MANAGEMENT AGREEMENT
This Agreement is made and entered into as of the 21 day of November,
1995, by and between Xxxxxxx Funding International, Ltd., a Delaware corporation
("Managing Agent"), and the following parties, who are collectively referred to
herein as "Developer:" Los Abrigados Partners Limited Partnership, an Arizona
limited partnership ("LAP" or the "Partnership"), ILE Sedona Incorporated, an
Arizona corporation (ILES) and ILX Incorporated, an Arizona corporation ("ILX").
RECITALS
A. The Partnership owns and operates that certain interval ownership
hotel known as Los Abrigados Resort & Spa in Sedona, Arizona (the "Property")
and is engaged in marketing and selling interval ownership interests therein
through the Sedona Vacation Club ("Memberships").
B. The general partner of the Partnership is ILES, which in turn is a
wholly-owned subsidiary of ILX. The Partnership through its general partner, has
entered into a Management Agreement with ILX whereby ILX is responsible for the
day to day management and operation of the Resort. ILX is further responsible
for the marketing and sale of Memberships and holds the required Arizona real
estate broker's license necessary to offer and sell Memberships. In sum, the
Partnership, ILES and ILX collectively have the exclusive authority and
responsibility for managing and operating the Property, marketing and selling
Memberships and managing the Partnership and for engaging assistance and
delegating responsibilities with respect thereto.
C. Managing Agent's primary business is that of providing financing for
the acquisition, development and operation of interval ownership hotels and of
purchasing receivables generated from sales at interval ownership interests. In
such capacity and as a result of being exposed to a wide variety of interval
ownership projects, it has significant knowledge and experience in all aspects
of the interval ownership business.
D. Developer would like to avail itself of this additional knowledge
and experience by retaining Managing Agent to provide general supervision and
oversight and strategic planning and consultation with respect to all aspects of
the management, operation, improvement, financing, sales and marketing of the
Property and the management of the Partnership; provided however that Developer
shall retain the authority and responsibility for the day to day aspects of
same. Managing Agent desires to accept the appointment and to diligently provide
such services.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
TERM AND AUTOMATIC EXTENSION
1.1 Term. The term of this Agreement shall commence on December l,
1995, and shall expire five (5) years thereafter, unless otherwise extended
pursuant to the terms and conditions of this Agreement. Except as otherwise
specifically provided herein, this Agreement shall be irrevocable and
non-cancelable.
1.2 Automatic Extension. The term of this Agreement shall be
automatically extended beyond the five year period for such additional period of
time as may be necessary to sell all of the 3,500 Memberships as described
hereinafter.
ARTICLE II
MANAGEMENT DUTIES AND RIGHTS
2.l Appointment. Developer hereby appoints Managing Agent as its
exclusive agent for providing general supervision, strategic planning and
consultation as to the management, operation, and financing of the Property and
the Partnership and for the marketing and sale of Memberships (including any
timeshare sales office marketing and selling Memberships) subject to all of the
terms and conditions hereinafter provided. In providing such services, Managing
Agent shall act at all times as an independent contractor. Managing Agent hereby
accepts the appointment and agrees to perform all acts necessary to diligently
and efficiently provide such services, including, without limitation, the duties
set forth in this Article II. Managing Agent shall perform its duties in a
manner as is customary and usual in the operation of comparable projects and
shall keep Developer advised as to all major policy matters affecting same.
Managing Agent shall meet and/or confer with Developer on a regular and as
needed basis with respect to the subject matter hereof. Managing Agent shall
have the exclusive right to finance timeshare receivables of the Partnership at
the Property on terms and conditions consistent with its previous practices with
respect to the Property except "holdbacks" shall be established at a level not
to exceed 10% of all amounts financed.
2.2 Specific Responsibilities . Without limiting the generality of the
foregoing, Managing Agent may, as necessary, provide general supervision,
strategic planning and consultation, both with respect to the Property as well
as the Partnership, as to long-term and short-term financing, cash flow needs,
budgeting, the marketing and sale of Memberships (including all components
thereof as indicated on attached Schedule "A"), accounting systems and controls,
the management of the Partnership by ILX and ILES, insurance, maintenance,
capital improvements, purchasing, disbursements, service agreements, utilities,
regulatory matters, personnel matters, and other matters reasonably necessary
for the care, protection, maintenance and efficient operation of the Property or
the Partnership; provided however that it is expressly understood and agreed
that all employees of the Property and/or the Partnership shall be employees of
Developer and shall not be employees of Managing Agent.
