July 20, 1994
Joseph P. Martori, President
ILX Incorporated
2777 East Camelback Road
Phoenix, Arizona 85016
Re: Tammac Financial Corp. ("Tammac")
to: ILX Incorporated ("ILX", "Developer" or "Borrower")
Resort: Golden Eagle Resort
Estes Park, Colorado
Dear Mr. Martori:
Pursuant to our various discussions, you have requested that Tammac
make a loan to ILX in the approximate amount of $2,000,000.00 (the "Loan"),
which is to be secured by Acceptable Contracts (as that phrase is hereinafter
defined) and certain other assets owned by ILX. You have also requested, on
behalf of ILX, that Tammac amend and restate that certain Financing Agreement
dated September 11, 1991 ("Financing Agreement"), entered into between ILX and
Tammac, setting forth the terms and conditions regarding ILX's sale and Tammac's
purchase of certain consumer installment obligations generated at that certain
timeshare condominium project known as the Golden Eagle Resort, located at Estes
Park, Colorado (the "Project" or "Resort").
After reviewing ILX's request for financing as hereinabove set forth,
Tammac is pleased to confirm its proposal to make the Loan and to modify the
Financing Agreement subject to the execution and delivery of the loan
documentation in form and substance as is satisfactory to Tammac and its counsel
and subject to the following terms and conditions:
I. THE LOAN:
A. Borrower: ILX Incorporated, an Arizona
Corporation.
B. Amount of Loan: Up to $2,000,000.00 (sometimes hereinafter
referred to as the "Advance Limit").
C. Advances: Advances shall be made on the basis of seventy
(75%) percent multiplied by the aggregate
remaining principal balance of the Acceptable Contracts (as herein defined), or
such greater or lesser percentage as Tammac shall, from time to time, establish,
provided, however, that the aggregate amount of Advances outstanding shall not
exceed $2,000,000.00 and the sums advanced pursuant to the Loan, even if in
excess of the Advance Limit, shall be secured by the Collateral (as hereinafter
defined).
Provided no event of default under the Loan
Documents or any obligations due and owing by Borrower to Tammac, whether
presently existing or hereafter arising, exists or is continuing, and provided
further that no Advances will be made to Borrower if the aggregate amount of all
Advances (including the Advance requested) exceeds or would exceed the Advance
Limit, Advances will be made during the period commencing from the closing date
of the Loan and ending twenty-four (24) months thereafter (the "Draw Period").
The request for an Advance must be at least in the amount of $50,000.00.
For purposes of this letter, an Acceptable
Contract shall be a consumer contract or agreement and all related documents
("Contract" or "Contracts") entered into between the Borrower as seller and/or
lender and a consumer ("Consumer") as the purchaser and/or borrower of (or
relating to) a timeshare interest (a "Unit Week" or "Timeshare Estate"), defined
in and created by the Declaration for Golden Eagle Resort, a Condominium, the
Articles of Incorporation and By-laws for the Resort, together with all
amendments, supplements and modifications thereto, which satisfy the following
requirements, and which are in all other respects acceptable to Tammac: (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 of principal and interest 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 Tammac) 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
Tammac 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 Tammac; (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 the Federal 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 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
Tammac; (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.
D. Maturity of the Loan: Unless accelerated pursuant to
the terms and conditions of the Loan
Documents, the maturity of the Loan shall be four (4) years from the date of the
expiration of the Draw Period, at which time the Borrower shall pay to Tammac
the unpaid principal balance of the Loan, together with all accrued and unpaid
interest thereon and all other unpaid fees and expenses.
E. Interest Rate: (i) Interest shall be payable monthly on
so much of the principal of the Loan as shall
have been advanced to the Borrower and be unpaid at a floating rate of four (4%)
percentage points above the highest prime rate as announced, from time to time,
in The Wall Street Journal. The rate of interest may change from time to time
without notice to the Borrower and each such change shall be effective on the
date such change occurs. In no event, however, shall the rate of interest exceed
the maximum allowable by law. All computations of interest shall be based on a
calendar year having 360 days.
(ii) Upon the occurrence and during the
continuance of an Event of Default, the rate used to calculate the interest rate
due on the Loan may, at the option of Tammac, increase by five (5%) percentage
points per annum above the then applicable interest rate referred to above (the
"Default Rate").
(iii) In the event Tammac 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 Tammac in processing
late payments and shall not be deemed to constitute additional interest.
F. Mandatory Payments: Unless accelerated pursuant to the terms and
conditions of the Loan Documents or paid
before the scheduled maturity date, the Borrower shall pay to Tammac seventy-two
(72) consecutive minimum monthly payments each in an amount equal to
seventy-nine (79%) percent of the schedule monthly payments of principal and
interest due on the Acceptable Contracts comprising the collateral security for
the Loan. All mandatory payments as hereinabove provided shall be applied first
to the payment of accrued and unpaid interest and the balance shall be applied
to the payment of installments of principal then remaining unpaid. The aforesaid
payments shall be payable in arrears on the first day of each calendar month
commencing on the first (1st) day of the month next following the date of the
Loan closing and shall continue until such time as the full principal sum,
together with all amounts owing under the Loan have been paid in full. The
aforesaid payments shall be payable out of the monthly collections received
under the Acceptable Contracts. In the event the monthly collections from the
Acceptable Contracts are insufficient to pay 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.
