herein and in the
Credit Agreement, Lender hereby agrees to extend credit to Borrower in a
collective sum not to exceed Forty Million Dollars ($40,000,000). Concurrently
herewith, Borrower shall execute and deliver to Lender the Line of Credit Note
in the face amount of Forty Million Dollars ($40,000,000). The indebtedness
evidenced by the Line of Credit Note shall be paid by, among other sources, a
collateral assignment of the principal, interest, late charges and all other
sums payable from and on the Pledged Accounts and shall be secured by, among
other things, the Deed of Trust, and that other Collateral and security as is
more fully described in the Credit Agreement.
B. Term of Credit Facility. All Obligations outstanding hereunder
shall be due and payable at the Maturity Date, subject to earlier payment
through amortization, voluntary or mandatory call and/or acceleration as
provided in the Credit Agreement and in the Line of Credit Note. The Obligations
shall bear interest at the rate and pursuant to the terms and conditions of the
Line of Credit Note.
C. Advances of Principal. Subject to Borrower's compliance with
the required terms and conditions of the Credit Agreement, Lender, during the
Borrowing Period, agrees to make loans and advances of principal to Borrower
upon the pledge and physical delivery to Lender of Pledged Accounts by Borrower
so long as, and to the extent that, the Obligations outstanding (inclusive of
all Advances) do not exceed either the Borrowing Base or the Maximum Line
Amount. Advances made pursuant to this Paragraph 2 (D) shall not be made more
frequently than weekly, or in amounts less than $25,000 per Advance. Borrower
shall be allowed to reborrow principal during the Borrowing Period at an advance
rate, however, which shall not exceed ninety percent (90%) of the principal
amount of any Qualified Pledged Account which is pledged to Lender as collateral
for said reborrowing. Any reborrowings (those occurring after new borrowings
have first aggregated the Maximum Line Amount) shall not be subject to the
Origination Fee specified in Paragraph 2(G) below.
D. Maximum Line Amount. At no such time shall the collective
principal amount of all Advances exceed the Maximum Line Amount.
E. Interest Rates, Payment and Calculation. All Obligations shall
bear interest, on a 360 day basis in accordance with the terms and conditions of
the Line of Credit Note. Interest shall begin to accrue on the date of any and
all Advances hereunder.
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Interest hereunder shall be due and payable as provided in the
Line of Credit Note. Lender may charge such interest, all Lender Expenses (as
and when incurred), and all installments or other payments due hereunder or
under the Credit Agreement to Borrower's loan account, which amounts shall
thereafter accrue interest at the then applicable rate of interest. Any interest
not paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder.
In no event shall the interest rate or rates payable under the
Credit Agreement and the Line of Credit Note, plus any other amounts paid in
connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and Lender, in executing the Credit Agreement and the Line
of Credit Note, intend to legally agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that, anything contained
herein or in the Line of Credit Note to the contrary notwithstanding, if said
rate or rates of interest or manner of payment exceeds the maximum allowable
under applicable law, then, ipso facto as of the date of the Credit Agreement
and the Line of Credit Note, Borrower is and shall be liable only for the
payment of such maximum rate of interest as allowed by law, and payment received
from Borrower in excess of such legal maximum, whenever received, shall be
applied to reduce the principal balance of the Obligations to the extent of such
excess.
F. Crediting Payments; Application of Collections. On the Friday
of each week, commencing with the week following the week in which the Closing
Date occurred, Lender will apply 100% of the funds collected under all Pledged
Accounts as of said dates, first to any unpaid Lender Expenses, then to the
payment of accrued and unpaid interest and then to the reduction of the
principal balance of the Obligations. The crediting of collections against
Obligations outstanding shall not be considered a payment against the
Obligations unless any wire transfer is of immediately available federal funds
and is made to the appropriate deposit account of Lender or unless and until
such check or other item of payment is honored when presented for payment. Any
Account payments received directly by the Borrower shall be immediately
forwarded to the Lender. Should any check or item of payment not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly.
G. Origination Fee. In consideration for underwriting, due
diligence and credit analysis services rendered, Borrower covenants and agrees
to pay Lender an origination fee equal to one percent (1%) of each Five Million
Dollars ($5,000,000), or portion thereof, of principal advanced by Lender to
Borrower pursuant to the terms of the Line of Credit Note, it being understood
that Lender is authorized by Borrower to deduct this sum directly from any
Advance once the initial or any subsequent origination fee is earned if said sum
is not otherwise paid by Borrower. In illustration of the foregoing, Lender
shall be entitled to deduct $50,000 from the first advance of principal
hereunder as its origination fee associated with the first $5,000,000 tranche of
principal becoming subject to advance hereunder and Lender shall be entitled to
deduct $50,000 once any principal is advanced from each successive $5,000,000
tranche of successive principal becoming subject to advance hereunder. If not
otherwise paid in accordance with the procedure referenced above, the entire
origination fee, or portion thereof, of one percent (1%) of the Maximum Line
Amount shall be due and payable in full at the expiration of the Borrowing
Period. However, no Origination Fee
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is due for any $5,000,000 tranche not commenced. Conversely, the entire $50,000
increment is due for any $5,000,000 tranche commenced, but not completed.
3. CONDITIONS TO ADVANCES.
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Conditions to Advances. The obligation of Lender to make any
Advance is subject to the fulfillment, to the satisfaction of Lender and its
counsel, of each of the following conditions on or before the date of any
Advance:
(a) With respect to the initial Advance, all of those documents as
are more fully described on that closing agenda attached hereto as EXHIBIT A,
which collectively constitute and comprise portions of the Credit Agreement are
in form and substance satisfactory to Lender and shall have been duly executed
by all parties thereto, with the signatures properly notarized and the
instruments in proper form for recordation, as required, and shall have been
recorded and/or delivered to Lender or Lender's agent, as appropriate.
(b) All conditions set forth herein to the making of the initial
Advance shall have been satisfied on or before the Closing Date.
(c) All representations and warranties contained herein shall be
true and correct as of the date of the execution of the Credit Agreement, the
Closing Date and the date of Advance.
(d) Borrower shall have executed such certificates and resolutions
as are required by Lender and will perform such other acts as may be required to
perfect Lender's security interests in the Collateral.
(e) There shall be no Event of Default, then in existence, or any
event or occurrence which with notice, the passage of time or both, would
constitute an Event of Default.
(f) Lender reviewed and approved sufficient Pledged Accounts
complying with the requirements of Paragraph 8 herein to support the
contemplated Advance.
(g) Borrower shall have delivered and Lender shall have received
and approved all certificates, instruments and other additional documents and
assurances as Lender may reasonably require and shall have the on-going right to
receive all other documents from Borrower which Lender may reasonably require
and which shall be in furtherance of the intentions and goals of this agreement.
(h) Lender has or shall have received copies of articles of
partnership or incorporation of Borrower and a current Certificate of Good
Standing for Borrower issued by the appropriate governmental authority as well
as copies, if any, of Borrower's licenses or qualifications to do business.