ARTICLE III
ADVANCES, MANAGEMENT FEE AND RECEIVABLES FINANCING
3.1 Advance. As soon as reasonably practicable following the execution
hereof, Managing Agent shall advance to the Developer the cash sum of
$3,500,000.00 (Three Million, Five hundred Thousand Dollars) (the "Advance").
The Advance may be used by Developer for working capital needs associated with
the Property and/or the Partnership and to reimburse it for sums previously
expended for capital improvements to, and other expenses associated with, the
Developer, the Property and/or the Partnership. The Advance, along with an
annual 12% cost of funds factor (the "Cost of Funds Factor"), shall be repaid to
Managing Agent to the extent of its share of Monthly Cash Flow (as described
below) in 36 equal monthly payments.
3.2 Management Fee. As compensation for the services rendered, Managing
Agent shall be entitled during the term of this Agreement to a monthly
management fee (the "Management Fee") equal to one half of the monthly cash flow
(as determined by reference to the attached Schedule "A") from the timeshare
sales of 3,500 Memberships (the "Monthly Cash Flow"), less funds received by it
during the month constituting the repayment of the Advance. The Management Fee
shall be payable monthly and shall be due and payable on the fifteenth (15th)
day of each succeeding calendar month throughout the term of this Agreement.
Developer agrees that the 3,500 Memberships shall remain free and clear of any
and all liens and encumbrances other than the existing Bank One lien.
3.3 Holdbacks and In-House Paper. Any "holdbacks" (the percentage of
time share paper not funded on sale or hypothecation)and any timeshare paper not
financed by Developer but held for its own account, shall be held jointly for
the benefit of Managing Agent and the Partnership.
3.4 Receivables Financing. As further consideration hereunder, during
the term as this Agreement Developer agrees to offer to Managing Agent (or its
nominee) the opportunity to purchase all timeshare receivables generated at the
Property on the same terms and conditions as have been historically offered to
Developer; provided however that the "holdbacks" will be reduced from 15% to no
more than 10%.
3.4 Miscellaneous. In order to provide Managing Agent additional
assurances concerning the repayment of the Advance and Cost of Funds Factor and
the payment of the Management Fee, Developer hereby represents, warrants,
guarantees and agrees that:
(a) the existing loan from Bank One secured by the Property in
the approximate principal amount of $1,045,000 will be fully satisfied
by Developer on or before December 31, 1996;
(b) Developer will not further encumber the Property during
the term of this Agreement;
(c) Repayment of the Advance shall be unconditionally
guaranteed, jointly and severally, by each of LAP, ILES and ILX
pursuant to separate written agreements executed and delivered
simultaneously herewith, and such guarantees will be further supported
by a collateral assignment of each of their respective interests
hereunder; and
(d) LAP will execute and record a Declaration of Trust whereby
it holds the 3,500 Memberships in trust to satisfy the obligations to
the respective parties to this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS OF DEVELOPER
During the term of this Agreement, Developer covenants and agrees:
4.1 Rules and Regulations . Developer shall comply with all statutes,
ordinances, laws, rules and regulations, orders and requirements of any federal,
state or local government or department having jurisdiction with respect to the
Property or to the construction, maintenance or operation thereof, with respect
to the Partnership and with respect to the offer and sale of Memberships.
4.2 Reimbursement for Expenditures. Developer shall promptly reimburse
Managing Agent for all expenses incurred by Managing Agent in the performance of
its duties hereunder.
