CREDIT AGREEMENT
(ILX ESOP)
THIS CREDIT AGREEMENT ("Agreement") is entered into as of August 12, 1999,
by and between Xxxxxxx X. XxXxxxxx, III, Xxxxx X. Xxxxx, and Xxxxx X. Xxxxx, in
their capacity as Trustees for the ILX Resorts Incorporated Employee Stock
Ownership Plan and Trust, whose address is 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, XX 00000 ("Borrower"), and LITCHFIELD FINANCIAL CORPORATION, a
Massachusetts corporation whose address is 00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000 ("Lender"), under the following facts:
R E C I T A L S:
A. Borrower is the Trustee of the ILX Resorts Incorporated Employee Stock
Ownership Plan and Trust. Borrower has requested that Lender extend a line of
credit to Borrower in the amounts and for the purposes set forth below.
B. Pursuant to the terms and conditions hereinafter set forth, Lender
agrees to establish a line of credit in favor of Borrower in maximum principal
amount of $500,000.00, to be secured by certain collateral now owned or
hereafter acquired as hereinafter set forth.
A G R E E M E N T S:
In consideration of the foregoing Recitals, and the covenants and
agreements hereinafter set forth, the legal adequacy and sufficiency of which is
hereby acknowledged, the parties hereby agree:
1. DEFINITIONS. In addition to the definitions set forth elsewhere in this
Agreement, the following terms shall have the following meanings unless
otherwise agreed.
1.1 "ADMINISTRATIVE COMMITTEE". The committee appointed by ILX Resorts
Incorporated ("ILX" or "Guarantor") pursuant to Section 10.02 of the Plan
(as hereinafter defined).
1.2 "ADVANCE". Means funding of a portion of the Line or Loan by
Lender.
1.3 "BORROWING PERIOD". The period of time during which Lender will
make an Advance to or for the benefit of Borrower pursuant to the terms
hereof, commencing on the date first set forth above and ending June 30,
2000.
1.4 "CODE". The Internal Revenue Code of 1986 as amended.
1.5 "COVERAGE RATIO". The ratio of the value (as shown in the reported
closing price as quoted by the American Stock Exchange) of the Stock and
other cash, cash equivalents or other collateral deposited by ILX with, and
acceptable tot he Lender, in its discretion as collateral for the Loan to
the outstandign principal balance of the Loan. At all times, the Coverage
Ratio shall be no less than 1.25. If, at any point in time the Coverage
Ratio is less than 1.25, within ten (10) days of Lender's written notice to
Borrower and ILX, the Coverage Ratio shall be restored to no less than 1.25
by either a principal pre-payment of the Loan or by ILX's deposit of
additional collateral with Lender in the form of cash or cash equivalent
securities or other collateral acceptable to Lender in its discretion so as
to restore the Coverage Ratio to not less than 1.25. By its execution
hereof ILX hereby grants Lender a first and prior duly perfected security
interest in any collateral delivered to Lender in order to maintain the
Coverage Ratio, and ILX agrees to execute such other documents and perform
such other acts as may be necessary or convenient to the perfection of
Lender's security interest on any such additional collateral including,
without limitation, the delivery of any such additional collateral to
Lender. Without limiting the foregoing, in the event any such additional
collateral consists of promissory notes or accounts, ILX will endorse same
to Lender with recourse and deliver same to Lender and ILX agrees to
execute the Pledge Agreement appended hereto as EXHIBIT B-2 and the
Irrevocable Limited Power of Attorney appended hereto as EXHIBIT G-2. In
addition, ILX shall execute and file UCC-1 financing statements as
necessary or appropriate to perfect Lender's security interest. Any
accounts assigned to Lender shall be serviced by Concord Servicing
Corporation ("Concord") pursuant to the terms of that certain April 9, 1996
Agreement by and between Concord, ILX, ILE Sedona Incorporated, Los
Abrigados Partners Limited Partnership, and Lender. ILX and Lender will
provide Concord written advice in this regard in the form appended hereto
as EXHIBIT H, and in the event of an uncured Event of Default, Lender shall
have the right to direct Concord to pay to Lender all payments received by
Concord with respect to any such pledged accounts. All fees of Concord as a
result of ILX's pledge of accounts to Lender (including, without
limitation, Concord's fees for providing reports to Lender and Concord's
fees for servicing the subject accounts) shall be paid by ILX. Lender shall
use reasonable care and due diligence in connection with its possession of
any such additional collateral provided, however, that Lender shall have no
liability of any nature to ILX in connection with its possession of any
such additional collateral unless damages associated with Lender's loss or
holding of the additional collateral constitutes gross negligence or wilful
misconduct. Upon payment in full of the Indebtedness after the conclusion
of the Borrowing Period, Lender shall return any such additional collateral
delivered to it by ILX to ILX. In the event any such additional collateral
comprises, in Lender's discretion, accounts payable to ILX, any such
accounts shall be endorsed by Lender to ILX without recourse at the time of
Lender's delivery of same to ILX.