(i) With regard to the initial Advance, Lender shall have received
an executed attorney opinion letter from legal counsel for Borrower in form and
substance satisfactory to Lender,
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addressed to Lender in form and scope satisfactory to Lender and covering such
matters relating to Borrower, the Pledged Accounts as Lender and its counsel in
their discretion may require.
(j) With regard to any subsequent Advance, if Lender has reason to
believe that any material change in any legal issue affecting the Project has
arisen, Lender shall have received a reaffirmation of the legal opinion issued
by Borrower's Counsel as of the Closing Date verifying that no changes in
condition to said opinion or the facts or legal conclusion referenced therein
have occurred.
(k) Lender shall have received satisfactory evidence that the
Pledged Accounts are (i) exempt from or in compliance with applicable statutes
and regulations governing the sale of timeshare interests or operation of
timeshare projects, or that the business of Borrower fully complies with all
such statutes and regulations, (ii) Borrower is in good standing with all
applicable governmental authorities, and (iii) the Pledged Accounts comply with
all applicable federal, state, and local statutes, regulations and ordinances.
(l) Lender shall have received and reasonably reviewed and
approved all documents relating to the sale of Timesharing Interests in the
Project including without limitation all regime documents and amendments
thereto, applicable state timeshare registrations, forms of sales contracts,
disclosure documents and property owner association constituent documents and
budgets.
(m) Lender or Escrow Agent shall have received the End-Loan
Documents with respect to each Pledged Account, which shall have been fully
executed by all applicable Account Debtors, and any cross-outs, erasures,
write-outs and modifications regarding any of the foregoing shall be initialed
by the Timeshare Purchaser.
(n) Borrower shall have provided Lender with evidence of insurance
in place in an amount sufficient to restore the improvements upon the property
constituting the Project to a usable state. At the time of execution hereof,
Lender acknowledges that Borrower has provided proof of insurance satisfying the
foregoing requirements.
(o) Borrower's net worth shall not decrease below $17,500,000.
(p) There shall have been no material adverse change or threatened
adverse change to the financial condition of Borrower nor shall there be any
material adverse change in Borrower's business operations or the Project.
(q) Lender shall have received verification that the Project
remains in continuing compliance with all local, state, and federal laws.
(r) Borrower shall have paid Lender all Lender's Expenses
including, without limitation, legal fees (but not more than $5,000 for such
fees, plus necessary costs incurred) and disbursements of Lender's counsel,
incurred by Lender in connection with the subject loan, and the preparation of
the Credit Agreement. Any unpaid reimbursement as provided in this paragraph may
be deducted by Lender from any Advance.
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(s) Borrower shall be in material compliance with all financial
and protective covenants and warranties and representations of every nature as
may be found in Borrower's lending agreements with third party lenders and
Borrower shall not be in material default in any term or condition of any other
agreement of whatever nature to which Borrower is a party.
(t) Lender must be satisfied that the Project is in complete
accordance with all applicable zoning requirements.
(u) Borrower shall demonstrate the existence of adequate
Timesharing Interest inventory so as to meet all demands for usage as required
by Account Debtors.
(v) During the term of the Credit Agreement, Borrower shall
maintain a debt to equity ratio of not greater than 7 to 1.
4. ADVANCES.
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Subject to the terms, limitations, and conditions herein, in the Credit
Agreement and in the Line of Credit Note, Lender agrees to advance funds to
Borrower as follows:
Procedures for Advances. Advances shall be made no more than
weekly in a minimum amount of $25,000 upon receipt by Lender of a written
request for an Advance from Borrower received by Lender at least five (5)
Business Days prior to the requested date of the Advance and Borrower's
compliance with all requirements as set forth herein and the satisfaction of all
criteria set forth herein regarding qualifying Accounts.
Principal of Note. Upon making an Advance or receiving a repayment
of principal or interest, Lender shall make such entries in its records as
Lender may deem necessary or appropriate to indicate the amount outstanding
under the Line of Credit Note and the Credit Agreement as adjusted for all
Advances hereunder. In the absence of manifest error, Lender's records shall be
conclusive proof of the amount outstanding, subject to rebuttal by Borrower.
5. SERVICER AND CUSTODIAN.
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Servicer. Servicer shall act as servicer of all Pledged Accounts.
The duties of the Servicer are set forth in the Servicing Agreement, which among
other things, shall limit the amount of servicing fees and costs which may be
imposed by Servicer.
Custodian. Lender shall serve as custodian of the Pledged Accounts
and all books and records pertaining thereto pursuant to the terms and
conditions of the Custodial Agreement.
6. (RESERVED)
7. SECURITY.
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As security to collateralize the Borrower's duty to pay and
perform all Obligations hereunder, Borrower shall and does hereby give and grant
to Lender:
(a) a first lien security interest in and to the Pledged
Accounts;
(b) a collateral assignment of all Pledged Accounts along with
corresponding deed of trust;
(c) a collateral assignment of all of Borrower's rights, title
and interest in and to all marketing, management, exchange and
related contracts in favor of Borrower or its affiliates and
otherwise associated with the Project;
(d) that other collateral and security which Lender may
reasonably require;
After the Closing Date, upon request by Lender, Borrower shall
grant to and in favor of Lender a security and collateral interest in the form
of a "surety" deed of trust in and to all or a portion, in Lender's discretion,
of The Inn at Los Abrigados and the 5000 Timesharing Interests currently owned
by Premiere Vacation Club (which number may be increased through amendment)
which shall be subordinate to the interests of Timesharing Interest Purchasers
and which shall otherwise contain nondisturbance provisions in favor of
Timesharing Interest Purchasers to the reasonable satisfaction of Borrower and
the Arizona Department of Real Estate. It is agreed that the form of said
instrument shall be similar to that form of surety deed of trust executed by
Borrower in favor of Lender in the Xxxx'x Ranch Lodge lending facility which was
entered into between the parties on or about June 27, 1997, which form will be
used as a general guide only in fulfilling the goals of this paragraph. At any
time and from time to time, the surety deed of trust will contain provisions to
automatically release a Timesharing Interest from the encumbrance of the surety
deed of trust upon the closing of a purchase by a Timesharing Interest Purchaser
so that no recording of a release, nor execution of any release document, is
necessary. If requested by Borrower, Lender will enter into inter-creditor pari
passu agreements with other lenders of Borrower which are fair and reasonable in
their terms and are not materially detrimental to Lender.