If, at any time during the term of the Loan,
any of the Acceptable Contracts fail to continue to be Acceptable Contracts and,
as a result, the amount advanced exceeds the Advance Limit, the Borrower will be
required to immediately prepay an amount equal to the excess borrowing. If at
any time the aggregate outstanding amount of the Loan shall exceed the Advance
Limit, Borrower shall immediately notify Tammac of such fact and make a
mandatory prepayment in such amount necessary (including accrued interest) to
reduce the outstanding principal amount of the Loan to the Advance Limit. If a
mandatory prepayment is required as herein provided, the Borrower shall have the
right, during the Draw Period, in lieu of payment to eliminate all, or any part,
of the excess borrowing and thereby avoid the obligation to make a mandatory
prepayment by: (a) promptly notifying Lender in writing of Borrower's intention
to assign new Acceptable Contracts of equal or greater value to the required
amount and (b) promptly effectuating the assignment of the new Acceptable
Contracts, but in no event later than five (5) business days after notice of the
over Advance is sent to Borrower by Tammac. Any mandatory prepayments made
hereunder shall not affect the due date or the amount of any other required
payments to be made under the Loan.
G. Voluntary Prepayment: The Borrower shall have the right to prepay
the principal of the Loan at any time without
penalty or premium.
H. Servicing of Acceptable
Contracts: Borrower shall, at its cost and expense, enter
into a servicing agreement with a servicing
entity selected by Borrower and approved by Tammac ("Servicing Agent"), to
service the Acceptable Contracts. The Servicing Agent shall furnish to Tammac
such reports, documentation and information regarding the Acceptable Contracts
as is reasonably satisfactory to Tammac.
I. Collection of Monies
Due Under Contracts: Borrower and/or the Servicing Agent shall
maintain a depository Dominion Account at an
insured financial institution selected by Borrower and acceptable to Tammac 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 into the aforesaid Dominion Account. Borrower, Tammac and the selected
and approved financial institution shall enter into an agency or lock box
agreement ("Agency Agreement"), the terms of which agreement shall be acceptable
to Tammac and Tammac's counsel, and which shall provided, among other things,
for the said financial institution 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
Tammac, all in accordance with the terms and conditions of the Loan Agreement to
be entered into between Borrower and Tammac and the Agency Agreement. The said
post office box and Dominion Account shall be subject to the exclusive control
of Tammac in accordance with the terms of the Loan Agreement and Agency
Agreement. The financial institution selected and approved as agent shall
transfer the funds deposited to the Dominion Account by wire transfer or check
as shall be directed by Tammac.
Borrower shall instruct all of the Consumers
under the Acceptable Contracts to direct remittances to a post office box
established by Tammac 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 remittances received by the
Borrower in payment of or on account of any of the Acceptable Contracts. Upon
receipt by Tammac, all such proceeds shall be applied to payment in full or in
part of the principal or interest due on the Loan or to any other obligation of
the Borrower to Tammac in such order as Tammac may elect.
J. Collateral: (i) A first lien on all of the Acceptable
Contracts and related consumer documents,
which shall be enumerated on a schedule prepared by Borrower and approved by
Tammac.
(ii) A valid second lien on the entire real
property, structures and fixtures located thereon at the Resort, subject,
however, to an existing first lien on said Resort in the approximate principal
balance of no more than $920,000.00.
Notwithstanding anything contained herein to
the contrary, provided the Borrower is not in default under the Loan Documents
or any other obligations due to Tammac, whether now existing or hereafter
arising, upon Borrower's request, Tammac 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 $2,000,000.00.
(iii) A valid perfected security interest in
all fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials and articles of personal property of every kind and nature whatsoever,
now or hereafter located in or upon any portion of the Resort used or usable in
connection with any present or future operation of the Resort and acquired by
Borrower.
(iv) A collateral assignment of all leases,
rents and profits relating to the Resort.
(v) All of the Borrower's (a) accounts and
accounts receivables relating to the Acceptable Contracts and Contracts
purchased by Tammac; (b) inventory; (c) machinery, equipment, furniture and
fixtures located at the Resort; (d) contract rights relating to the Acceptable
Contracts and Contracts purchased by Tammac; (e) general intangibles relating to
the Acceptable Contracts and Contracts purchased by Tammac; (f) interests in
marketing or direct mail agreements relating to the Resort as same relate to the
Acceptable Contracts and Contracts purchased by Tammac; (g) licenses, contracts,
management contracts or agreements, permits or certificates relating to the
Resort; (h) rights as declarant, developer, owner and/or otherwise under the
governing documents or restrictive covenants affecting the Resort; and (i)
proceeds and products of the foregoing, which the Borrower may have or may
hereafter acquire and relating to or used in connection with the Resort.