1.6 "ERISA". The Employee Retirement Employment Security Act of 1974,
as amended.
1.7 "GUARANTOR". ILX Resorts Incorporated, an Arizona corporation. ILX
is the "Employer" designated in the Plan. By its execution hereof, ILX
commits to make Contributions (as defined in the Plan) to the Plan in
amounts necessary to amortize the principal and interest payments due under
the Loan contemplated hereby.
1.8 "INDEBTEDNESS". All sums and other obligations owed to Lender by
Borrower whether under this Agreement or any other Loan Document
(including, without limitation, the Line Note) or otherwise.
1.9 "INTEREST RATE". Refers to the rate of interest due and owing from
Borrower to Lender, on the outstanding portion of the Loan, from time to
time. The "Regular Interest Rate" or "Regular Rate" refers to the interest
rate due and owing prior to an Event of Default. The Regular Interest Rate
shall be the Prime Rate plus 2.5% (but in no event less than 10.5%). The
"Default Interest Rate" or "Default Rate" shall mean the rate of interest
charged on and after an Event of Default has occurred. The Default Interest
Rate shall be the Regular Rate plus 6%. Provided, however, that in no event
shall the Regular Rate or the Default Rate exceed the highest rate of
interest permitted by law. The Interest Rate shall be adjusted with each
change in the Prime Rate from and after the date of the first Advance.
Provided, however, that no adjustment that results in a decrease in the
Interest Rate shall take effect during any period during which Borrower is
in default under the terms of the Line Note, this Agreement, or any other
Loan Document. Any such decrease shall not become effective until the first
day of the month following the date that all such defaults have been cured.
After cure of all defaults, the Interest Rate shall revert to the Regular
Interest Rate effective the first day of the month following the cure of
all defaults.
1.10 "INVESTMENT MANAGER". The agent of the Administrative Committee
appointed pursuant to Section 10.03(a) of the Plan.
1.11 "LOAN OR LINE DOCUMENTS". All documents executed by Borrower,
Lender, Guarantor, or third parties, or any of them, in connection with the
Loan more fully described herein, including but not limited to this Credit
Agreement, the Line Note, the Pledge Agreement, the Guaranty and UCC-1
Financing Statements.
1.12 "PLAN". The ILX Resorts Incorporated Employee Stock Ownership
Plan and Trust as established by that certain document entitled ILX Resorts
Incorporated Employee Stock Ownership Plan and Trust dated April 9, 1999
(effective January 1, 1999) as may be amended from time to time.
1.13 "PLAN YEAR". January 1 through December 31 or such other 12-month
period as may be specified in the Plan as the Plan Year.
1.14 "PRIME RATE". Prime Rate means the highest rate of interest
published by THE WALL STREET JOURNAL as the base rate on corporate loans at
large United States money center commercial banks. If THE WALL STREET
JOURNAL (or any successor) ceases to exist or ceases to publish a
comparable Prime Rate, Lender will choose a new index which is based on
comparable information.