8. ELIGIBILITY OF ACCOUNTS.
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In order to be considered Qualified Pledged Accounts and therefore
subject to having the Borrowing Base applied thereto, an Account must meet the
following underwriting standards:
(a) The Account must relate to sale of fee simple Timesharing
Interests or the sale of Club membership interests in the Project to a citizen
of the United States or Canada. However, not more than five percent (5%) of the
Pledged Accounts may be from citizens of other countries if such Pledged
Accounts meet Lender's reasonable underwriting criteria;
(b) The Accounts must be fully amortizing and have an original
term of no more than eighty-four (84) months and a minimum cash (or other
immediate funds) down payment of ten percent (10%) or paid-in equity of ten
percent (10%), less closing costs; provided that fully amortizing Accounts
possessing an original term of eighty-five (8 5) to one hundred and twenty (
120)
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months or less are permissible so long as the monthly payments associated with
same or equal to or greater than $150. With regard to Accounts possessing a term
of eighty-four (84) or less months, then the minimum monthly installment payable
with regard thereto shall not be less than $80;
(c) At the time of any Advance, no installment on the Account may
be more than twenty-nine (29) days contractually past-due, unless waived by
Lender. Subsequent to any Advance, any Pledged Account will be considered
ineligible for Borrowing Base application should any scheduled monthly
installment become more than eighty-nine (89) days contractually past-due,
unless waived by Lender provided Lender shall accept previously delinquent
Accounts which have been reinstated by Borrower and have been amended, in
writing, to provide for the deferral of the delinquent payments to the end of
the contract payment obligation (thereby extending the term of said contract),
provided (a) such contract otherwise meets the requirements hereunder in
relation to an Advance; (b) the agreement of extension or modification must be
in writing and signed by the Account Debtor; (c) the Account Debtor has made the
three (3) successive payments immediately prior to submittal for Pledged Account
status and (d) such an extension accommodation has not been made between
Borrower and Account Debtor more than three (3) times during the life of the
Account.
(d) The maker or guarantor of the Account shall not claim a
defense, set-off or counterclaim with respect to the Account or dispute, contest
or repudiate its purchase of a Timesharing Interest;
(e) The repayment of the Account is secured and collateralized by
a deed of trust or assignment of contract for sale encumbering the Timesharing
Interest subject only to (i) the lien of real property taxes and assessments not
yet due or payable, and (ii) such other non-monetary exceptions to title as are
acceptable to the Lender;
(f) Lender is satisfied that all dwelling units and promised
Project amenities have been completed and are ready for occupancy and usage;
(g) All monies to be paid under and pursuant to the Account are to
be paid in United States Dollars;
(h) Borrower shall furnish to Lender an executed credit
application with respect to each Account submitted to Lender for underwriting,
and a credit report along with appropriate scoring matrix in that format that
Lender may reasonably request;
(i) Lender may reject any Account which, in its sole discretion,
reasonably fails to meet Lender's underwriting criteria and conditions;
j) All Timesharing Interests giving rise to Accounts to be
financed hereunder shall be located in buildings wherein the appropriate
governmental entity has issued a certificate of occupancy or similar document;
(k) The obligor's creditworthiness must be reasonably acceptable
to Lender;
12
(1) All monies to be paid under the pursuant to the accounts shall
be paid in United States Dollars; Pledged Accounts may be paid by automatic
debit to an Account Debtor's bank account;
(m) All Timesharing Interests giving rise to Accounts must have
been registered with and approved by all applicable regulatory entities and the
Project in which the Timesharing Interest is located along with all regime
documents pertaining thereto must have been reviewed and approved by Lender.
Should any Pledged Account become more than eighty-nine (89) days or
more contractually delinquent or fail to meet or to continue to meet the
above-noted eligibility criteria (an "Ineligible Account"), then the cumulative
principal of all Pledged Accounts to which the Borrowing Base is applied in
determining Borrower's prospective Advances hereunder shall be reduced by the
principal value of the Ineligible Account even if the Account had previously
qualified for inclusion in determining Advance availability.
9. WEIGHTED AVERAGE COUPON.
------------------------
The Pledged Accounts shall at all times possess and maintain a weighted
average coupon rate ("WAC") of not less than the interest rate set forth in the
Line of Credit Note plus 100 basis points. If the WAC requirements hereunder
become out of balance then Lender shall have the right to take any action with
regard to subsequently Pledged Accounts that it deems reasonable in order to
bring the Pledged Accounts into compliance with the WAC standard.
10. (RESERVED)
11. BORROWING PERIOD.
-----------------
During the Borrowing Period, payments of interest only at a minimum
shall be due and payable on the first (1st) day of the first month following the
Closing Date and on the first (1st) day of each month thereafter. All payments
received on the Pledged Accounts shall be applied first to amounts, fees, costs
and Lender Expenses due under the Credit Agreement, then to interest due
thereunder, then to principal due thereunder or, at the option of holder, to any
other indebtedness or Obligations owed by Borrower or its affiliates to Lender
or its affiliates. In the event the funds received by Lender from the Pledged
Accounts are less than the required monthly payment hereunder, Borrower shall
pay the difference within ten (10) days after notice. In the event that payments
received from and on the Pledged Accounts and forwarded to Lender exceed the
amount required to fund the then-due interest, the excess amounts and payments
shall be applied to reduce the principal outstanding under the Line of Credit
Note and this Credit Agreement.
12. EXTENSION OF BORROWING PERIOD.
------------------------------
Upon request of the Borrower, the Borrowing Period may be extended for
an additional period at Lender's sole discretion.
13
13. PRINCIPAL AMORTIZATION PERIOD.
------------------------------
Equal fully amortizing monthly payments of principal and interest shall
at a minimum be due and payable beginning on the first (1st) day of the first
month immediately following the end of the Borrower Period and monthly
thereafter during the Amortization Period. Lender shall provide Borrower with
notice of the amount of such installment payments. If not otherwise paid during
the Amortization Period, all Obligations outstanding under the Credit Agreement
and the Line of Credit Note shall be due and payable in full on or before the
Maturity Date. The minimum monthly payment during the Amortization Period shall
be an amount which will amortize the unpaid balance of the Obligations over the
Amortization Period. All payments received by Lender from and on the Pledged
Accounts shall be applied first to amounts, fees, costs and Lender Expenses due
under the Agreement, then to interest due hereunder, then to principal due
hereunder, or at the option of the holder, to any other indebtedness owed by
Borrower or its affiliates to Lender or its affiliates. In the event the funds
received by Lender from the Pledged Accounts are less than the required monthly
payment hereunder, Borrower shall pay the difference within ten (10) days after
notice.
14. VOLUNTARY PRE-PAYMENTS.
-----------------------
The Borrower is prohibited from prepaying principal during the Borrowing
Period. Thereafter, at any time and from time to time, subject to the following
prepayment fees, Borrower may prepay all or a portion of the Line of Credit Note
commencing upon the termination of the Borrowing Period and continuing for a
twelve (12) month period thereafter by tendering with such prepayment a
prepayment fee of three percent (3%) of the amount of the prepayment. Commencing
at the beginning of the thirteenth (13th) month after the termination of the
Borrowing Period and for a twelve (12) month period thereafter, any such
prepayment shall be accompanied by a prepayment fee of two percent (2%) of the
amount of the prepayment. Commencing at the beginning of the twenty-fifth (25th)
month after the termination of the Borrowing Period and continuing for a period
of twelve (12) months thereafter, any such prepayment shall be accompanied by a
prepayment fee of one percent (1%) of the amount of the prepayment. Thereafter,
there shall be no prepayment fee. In the event Borrower does not tender a
prepayment fee as required herein, Lender may deduct same from the amount of any
tendered prepayment and apply the remainder of the payment against the
Obligations owing under the Line of Credit Note and this Credit Agreement. Any
such prepayments shall not delay or reduce the next-due monthly installments.
