LOAN AND SECURITY AGREEMENT
AGREEMENT dated this 7th day of September, 1994 by and between TAMMAC
FINANCIAL CORP., a Delaware Corporation, having its principal office located at
100 Commerce Boulevard, Wilkes-Barre, Pennsylvania 18702 (hereinafter referred
to as the "Lender"), and LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona
Limited Partnership, having its principal place of business located at 2777 East
Camelback Road, Phoenix, Arizona 85016 (hereinafter referred to as the
"Borrower").
R E C I T A L:
Borrower has requested Lender to loan it certain funds on a secured
basis, and Lender has agreed to do so, subject to and upon the terms and
conditions hereinafter set forth. The principal amount of the loan to be made by
the Lender to the Borrower is Four hundred ninety-nine thousand eight hundred
fifty-nine and 15/100 DOLLARS ($499,859.15).
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
I
DEFINITIONS
Acceptable Contract: For purposes of this Agreement, an
"Acceptable Contract" shall be a consumer contract or agreement and all related
documents entered into between the Borrower as seller and/or lender and a
Consumer as the purchaser and/or borrower of (or relating to) a timeshare
interest defined in and created by the Project Documents, which satisfy the
following requirements, and which are in all other respects acceptable to
Lender: (i) Borrower is the seller of a Unit Week under a Contract to a Consumer
who is a United States resident, which Contract shall have a term of at least
four years, except for non-interest bearing Contracts, which shall have a term
of at least one year; (ii) the purchase price under the terms of the Contract is
payable in not more than 84 equal monthly installments in U.S. currency; (iii)
no monthly installment is more than 30 days contractually delinquent under the
original terms of the Contract, and neither the Borrower nor the Consumer is (in
the sole discretion of Lender) materially in default under the terms of the
Contract; (iv) all documents relating to the Contract and Project have been
executed and delivered and copies are readily available to Lender in the files
of Borrower; (v) none of the Contracts are or shall be subject to any defense,
offset, counterclaim, discount or allowance except as otherwise consented to in
writing by Lender; (vi) the terms of any Contract and all related documents
shall comply in all respects with all applicable laws and regulations
promulgated thereunder, including without limitation the provisions of
theFederal Consumer Credit Protection Act of 1968, the Federal Consumer Leasing
Act of 1976, the Real Estate Settlement Procedures Act, Regulation X, the
Truth-in-Lending Act and Regulation Z; (vii) a cash down payment has been
received in an amount equal to at least 10% of the purchase price under the
Contract or, if the Consumer is upgrading his Unit Week, the 10% requirement may
be met by aggregating the cash down payment and principal payments under the
prior and current Contracts, prior to any discount; (viii) the rate of interest
thereon applied to the unpaid balance (if said Contract provides for the payment
of interest) is at least 3 percentage points above the highest prime rate as
announced in The Wall Street Journal on the business day preceding the closing
of the Loan; (ix) the Consumer has immediate access to a Unit Week which has
been developed to the specifications provided in the Project Documents,
approvals and Contract; (x) at least one monthly payment has been made thereon
and any applicable statutory or contractual "cooling off" or recision period has
expired; (xi) under which no single Consumer has a balance due Borrower in
excess of $15,000.00, unless specifically approved in writing by Lender; (xii)
Borrower is the sole owner of the Contract and has not sold, assigned,
mortgaged, pledged or hypothecated all or any portion thereof, nor is the
Contract subject to any claim, lien or security interest of any person or
entity, including without limitation, the United States, or any agencies or
instrumentalities thereof; and (xiii) the Contract shall be valid, enforceable
and legally binding upon the Consumer.
Accounts or Accounts Receivable: The term "Account" or
"Accounts Receivable" shall mean any and all obligations of any kind at any time
due and/or owing to Borrower relating to the Acceptable Contracts serving as
collateral for the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement and all rights of Borrower to receive
payment or other consideration (whether classified under the Uniform Commercial
Code of the State of Arizona or any other state as accounts, contract rights,
chattel paper, general intangibles, or otherwise) relating to the Acceptable
Contracts serving as collateral for the Loan and the Contracts and Related
Documents purchased by Tammac pursuant to the Financing Agreement, including
without limitation, invoices, contract rights, accounts receivable, general
intangibles, leases, choses-in-action, notes, drafts, acceptances, instruments
and all other debts, obligations and liabilities in whatever form owing to
Borrower from any person, firm, governmental authority, corporation or any other
entity, all security therefore, whether now existing or hereafter arising, all
relating to the Acceptable Contracts serving as collateral for the Loan and the
Contracts and Related Documents purchased by Lender pursuant to the Financing
Agreement, together with all proceeds and products of any and all of the
foregoing.
Agency Agreement: "Agency Agreement" shall be that certain
agreement to be entered into by and among Borrower, Lender and the Agent which
will provide, among other things, for the Agent to apply for, obtain and
maintain in Borrower's name a post office box to which all payments under the
Acceptable Contracts shall be made and to deposit into a Dominion Account at an
insured financial institution selected by Borrower and acceptable to Lender all
funds received in connection with the Acceptable Contracts and turn said funds
over to Lender, all in accordance with the terms and conditions of this
Agreement.
Agent: "Agent" shall mean the financial institution selected
by Borrower and approved by Lender to act as agent pursuant to the Agency
Agreement.
Collateral: "Collateral" shall mean the Collateral described
in Section III of this Agreement.
Commitment Letter: The "Commitment Letter" shall incorporate
and include all of the terms and provisions set forth in that certain Commitment
Letter dated June 28, 1991 issued by Lender to International Leisure Enterprises
Incorporated and assigned to Borrower, and that certain Commitment Letter dated
July 20, 1994 issued by Lender to the Borrower, together with all amendments and
modifications thereto.
Consumer or Consumers: "Consumer" or "Consumers" shall mean
those lessees or purchasers and/or borrowers of the Borrower leasing or
purchasing and financing the purchase of Unit Weeks (including any guarantor
thereof), executing an agreement, contract, a note or lease and/or similar
documentation, which evidence his and/or her or their obligation to the Borrower
for the repayment of the unpaid portion of the cash price for the Unit Week and
the first lien and security interest granted to Borrower in and to the Unit
Week.
Contract or Contracts: "Contract" or "Contracts" means a
Consumer contract or agreement between the Borrower as lessor, seller and/or
lender and a Consumer, as the lessee or purchaser and/or borrower of (or
relating to) a Unit Week together with all Related Documents. The term
"Contract" or "Contracts" shall also mean the Acceptable Contracts where the
context and sense and circumstances so require.
Default: "Default" shall mean an event or condition, the
occurrence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
Dominion Account: "Dominion Account" shall mean the dominion
account described in Section V. 21. of this Agreement.
Event of Default: "Event of Default" shall mean the occurrence
of any of the events described in Section VIII of this Agreement.
Financing Agreement: "Financing Agreement" shall mean that
certain Financing Agreement dated as of September 10, 1991, together with all
amendments and modifications thereto, whether presently in existence or
hereafter arising, entered into by and among Borrower and Lender regarding the
sale and purchase of installment obligations generated by Borrower relating to
Borrower's development of the Resort, and any subsequent amendments or
modifications thereto.
Financing Statements: "Financing Statements" shall mean the
financing statements required to be filed with the Arizona Secretary of State's
Office, the Office of the Recorder in Coconino County, Arizona and/or any other
recording office in order to perfect the security interests granted to the
Lender by the Loan Documents.
General Intangibles: "General Intangibles" shall mean and
include all of the Borrower's now owned or hereafter acquired chooses in action,
causes of action and all other intangible personal property including, without
limitation, corporate or other business records, inventions, designs, patents,
patent applications, trademarks, trademark applications, tradenames, trade
secrets, goodwill, registrations, copyrights, licenses, franchises, customer
lists, tax refunds, tax refund claims, insurance claims and rights to
indemnification all related to the Acceptable Contracts serving as Collateral
for the Loan and the Contracts and Related Documents purchased by Lender
pursuant to the Financing Agreement.
Guarantor or Guarantors: "Guarantor" or "Guarantors" shall
mean any one or all of the following (as the context so requires) who have
executed and delivered guaranty agreements (the "Guaranty"), and/or
modifications or amendments thereto, in favor of Lender, or any additional
guarantors who may have or may in the future unconditionally guaranty the
obligations of the Borrower: ILX Incorporated (f/k/a International Leisure
Enterprises Incorporated), an Arizona Corporation.
Lender: "Lender" shall mean Tammac Financial Corp., its
successors or assigns.
Loan: "Loan" shall mean the Loan described herein, which shall
be in the principal amount of _Four hundred ninety-nine thousand eight hundred
fifty-nine and 15/100 ($499,859.15_) Dollars.
Loan Documents: "Loan Documents" shall mean this Agreement,
the Note, the Deed of Trust, the Financing Agreement, the Financing Statements,
the Guaranty, the Security Agreement, the Environmental Indemnity Agreement, the
Agency Agreement, the Incumbency Certificates, the Corporate Resolutions and all
other documents executed in connection with the Loan and the Financing
Agreement, whether executed contemporaneously herewith or at any other time,
together with all amendments, supplements, substitutions, replacements or
modifications to any or all of them.