1.15 "RELEASE FEE". A principal and/or interest payment on the Loan
made by Borrower to Lender in order to secure Lender's release of its
security interest in one or more shares of Stock pledged to Lender pursuant
to paragraph 7.1, below, in order to allocate said share(s) of Stock to a
participant in the Plan.
1.16 "STOCK". Common stock issued by ILX Resorts Incorporated which is
readily tradeable on the American Stock Exchange, the New York Stock
Exchange or other established securities market approved by Lender, and
which otherwise qualifies as "company stock" within the meaning of the
Plan.
1.17 "STOCK PRICE". The average price per share of Stock purchased by
Borrower with the proceeds of the Loan.
1.18 "TRANSFER AGENT". Xxxxxx Trust and Savings Bank or its successor,
acting as the Transfer Agent for the common and unexchanged Stock of ILX
Resorts Incorporated.
1.19 "TRUST". ILX Resorts Incorporated Employee Stock Ownership Trust
as established pursuant to the Plan.
1.20 "TRUSTEE". The Trustee or Trustees of the Plan including the
Trustees executing this Agreement and any Successor Trustee appointed
pursuant to the Plan.
2. LOAN. Upon the terms and conditions contained herein, Lender hereby
agrees to extend credit to Borrower in a sum not to exceed $500,000.00 (the
"Line" or "Loan"). At Borrower's request, Lender may increase the foregoing
$500,000.00 Line in its sole discretion,
3. LOAN DOCUMENTS; SECURITY. Concurrently herewith, Borrower shall execute
a promissory note (the "Line Note") in the face amount of $500,000.00, in the
form attached hereto as EXHIBIT A. The Indebtedness (including, without
limitation, that portion evidenced by the Line Note) shall be secured, INTER
ALIA, by a collateral assignment of the Stock that was purchased with the
proceeds of the Loan pursuant to the Pledge Agreement appended hereto as EXHIBIT
B-1. Repayment of the Indebtedness and all other obligations of Borrower to
Lender under the Loan Documents will be guaranteed by the Guarantor pursuant to
the Guaranty in the form appended hereto as EXHIBIT C.
4. TERM AND REPAYMENT. The Loan shall bear interest at the applicable
Interest Rate and be paid as specified in the Line Note. If not sooner paid
pursuant to the provisions hereof, the Line Note shall be paid in full on or
before January 1, 2002 (the "Due Date").
4.1 BORROWING PERIOD. During the Borrowing Period payments of interest
only shall be due and payable monthly on the first day of each month
commencing on the first day of the month following the date of this
Agreement.
4.2 REPAYMENT PERIOD. Commencing on the first day of the first month
after the end of the Borrowing Period (i.e., July 1, 2000), for a period of
eighteen (18) months (the "Repayment Period") Borrower shall make monthly
payments of interest on the first day of each month and in addition thereto
on each July 1 and January 1 thereafter prior to the Due Date (i.e., on
July 1, 2000, January 1, 2001, and July 1, 2001), Borrower shall pay to
Lender an amount equal to 25% of the principal balance outstanding on the
Loan on June 30, 2000. Each principal and/or interest payment on the Loan
shall constitute a Release Fee pursuant to the provisions of paragraph 7.1,
below.
5. Conditions to Loan. Satisfaction of or waiver by Lender of each of the
following requirements shall be conditions precedent to the making of each
Advance:
5.1 All of the Loan Documents in form and substance satisfactory to
Lender shall have been duly executed by all parties thereto, with the
signatures properly notarized and the instruments in proper form for filing
or recordation, as required, and shall have been filed or recorded and/or
delivered to Lender or Lender's agent, as appropriate.
5.2 All representations and warranties contained herein shall be true
and correct as of the day of closing and as of the day of making each and
every Advance.
5.3 Borrower, Guarantor and the Administrative Committee shall have
executed and delivered such certificates and resolutions as are required by
Lender.
5.4 There shall be no Event of Default (as defined in Paragraph 12,
below) then in existence.