The prepayment fees referenced herein are understood to compensate the Lender
for its costs associated with the Lender's commitment of funds and other
expenses associated with the providing of this credit facility to Borrower. The
prepayment penalties hereunder shall not apply to principal payments which are
collected by the Servicer through the natural payment or pre-payment of the
Pledged Accounts by the Account Debtors during the Borrowing Period or the
Amortization Period, nor shall it apply to the relocation of Pledged Accounts
from this credit facility to any other credit facility between Lender and
Borrower. Such prepayments on Pledged Accounts by Account Debtors shall apply to
Borrower's installments in the order of their maturity. Moreover, the prepayment
penalties hereunder shall not apply to prepayments from receivables
securitizations or other like financing proceeds so long as (a) Lender has been
engaged by Borrower to negotiate and effectuate the contemplated securitization
or other like financing, (b) the receivables which are the subject of the
contemplated securitization or other like financing are aged at least twelve
(12) months or more, and (c) at least Ten Million
14
Dollars ($10,000,000) of principal continues to be owed and outstanding under
this Agreement after the closing and funding of the contemplated securitization
or other like financing.
15. MANDATORY PREPAYMENT.
---------------------
Should the Obligations outstanding ever exceed the Borrowing Base, then
the Borrower shall be required within twenty (20) days after notice to pledge
additional eligible Accounts sufficient to reinstate the Borrowing Base to its
prescribed ratio. Borrower may also, or in the alternative, repay in cash an
amount equal to the deficit under the Borrowing Base. No prepayment fee will be
payable in connection with prepayments in such circumstances. Mandatory
prepayment shall also arise should an Event of Default occur hereunder. Upon the
occurrence of an Event of Default, all Obligations outstanding hereunder shall
immediately become due and payable.
16. CONFIRMATION AUDIT OF PLEDGED ACCOUNTS.
---------------------------------------
Lender shall have the right to audit the Pledged Accounts by
confirmatory letters at any time prior to or after the Closing Date. Lender
shall have the right to perform confirmatory telephone audits. Borrower agrees
to furnish or to cause Servicer to furnish Lender all information necessary for
Lender to conduct such audits and to fund all reasonable costs incurred by
Lender in performing such audits.
17. REPRESENTATIONS AND WARRANTIES.
-------------------------------
Borrower makes the following representations and warranties to Lender,
each of which shall be deemed made again as of the date of each and every
Advance:
(a) Borrower is a corporation or partnership, as the case may be, duly
organized, validly existing, and fully qualified and authorized to do business
in the State of Arizona; and Borrower and its business and operations are in
full compliance with all applicable federal, state and local laws, ordinances
and regulations. Borrower is governed by the terms of its Articles of
Incorporation or constituent documents, true copies of which have been delivered
to Lender. The Articles of Incorporation or constituent documents are in full
force and effect and have not been amended or modified in any manner, except as
indicated in the copies furnished to Lender. There is no agreement of any kind
other than as provided Lender which governs Borrower or the relative rights and
duties of the parties holding interests in Borrower.
(b) Borrower has taken all action to permit Borrower to enter into this
Agreement or any other agreement or transaction contemplated herein, and the
same is valid and binding upon Borrower. No officer or agent of Lender shall be
required to make any inquiry concerning the validity of any transaction
purported to be made by Borrower or the authenticity of any signature or
endorsements relating to same, and Lender may conclusively assume that every
obligation, agreement, instrument or act or thing done and executed by such
person purportedly on behalf of Borrower has been so executed or done in this
official capacity as an agent of Borrower.
15
(c) Borrower is not subject to any disciplinary actions or proceedings
by any governmental authority or trade organization with respect to any licenses
or permits held by Borrower.
(d) Borrower's execution, delivery and performance of this Agreement,
the Credit Agreement and the borrowing evidenced by the Line of Credit Note (i)
will not violate any indenture, agreement or any other instrument to which
Borrower is a party or by which Borrower or any of its property is bound; and
(ii) will not be in conflict with, result in a breach of or constitute (with due
notice and/or lapse of time) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of its property or assets, except
as contemplated by the provisions of this Agreement. Each of the documents which
collectively constitute the Credit Agreement, when executed and delivered to
Lender, will constitute the legal, valid and binding obligations of respective
signatories thereto enforceable in accordance with their terms.
(e) All financial data and other information of whatever nature that
have been given to Lender with respect to Borrower (i) is complete and correct
in all material respects and do not omit to state any material fact necessary in
order to make the statements herein or therein not misleading; and (ii)
accurately present the financial condition of Borrower as of the date on which
the same have been furnished. All balance sheets disclose all known liabilities,
direct and contingent, as of their respective dates. There has been no adverse
change in the financial condition of Borrower since the date of the most recent
of each such financial statement given to Lender other than changes in the
ordinary course of business, none of which changes has been materially adverse.
(f) The Borrower is not a party to any agreement or instrument
materially and adversely affecting its present or proposed business, properties
or assets, operations or condition, financial or otherwise; and is not in
material default in performance, observance or fulfillment of any of the
material obligations, covenants or conditions set forth in any agreement or
instrument to which it is a party.
(g) All other reports, papers, data and information given by Borrower to
Lender with respect to Borrower and other persons and entities, are accurate and
correct in all material respects and complete insofar as completeness may be
necessary to give Lender a true and accurate knowledge of the subject matters.
(h) Borrower has filed all required federal, state, county and municipal
income tax returns and has paid all taxes which have become due pursuant to such
returns or pursuant to any assessments received by it. Borrower knows of no
basis for a material additional assessment in respect of any such taxes.
(i) There is not now pending against or affecting Borrower nor to its
knowledge is there threatened any action, suit or proceeding at law or in equity
or by or before any administrative agency which, if adversely determined, would
materially impair or affect the financial condition or operation of Borrower.
16
(j) No authorization, consent, approval, license, exemption, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or securities exchange,
is or will be necessary to the validity of the rights created under this
Agreement.
(k) This Agreement, the documents relating thereto and all aspects of
the transactions contemplated therein do not violate any federal or state laws
or regulations, including without limitation laws or regulations relating to
usury and the Truth-in-Lending Act.