Mortgage: "Mortgage" or "Deed of Trust" shall mean the
Mortgage or Deed of Trust covering the Premises, given by the Borrower in favor
of the Lender to secure the Loan and the Borrower's obligations under the
Financing Agreement, which may be singular or plural as the text requires.
Note: "Note" shall mean the Promissory Note made by the
Borrower and delivered to the Lender as evidence of the Loan.
Premises: "Premises" or "Project" or "Resort" shall mean the
land owned by Borrower located at 160 Portal Lane, Sedona, Coconino County,
Arizona, as more particularly described in Exhibit "A" attached hereto and made
a part hereof, at which is located the timeshare condominium project (including,
but not limited to the Unit Weeks) known as Los Abrigados Resort & Spa (f/k/a
Sedona Vacation Club), including the real estate, the improvements thereon and
all furnishings, fixtures and personalty contained thereon and all common areas
and/or elements appurtenant thereto.
Project Documents: "Project Documents" shall mean the
constituent documents for the Premises, including, but not limited to the
Membership Plan and By-laws for the Resort creating and/or establishing the
Resort, the By-laws for the Sedona Vacation Club Incorporated, an Arizona
non-profit corporation, the Public Offering Statement and any exhibits thereto,
and any supplements, additions, substitutions, modifications or amendments
thereto, as may be made from time to time.
Obligations: "Obligations" shall mean all indebtedness,
obligations, liabilities and agreements of every kind and nature of Borrower to
or with Lender, or to or with any affiliate of Lender, now existing or hereafter
arising, and now or hereafter contemplated, pursuant to this Agreement and/or
the Loan Documents, or otherwise, whether in the form of refinancing, loans,
interest, charges, expenses or otherwise, direct or indirect, including without
limitation, the Financing Agreement, the Loan and any participation or interest
of Lender (or of any affiliate of Lender) in any obligations of Borrower to
others, acquired outright, conditionally or as collateral security from another,
absolute or contingent, joint or several, liquidated or unliquidated, direct or
indirect, secured or unsecured, arising by operation of law or otherwise,
including without limitation any future advances, renewals, extensions or
changes in form of, or substitutions for, any of said indebtedness, obligations
or liabilities, the other sums and charges to be paid to and all interest and
late charges on any of the foregoing.
Related Documents: "Related Documents" means, as applicable to
each Contract, the credit package, security agreements, mortgages, mortgage
deeds, deeds of trust securing the Contracts and encumbering the Unit Weeks,
guaranty agreements, all records pertaining to the Contracts, including, but not
limited to, all files, closing or settlement statements, title insurance reports
and policies, copies of deeds, contracts, prospectuses delivered to Consumers,
public offering statements, receipts for said prospectuses and public offering
statements, truth-in-lending disclosure statements, information, documents,
records and such other writings or documents of every kind and nature submitted
and/or executed by or on behalf of a Consumer and relating to the Contracts and
the Consumer's financing thereof.
Servicing Agent: "Servicing Agent" shall mean the entity
selected by Borrower and approved by Lender to act as the servicing agent
pursuant to the Servicing Agreement.
Servicing Agreement: "Servicing Agreement" shall mean the
agreement entered into between Borrower and the Servicing Agent to service the
Acceptable Contracts as described in Section V. 20. of this Agreement.
Transaction or Transactions: "Transaction" or "Transactions"
shall mean a lease or sale transaction evidenced by a Contract and/or Related
Documents, which transactions are sold to Tammac in accordance with the
Financing Agreement.
Unit Week: "Unit Week" or "Unit Weeks" or "Timeshare Estate"
or "Timeshare Estates" shall mean the timeshare interest(s) or estate(s) defined
in or created by the Project Documents or otherwise.
II
LOAN
Loan: The Lender agrees to lend to Borrower (subject to the
terms of this Agreement) the principal sum of Four hundred ninety-nine thousand
eight hundred fifty-nine and 15/100 ($499,859.15) Dollars. The Loan shall bear
interest from the date hereof at the rate set forth herein and in the Note.
Interest Rate: The interest rate which shall be used to
calculate the amount of interest due each month shall be the highest Prime Rate
as announced, from time to time, in The Wall Street Journal during the month for
which interest is being charged, plus four (4%) percentage points per annum.
Interest shall be calculated on the outstanding principal balance at the close
of each day, on the basis that one day represents 1/360th of a year. The
interest rate may be changed from time to time without notice to the Borrower
and for the purposes of this Agreement, any such change shall be effective on
the date of the change. Interest shall continue to accrue on the unpaid
principal balance of the Loan until all sums due under the Loan are paid in
full. Any failure or delay by Lender in submitting invoices for interest
payments shall not discharge or relieve Borrower of the obligation to make such
interest payments. In the event that the interest rate charged under the Note
exceeds the legal limit permitted by law, the interest rate shall be
automatically reduced to the permitted limit and any interest charged which
exceeds or exceeded the permitted limit shall, at Lender's option, be treated as
a payment of principal or refunded directly to Borrower.
Default Rate: Upon the occurrence and during the continuation
of an Event of Default, the rate used to calculate the interest rate due on the
Loan may, at the option of Lender, increase by five (5%) percentage points per
annum above the then applicable interest rate referred to in Section II.2. above
(the "Default Rate"). In no event, however, shall the Default Rate exceed the
maximum allowable by law.
Late Charge: In the event the Lender receives a payment of
interest or principal more than fifteen (15) days after the date due, such
payment shall be subject to a late charge of five (5%) percent of such payment
(the "Late Charge"). The Late Charge represents the cost to the Lender in
processing late payments and shall not be deemed to constitute additional
interest.
Maturity Date: The unpaid principal, the accrued interest and
all costs and expenses relating to the Loan shall be payable on September 1,
1998, unless sooner demanded in accordance with the terms and provisions set
forth herein.
Mandatory Payments: Commencing on the first day of October,
1994, and on the same day of each successive month thereafter through and
including September 1, 1995, the Borrower shall pay to Lender a minimum payment
each month in the amount of $20,603.00. Thereafter, commencing on the first day
of October, 1995, and on the same day of each successive month thereafter
through and including September 1, 1998, the Borrower shall pay to Lender a
minimum payment each month in the amount of $6,280.00. All of the mandatory
payments as hereinabove provided shall be applied first to the payment of
accrued and unpaid interest and the balance, if any, shall be applied to the
payment of the installments of principal then remaining unpaid. The aforesaid
payment shall be made payable out of the monthly collections received under the
Acceptable Contracts. In the event the monthly collections are in excess of the
applicable monthly Mandatory Payment as aforesaid, said excess shall be applied
as a prepayment of the principal balance remaining due under the Loan. In the
event the monthly collections from the Acceptable Contracts are insufficient to
pay the aforesaid monthly principal and/or interest on the Loan, the Borrower
shall pay the interest and/or principal insufficiency on the first of each month
as aforesaid.
Prepayment: The Borrower shall have the right to prepay the
principal of the Loan at any time without penalty or premium, provided, however,
the Borrower shall notify Lender of each such prepayment. Any such prepayments
of principal shall be applied in the inverse order of their maturity.
Instructions to Consumers;
Payments Received by Borrower: The Borrower shall direct or
otherwise cause all Consumers under the Acceptable Contracts to pay all monies
due thereunder to the Agent or as otherwise advised by Lender in writing. The
Borrower, to the extent that it receives such payments directly from or on
behalf of such Consumers, shall hold the same (in the form so received) in trust
for the sole and exclusive benefit of Lender and immediately deliver same to
Lender or Agent. Monies (in good, collected funds) from Contracts collected and
paid to Lender by the Agent or the Borrower shall be (subject to the payment of
fees, costs and expenses as set forth in this Agreement) applied on the first
business day of the calendar month following the receipt thereof, first towards
the payment of accrued and unpaid interest on the Loan and then to the payment
of the principal amount then outstanding under the Loan, or to any other
Obligation in such order as Lender may elect in its sole discretion.
Computation of Unpaid Principal Balance: (a) For purposes of
computing the amount of interest payable on the Loan, the outstanding principal
amount of the Loan shall not be reduced by the amount of any funds collected by
the Agent or the Borrower until such funds are received by Lender as good,
collected funds and applied to the Loan.
(b) Checks received by Lender prior to 12:00 noon on any
business day shall be credited against the balance of the Obligations on such
business day. Checks received by the Lender after 12:00 noon any business day,
shall be credited against the balance of the Obligations on the following
business day. The crediting of checks received as aforesaid shall be conditioned
upon final payment to Lender at its own office in cash or solvent credits of the
items giving rise to them and if any item is not so paid, the amount of any
credit given for it shall be charged to the Loan whether or not the item is
returned.