5.5 No other person, firm, or entity shall have or claim a security
interest in the Stock acquired with the proceeds of the Loan as provided in
this Agreement, to the extent not yet released as security for the Loan.
5.6 All necessary UCC financing statements have been filed and Lender
has obtained a properly perfected first and prior security interest in the
Stock and other collateral identified in the Pledge Agreement securing
same.
5.7 Lender shall have received and approved such additional documents
and assurances as Lender may reasonably require.
5.8 Lender shall have received one or more attorney opinion letters
from counsel for Borrower in the form appended hereto as EXHIBIT D and
otherwise in form and substance satisfactory to Lender, addressed to Lender
covering such matters relating to Borrower, the Plan, and the Stock as
Lender in its discretion may require.
5.9 There shall have been no material adverse change to the financial
condition of Borrower or ILX, or ILX's operations or properties.
5.10 The Plan remains in continuing compliance with all local, state,
and federal laws, including, without limitation, the continued
qualification under the provisions of Sections 401 ET SEQ. and 501 ET SEQ.
of the Code and ERISA.
5.11 Borrower hereby agrees to pay, and Borrower or Guarantor shall
have paid to Lender, all Lender's reasonable out-of-pocket expenses
including, without limitation, recording costs, filing fees and legal fees
and disbursements of Lender's counsel, incurred by Lender in connection
with the subject Loan, and the preparation of the initial Loan Documents
(which legal expenses shall not exceed $5,000.00) and any amendment or
modification thereof. Any unpaid reimbursements as provided in this
paragraph may be deducted by Lender from any Advance.
5.12 Borrower or Guarantor shall have paid Lender a one-time Facility
Fee in the amount of $5,000.00.
5.13 Borrower shall provide Lender a duly executed Request for Advance
in the form appended hereto as EXHIBIT E.
5.14 Lender shall have received the duly executed Authorizing
Resolution and Incumbency Certificate from Borrower, Guarantor and the
Administrative Committee in the form appended hereto as EXHIBIT F.
5.15 Lender shall have received the duly executed Irrevocable Power of
Attorney and Stock Power from Borrower in the form appended hereto as
EXHIBIT G-1.
5.16 The Coverage Ratio resulting after giving effect to the Advance
shall not be less than 1.25.
6. ADVANCES. Subject to the terms, limitations, and conditions herein and
in the Line Note, Lender agrees to advance funds to Borrower as follows:
6.1 PROCEDURES FOR ADVANCES. Advances shall be made in a minimum
amount of $50,000.00 (unless said minimum amount is waived by Lender).
Borrower shall have provided Lender an executed Request for Advance at
least five (5) days prior to the requested date of Advance. The initial and
subsequent Advances shall be funded upon receipt by Lender of a written
acknowledgment from the stock broker effecting the acquisition of the Stock
that said stock broker has or will acquire the subject Stock, has in its
possession a stock power with respect to same duly executed by Borrower,
conveying the subject Stock to Lender, and that said stockbroker has and
will hold such Stock (and all Stock purchased with the proceeds of the Loan
and not subject to a partial release as hereinbefore provided) in an
account in the name of Lender as custodian of the Stock held therein for
the ILX Resorts Incorporated Employee Stock Ownership Plan and Trust.
6.2 ENDORSEMENT OF NOTE. Upon making an Advance or receiving a
repayment of principal or interest, Lender shall endorse the Line Note as
appropriate or otherwise make such entries in its records as Lender may
deem necessary or appropriate to indicate the amount outstanding. Lender
shall provide Borrower a monthly statement reflecting the outstanding
balance due on the Line Note. In the absence of manifest error, Lender's
records shall be conclusive proof of the amount outstanding.
6.3 FEES. The following fees will be deducted from the sums Advanced:
6.3.1 FACILITY FEE. The $5,000.00 Facility Fee, to the extent not
previously paid.
6.3.2 LENDER'S EXPENSES. Any unpaid expenses of Lender pursuant
to paragraph 5.11, above.