(l) Borrower has not made an assignment for the benefit of creditors;
has not suspended business or commenced proceedings for its dissolution; has not
filed bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings for relief under the bankruptcy laws for the
relief of debtors, instituted by or against it or has consented thereto; or has
any judgment, writ or warrant or attachment, or similar process, entered or
filed against it or any of its property or assets which renders it insolvent or
impairs its ability to continue doing business and which has remained unvacated,
unbonded or unstayed for a period of 30 days.
(m) Borrower has good and marketable legal title to and is the sole
owner of the Pledged Accounts and the Pledged Accounts are not subject to a
security interest or other claim from third parties, except as may be disclosed
to Lender in writing.
(n) The real property which is the subject of each Pledged Account is
free and clear from all material encumbrances which might have a substantive
negative impact upon the use of said real property as contemplated by the Credit
Agreement and, during the term of the Credit Agreement, shall remain free and
clear of all such material encumbrances.
(o) Borrower and the Project are in material compliance with all state
laws and regulations, concerning the operation of the Project from which the
Pledged Accounts arise and the sale of interests therein. The Project possesses
the presence of no Hazardous Materials to Borrower's knowledge nor is Borrower's
current or proposed operation of the Project likely to cause the production or
location upon the Project of Hazardous Materials. The Borrower's operations of
the Project and the Project's current status are all in accordance with all
state, federal or other environmental rules, regulations and laws of every
nature.
(p) Borrower is not insolvent nor has made an assignment for the benefit
of creditors; has not suspended business or commenced proceedings for
dissolution or become insolvent; has filed any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings for
relief under bankruptcy, insolvency or receivership laws for the relief of
debtors, instituted by or against it or has consented thereto; or has any
judgment, writ or warrant of attachment, or similar process, entered or filed
against it or any of its property or assets, which renders it insolvent or
impairs its ability to continue doing business and which has remained unvacated,
unbonded or unstayed for a period of 30 days; has generally not failed to pay
its debts as they become due; has not taken any action, nor has any intentions
to take any action, which would constitute an "act of bankruptcy" under the
Federal Bankruptcy Code or in contemplation thereof.
17
(q) The purpose of this transaction is exclusively for commercial or
business purposes.
(r) Borrower has (i) undertaken a detailed inventory, review and
assessment of all areas within its business operations that could be adversely
affected by the failure of Borrower to be year 2000 compliant on a timely basis,
(ii) developed a detailed plan and time line for becoming year 2000 compliant on
a timely basis and (iii) to date, implemented that plan in accordance with that
time table in all material respects. Borrower reasonably anticipates that it
will be year 2000 compliant on a timely basis.
(s) Borrower has made, or will make, written inquiry of each of its key
suppliers, vendors and customers as to whether such persons will, on a timely
basis, be year 2000 compliant in all material respects and on the basis of such
inquiry believes that all such persons will be so compliant, or Borrower
believes that such an inquiry is not necessary. For purposes hereof, "key
suppliers, vendors and customers" refers to those suppliers, vendors and
customers of Borrower whose business failure would, with reasonable probability,
result in a material adverse change in the business, properties, condition
(financial or otherwise), or prospects of Borrower.
(t) At the time of the execution of this agreement and throughout the
term of this credit facility, including any extensions hereto, Borrower shall at
all times maintain a ratio of at least one deeded, perpetual and unencumbered
Timesharing Interest per Club membership which has been sold to a third party
and is outstanding, all in accordance with the Club's recorded membership plan.
18. PROTECTIVE COVENANTS.
---------------------
So long as any of the Obligations remains unpaid, Borrower shall at all
times be in full and timely compliance with all of the following covenants and
perform all duties and obligations set forth below in a timely manner:
(a) The Borrower shall at all times insure that the Project and the
Pledged Accounts are in material compliance with all laws, rules and regulations
of whatever nature associated with the Borrower's operation of the Project and
its sale of Timesharing Interests or Club memberships therein including, without
limitation, all laws pertaining to timeshare sales and marketing activities, the
providing of consumer credit to third parties, the manner in which real property
transactions are closed, and all other laws and regulations that serve as a
condition to or might otherwise have a negative impact upon the enforceability
of the Pledged Accounts as represented in the Credit Agreement.
(b) True and correct pro-forma copies of all end-loan consumer documents
which pertain to the sale of Timesharing Interests or Club memberships in and to
the Project have been presented to the Lender for review prior to the date
hereof. All such documents are and will always be in complete compliance with
all rules and regulations applicable thereto and will continue to so remain in
compliance during the term of the Credit Agreement.
(c) The Borrower shall comply with the requirement of all applicable
laws, rules, regulations and orders of any governmental authority, including,
without limitation, applicable usury laws, Truth-
18
in-Lending laws, subdivisions law, consumer credit laws, Timesharing Interest
sales and registration laws and the Interstate Land Sales Full Disclosure Act.
(d) The Borrower shall keep adequate records and books of account
reflecting all financial transactions in conformity with (i) generally accepted
accounting practices applied on a consistent basis, and (ii) all applicable
requirements of any governmental agency having jurisdiction over Borrower or any
of its businesses.
(e) Borrower acknowledges that the placement of any additional liens
upon the Pledged Accounts described in the Credit Agreement may impair the
ability of Lender to obtain assurance that its security interest remains in a
prior position and that the Obligations will be repaid in accordance with the
Credit Agreement. Accordingly and to facilitate the purposes of this Agreement
and to avoid causing damage to Lender, Borrower agrees that it shall not create
or suffer to be created any additional lien upon any of the Pledged Accounts
without Lender's prior written consent which will not be unreasonably withheld.
(f) Upon the request of Lender, the Borrower shall execute or cause the
execution, acknowledgment and delivery of such further instruments (including,
without limitation, declarations of no set-off) and do such further acts as may
be necessary, desirable or proper to carry out more effectively the purposes of
this Agreement or the other Credit Agreement.
(g) The Borrower shall not take any action with respect to any of the
security for the Obligations held by Lender from time to time which is
inconsistent with the provisions and the purpose of this Agreement or which
would materially and adversely affect the rights of Lender under the Credit
Agreement.
(h) Lender shall have the right to make reasonable periodic audits of
Borrower's books and records and those of the Project, and to verify the Pledged
Accounts, with Lender's reasonable expenses to be reimbursed by Borrower.
(i) Borrower shall not use Lender's name, or the name of any of Lender's
affiliates, in connection with its business activities, except as necessary in
Borrower's dealing with governmental agencies, financial institutions, and
Borrower's internal business matters.
(j) Borrower shall supply Lender on a monthly basis with all forms of
Timeshare Interest inventory reconciliation reports as Lender may reasonably
require to insure that Borrower's Pledged Accounts are consistent with its
available and unencumbered sales inventory and so as to insure that Borrower's
Club membership sales are consistent with the provisions of paragraph 17(t)
hereof.
(k) Borrower shall provide Lender with a schedule of all proposed
Accounts which may be subject to a contemplated Advance hereunder at least five
(5) Business Days prior to the date of the contemplated Advance.