III
SECURITY AND CROSS-COLLATERAL
To secure the payment and performance of all Obligations of
the Borrower set forth in this Agreement and the accompanying Loan Documents, as
well as any extensions, renewals and modifications therefore or substitutions
therefore and all other obligations of the Borrower to Lender, whether now
existing or hereafter arising, Borrower hereby grants or causes to be delivered
to Lender the following security interests:
(a) a valid second lien on the Premises, which shall be
evidenced by the Deed of Trust;
(b) a valid perfected security interest in all items of
personal property owned by the Borrower, including, but not limited to,
fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials, including, but not limited to, furnaces, boilers, oil burners,
radiators and piping, plumbing and bathroom fixtures, refrigeration systems,
air-conditioning systems, sprinkler systems, washtubs, sinks, gas and electric
fixtures, stoves, ranges, awnings, screens, window shades, elevators, motors,
dynamos, refrigerators, kitchen cabinets, incinerators, plants and shrubbery and
all other equipment and machinery, tools, appliances, fittings, fixtures and
building materials of any kind and whether or not affixed to the realty located
at the Premises if and when such items exist now or are hereafter located in or
upon any portion of the Premises and used or usable in connection with any
present or future operation of the Premises;
(c) all of the Borrower's right, title and interest in and to
the Contracts and Related Documents purchased by the Lender pursuant to the
Financing Agreement;
(d) the Accounts Receivable;
(e) the General Intangibles;
(f) inventory, as that term is defined in the Uniform
Commercial Code of the State of Pennsylvania, all goods, merchandise or other
personal property held by Borrower for sale or lease and all right, title and
interest of Borrower therein and thereto, and all proceeds and products of any
of the foregoing, whether nor owned or hereafter acquired by Borrower and
wherever located;
(g) equipment, machinery, fixtures and furnishings and all
other tangible assets and/or replacements, repairs, modifications, alterations,
additions, controls and operating accessories therefore, and all substitutions
and replacements therefore, and all accessions and additions thereto and all
proceeds and products of the foregoing now or hereafter acquired by Borrower;
(h) a valid first lien on all of the Acceptable Contracts and
Related Documents which are more particularly set forth and described on the
schedule attached hereto and made a part hereof and labelled as Exhibit "B";
(i) any claims of Borrower against third parties for loss or
damage to, or destruction of, any and all of the foregoing, all guarantees,
security and liens for payment of any Accounts Receivable and documents of
title, policies, certificates of insurance, insurance proceeds, securities,
chattel paper, and other documents and instruments evidencing or pertaining
thereto, and all files, correspondence, computer programs, tapes, discs and
related data processing software owned by Borrower or in which Borrower has an
interest which contain information identifying any one or more of the items in
(a) through (h) above or (j) through (o) below, or any Consumer, showing the
amounts owed by each, payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof;
(j) with respect only to those Acceptable Contracts securing
this Loan and those Contracts and Related Documents purchased by Lender pursuant
to the Financing Agreement, any and all moneys, securities, drafts, notes,
contracts, leases, licenses, General Intangibles and other property of Borrower,
including customer lists, and all proceeds and products thereof, and all other
assets of Borrower now or hereafter held or received by or in transit to Lender
from or for Lender, or which may now or hereafter be in the possession of
Lender, or as to which Lender may now or hereafter control possession, by
documents of title or otherwise, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and any and all deposits, general or
special, balances, sums, proceeds, the Reserve Account, as that term is defined
in the Financing Agreement, and credits of Borrower and all rights and remedies
which Borrower might exercise with respect to any of the foregoing, but for the
execution of this Agreement;
(k) Borrower's right, title and interest throughout the world
in and to the trade secrets, rights in information regarding computer software
programs developed by or for Borrower, as same relate to the Acceptable
Contracts securing the Loan and the Contracts and Related Documents purchased by
Lender pursuant to the Financing Agreement, including without limitation, the
right to prevent all persons, including Borrower, from using the programs or
from using and transferring the information contained therein without
authorization;
(l) Borrower's interest in any marketing or direct mail
agreements with respect to the Project as same relate to the Acceptable
Contracts securing the Loan and the Contracts or Related Documents purchased by
Lender pursuant to the Financing Agreement;
(m) licenses, contracts, management contracts or agreements,
franchise agreements, permits or certificates now or hereafter acquired or used
in connection with the ownership, operation or maintenance of the Project as
same relate to the Acceptable Contracts securing the Loan and the Contracts or
Related Documents purchased by Lender pursuant to the Financing Agreement;
(n) Borrower's rights as "declarant", "developer," "owner"
and/or otherwise under the Project Documents, whether now or hereafter existing
as same relate to the Acceptable Contracts securing the Loan and the Contracts
or Related Documents purchased by Lender pursuant to the Financing Agreement;
and
(o) all proceeds, including insurance proceeds, and products
of the Collateral.
Scope of Security Interest: The security interest granted
hereunder is given to and shall be held by Lender as collateral security for the
payment and performance of all liabilities and obligations of Borrower to Lender
of every kind and description, whether direct or indirect, absolute or
contingent, due or to become due, joint or several, howsoever created, arising,
or evidenced and now existing or at any time hereafter created, arising, or
incurred.
Effective as Security Agreement: This Agreement shall be
effective as a Security Agreement as that term is used in the Uniform Commercial
Code as enacted in the State of Pennsylvania.
IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce the Lender to enter into this Agreement and to amend the
Financing Agreement and to make the Loan hereunder, the Borrower represents,
warrants and covenants to the Lender that:
Partnership Existence: Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Arizona and has the power to execute, deliver and carry out the terms of this
Agreement and the Board of Directors of its general partner, has duly authorized
and approved the terms of the Financing Agreement, the Loan described herein,
the other Loan Documents and the taking of any and all action contemplated
hereunder or thereunder by the Borrower.
Validity of Agreement: The execution of this Agreement and the
other Loan Documents and every other instrument or document required to be
executed in accordance herewith or therewith, or which the Lender may deem
advisable in connection herewith, does not violate any provisions of the
Certificate of Limited Partnership and Agreement, or of any agreement or
undertaking to which Borrower is a party or in which the Borrower is bound in
any fashion.
Partnership Action: Borrower has taken all action required by
law to validate and make this Agreement and to enter into the Loan Documents and
any other documents required in connection herewith enforceable, and will
deliver contemporaneously herewith a certification of such partnership action.
Lien Priority: The Borrower has, and at all times will have,
good and marketable title in and to the Collateral. No other person has or will
have any right, title, interest, claim or lien therein, thereon or thereto,
other than: (a) the existing first lien on the Resort maintained by Bank One,
Arizona, N.A., with a principal balance remaining due thereunder of no more than
$2,300,000.00, (b) that certain Deeds of Trust Equal Priority Agreement entered
into by and among Tammac and Resort Funding, Inc.; (c) customary equipment lease
agreements entered into by Borrower relating to the Project, which unpaid lease
obligations thereunder do not exceed, at any time, in the aggregate, the sum of
$250,000.00 (items 4(a), (b) and (c) above being hereinafter sometimes referred
to as the "Permitted Lien(s)"); and (d) the rights, if any, of the Consumers.
Notwithstanding anything contained herein to the contrary, provided the Borrower
is not in Default under the Loan Documents or any Obligations, whether now
existing or hereafter arising, upon Borrower's request, Lender shall subordinate
its second lien on the Resort to one or more prior liens thereon held by one or
more financial institutions or reputable funding sources having an aggregate
principal balance of no more than $2,500,000.00, which permitted prior lien(s)
shall be construed to be "Permitted Lien(s)". The Collateral will remain free
and clear of any liens other than the Permitted Liens, excepting the liens
hereby granted to Lender, which liens to Lender shall, at all times, except as
hereinabove set forth, be first and prior on the Collateral above described and
as to the Accounts and proceeds, including insurance proceeds, resulting from
the sale, disposition or loss thereof, that no further action need be take to
perfect the lien to Lender other than filing continuation statements under the
Uniform Commercial Code and continued possession by Lender of that portion of
the Collateral which constitutes instruments or other pledged collateral.
Financing Statements; Perfection of Lien: Borrower agrees at
its own expense, to execute the Financing Statements or continuation statements
required by the Uniform Commercial Code, together with any and all other
instruments or documents and take such other action including delivery as may be
required to perfect or maintain Lender's security interest in the Collateral
and, unless prohibited by law, Borrower hereby authorizes Lender to execute and
file any such financing statements or continuation statements on Borrower's
behalf.
No Governmental Consent Necessary: No consent or approval of,
giving of notice to, registration with or taking of any other action in respect
of, any governmental authority or agency is required with respect to the
execution, delivery and performance by Borrower of this Agreement or any of the
other Loan Documents.