ARTICLE V
EVENTS OF DEFAULT
Each of the following events shall constitute an event of default by
Developer in the performance of its obligations under this Agreement:
(a) The failure of Developer to perform, keep or fulfill the material
covenants, undertakings, obligations and conditions set forth in this Agreement
and the continuance of any such breach or nonperformance for a period of ninety
(90) days after Managing Agent's written notice of said failure to Developer;
(b) The filing of a voluntary assignment in bankruptcy or insolvency or
a petition for reorganization under any bankruptcy law by Developer; or
(c) The entering of an order, judgment or decree by any court of
competent jurisdiction, on the application of a creditor, adjudicating Developer
bankrupt or insolvent or approving a petition seeking reorganization or
appointing a receiver, trustee or liquidator of all or a substantial part of
Developer's assets, provided that Developer shall have 90 days from the date on
which the order, judgment or decree is entered to have such order, judgment or
decree dismissed or vacated.
ARTICLE VI
ASSIGNMENT
This Agreement may not be assigned by either Developer or Managing
Agent without the prior written consent of the other, which consent shall be in
the sole and exclusive discretion of the party whose consent is requested.
ARTICLE VII
INDEMNIFICATION
7.1 Developer. Developer shall indemnify, defend and hold Managing
Agent harmless from and against all claims, damages and costs (including
reasonable attorneys' fees and costs) incurred by or asserted against Managing
Agent and arising out of or in connection with the acts or inactions of Managing
Agent, its agents, officers, employees or contractors, hereunder, except those
due to the willful misconduct of Managing Agent or resulting from acts or
inactions outside the scope of Managing Agent's authority hereunder.
7.2 Managing Agent. Managing Agent shall indemnify, defend and hold
Developer harmless from and against all claims, damages and costs (including
reasonable attorneys' fees and costs) incurred by or asserted against Developer
and arising out of or in connection with all acts of Managing Agent, its agents,
officers, employees or contractors, that are outside the scope of Managing
Agent's authority hereunder.
7.3 Waiver. Each party hereby waives any and all rights of recovery or
claims against the other, or the officers or employees thereof, for any loss or
damage suffered by the waiving party to the extent that such loss or damage is
covered by any insurance policy in effect at the time thereof. Each party shall,
when obtaining insurance, give the company issuing such insurance, together with
any other companies insuring such party, notice of the waiver of subrogation set
forth herein and shall obtain appropriate endorsements with respect thereto from
each such company and shall deliver copies thereof to the other party.
ARTICLE VIII
GENERAL
8.1 Notices. Any notice, election or communication to be given under
the terms of this Agreement shall be in writing and hand delivered or deposited,
certified mail, return receipt requested and postage prepaid, addressed as
follows:
If to Managing Agent, at:
Xxxxxxx Funding International, Ltd.
Xxx Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
If to Developer, at:
ILX Incorporated
ILE Sedona Incorporated
Los Abrigados Partners Limited Partnership
0000 Xxxx Xxxxxxxxx
XxxxxxX, Xxxxxxx 000x0
or to such address as either party may hereafter designate by notice hereunder.
Such notices, elections or communications shall be deemed given, delivered or
received, upon the date of receipt or the date delivery was first refused by the
addressee as shovn on the return receipt.
8.2 Modification and Amendments. This Agreement shall not be altered or
anended except in writing, signed by the parties or their authorized agents.
8.3 Complete Agreement. This Agreement constitutes and embodies the
full and complete understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings, whether oral or
in writing.
8.4 Third Parties. Any provision herein to the contrary
notwithstanding, it is specifically understood and agreed that this Agreement is
made for the benefit of the parties hereto, and that none of the benefits
hereunder shall run to or be enforceable by any person other than a party to
this Agreement.
8.5 Headings. The article and section headings used herein are for
convenience and reference only and are not intended to define, limit or describe
the scope or intent of any provision of this Agreement.
8.6 Governing Law. This Agreemement shall be governed and controlled by
the law of the State of Arizona.
8.7 Assigns. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
8.8 No Waiver or Breach. No failure by Managing Agent or Developer to
insist upon the strict performance of any covenant, agreement, term or condition
of this Agreement, or to exercise any right or remedy available upon a breach
thereof, shall constitute a waiver of any such breach thereof, or any subsequent
breach of such covenant, agreement, term and condition. No waiver of any such
breach shall affect or alter this Agreement, but each and every covenant,
agreement, term and condition of this Agreement, shall continue in full force
and effect with respect to any other then existing or subsequent breach thereof.