(1) Borrower or Servicer shall furnish and deliver to Lender within five
(5) days after the end of each month a detailed trial balance of the collection
and accounting status of each Pledged Account
19
which shall contain a monthly delinquency report, a cash transactions report, a
collections report, and all other reports as Lender may request, all in form
acceptable to the Lender.
(m) Borrower shall submit to Lender at least annually and as otherwise
requested by Lender a detailed annual operating budget for the Project and
financial statements regarding the operations of the Project's property owners
associations, certified by an appropriate officer of Borrower.
(n) Borrower shall take all steps necessary in order to insure that its
data processing, management information and related computer systems are year
2000 compliant and are otherwise in accordance with year 2000 policies and
procedures which are routinely observed by publicly traded corporations.
(o) Borrower shall at all times pay all personal and real property taxes
of whatever nature which are applicable to the Project and shall, moreover, at
all times insure that the Project carries liability and casualty insurance in
amounts which Lender deems reasonable based upon objective industry standards.
Borrower shall provide Lender with proof of payment of all real and personal
property taxes applicable to the Project on an annual basis upon request, and
shall additionally upon request, provide Lender with a certificate of insurance
from a nationally recognized insurance company certifying the existence of the
required casualty and liability insurance, which without request shall
additionally specify Lender as a co-insured and co-loss payee thereon.
19. FINANCIAL STATEMENTS; REPORTS AND TAX RETURNS.
----------------------------------------------
Accountings, Tax Returns and Financial Statements. Borrower shall
deliver to Lender: (a) monthly sales and cancellation reports, (b) quarterly
financial statements within forty-five (45) days after the end of each fiscal
quarter, (c) annual audited consolidated financial statements for ILX Resorts
Incorporated within ninety (90) days after the end of each fiscal year, and (d)
such other information as Lender might reasonably request from time to time.
With regard to internally generated reports, all shall be certified by
Borrower's chief financial officer as being true and correct.
20. AUDIT.
------
Lender shall have the right to inspect and/or audit Borrower's books and
records at Borrower's place of business during business hours upon ten (10) days
notice to Borrower.
21. TIMESHARING INTEREST SALES PRICE LIST.
--------------------------------------
Borrower shall, upon request, provide to Lender quarterly current
Timesharing Interests sales price list, and minimum sales prices regarding the
sale of Timesharing Interests to third party retail purchasers.
22. SERVICING REPORTS.
------------------
Servicer and/or Borrower shall provide Lender upon request by Lender
with copies of all reports produced by Servicer with respect to the Pledged
Accounts.
20
23. CROSS-DEFAULT.
--------------
Any defaults under the Credit Agreement, Line of Credit Note, Secured
Line of Credit Lending Agreement (ILX Incorporated) dated April 9, 1996,
$2,000,000 Secured Line of Credit Promissory Note dated April 9, 1996,
Receivables Sale and Purchase Agreement dated February 19, 1997, $1,500,000
Secured Term Promissory Note dated June 27, 1997, $5,000,000 Secured Line of
Credit Promissory Note dated June 27, 1997, Secured Line of Credit Lending
Agreement (ILX Incorporated -- Xxxx'x Ranch Lodge Facility) and all documents
referenced therein or pertaining thereto which have been previously executed by
and between Lender and Borrower, or any other obligation from Borrower or its
affiliates to Lender or its affiliates shall be deemed to constitute and
comprise an Event of Default hereunder and a default under any and/or all of the
other loans or agreements with Lender or its affiliates and any collateral under
any or all of the above shall be deemed to be collateral for the others. Lender,
at its option may exercise any of its rights and remedies under these agreements
to cure a default under any of the agreements, including but not limited to
retention of and/or application of payments on the Pledged Accounts, and/or any
other collateral.
24. DEFAULT.
--------
The occurrence of any one or more of the following events and/or
occurrences shall constitute an "Event of Default" hereunder:
(a) Default in the performance of any obligation by Borrower under the
Line of Credit Note, this Secured Line of Credit Lending Agreement, or any of
the documents which constitute the Credit Agreement, whether or not such default
is with respect to the payment of money or otherwise;
(b) Borrower's failure to comply with the provision of any financial
covenant or any other covenant, condition or obligation contained in the Credit
Argument;
(c) Any warranty or representation contained herein at any time proves
to be false or misleading in any material respect;
(d) The levy of an attachment, execution or other such process against
Borrower's property or any of its assets with respect to a claim or claims
aggregating $100,000 or more and the failure by Borrower to obtain the discharge
thereof or provide adequate bond acceptable to Lender as security therefor
within 30 days after attachment;
(e) Default in the performance of any other obligation of Borrower to
Lender under any other agreement between Borrower and Lender;
(f) Borrower's entry into or granting of a general assignment for the
benefit of its creditors, the voluntary or involuntary appointment of a receiver
for all or substantially all of its assets, Borrower's bankruptcy or Borrower
admits in writing its inability to make payments on its debts as they mature;
21
(g) The occurrence of any material adverse change in the financial
conditions or operations of Borrower;
(h) The occurrence of a default in the performance of any other payment
obligation of Borrower, whether owed to Lender or any other person, firm, or
entity, which default gives rise to a liability of $100,000 or more, which
obligation is not contested or defended by Borrower in good faith;
(i) The occurrence of a monetary or non-monetary event of default under
the Secured Line of Credit Lending Agreement (ILX Incorporated) dated April 9,
1996, $2,000,000 Secured Line of Credit Promissory Note dated April 9, 1996,
Receivables Sale and Purchase Agreement dated February 19, 1997, $1,500,000
Secured Term Promissory Note dated June 27, 1997, $5,000,000 Secured Line of
Credit Promissory Note dated June 27, 1997, Secured Line of Credit Lending
Agreement (ILX Incorporated -- Xxxx'x Ranch Lodge Facility) and all documents
referenced therein or pertaining thereto which have been entered into by and
between Lender and Borrower.
25. REMEDIES.
---------
Upon the occurrence of any Event of Default, Lender may:
(a) Declare all of the Obligations immediately due and payable;
(b) Commence foreclosure or otherwise enforce Lender's rights against
any security then held by Lender for the Obligations in such order as Lender may
determine;
(c) Terminate Lender's agreement to make further Advances under this
Agreement;
(d) Offset any indebtedness from any amounts due Borrower under any
other agreement between Borrower and Lender;
(e) Exercise any and all other rights and/or remedies which may be
available to Lender either at law or in equity.
Marshalling. Borrower specifically waives, to the fullest extent
permitted by law, any right to require marshalling of any of the assets
encumbered to secure the Obligations and to direct the order in which such
assets are sold.