No Proceedings: There are no actions, suits, or proceedings
pending (nor, to the knowledge of the Borrower, any actions, suits or
proceedings threatened, nor is there any basis therefore) against or in any way
relating adversely to the Borrower, the Premises, any other Collateral or any
property of the Borrower in any court or before any arbitrator of any kind or
before or by any governmental or non-governmental body which, if adversely
determined, would singly or in the aggregate have a material adverse effect on
the Borrower or the Collateral; the Borrower is not in default with respect to
any order of any court, arbitrator or governmental or non-governmental body; and
the Borrower is not subject to or a party to any order of any court or
governmental or non-governmental body arising out of any action, suit or
proceeding under any statute or other law respecting anti-trust, monopoly,
restraint of trade, unfair competition or similar matters.
Financial Statements: The financial statements of Borrower
submitted to Lender in connection with the application for the within Loan
fairly presents the financial condition of Borrower. Borrower knows of no
liability, direct or contingent, involving significant amounts, not disclosed by
or reserved against in said financial statements.
Changes in Financial Condition: There has been no material and
adverse change in Borrower's condition, financial or otherwise, since the date
of the financial statements delivered to Lender.
Further Assurances: The Borrower agrees that it will execute
and deliver any further deeds of trust or any other documents or instruments
necessary to achieve and maintain at all times the balance due to the Lender as
a valid second lien on the Premises and a first, valid lien on the other
Collateral described herein.
Taxes and Assessments: All federal, state and other tax
returns of Borrower required by law to be filed have been duly filed and all
federal, state and other taxes, assessments and other governmental charges or
levys upon the Borrower or its property, income, profits and assessments which
are due and payable have been paid. All taxes due to the Federal government, the
state of Arizona, and any taxes or assessments due to any other State, county or
municipality, have been fully paid and satisfied by the Borrower except for
current taxes not now due and payable.
Chief Executive Office and Location of Property: The
Borrower's Chief Executive Office, principal place of business and books and
records related to the Collateral pledged hereunder are located at 2777
Camelback Road, Phoenix, Arizona 85016. The Borrower will not move its Chief
Executive Office, its principal place of business or its books and records
referred to herein or change its name, identity or partnership structure without
giving the Lender prior written notice thereof and obtaining its written
consent, which consent shall not be unreasonably delayed or withheld. Borrower
further agrees that it will not remove any Collateral referred to herein from
the address where they are presently located other than in the ordinary course
of business.
Representations and Warranties True, Accurate and Complete:
None of the representations, warranties or statements made to Lender pursuant
hereto or in connection with this Agreement or the transactions contemplated
hereby contains any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances in which they are made, not misleading.
Validity and Enforceability of Acceptable Contracts: All of
the Acceptable Contracts are, and will be, legal, valid, binding and enforceable
obligations of the parties thereto (without right of set-off or subject to any
counterclaims or other defenses) in accordance with the terms thereof, and are
not, and will not be subject to any liens, and none of such Acceptable Contracts
are forged or have affixed thereto any unauthorized signatures or have been
entered into by any persons without the required legal capacity and otherwise
meet all of the criteria as set forth in the definition of an Acceptable
Contract herein above provided.
Project: The Project has direct access to a publicly dedicated
road and all roadways inside the Project are owned in fee simple by the
Borrower. Electric, gas, sewer, water facilities and other necessary utilities
are available in sufficient capacity to service the Project and any easements
necessary to the furnishing of said utility services have been obtained and duly
recorded. Each Consumer has access to and the use of all of the amenities and
public utilities of the Project. All costs arising from the construction of any
improvements or the purchase of any equipment located in the Project have been
fully paid for, except for customary equipment leases entered into by Borrower
in connection with the Project. The Project complies with all applicable
restrictive covenants, zoning and land use ordinances and building codes, all
applicable health and environmental laws and regulations and all other
applicable laws, rules and regulations.
No Default: No Event of Default (as specified in Section
VIII), and no event which, with a lapse of time or the giving of notice, would
constitute an Event of Default, shall have occurred and be continuing at the
closing date of the Loan and Borrower is not presently in violation of any of
the representations and warranties herein specified.
Other Statements: All statements contained in any certificate,
financial statement, legal opinion or other instrument delivered by or on behalf
of the Borrower pursuant to or in connection with or in any amendment to this
Agreement, shall constitute representations and warranties made under this
Agreement. All representations and warranties made under this Agreement shall be
made at and as of the date as of which this Agreement is dated. All
representations and warranties made under this Agreement shall survive and not
be waived by the execution and delivery of this Agreement or any investigation
by the Lender.
Subdivision/Final Site Plan: All right to appeal from any
decision rendered by any governmental body in connection with the subdivision or
final site plan approval of the Premises, if any, or proposed or actual use of
the Premises has expired.
O.S.H.A. and Environmental Matters: (a) Borrower has duly
complied with, and its facilities, business, assets, property, leaseholds and
equipment are in compliance in all material respects with, the provisions of the
Federal Occupational Safety and Health Act, the Americans with Disabilities Act
and the Environmental Protection Act, and all rules and regulations thereunder
and all similar state and local laws, rules and regulations; and there have been
no outstanding citations, notices or orders of non-compliance issued to Borrower
or relating to its business, assets, property, leaseholds or equipment under any
such laws, rules or regulations.
(b) Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to Borrower and its ownership,
use and development of the Premises (including without limitation, all necessary
utility connections or permits) and its facilities, business, assets, property,
leaseholds and equipment are in compliance in all material respects with, all
applicable federal, state and local laws, rules and regulations relating to, air
emissions, water discharge, noise emissions, solid or liquid waste disposal,
hazardous waste or materials, or other environmental, health or safety matters.
Protection of Collateral; Reimbursement: All insurance
expenses and all expenses of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, and any and all excise,
property, sale and use taxes imposed by any state, federal or local authority on
any of the Collateral or in respect of the sale thereof, shall be borne and paid
by Borrower; if Borrower fails to promptly pay any portion thereof when due,
Lender may, at its option, but shall not be required to, pay the same and charge
Borrower's account therefore, and Borrower agrees promptly to reimburse Lender
therefore with interest accruing thereon daily at the Default Rate. All sums so
paid or incurred by Lender for any of the foregoing and any and all other sums
which Borrower may become liable hereunder and all costs and expenses (including
attorney's fees, legal expenses and court costs) which Lender may incur in
enforcing or protecting its lien on or rights and interest in the Collateral or
any of its rights or remedies under this or any other agreement between the
parties hereto or with respect to any of transactions to be had thereunder,
until paid by Borrower to Lender with interest at the rate aforesaid, shall be
considered as additional indebtedness owing by Borrower to Lender hereunder and,
as such, shall be secured by all the said Collateral and the proceeds from the
sale thereof and by any and all other collateral, security, assets, reserves or
funds of Borrower in or coming into the hands or enuring to the benefit Lender.
The Lender shall not be liable or responsible in any way for the safekeeping of
any of the Collateral or for any loss or damage thereto or for any diminution in
the value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency or other person whomsoever, but the same shall be at the
Borrower's sole risk.
Solvent Financial Condition: As to Borrower immediately prior
to the issuance of the Note, the present fair salable value of its assets is
greater than the amount required to pay its total liabilities, and it is able to
pay its debts as they mature or become due. Borrower shall maintain such solvent
financial condition, giving affect to the Obligations, as long as Borrower is
obligated to Lender under this Agreement.
Use of Proceeds: The proceeds of the Loan will be used for
working capital purposes of Borrower. None of the transactions contemplated in
this Agreement (including, without limitation, the use of the proceeds from such
loan) will violate or result in the violation of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto, including, without
limitation, Regulation G of the Board of Governors of the Federal Reserve
System.
V
AFFIRMATIVE COVENANTS
Until payment in full of all Obligations and the termination of this
Agreement, Borrower covenants and agrees that it will:
Notify Lender: Promptly inform Lender of any material adverse
change in circumstances with respect to matters set forth in the representations
and warranties under Section IV of this Agreement.
Pay Taxes and Liabilities; Comply with Agreements: Promptly
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits and upon any properties belonging
to it prior to the date on which penalties attach thereto, and all lawful claims
for labor, materials and supplies which, if unpaid, might become a lien or
charge upon any properties of the Borrower; except that no such tax, assessment,
charge, levy or claim need be paid which is being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside.
Observe Covenants, etc.: Observe, perform and comply with the
covenants, terms and conditions of this Agreement, the other Loan Documents and
any other agreement or document entered into between Borrower and Lender.
Access to Records and Property: At any time and from time to
time, upon request by Lender permit representatives of the Lender to:
(a) Visit and inspect the properties of the Borrower,
(b) Inspect, copy and make extracts from its books
and records at any place designated by Lender, and
(c) Discuss with its employees its respective
businesses, assets, liabilities, financial conditions, results of operations and
business prospects.
Comply with Laws: Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
compliance with which is necessary to maintain its partnership existence or the
conduct of its business or non-compliance with which would materially and
adversely affect (a) its ability to perform in accordance with the terms and
conditions of this Agreement, or (b) any security given to secure its
Obligations.