6.4 FUNDING OF ADVANCE. Lender shall fund each Advance by wire
transfer to the stockbroker acquiring the Stock pursuant to a written
letter agreement by and between said stockholder and Lender referencing the
terms set forth above in paragraph 6.1. By its execution hereof, Borrower
acknowledges and agrees that any and all Stock purchased with the proceeds
of the Loan shall be held by any such stockbroker in an account in the name
of Lender as custodian of the Stock held therein for the ILX Resorts
Incorporated Employee Stock Ownership Plan and Trust so as to perfect
Lender's security interest in same by possession. Lender shall have no
further responsibility or obligation with respect to the delivery or
disbursement of funds.
7. PLEDGE AGREEMENT. Borrower's obligations under this Agreement and the
Line Note (as well as all other obligations of Borrower to Lender shall be
secured, INTER ALIA, by a first, prior and only lien against (a) cash or cash
equivalent collateral, if any, acceptable to Lender and provided by ILX to
Lender in order to maintain the Coverage Ratio and (b) the Stock acquired by
Borrower with the proceeds of the Loan pursuant to the Pledge Agreement in the
form appended hereto, to the extent not released pursuant to paragraph 7.1
below.
7.1 PARTIAL RELEASES. At the end of each Plan Year that the Loan is
outstanding and a payment of principal and/or interest is made, at
Borrower's request, Lender shall grant a partial release of share(s) of
Stock pledged pursuant to the Pledge Agreement as follows: Lender shall
release the number of shares equal to the number of Shares held immediately
before the release for the current Plan Year multiplied by a fraction, the
numerator of which is the amount of principal and interest paid for the
Plan Year and the denominator of which is the principal and interest to be
paid for all future Plan Years, based on the interest rate in effect at the
end of the Plan Year.
7.2 FINAL RELEASE. All Stock and any collateral provided by ILX shall
be fully released from Lender's lien after the Borrowing Period upon
payment in full of the Indebtedness.
8. 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 Advance:
8.1 The Plan and Trust qualify under the provisions of Sections 401 ET
SEQ. and 501 ET SEQ. of the Code and ERISA.
8.2 Borrower has taken all action to permit Borrower to enter into
this Agreement and any other agreement or transaction contemplated hereby,
and repay the Loan. 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, 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 his
official capacity as an agent of Borrower.
8.3 Neither Borrower nor the Plan are subject to any disciplinary
actions or proceedings by any governmental authority or trade organization.
8.4 Borrower's execution, delivery and performance of this Agreement,
the Loan Documents and the borrowings evidenced by the Line Note (a) will
not violate any law, regulation, indenture, agreement or any other
instrument to which Borrower is a party or by which Borrower or any of its
property is governed or bound; and (b) 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 law, regulation, indenture, agreement or other
instrument, or result in the violation of any law or regulation or 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 Loan Documents, when executed
and delivered to Lender, will constitute the legal, valid and binding
obligations of respective signatories thereto in accordance with their
terms.
8.5 All financial data that have been given to Lender with respect to
Borrower and/or ILX (a) are complete and correct in all material respects;
and (b) accurately present the financial condition of Borrower in all
material respects as of the date on which the same have been furnished. All
balance sheets disclose all known liabilities, direct and contingent (as
determined by GAAP), 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.
8.6 Neither the Borrower nor the Guarantor are 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 none is 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.
8.7 All other reports, papers, data and information given to Lender
with respect to Borrower, the Plan, and the Guarantor 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 applicable
subject matter.
8.8 Borrower has properly and timely filed all required federal,
state, county and municipal reports and submissions and has paid all
required fees due governmental entities. Borrower knows of no basis for a
material additional assessment of Borrower in respect of any such fees.
8.9 There is not now pending against or affecting Borrower or the
Guarantor, nor to their 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 or the Guarantor.
8.10 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.
8.11 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.