Disposition of Proceeds. Subject to the provisions of all
applicable law, the net cash proceeds resulting from the sale or other
disposition of all or any part of the security held by Lender shall be applied
in the following order: (i) first, to the costs and expenses (including any
trustee's and attorney's fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating the Collateral securing the
repayment of the Obligations and the like, including all costs associated with
work-out negotiations, litigation and bankruptcy proceedings, legal and
administrative costs, (ii) then to the satisfaction of the Obligations, with
application to principal, interest, charges and expenses to be in such order and
manner as determined by Lender in its sole discretion; and (iii) then to
satisfaction of any remaining obligations of Borrower hereunder. Any surplus
after such
22
application shall be delivered to Borrower, and Borrower shall be liable for,
and shall pay to Lender on demand, any deficiency remaining after such
application.
Remedies Cumulative. The remedies provided for herein are
cumulative and shall be in addition to any and all other rights or remedies
provided for herein or at law or in equity including any banker's lien and right
of offset. The exercise of any right or remedy by Lender hereunder shall not
constitute a cure or waiver of any default in connection with the Obligations
nor invalidate any notice of default or act done pursuant to any such notice,
nor prejudice Lender in the exercise of any of its other rights.
26. MISCELLANEOUS.
--------------
(a) Waiver. No waiver by Lender of any default or breach by Borrower
hereunder shall be implied from any omission by Lender to take, or any delay in
taking, action on account of such default other than the default expressly made
the subject of the waiver and any such express waiver shall be operative only
for the time and to the extent therein stated. Any waiver of any covenant, term
or condition contained herein shall not be construed as a waiver of any
subsequent breach of the same covenant, term or condition. The consent or
approval by Lender to or of any act by Borrower requiring further consent or
approval shall not be deemed to waive or render unnecessary the consent or
approval to or of any subsequent similar act. Notwithstanding anything set forth
herein to the contrary, if no notice of a default or waiver is required
hereunder and none has been given, Lender shall not be deemed to have waived any
rights which it may have hereunder until seven (7) days following receipt by it
of written notice from Borrower alerting Lender to the fact that the time for
exercising any right or remedy hereunder has elapsed without exercise thereof
and such time for exercise shall automatically be extended to seven (7) days
following notice, said right shall conclusively be deemed to have been waived by
Lender. The intent of this paragraph is to avoid unintentional waivers by Lender
of any of its rights hereunder.
(b) No Duty of Lender. Nothing in this Agreement shall impose or imply
any duty or obligation whatsoever upon Lender, and Lender shall be under no duty
to take any action to preserve rights of Borrower with respect to any of the
security held by Lender for the Obligations. Borrower waives any and all
impairment of recourse and/or impairment of collateral defenses which it may
possess against the Lender.
(c) Amendment. The Agreement and the Credit Agreement, and the terms of
each of them, is the entire agreement between the parties and may not be
changed, waived, discharged or terminated orally, but only by an instrument or
instruments in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is asserted.
(d) Indemnification. To the fullest extent permitted by law, Borrower
agrees to indemnify and hold harmless Lender, and Lender's officers, directors,
shareholders, agents, attorneys and employees (collectively Indemnitee"), from
and against any and all out of pocket costs resulting from liability, loss,
damage, costs or expense, including court costs and attorney's fees, that
Indemnitee may hereafter suffer, incur, reasonably pay or in any manner be held
liable for to third parties, by reason of any breach, default, misstatement or
misrepresentation of any of the statements, warranties
23
or representations of Borrower contained in the Credit Agreement or any related
agreement, or by reason of any breach or default by Borrower, or any of
Borrower's employees, officers or agents, in the performance of any duties,
covenants or obligations arising under this or any related agreement. In this
connection, but without limitation, Borrower agrees to reimburse any Indemnitee
promptly upon demand for any payments reasonably made by such person to a third
party with respect to any liability, damage, loss or claim to which the
foregoing indemnity relates.
(e) Notices. Any notice, demand or request which may be permitted,
required or desired to be given in connection herewith shall be in writing and
directed to the parties at the respective addresses set forth below (or at such
other address as a party hereto may designate in writing) and shall be tendered
by personal delivery or by facsimile transmission with verifiable transmission
capability or be deposited in the U.S. mail, registered or certified, return
receipt requested. Such notice, if forwarded by mail, shall be deemed effective
seventy-two (72) hours after deposit in the U.S. mail, or if personally
delivered, upon delivery. A registered mail or certified mail receipt will be
prima facie evidence of the giving of such notice and the date thereof. If such
notice is personally served, such notice shall be effective upon delivery or if
such notice is sent by facsimile transmission, such notice shall be effective
upon the completion of the transmission of the same (so long as the sender
retains evidence of the recipient's(s') receipt).
If to Borrowers: ILX Resorts Incorporated
Attn: Xxxxx Xxxxx
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
If to Lender: Litchfield Financial Corporation
Attn: Xxxxx Xxxxxxxxxx
Senior Vice President
00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
With a copy to: Xxxxxxxxx Xxxxx III
Xxxx Law Firm, P.A.
0000 XXXX Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
Nothing herein contained shall be construed as preventing the parties
hereto, respectively, from changing the place to which notice shall be
addressed, but no such change shall be valid unless it is given in
accordance with the terms of this paragraph.
24
(f) Attorneys' Fees. Borrower does hereby covenant and agree that it
shall reimburse Lender for any and all reasonable litigation, collection and
enforcement fees and costs of whatever nature, including attorneys reasonable
fees and court costs, which Lender may incur as a result of its enforcement of
Borrower's obligations hereunder including, without limitation, all "workout" or
similar discussions and negotiations, and all reasonable fees and costs incurred
in connection with Lender's involvement in any bankruptcies arising therefrom.
(g) Binding Effect; Assignment. This Agreement may be assigned by
Lender. Borrower may not assign its interest in, or obligation under, this
Agreement except with the written consent of Lender. Subject to the forgoing,
all of the terms, covenants, conditions, representations and warranties hereof
shall inure to the benefit of, and be binding upon, the successors and assigns
of Lender and Borrower. Borrower hereby consents to the Collateral Assignment of
Lender's interests in and to the Credit Agreement to third party creditors of
Lender without the need for any further consent of whatever nature by Borrower.
Should Lender's assignee assume rights under the Credit Agreement, Lender
covenants and agrees that it will continue to perform the Credit Agreement in
accordance with its terms and conditions and shall recognize said assignee as
the lawful and enforceable successor in interest to Borrower.
(h) Interpretation and Venue. This Agreement shall be governed and
interpreted under Colorado law. Whenever the context requires, all words used in
the singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the paragraph of
this Agreement are for convenience only and do not define or limit any terms or
provisions. Time is of the essence in the performance of this Agreement by
Borrower. The invalidity or unenforceability of any one or more provisions of
this Agreement will in no way affect any other provision.
(i) Preparation of Agreement. The parties hereto acknowledge that this
Agreement has been negotiated and prepared in an arms-length transaction and
that both Lender and Borrower have negotiated all the terms contained herein.
Accordingly, the parties agree that neither party shall be deemed to have
drafted the Agreement and the Agreement shall not be interpreted against either
party as the draftsman.