Insurance Required: (a) Cause to be maintained, in full force
and effect on the building(s) and all other structures erected or to be erected
upon the Premises and all property given as Collateral security for all
Obligations, insurance in such reasonable amounts and against such customary
risks as is satisfactory to Lender, including, but without limitation, fire,
theft, burglary, pilferage, loss in transit, boiler, machinery, workman's
compensation, builder's risk, liability and hazard insurance. Said insurance
policy or policies shall:
(i) Be in a form and with insurers which are
satisfactory to Lender;
(ii) Be for such risks and for such insured
values as Lender or its assigns may require in order to replace the property in
the event of actual or constructive total loss;
(iii) Designate Lender and its assignees, as
first (or second, as the case may be,) mortgagee and/or additional loss payees,
as their interests may from time to time appear;
(iv) Contain a "Breach of Warranty" clause
whereby the insurer agrees that a breach of the insuring conditions or any
negligence by Borrower or any other person shall not invalidate the insurance as
to Lender and its assignees;
(v) Provide that they may not be cancelled
or materially altered without thirty (30) days prior notice to the Lender and
its assignees; and
(vi) Upon demand, be delivered to Lender.
(b) Obtain such additional insurance as Lender may
reasonably require.
(c) In the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer. Borrower hereby
authorizes Lender to endorse any checks or drafts constituting insurance
proceeds.
(d) Forthwith upon receipt of insurance proceeds
endorse and deliver the same to Lender.
(e) In no event shall Lender be required to: (i)
ascertain the existence of or examine any insurance policy; or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement or any other Loan Documents; or (iii) obtain any
insurance on the aforementioned risks.
(f) Borrower hereby directs any insurance company
concerned to pay directly to Lender any monies which may become payable to
Lender or Borrower under such insurance policies, and Borrower appoints the
Lender as attorney-in-fact (which appointment is agreed to be coupled with an
interest) to endorse any draft therefore. Lender shall have the right to retain
and apply the proceeds of any such insurance, at its election, to reduction of
any sums advanced to Borrower by Lender, or to restoration or repair of the
property damaged, as more particularly set forth in the Loan Documents.
Further Assurances: Borrower shall execute and deliver to
Lender, any pledge, lien, encumbrance, security agreement, financing statement
or other documents as may reasonably be requested by Lender at any time when
there are monies due and payable to Lender under the terms and conditions of
this Agreement in order to effectuate more fully the purposes of this Agreement
and/or any other Loan Documents.
Pay Legal Fees and Expenses: Pay to Lender, upon demand,
together with interest at the rate set forth in the Note, from the date when
incurred or advanced by Lender until repaid by Borrower all costs, expenses or
other sums incurred or advanced by Lender to preserve, collect and protect its
interest in or realize on the collateral, and to enforce Lender's rights as
against Borrower, any account debtor or guarantor, or in the prosecution or
defense of any action or proceeding related to the subject matter of this
Agreement, including without limitation legal fees, expenses and disbursements
incurred by Lender. All such expenses, costs and other sums shall be deemed
Obligations secured by the Collateral.
Reaffirmation of Representations and Warranties: All
warranties and representations made herein by Borrower, and in any other
agreements or documents executed and/or delivered by Borrower to Lender in
connection with this Agreement, will continue to be true and accurate so long as
the Obligations remain unpaid.
Expenses: The Borrower agrees to pay all charges incident to
the procuring and making of the Loan and the charges for the examination of the
title of the Premises, searches relating to the Borrower, the Guarantor and the
Collateral, title insurance premiums, surveys and drawing of papers, mortgage
tax, recording fees, legal fees and expenses of Lender's attorneys (as limited
pursuant to the Commitment Letter), and for all searches which may be required
by the Lender to assure the Lender that the Deed of Trust is a second lien as
herein provided.
Taxes, Assessments, etc. The Borrower agrees to pay any tax,
assessment or other charge or liens upon the Premises, existing at any time,
whether before or after the making of the Loan, and to furnish proof thereof
satisfactory to the Lender, within thirty (30) days after such payment is due,
and upon the Borrower's failure to do so, all further obligation on the part of
the Lender to make said Loan, or the balance thereof, shall cease, and the
amount previously advanced, if any, shall become immediately due and payable; or
if the Lender shall so elect, it may pay such encumbrances or liens and add the
amount of said payments to the amount thereafter becoming due. Any sums paid or
expended in accordance with any of the foregoing provisions of this clause shall
be deemed to be advanced to the Borrower pursuant to this Agreement and shall be
secured by the Loan Documents.
Permits, Licenses, etc.: The Borrower hereby assigns as
further security for the Obligations, all permits, licenses and contracts
relating to the Premises, including but not limited to, all environmental
approvals, all approvals for sewer, water and other utilities, all building or
construction permits, zoning, site plan or subdivision approvals, all licenses,
permits or approvals in connection with the operation of the Resort and the sale
and financing of Timeshare Estates, and all prepaid fees or charges relating
thereto, if any, each as may be permitted by the entity issuing such permits,
approvals, licenses and contracts.
Notice of Environmental, Health or Safety Complaints: Borrower
shall immediately provide to Lender notice or copies if written, of all
complaints, orders, citations or notices, whether formal or informal, written or
oral, from a governmental body or private person or entity, relating to air
emissions, water discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or safety
matter.
Assignment of Leases, Contract(s) of Sale: Borrower agrees to
and hereby does assign to Lender as further security for the Obligations, all
leases and/or contract(s) of sale of or affecting the Premises.
Financial Statements:
(a) Borrower agrees to submit to Lender its financial
statements, all prepared in accordance with generally accepted accounting
principles consistently applied, and in addition to such statements, any
supplementary information to the financial statements as Lender shall reasonably
require, as more particularly set forth in the other Loan Documents.
(b) Borrower shall, within one hundred twenty (120) days after
the end of each fiscal year, furnish to Lender its balance sheet as at the end
of such year, and its income and surplus statement and statement of cash flow
for such fiscal year, all in reasonable detail, all prepared in accordance with
generally accepted accounting principals consistently applied on a consolidated
basis with its subsidiaries and affiliates (including the Guarantor), and all
audited by independent certified public accountants of recognized standing
selected by Borrower and satisfactory to Lender, and in addition to such
statements, any supplementary information to the financial reports as Lender
shall reasonably require.
(c) Borrower shall also deliver to Lender within sixty (60)
days after the end of each quarter-annual fiscal period of the Borrower, except
the 4th quarter, Borrower's and Guarantor's balance sheet as at the end of such
period, Borrower's and Guarantor's cumulative income and surplus statement and
Guarantor's statement of cash flow for the period beginning on the first day of
such fiscal year and ending on the date of such balance sheet, all in reasonable
detail, all prepared in accordance with generally accepted accounting principals
consistently applied, certified by the Chief Financing Officer of the Borrower
and in addition to such statements any supplementary information to the
financial reports as Lender shall reasonably require.
(d) As soon as practical after the end of each month, and in
any event within ten (10) days after the end of such month Borrower shall cause
to be furnished to Lender a monthly detailed trial balance of all Acceptable
Contracts and a schedule of all collections and delinquencies relating to the
Acceptable Contracts, in form and substance acceptable to Lender. All such
statements shall be certified as correct by the Chief Financial Officer of
Borrower.
Broker's Fees: Borrower agrees to promptly pay all finders'
fees, brokerage fees, commissions or similar fees payable to them in connection
with the transactions described in this Agreement, if any. Borrower agrees to
indemnify and hold harmless Lender from and against any claim of any broker,
finder or other person, together with any attorneys' fees incurred by Lender in
respect thereto, arising out of the transactions contemplated by this Agreement.
Borrower and Lender acknowledge that they are not, as of the date of this
Agreement, aware of any such fees due to any person or entity. This obligation
shall survive the expiration or termination of the Commitment Letter and this
Agreement.
Payment of Contracts: Borrower will direct all account debtors
under the Contracts to remit all payments under such Contracts to the Lender's
account established at Bank One Arizona, N.A., or such other bank or other
entity as may be acceptable to Lender pursuant to the terms of the Agency
Agreement between the Agent, Lender and Borrower. Lender agrees to apply such
funds paid to the Obligations upon collection thereof by the Agent and delivery
to Lender, provided an Event of Default shall not then exist.
Other Documents: Borrower agrees that it will maintain
accurate and complete files relating to the Contracts and other Collateral to
the satisfaction of Lender, and that such files will contain copies of each
Contract, Related Documents, copies of all relevant credit memorandum relating
to the Contracts, and all collection information and correspondence relating
thereto and such other documents as are reasonably requested by Lender.
Assignment of Acceptable Contracts: Contemporaneously with the
execution and delivery of this Agreement by Borrower, Borrower will execute and
deliver to Lender a formal written assignment of all of the Acceptable Contracts
included in the Collateral, accompanied by the executed originals of all such
Acceptable Contracts, to which shall be annexed receipted copies of all Related
Documents.
Servicing of Acceptable Contracts: Borrower shall, at its cost
and expense, enter into and maintain, for as long as the Loan remains unpaid, a
servicing agreement ("Servicing Agreement") with a servicing entity selected by
Borrower and approved by Lender ("Servicing Agent"), to service the Acceptable
Contracts. The Servicing Agent shall furnish to Lender such reports,
documentation and information regarding the Acceptable Contracts as is
reasonably satisfactory to Lender.