8.12 Borrower is not insolvent; has not made an assignment for the
benefit of creditors; has not suspended business or commenced proceedings
for dissolution or become insolvent; has not 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 consented
thereto; does not have 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 not generally failed to pay its debts as they become
due; has not taken any action, nor has any intention to take any action,
which would constitute an "act of bankruptcy" under the Federal Bankruptcy
Code or in contemplation thereof.
8.13 The purpose of this transaction is exclusively for commercial or
business purposes and the proceeds of each Advance will be used for the
purpose of acquiring Stock as set forth in Borrower's Request for Advance.
8.14 That the undersigned comprise each and every Trustee under the
Plan.
9. PROTECTIVE COVENANTS.
9.1 So long as any of the Indebtedness remains unpaid, Borrower shall:
9.1.1 Not terminate and shall comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental
authority, including, without limitation, the Code and ERISA so as to
remain qualified under Sections 401 ET SEQ. and 501 ET SEQ. of the
Code and ERISA.
9.1.2 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 or authority having
jurisdiction over Borrower or any of its businesses.
9.1.3 Borrower acknowledges that the placement of any additional
liens upon the Stock acquired with the proceeds of the Loan and other
collateral encumbered by Borrower's Pledge Agreement may impair the
ability of Lender to obtain assurance that its security interest
remains in a prior position. 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 Stock owned by Borrower and encumbered
by the Pledge Agreement without Lender's prior written consent in its
sole discretion.
9.1.4 Borrower hereby subordinates any and all sums payable to
Guarantor, or to Borrower's or Guarantor's officers, trustees, or any
affiliates to repayment of the Indebtedness, and no such payments or
distributions shall be made to any such officers, trustees, or
affiliates if an Event of Default is outstanding and uncured.
9.1.5 Upon the request of Lender, 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 Loan
Documents.
9.1.6 Not take any action with respect to any of the security for
the Loan held by Lender from time to time which is inconsistent with
the provisions and the purpose of this Agreement or which would
adversely affect the rights of Lender under the Loan Documents.
9.1.7 Permit Lender and/or its representative(s) at Borrower's
expense to review Borrower's books and records. Prior to an Event of
Default, said review shall take place not more often than annually.
Borrower or Guarantor shall reimburse Lender its reasonable and
necessary out-of-pocket expenses incurred in connection with any such
review (including, without limitation, travel and lodging) within ten
(10) days of Lender's invoice therefor. Any such invoice not paid by
Borrower in a timely fashion may be paid, at Lender's option, by an
Advance.
9.1.8 Not cause, suffer or permit the Coverage Ratio to be less
than 1.25.
10. FINANCIAL STATEMENTS, REPORTS AND TAX RETURNS.
10.1 REPORTS AND FINANCIAL STATEMENTS. Borrower shall furnish to
Lender the following-described complete and correct reports and financial
statements accurately reflecting the performance and financial condition of
Borrower. The reports and financial statements shall be in such detail, be
in form and content and be prepared with such level of accounting control
as Lender may require from time to time. Borrower shall give Lender prompt
notification of any event which has, or the commencement of any litigation
which if adversely determined would have, a material adverse effect on
Borrower's or the Project's financial condition. The reports and financial
statements to be provided include:
10.1.1 Within forty-five (45) days after the end of each fiscal
quarter, Borrower shall provide Lender quarterly statements of account
as described in Section 11.15 of the Plan and an accounting of all
Employer contributions certified true and accurate by Borrower.
10.1.2 Within ninety (90) days after the end of each fiscal year,
Borrower shall provide Lender audited annual statements of account and
an accounting of all Employer contributions.
10.1.3 Within ten (10) days after each required filing deadline,
Borrower will furnish Lender with a copy of its executed and filed
federal tax return or report and/or with a copy of any extension forms
filed in lieu of the subject tax return or report.
10.1.4 Such other information and reports as Lender may
reasonably request from time to time.
10.2 AUDIT. Lender shall have the right to inspect and/or audit
Borrower's books and records at Borrower's or Borrower's accountant's place
of business during business hours. Borrower shall reimburse Lender's
reasonable and necessary out-of-pocket expenses incurred in any such
inspection or audit.