(j) Other Acts and Documents. The parties agree to undertake such other
acts and execute such other documents as may be reasonably necessary to effect
the purpose and intent of this Agreement.
(k) Merger. This Agreement represents the culmination of all prior
negotiations, representations, and agreements between the parties with respect
to the transaction contemplated hereby. All such prior negotiations,
representations, and agreements are merged herein.
(1) Advice of Counsel. Each party acknowledges to the other that such
party has been advised by legal counsel in connection with the negotiation and
execution of this Agreement and that each party understands the terms and
conditions contained herein and that each has entered into this Agreement
voluntarily.
25
(m) JURY WAIVER. BORROWER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ITS
RIGHT TO A JURY TRIAL IN THE EVENT OF ANY DISPUTE OR LITIGATION ARISING
HEREUNDER OR UNDER ANY RELATED DOCUMENT EXECUTED IN CONNECTION HEREWITH.
BORROWER COVENANTS AND AGREES THAT THE SOLE AND EXCLUSIVE JURISDICTION AND VENUE
FOR ALL LITIGATION ARISING IN CONNECTION WITH THE ENFORCEMENT, COLLECTION OR
ADMINISTRATION OF THIS SECURED LINE OF CREDIT LENDING AGREEMENT SHALL REST
EXCLUSIVELY IN JEFFERSON COUNTY, COLORADO AND MAKER WAIVES ALL RIGHTS TO ASSERT
OTHERWISE.
(n) Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statement" shall include all notes and schedules thereto.
(o) Construction. Unless the context of any provision of this document
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or". The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, paragraph, exhibit and similar references are to this Agreement unless
otherwise specified. Any reference in this Agreement to the Credit Agreement or
any other Agreement to which Lender and Borrower are a party shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions and supplements thereto.
(p) Financing Rights. In consideration for Lender's establishing of the
subject credit facility, the reservation of funds needed to fulfill Lender's
obligations hereunder, and Lender's underwriting of Borrower's operations and
the Project, the Borrower does hereby grant to Lender and its successors and
assigns during the term of this Credit Agreement or any extensions hereof a
first right of refusal to purchase, hypothecate or otherwise finance all
Accounts generated, originated or otherwise owned by Borrower or any of
Borrower's affiliated entities from that project owned by Borrower and known as
the Inn at Los Abrigados and that project owned by Borrower known as Xxxx'x
Ranch Lodge (subject to Tammac Financial Corp.'s right to finance Accounts from
Xxxx'x Ranch Lodge in accordance with the provisions of that Secured Line of
Credit Lending Agreement -- Xxxx'x Ranch Lodge Facility dated June 27, 1997 and
any agreement between Tammac and Lender). Except for projects specifically named
in this subparagraph, Borrower further grants Lender the first right of refusal
to purchase, hypothecate or otherwise finance all Accounts generated, originated
or otherwise owned by Borrower for any of its affiliated entities from units
constructed at any project wherein Lender advances to Borrower in the future the
acquisition, development or construction financing for such units. Except for
Tammac's rights, should Borrower consider financing or selling any Account
referred to above to a third party, Borrower shall first inform Lender of such
plan and shall provide Lender with a definitive written commitment to provide
such financing from the contemplated finance company which sets forth the
definitive terms and conditions of the contemplated financing. Thereafter,
Lender shall have a twenty (20) day period in which to match the terms and
conditions as set forth in said letter. Should Lender match said terms and
conditions,
26
then Borrower covenants and agrees that Borrower shall utilize Lender as its
exclusive financing source in connection with the subject financing. Recognizing
the difficulty in determining Lender's damage or damages should Borrower breach
the terms and conditions hereof, Borrower agrees to pay as liquidated damages to
Lender a sum equal to ten percent (10%) of the total principal value of all
accounts which Borrower finances to a third party in violation of the terms and
conditions of this Agreement. Additionally, subject to any existing rights of
lenders, Borrower will offer to Lender the non-exclusive opportunity to finance
Accounts generated from timeshare sales of Los Abrigados Resort & Spa, Varsity
Clubs of America at South Bend and Tucson, and Premiere Vacation Club.
(q) Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by this reference.
(r) Other Credit Facilities. It is recognized that Lender and Borrower
have entered into previous credit facilities that continue to remain outstanding
and enforceable including that Secured Line of Credit Lending Agreement (ILX
Incorporated) dated April 9, 1996, $2,000,000 Secured Line of Credit Promissory
Note dated April 9, 1996, Receivable Sale and Purchase Agreement dated February
19, 1997, $1,500,000 Secured Term Promissory Note dated June 27, 1997,
$5,000,000 Secured Line of Credit Promissory Note dated June 27, 1997, Secured
Line of Credit Lending Agreement (ILX Incorporated -- Xxxx'x Ranch Lodge
Facility) and all documents referenced therein or pertaining thereto
(collectively, the "Pre-existing Credit Facilities"). Nothing herein shall serve
to modify or amend any of the terms and conditions of the Pre-existing Credit
Facilities. As evidenced by Borrower's signature below, Borrower covenants,
agrees and acknowledges that, except to the extent a Pre-Existing Credit
Facility is retired by proceeds from this transaction, all documents and
agreements of every nature which evidence or pertain to the Pre-Existing Credit
Facilities continue to remain in full force and effect, completely enforceable
in accordance with their terms and free from all set-off rights, counterclaims
or other defenses to payment and enforceability by Lender.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year set forth above.
LENDER:
LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------------
Title: Senior Vice President
-----------------------------
(Additional Signature Page Follows)
27
BORROWER:
ILX RESORTS INCORPORATED,
an Arizona corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Title: President
-----------------------------
LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership
By: ILE SEDONA INCORPORATED,
an Arizona corporation, its sole general partner
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Title: Vice President
-----------------------------
PREMIERE DEVELOPMENT INCORPORATED,
an Arizona corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Title: President
-----------------------------
28
EXHIBIT A
CLOSING AGENDA
$40,000,000
HYPOTHECATION LINE OF CREDIT LOAN
(GLOBAL FACILITY)
BETWEEN
LITCHFIELD FINANCIAL CORPORATION
TO
ILX RESORTS INCORPORATED
1. Good Standing Certificates
1. ILX Resorts Incorporated
2. Los Abrigados Partners Limited Partnership
3. Premiere Development Incorporated
2. Authorizing Resolutions
3. Closing and Incumbency Certificates
4. Secured Line of Credit Promissory Note
5. Secured Line of Credit Lending Agreement
6. Pledge and Security Agreement
7. UCC-1 Financing Statements
1. Arizona Secretary of State
2. Pima County
8. Collateral Assignment of Management, Marketing, Exchange and Other Contracts
9. Collateral Assignment of Receivables
10. Collateral Assignment of Deeds of Trust
11. UCC Lien Search Updates
12. Custodial Agreement
13. Irrevocable Limited Power of Attorney
14. Form of Allonge
15. Opinion of Borrower's Counsel
29