Dominion Account; Agency Agreement: Borrower and/or the
Servicing Agent shall maintain a Dominion Account at an insured financial
institution selected by Borrower and acceptable to Lender into which all
payments due under the Acceptable Contracts will be made. All proceeds of the
Acceptable Contracts shall be deposited in the form received by the Borrower or
the Servicing Agent into the Dominion Account. Borrower, Lender and the selected
and approved Agent shall enter into an Agency Agreement, the terms of which
Agency Agreement shall be acceptable to Lender and Lender's counsel, and which
shall provide, among other things, for the said Agent to apply for, obtain and
maintain in Borrower's name a post office box to which all payments under the
Acceptable Contracts shall be made and to deposit in the Dominion Account all
funds received in connection with the Acceptable Contracts and turn said funds
over to Lender, all in accordance with the terms and conditions of this
Agreement. The said post office box and Dominion Account shall be subject to the
exclusive control of Lender in accordance with the terms of this Agreement and
the Agency Agreement. The Agent selected and approved as Agent shall transfer to
Lender the funds deposited to the Dominion Account by wire transfer or check as
shall be directed by Lender. Borrower shall instruct all of the Consumers under
the Acceptable Contracts to direct remittances to a post office box established
by Lender in the name of the Borrower. All proceeds of the Acceptable Contracts
shall be directed to such post office box, whether in the form of cash, checks,
drafts, notes or other agreements received by the Borrower or the Servicing
Agent in payment of or on account of any of the Acceptable Contracts. Upon
receipt by Lender, all such proceeds shall be applied in payment in full or in
part of the Obligations in such order as Lender may elect.
Notice of Default or Event of Default: Borrower shall
immediately upon becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, give a written notice to Lender
specifying the notice given or action taken by such holder and the nature of the
claimed Default or Event of Default and what action Borrower is taking or
proposes to take with respect thereto.
Material Adverse Developments: Borrower shall immediately upon
becoming aware of any developments or other information which may materially and
adversely affect the Collateral, business, prospects, profits or condition
(financial or otherwise) of Borrower or its ability to perform this Agreement,
give to Lender telephonic or telegraphic notice specifying the nature of such
development or information and such anticipated effect.
VI
NEGATIVE COVENANTS
Until payment in full of all Obligations, Borrower covenants and agrees
that it will not:
Other Liens: Incur, create or permit to exist any mortgage,
assignment, pledge, hypothecation, security interest, lien or other encumbrance
on any of its property or assets, whether now owned or hereafter acquired,
except: (a) liens for taxes not delinquent; (b) those liens in favor of Lender,
and (c) the Permitted Liens.
Other Liabilities: Incur, create, assume or permit to exist
any indebtedness or liability on account of either borrowed money or the
deferred purchase price of property, except (a) Obligations to Lender; or (b)
indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing; or (c) the Permitted Liens.
Loans: Make loans to any person, firm or entity, except in the
ordinary course of its business in connection with the financing of the sale of
Time Share Estates.
Secondary Financing: Incur, create, assume, or permit to exist
any secondary financing encumbering the Premises and/or any other Collateral
securing the Obligations, except for Permitted Liens, nor shall there be any
encumbrances or security interest conveyed in any fixture or fixtures, nor in
any personalty whether affixed to the Premises or otherwise except for Permitted
Liens.
Partnership Structure: Alter or change its partnership
structure, or materially change the present ownership of the interest of the
general partner and limited partners of the Borrower or Borrower's management
without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed.
Guaranties: Assume, guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any person, firm or
entity except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Assignment: Assign this Agreement or any loan proceeds to be
made hereunder or any part thereof.
Lease: Rent or lease all or any portion of the Premises
without the prior written consent of the Lender, except in the ordinary course
of Borrower's business.
No Indulgences to Consumers: Borrower shall not grant
extensions of time for the payment or compromise for less than the full face
value or release in whole or in part any person liable for the payment of, allow
any credit whatsoever, except for the amount of cash to be paid upon any
Collateral or any instrument or document representing the Collateral without the
prior written consent of the Lender.
Modifications of Contracts or other documents: Borrower will
not modify, amend, or otherwise alter any of the terms of the Contracts or any
other documents relating thereto without Lender's prior written consent or waive
any of Borrower's rights, if such modification might result in any diminution or
adverse affect upon the Collateral or the conduct of the business of the
Borrower. The Borrower shall also not change, alter or modify or permit any
change, alteration or modification of its Certificate of Limited Partnership and
Agreement or other governing documents without Lender's prior written consent,
which consent shall not be unreasonably withheld or delayed.
VII
MISCELLANEOUS RIGHTS OF LENDER
Collections; Modification of Terms: Lender may, in its sole
and absolute discretion, and at any time, with respect to any of the Collateral,
demand, sue for, collect or receive any money or property, at any time payable
or receivable on account of or in exchange for, or make any compromises it deems
desirable including without limitation extending the time of payment, arranging
for payment in installments, or otherwise modifying the terms or rights with
respect to any of the Collateral, all of which may be effected without notice to
or consent by Borrower and without otherwise discharging or affecting the
Obligations, the Collateral or the security interests granted hereunder.
Notification to Consumers: At any time, prior to or after an
Event of Default, Lender may notify the Consumers on any of the Acceptable
Contracts to make payment directly to Lender, and Lender may endorse all items
of payment received by it which are payable to Borrower. Borrower, at the
request of Lender, shall notify the Consumers of Lender's security interest in
the Acceptable Contracts. Until such time as Lender elects to exercise its right
of notification, Borrower is authorized to collect and enforce the Acceptable
Contracts under the terms and conditions as set forth herein.
Uniform Commercial Code: At all times prior and subsequent to
an Event of Default hereunder, Lender shall be entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in
Pennsylvania (or any other state having jurisdiction), as the same may be
amended from time to time, with respect to all Collateral.
Preservation of Collateral: At all times prior and subsequent
to an Event of Default, Lender may take any and all action which in its sole and
absolute discretion is necessary and proper to preserve its interest in the
Collateral, including without limitation the payment of debts of Borrower which
might in Lender's sole and absolute discretion, impair the Collateral or
Lender's security interest therein, purchasing insurance on the Collateral,
repairing the Collateral, or paying taxes or assessments thereon, and the sums
so expended by Lender shall be secured by the Collateral, shall be added to the
amount of the Obligation(s) due Lender and shall be payable on demand with
interest at the Default Rate from the date expended by Lender until repaid by
Borrower.
Mails: From and after an Event of Default, Lender is
authorized to (and Borrower shall, upon request of Lender) notify the postal
authorities to deliver all mail, correspondence or parcels addressed to Borrower
and relating to the Collateral to Lender at such address as Lender may direct.
Lender's Right to Cure: In the event Borrower shall fail to
perform any of its Obligations hereunder or under any of the other Loan
Documents, then Lender, in addition to all of its rights and remedies hereunder,
may perform the same, but shall not be obligated to do so, at the cost and
expense of Borrower. In any such event, Borrower shall promptly reimburse Lender
together with interest at the Default Rate from the date such sums are expended
until repaid by Borrower.
Test Verifications: Lender shall have the right to make test
verifications of any and all Acceptable Contracts in any manner and through any
medium Lender considers advisable, and Borrower shall render any necessary
assistance to Lender.
Power of Attorney: Subject to the terms, conditions and
restrictions of this Agreement, Borrower hereby irrevocably constitutes and
appoints Lender as its true and lawful attorney, with full power of
substitution, to enforce collection of the Collateral at the sole cost and
expense of Borrower but for the sole benefit of Lender, either in its own name
or in the name of Borrower including but not limited to executing releases,
compromising or settling with any debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral; to receive,
open and dispose of all mail addressed to Borrower and take therefrom, any
proceeds of Collateral pledged or assigned to Lender; to notify Post Office
authorities to change the address for delivery of mail addressed to Borrower to
such address as Lender shall designate; to endorse the money orders, notes,
acceptances or other instruments of the same or different nature; to sign and
endorse the name of Borrower on and to receive as pledgee or secured party of
the property covered by any of the Collateral, any invoices, schedules of
Collateral assigned, freight or express receipts, or bills of lading, storage
receipts, warehouse receipts or other documents of title of same or different
nature relating to the Collateral and to do any and all things necessary or
proper to carry out the intent of this Agreement and to perfect the liens and
rights of Lender created under this Agreement. Lender shall not be obliged to do
any of the acts or exercise any of the powers hereinabove authorized, but if
Lender elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
said power, and it shall not be liable or responsible to Borrower for any acts
or omissions nor for any error in judgment or mistake of law or fact. All powers
conferred upon Lender by this Agreement being coupled with an interest shall be
irrevocable so long as any Obligations of Borrower to Lender shall remain
unpaid. Lender is hereby further authorized to sign on behalf of Borrower any
Financing Statement Lender deems necessary to perfect its security interest and
to file same with the appropriate authorities in Arizona or any other state. All
costs of such filings shall be charged to and be borne by Borrower.