11. CROSS-DEFAULT. Any Event of Default under this Loan or any other
obligation from Borrower to Lender shall be deemed an Event of Default under any
and/or all of the other loans or agreements by Borrower with Lender or its
affiliates and any collateral under any or all of the above shall be deemed to
be collateral for the others; provided, however, that the Stock purchased with
the proceeds of the Loan shall not be deemed collateral for any other loan.
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, foreclosure or sale of any other collateral.
12. DEFAULT.
12.1 The occurrence of any one or more of the following shall
constitute an "Event of Default" hereunder, if any such breach or default
is not cured within ten (10) days (twenty (20) days in the case of a
non-monetary default) from Borrower's receipt of written notice:
12.1.1 Default in the performance of any obligation by Borrower
under the Indebtedness, the Line Note, the Pledge Agreement, other
Loan Documents, or otherwise, whether or not such default is with
respect to the payment of money or otherwise.
12.1.2 Any material misrepresentation or warranty contained
herein at any time proves to be false or misleading in any material
respect.
12.1.3 The levy of a material attachment, execution or other such
process against Borrower's property or any of it and the failure by
Borrower to obtain the discharge thereof or provide adequate bond
acceptable to Lender as security therefor within 60 days.
12.1.4 Default in the performance of any other obligation of
Borrower to Lender under any other agreement between Borrower and
Lender.
12.1.5 Borrower's or Guarantor'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, filing of bankruptcy (either voluntary or involuntary) or
Borrower or Guarantor admits in writing its inability to make payments
on its debts as they mature.
12.1.6 The occurrence of any materially adverse change in the
financial conditions or operations of Borrower or Guarantor.
12.1.7 The occurrence of a material default in the performance of
any other payment obligation of Borrower whether owed to Lender or any
other person, firm, or entity.
12.1.8 The termination of Borrower.
12.1.9 Failure to maintain at all times a Coverage Ratio of not
less than 1.25.
12.2 Upon the occurrence of any Event of Default, Lender may, at its
option:
12.2.1 Declare all of the Indebtedness (including, without
limitation, the Line Note) immediately due and payable;
12.2.2 Commence foreclosure or otherwise enforce Lender's rights
against any security then held by Lender for the Loan in such order as
Lender may determine;
12.2.3 Terminate Lender's agreement to make further Advances
under this Agreement; and/or
12.2.4 Offset any indebtedness from any amounts due Borrower
under any other agreement between Borrower and Lender.
12.3 MARSHALING. Borrower specifically waives, to the fullest extent
permitted by law, any right to require marshaling of any of the assets
encumbered to secure the Indebtedness and to direct the order in which such
assets are sold.
12.4 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 attorneys' fees) of retaking, holding,
storing, processing and preparing for sale, selling, collecting,
liquidating and the like; (ii) then to the satisfaction of the
Indebtedness, 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 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.
12.5 REMEDIES. The remedies provided for herein are cumulative and
shall be in addition to any and all other rights or remedies provided for
in this Agreement, or any other Loan Document including, without
limitation, 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 Loan 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 unless, in the exercise of the
rights or remedies undertaken by Lender, Lender realizes all amounts owed
to it in connection with the Loan.
13. MISCELLANEOUS.
13.1 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 if such default persists
or is repeated, and no express waiver shall affect any 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 after such notice. If no action is taken by Lender within the
seven (7) days following notice, said right shall conclusively be deemed to
have been Waived by Lender. The intent of this section is to avoid
unintentional waivers by Lender of any of its rights hereunder.
13.2 NO DULY OF LENDER. Nothing in this Agreement or any other Loan
Document shall impose or imply any duty or obligation whatsoever upon
Lender to take any action with respect to any of the security held by
Lender for the Loan or to preserve any rights of Borrower with respect to
any of the security held by Lender for the Loan.