8.9 Severability of Provisions. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, as the case may be, shall
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
8.10 Additional Acts and Documents. The undersigned hereby agree to do
all other things or acts and to execute and provide each other with all other
documents reasonably required to give effect to this Agreement.
8.11 Relationship. The relationship of Managing Agent to Developer
hereunder shall be that of independent contractor and not joint venturer or
partner or otherwise. Nothing herein shall be deemed to imply any relationship
between the parties other than that of independent contractor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized agents the day and year first written above.
XXXXXXX FUNDING INTERNATIONAL, LTD.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxx
---------------------------
Xxxxxxx Xxxxxxx
Its: President
---------------------------
LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited
partnership
By: ILE Sedona Incorporated,
an Arizona corporation, its
general partner
By: /s/ Xxxxxx X. Xxxxxxx
----------------------
Xxxxxx X. Xxxxxxx
Its: President
----------------------
ILE SEDONA INCORPORATED,
an Arizona corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx
Its: President
----------------------------
ILX INCORPORATED,
an Arizona corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
Its: President
---------------------------
SCHEDULE "A"
Responsibility Components
SALES
Gross Sales
Less Giveaways
Net Sales Less Giveaways
COST OF SALES
Cost of Timeshare Interest
Commissions
Salesmen/Mgrs./Proj. Dir.
Sales Salaries
Payroll Taxes/Insurance
Spiffs
Guarantee Fees
Closing costs other
Provision for Doubtful Acct.
Costs Strictly Variable to Sales
MARKETING PROCUREMENT EXPENSES
Telemarketing Camelback
Telemarketing 7th Street
Telemarketing Marketel
Customer Procurement
LA Bucks
Tour Nights
OPC Program
Other
Concierge Salaries
Total Marketing Procurement
OFFICE EXPENSES
Salaries Office Staff
Salaries Other/Broker
Taxes/Insurance
Telephone
Copy Machine Expenses
Supplies
Postage
Printing
Travel and Entertainment
Repairs & Maintenance
Rent
Misc Income & Expenses
Total Office Expenses
Total Expenses
Total Timeshare Profit
# of Annual Sales
# of Bi-Annual Sales
# of Converters
#of Other Sales
# of Upgrades
Average Sales Price Net of Giveaways
LOS ABRIGADOS RESORT & SPA
TIMESHARE CASH FLOW ANALYSIS
3500 INTERVALS
PROJECTIONS
YEAR 1 YEAR 2 YEAR 3 TOTAL
----------- ----------- ----------- -----------
INTERVAL SALES 1200 1200 1100 3500
AVERAGE PRICE PER INTERVAL 12,000 12,000 12,000 12,000
TOTAL SALES (NET) $14,400,000 $14,400,000 $13,200,000 $42,000,000
COST OF SALES 68.00% 9,792,000 9,792,000 8,976,000 28,560,000
----------- ----------- ----------- -----------
TIMESHARE PROFIT 32.00% 4,608,000 4,608,000 4,224,000 13,440,000
ADD: PRODUCT COST 15.00% 2,160,000 2,160,000 1,980,000 6,300,000
LESS: BANK ONE RELEASES (1,045,000) 0 0 (1,045,000)
LESS: BGI PAYMENTS 12.00% (420,000) (101,820) 0 (521,820)
----------- ----------- ----------- -----------
CASH FLOW FROM TIMESHARE SALES 5,303,000 6,666,180 6,204,000 18,173,180
=========== =========== =========== ===========
CASH FLOW PER PARTY 2,651,500 3,333,090 3,102,000 9,086,590
=========== =========== =========== ===========
BGI PAYMENT SUMMARY
-------------------
BEGINNING PAYMENT/BALANCE (3,500,000) (848,500) 2,484,590 (3,500,000)
CURRENT YEAR RETURN (EXCLUDING 12%) 2,651,500 3,333,090 3,102,000 9,086,590
----------- ----------- ----------- -----------
END OF YEAR BALANCE (848,500) 2,484,590 5,586,590 5,586,590
=========== =========== =========== ===========
TOTAL RETURN INCLUDING 12% PAYMENTS 3,071,500 3,434,910 3,102,000 9,608,410
=========== =========== =========== ===========