VIII
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event
of Default (hereinafter referred to as an "Event of Default"):
The Borrower shall have failed to make any payment of any
installment of interest on the Loan when due;
The Borrower shall have failed to make any payment of any
principal when due;
Borrower's and/or the Guarantor's failure to keep, observe,
perform, and/or carryout in every particular the covenants, terms or provisions
contained in this Agreement or any of the other Loan Documents and such Default
shall have remained uncured for a period of fifteen (15) days after notice
thereof to the Borrower by the Lender;
Borrower's or the Guarantor's consent to the application for
an appointment of a receiver or trustee for them or for substantially all of
their property, their sufferance of any such appointment made without their
consent to any proceedings against them under any law relating to bankruptcy,
insolvency, or the reorganization or relief of debtors, which shall have
continued unstayed and in effect for a period of thirty (30) consecutive days;
Borrower's or the Guarantor's admission in writing of their
inability to pay their debts as they mature, or commission of any act of
bankruptcy; Borrower's or the Guarantor's making of an assignment for the
benefit of creditors, or the filing of a voluntary petition in bankruptcy by the
Borrower or by the Guarantor; or the application for a receiver by the Borrower
or by the Guarantor;
The entry of any judgment or execution or attachment order
against or affecting the Borrower and/or the Guarantor which, in the reasonable
opinion of the Lender, adversely and materially affects the credit standing of
the Borrower and/or the Guarantor. (For purposes of this subsection, the term
"materially" shall be defined to mean an amount in excess of ten (10%) percent
of the Borrower's or the Guarantor's, as the case may be, net worth, as shown on
the Borrower's or the Guarantor's, as the case may be, most recently available
financial statements or $50,000.00, whichever is greater);
Any statement, representation, or warranty by the Borrower
contained in this Agreement, the other Loan Documents, the financial statements,
applications submitted for credit or any other agreement for the payment of
money with Lender proving to be incorrect or misleading in any material respect,
or a breach in any of the terms and conditions of this Agreement, the other Loan
Documents or any other agreement with Lender at any time when the Borrower is
obligated to Lender hereunder;
The failure of the Borrower or the Guarantor to pay any
principal or interest on any other material borrowed money obligation when due,
so that the holder of such obligation declares, or may declare, such obligation
due prior to its stated maturity because of the Borrower's or the Guarantor's
default thereunder and the Borrower and/or the Guarantor shall have failed to
procure, within thirty (30) days after the declaration of said default, a
written statement cancelling said default and/or reinstating said obligation.
(For purposes of this subsection, the term "material" shall have the same
meaning as set forth in Section VIII 6. above);
Any material and adverse change in the condition or affairs,
financial or otherwise, of the Borrower or the Guarantor, which in the
reasonable opinion of Lender impairs Lender's security or increases its risk so
as to jeopardize the repurchase Obligations of the Borrower under the Financing
Agreement or any of the other Obligations of the Borrower under this Agreement
or any of the other Loan Documents or the obligations of the Guarantor pursuant
to the Guaranty;
If at any time Lender reasonably determines that an
environmental claim against the Premises will have a material adverse effect on
the financial condition of the Borrower;
The failure of the Borrower and/or the Guarantor to provide
financial statements and/or annual tax returns to Lender when required or
requested to do so, together with such financial information as may reasonably
be requested by Lender;
The passing of title, legal or equitable, to the Premises
(except as to the Transactions and Unit Weeks and any "cash sales" of Unit Weeks
at the Premises sold by Borrower in the ordinary course of Borrower's business)
without the written consent of Lender;
The failure to make payment of any tax, assessment, or
municipal or governmental charge against the Premises, or any Unit Week, when
due or the imposition of any lien thereon not paid and removed within 15 days
from the date thereof, except that no such tax, assessment or charge need be
paid which is being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside, provided, however, any such
payment must be made if necessary to prevent the forfeiture or sale of the
Premises or any Unit Week, as the case may be;
The failure to pay any insurance premium when due on or
relating to the Premises or the Collateral;
Any material change in the partnership structure or management
of the Borrower without the prior written consent of Lender, which consent shall
not be unreasonably withheld or delayed;
Any suspension of the Borrower's or the Guarantor's
transaction of its or their usual business(es);
Liquidation and/or dissolution of the Borrower or the
Guarantor;
The loss, revocation or failure to renew any license and/or
permit now held or hereafter acquired by Borrower which is necessary for the
continued operation of the Borrower's business, including, but not limited to,
the Project, which, in the sole opinion of Lender, materially adversely affects
Borrower's business or its ability to repay the Loan;
The issuance of any stay, order, cease and desist order or
similar judicial or non-judicial sanctions limiting or otherwise affecting the
sale of Contracts, if such order or sanction is not discharged within thirty
(30) days thereafter, which in the sole opinion of Lender, materially adversely
affects the Borrower's business or its ability to repay the Loan;
Borrower terminates or breaches any management or marketing
agreement and/or engages the services of a different, substitute or subsequent
management or marketing firm, or materially modifies the management or marketing
agreement(s), without first obtaining the written consent of Lender, which
consent shall not be unreasonably withheld or delayed;
The Premises is partially or totally destroyed and the
Borrower, the Association governing the Resort and/or the owners of the Unit
Weeks, as the case may be, if permitted, elect not to rebuild the improvements
at the Premises in substantially the same size, quality of construction,
architecture and in all other manner so as to conform with the improvements
which existed prior to such damage or destruction; or
A mechanics' lien, stop notice, or notice of intention or any
other lien or encumbrance shall have been filed against the Premises and/or any
of the other Collateral and the Borrower shall have failed to procure within
thirty (30) days after the same is filed, a cancellation of the said lien or a
discharge thereof or shall have failed to post a bond or escrow sufficient funds
to discharge the same in the opinion of Lender, in the manner and form provided
by law, and such default shall have remained uncured for a period of thirty (30)
days.
IX
CONSEQUENCES OF DEFAULT
In case any Event of Default shall have occurred and be continuing,
then and in every such Event of Default, the Lender may take any or all the
following actions in addition to those actions allowed in the other Loan
Documents, at law or in equity, at the same time or at different times:
Demand Obligations: Declare all Obligations owing to the
Lender from the Borrower under this Agreement, the other Loan Documents or any
other agreement between the Lender and the Borrower, to be forthwith due and
payable, whereupon all such Obligations and sums shall forthwith become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by Borrower;
Possession and Disposition of Collateral: Lender may forthwith
give written notice to Borrower, whereupon Borrower shall, at its expense,
promptly deliver any and all Collateral to such place as Lender may designate,
or Lender shall have the right to enter upon the premises where the Collateral
is located and take immediate possession of and remove the Collateral without
liability to Lender except such as occasioned by the gross negligence or willful
misconduct of Lender, its employees or agents. In the event Lender obtains
possession of the Collateral, Lender may sell any or all of the Collateral at
public or private sale, at such price or prices as Lender may deem best, either
for cash, on credit or for future delivery, in bulk or in parcels and/or lease
or retain the Collateral repossessed using it or keeping it idle.
Notwithstanding anything contained herein to the contrary, Lender shall have no
obligation to take possession of all or any portion of the Collateral. Notice of
any sale or other disposition shall be given to the Borrower at least ten (10)
days before the time of any intended sale or disposition of the Collateral is to
be made, which Borrower hereby agrees shall be reasonable notice of such sale or
other disposition. Lender may also elect to retain the Collateral or any part
thereof in satisfaction of the Borrower's Obligations. The proceeds, if any, of
any such sale or leasing by Lender shall be applied: first, to the payment of
all fees and expenses incurred by Lender as a result of such Event of Default,
including without limitation any legal fees and expenses incurred in
repossessing the Collateral and selling it or leasing it; second, to pay the
Obligations in such order and in such manner as Lender shall deem appropriate;
and third, to pay any excess remaining thereafter to Borrower.
Terminate Borrower's Rights Under Loan Documents: Upon the
occurrence of any Event of Default, Lender may also, with or without proceeding
with such sale or foreclosure of any Collateral or demanding payment of the
Obligations, without notice terminate further performance under this Agreement
or any of the other Loan Documents or exercise all rights granted in any other
agreement or agreements between Lender and Borrower without further liability or
obligation by Lender. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice or otherwise, shall absolve,
release or otherwise affect the liability of Borrower in respect to transactions
had prior to such termination, nor affect any of the liens, security interests,
rights, powers and remedies of Lender, but they shall, in all events, continue
until all Obligations are satisfied.
Foreclosure: To institute and maintain foreclosure proceedings
in accordance with the laws of the States of Pennsylvania or Arizona, as the
case may be;
Collection of Obligations: To institute proceedings to collect
all or any portion of the Obligations without instituting foreclosure
proceedings;
Other Remedies: Exercise any rights or take any of the
remedies otherwise available to it under the Loan Documents or as a matter of
law or equity; and
Set-Off: Immediately, and without notice or other action, to
set-off any money owed by the Lender in any capacity to the Borrower against any
of the Borrower's liability to the Lender, whether due or not, and the Lender
shall be deemed to have exercised such right of set-off and to have made a
charge against any such money immediately upon the occurrence of such Event of
Default, even though the actual book entries may be made at some time subsequent
thereto.