13.3 AMENDMENT. This Agreement and the Loan Documents, 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.
13.4 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 liability, loss, damage, costs
or expense, including court costs and reasonable attorneys' fees, that
Indemnitee may hereafter suffer, incur, pay or lay out or in any manner be
held liable for, by reason of any breach, default, misstatement or
misrepresentation of any of the statements, warranties or representations
of Borrower contained in this 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 made or losses suffered by such person with respect
to any liability, damage, loss or claim to which the foregoing indemnity
relates.
13.5 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 addresses as a party hereto may designate in writing) and
shall be tendered by personal delivery or by facsimile transmission 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 deposited 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 Borrower: Xxxxxxx X. XxXxxxxx, III, Xxxxx X. Xxxxx and Xxxxx X. Xxxxx
in their capacity as Trustees for the
The ILX Resorts Incorporated Employee Stock Ownership Plan
and Trust
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Facsimile: 000-000-0000
with a copy to: ILX Resorts Incorporated
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
If to Lender: Litchfield Financial Corporation
00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxxx,
Senior Vice President
Facsimile: (000)000-0000
with a copy to: Litchfield Financial Corporation
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxx Xxxxxxx,
Senior Vice President
Facsimile: (000)000-0000
and: Xxxxx X. Xxxxx, Esq.
Xxxxx X. Xxxxx & Associates, P.C.
0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 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.
13.6 BINDING EFFECT; ASSIGNMENT. This Agreement may be assigned by
Lender. Borrower may not assign its interest in, or obligations under, this
Agreement except with the written consent of Lender, in its sole
discretion. Subject to the foregoing, 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.
13.7 INTERPRETATION AND VENUE. Except as provided below, 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 paragraphs 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. Any action to enforce
or construe this Agreement or any other Loan Document shall be brought
exclusively in the District Court in and for Jefferson County, Colorado.
Borrower hereby consents to the foregoing exclusive jurisdiction and venue.
Provided, however, that nothing contained herein shall preclude Lender from
bringing one or more actions to enforce its rights hereunder in the State
of Arizona or any other state in which Borrower or Guarantor maintain
offices or assets.
13.8 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.
13.9 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.
13.10 MERGER. This Agreement represents the culmination of all prior
negotiations, representations, and agreements between the parties with
respect to the credit facility contemplated hereby. All such prior
negotiations, representations, and agreements are merged herein.
14. 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.
15. JURY WAIVER. BORROWER HEREBY 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year set forth above.
BORROWER:
ILX RESORTS INCORPORATED
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST
By: /s/ Xxxxxxx X. XxXxxxxx, III
----------------------------------------
Xxxxxxx X. XxXxxxxx, III, Trustee
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx, Trustee
By: /s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx, Trustee
GUARANTOR:
ILX RESORTS INCORPORATED,
an Arizona corporation
By: /s/ Xxxxxx X. Xxxxxxx, Chairman
-------------------------------------
Xxxxxx X. Xxxxxxx, Chairman of the Board
LENDER:
LITCHFIELD FINANCIAL CORPORATION,
a Massachusetts corporation
By: /s/ Xxxxx X. Xxxxxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxxxxx,
Senior Vice President
LIST OF EXHIBITS
EXHIBIT A Line Note
EXHIBIT B Pledge Agreement
EXHIBIT B-1 Pledge Agreement of Borrower
EXHIBIT B-2 Pledge Agreement of ILX
EXHIBIT C Guaranty
EXHIBIT D Form of Attorney Opinion
EXHIBIT E Request for Advance
EXHIBIT F Authorizing Resolution and Incumbency Certificate
EXHIBIT F-1 Borrower
EXHIBIT F-2 ILX Resorts Incorporated
EXHIBIT F-3 Administrative Committee
EXHIBIT G Irrevocable Power of Attorney
EXHIBIT G-1 Irrevocable Power of Attorney and
Stock Power of Borrower
EXHIBIT G-2 Irrevocable Power of Attorney of ILX
EXHIBIT H ILX/Litchfield Letter to Concord