Cumulative Remedies; Waivers: No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lender at law or in
equity. No express or implied waiver by Lender of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of Lender in
exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by this Agreement, the other Loan Documents and applicable law.
Waive Jury Trial: BORROWER HEREBY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR OTHER AGREEMENTS OR INSTRUMENTS BETWEEN BORROWER AND LENDER. JPM
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Initial
No Marshalling: Lender shall be under no obligation whatsoever
to proceed first against any of the Collateral before proceeding against any
other of the Collateral. It is expressly understood and agreed that all of the
Collateral stands as equal security for all Obligations, and that Lender shall
have the right to proceed against any or all of the Collateral in any order, or
simultaneously, as in its sole and absolute discretion it shall determine. It is
further understood and agreed that Lender shall have the right, in its sole and
absolute discretion, to sell any or all of the Collateral in any order or
simultaneously.
X
MISCELLANEOUS
Reimbursement of Expenses: The Lender shall be entitled to its
reasonable expenses incurred in the enforcement or liquidation of any
Obligations due hereunder, or for the enforcement of payment of the Obligations,
and those expenses shall, without limitation, include reasonable attorneys' fees
plus other legal costs and expenses incurred. Borrower agrees to pay all costs
and expenses of the Lender in connection with the preparation, execution,
delivery, and administration of this Agreement, the other Loan Documents and
other instruments and documents to be executed contemporaneously herewith,
including reasonable attorney's fees and out-of-pocket expenses of counsel for
Lender, subject to the limitations set forth in the Commitment Letter.
No Waiver: The Borrower agrees that no delay on the part of
the Lender in exercising any power or right hereunder shall operate as a waiver
or relinquishment of any such power or right, nor preclude any further exercise
thereof, or the exercise of any other power or right. The Lender shall not by
any act or omission be deemed to have waived any of its rights or remedies
hereunder, unless such waiver is in writing and signed by the Lender, and then
only to the extent set forth therein. A waiver as to any one event shall in no
way be construed as continuing or as preventing the exercise of such rights or
remedy by subsequent event.
Waiver of Presentment, Etc.: The Borrower waives presentment,
dishonor and notice of dishonor, protest and notice of protest of all commercial
papers at any time held by the Lender on which the Borrower is in any way
liable.
Incorporation of Other Loan Documents: The provisions of this
Agreement shall be in addition to those of the other Loan Documents or other
writings held by the Lender relating to the Obligations, all of which shall be
construed as one instrument. To the extent there is any conflict between the
provisions of this Agreement and any other Loan Documents, the terms of the
agreement which affords the greater protection to Lender shall control. Borrower
agrees that all of the terms of the Commitment Letter shall be incorporated
herein as though set forth at length.
Consent to Extensions, Postponements,
Releases, Etc.: Borrower consents to any extension,
postponement of time of payment, indulgence or to any substitution exchange or
release of Collateral and to any addition to or release of, any party or persons
primarily or secondarily liable, or acceptance of partial payments on any
Contracts or instruments in the settlement, compromising or adjustment thereof.
Survival of Representations and Warranties: All
representations and warranties made herein or in any certificate or instrument
contemplated hereby shall survive any independent investigation made by Lender
in the execution and delivery of this Agreement, in said certificates or
instruments and shall continue so long as any Obligations are outstanding and
unsatisfied, applicable statutes of limitation to the contrary, notwithstanding.
Binding Effect: This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors and
assigns.
Rights and Remedies Cumulative: The rights and remedies herein
expressed to be vested in or conferred upon the Lender shall be cumulative and
shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred by any applicable law.
No Obligation to Enforce Terms: Nothing herein contained shall
impose upon the Lender any obligation to enforce any terms, covenants or
conditions contained herein. Failure of the Lender, in any one or more
instances, to insist upon strict performance by the Borrower of any terms,
covenants or conditions of this Agreement and/or the other Loan Documents, shall
not be deemed to be a waiver or relinquishment of any such terms, covenants and
conditions.
Lender's Right to Assign: This Agreement and all rights
hereunder may be assigned or otherwise transferred by the Lender to anyone of
its choosing.
Governing Law: This Agreement, the other Loan Documents and
the rights of the parties shall be governed by and construed under the laws of
the Commonwealth of Pennsylvania, except where the laws of the State of Arizona
control with respect to the exercise of Lender's rights and remedies as against
the Premises.
Indemnification: The Borrower hereby agrees to and does hereby
indemnify, protect, defend and save harmless the Lender, its directors,
employees, agents and shareholders from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits, claims or
demands including reasonable counsel fees incurred in investigating or defending
such claim, suffered by any of them, and caused by, relating to, arising out of,
or resulting from this Agreement, the other Loan Documents and the transactions
contemplated herein, including, but not limited to: (a) any act or omission to
act by the Borrower in connection with this Agreement; or (b) losses, damages,
expenses or liabilities sustained by the Lender pursuant to any provisions
contained in any local, state or federal law, statute or ordinance, including
any environmental law or regulation. The provisions of this paragraph shall
survive the termination of this Agreement, cancellation of the other Loan
Documents and the repayment of the Obligations.
Modification: This Agreement may not be modified, amended,
altered or changed orally or by course of dealing between Borrower and Lender,
but only by an agreement in writing duly executed on behalf of the party to whom
enforcement of any such waiver, change, modification or discharge is sought.
Severability: If any term or provision of this Agreement or
the application thereof shall to any extent be invalid or unenforceable, the
remainder of this Agreement, or the application of such terms or provisions
other than that which is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
No Third Party Beneficiary; No Joint Venture or Agency
Relationship: All sums advanced hereunder and evidenced by the Note shall be
strictly for the benefit of the Borrower and shall not inure to the benefit of,
nor be intended or construed to give any third parties any legal or equitable
right, remedy or claim under or through the Borrower, the relationship between
Lender and Borrower being strictly a contractual one evidencing a
creditor-debtor relationship. Borrower and Lender hereby expressly disclaim the
existence of any partnership, joint venture, employment or other agency
relationship between them by virtue of this Agreement.
Cross Default; Cross Collateralization: All other agreements
between the Borrower and Lender and/or any of its affiliates or subsidiaries are
hereby amended so that a default under this Agreement is a default under all
other agreements and a default under any one of the other agreements is a
default under this Agreement. Further, that the Collateral under this Agreement
secures the Obligations now or hereafter outstanding under all other agreements
with Lender and/or its affiliates or subsidiaries and the collateral pledged
under any other agreement with Lender and/or its affiliates or subsidiaries
secures the Obligations under this Agreement.
Notices: Any notices under this Agreement shall be deemed duly
served on the Borrower on the date received if mailed by certified mail, return
receipt requested, postage prepaid addressed to Borrower at Borrower's last
address on the Lender's records. Any notices to Lender pursuant to this
Agreement shall be mailed to Lender by certified mail, return receipt requested,
postage prepaid at the address of set forth at the heading of this Agreement and
shall be deemed effective upon receipt by Lender.
Term of Agreement: This Agreement shall continue in full force
and effect and the liens of the Collateral granted hereby and the duties,
covenants and liabilities of Borrower hereunder and all terms, conditions and
provisions hereof relating thereto shall continue to be fully operative until
all Obligations created under this Agreement and, at Lender's option, all
Obligations under any other agreement or agreements between the Lender and
Borrower have been satisfied in full, concluded and/or liquidated. Borrower
expressly agrees that to the extent Borrower or any Consumer makes a payment or
payments to Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and are required to be repaid to a trustee, receiver or any other party under
any Bankruptcy Code, state or federal law, common law or equitable cause, then
to the extent of such payment or repayment, the Obligations or part thereof
intended to be satisfied, shall be revived and continued in full force and
effect as if said payment had not been made.
Amendment of Security Agreement: The terms and conditions of
this Agreement shall amend, modify and supersede that certain Security Agreement
dated as of September 10, 1991, executed and delivered by Borrower in favor of
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers, as of
the day and year first above written.
ATTEST: LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona Limited
Partnership
By: ILE SEDONA INCORPORATED,
an Arizona Corporation, Sole
General Partner
Nancy J. Stone By: Joseph P. Martori
------------------------- -----------------------------
NANCY J. STONE, Secretary JOSEPH P. MARTORI, President
WITNESS/ATTEST: TAMMAC FINANCIAL CORP.
Joseph J. Lombardi By: Andy G. Roosa
----------------------------- -------------------------
Joseph J. Lombardi, Asst. Sec. Andy G. Roosa, President
EXHIBIT A
EXHIBIT B
LIST OF ACCEPTABLE CONTRACTS AS OF THE DATE OF THIS AGREEMENT