II. PURCHASE OF CONTRACTS:
A. Developer: ILX, Incorporated, an Arizona corporation.
B. Collateral: (i) Assignment of the Developer's right, title
and interest in and to the Contracts and
related consumer documents purchased by Tammac.
(ii) A first lien on all of the Acceptable
Contracts and related consumer documents, which shall be enumerated on a
schedule prepared by Borrower and approved by Tammac.
(iii) A valid second lien on the entire real
property, structures and fixtures located thereon at the Resort, subject,
however, to an existing first lien on said resort in the approximate principal
balance of no more than $920,000.00.
Notwithstanding anything contained herein to
the contrary, provided the Borrower is not in default under the Loan Documents
or any other obligations due to Tammac, whether now existing or hereafter
arising, upon Borrower's request, Tammac 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 $1,000,000.00.
(iv) A valid perfected security interest in
all fixtures, furnishings, equipment, machinery, apparatus, fittings, building
materials and articles of personal property of every kind and nature whatsoever,
now or hereafter located in or upon any portion of the Resort used or usable in
connection with any present or future operation of the Resort and acquired by
Developer.
(v) A collateral assignment of all leases,
rents and profits relating to the Resort.
(vi) All of the Borrower's (a) accounts and
accounts receivables relating to the Acceptable Contracts and Contracts
purchased by Tammac; (b) inventory; (c) machinery, equipment, furniture and
fixtures located at the Resort; (d) contract rights relating to the Acceptable
Contracts and Contracts purchased by Tammac; (e) general intangibles relating to
the Acceptable Contracts and Contracts purchased by Tammac; (f)interests in
marketing or direct mail agreements relating to the Resort as same relate to the
Acceptable Contracts and Contracts purchased by Tammac; (g) licenses, contracts,
management contracts or agreements, permits or certificates relating to the
Resort; (h) rights as declarant, developer, owner and/or otherwise under the
governing documents or restrictive covenants affecting the Resort; and (i)
proceeds and products of the foregoing, which the Borrower may have or may
hereafter acquire and relating to or used in connection with the Resort.
C. Financing Agreement: The Financing Agreement shall be amended and
restated and will provide, among other things,
as follows:
(i) Provided Developer is not in default under
the terms and conditions of the Amended and Restated Financing Agreement, Tammac
shall purchase up to $3,000,000.00 of those Contracts offered for sale by the
Developer, provided said Contracts meet Tammac's lending criteria and
guidelines, as same shall be in effect on the date that the Amended and Restated
Financing Agreement is executed and delivered to Tammac by the Developer. A copy
of Tammac's then current lending guidelines and criteria shall be attached to
the Amended and Restated Financing Agreement. Tammac's lending guidelines and
criteria shall not change during the term of the Financing Agreement.
Except as set forth in 10(f) below, Tammac
shall accept Contracts that meet Tammac's lending guidelines and criteria and
which are written at a contract rate of six and one-quarter (6 1/4%) percentage
points above the highest prime rate as announced from time to time in The Wall
Street Journal (the "Acceptable Contract Rate"). The Acceptable Contract Rate
shall be fixed for a period of six months from the execution and delivery of the
Amended and Restated Financing Agreement and shall be based on the highest prime
rate as announced in The Wall Street Journal on the business day preceding the
execution and delivery of the Amended and Restated Financing Agreement.
Thereafter, the Acceptable Contract Rate is subject to change every six (6)
months following the execution and delivery of the Amended and Restated
Financing Agreement (the "Change Date") and will be reset, if at all, based upon
the highest prime rate as announced in The Wall Street Journal then in effect on
each Change Date. See Section 2.2 of the Amended and Restated Financing
Agreement.
(ii) Tammac shall pay the Developer for each
accepted Contract the unpaid principal balance of the Contract at the time of
purchase, subject to the provisions of (iv) and (v) and (vii) below.
(iii) The Developer shall guarantee the
payment and performance of each Contract purchased by Tammac and shall remain on
full recourse therefore.
(iv) A portion of the purchase price of each
Contract (10%) shall be deposited by Tammac in a non-interest bearing
holdback/security account to be maintained by Tammac. The monies so held in this
holdback/security account may be applied, at Tammac's discretion, to any
repurchase and/or guaranty obligations or other obligations pursuant to the
Amended and Restated Financing Agreement or otherwise.
(v) The Developer shall pay a placement/
processing fee to Tammac equal to $150.00 for each Contract purchased by Tammac
pursuant to the Amended and Restated Financing Agreement. Said fee shall be due
and payable at the time of Tammac's purchase of said Contracts. Notwithstanding
anything contained herein to the contrary, in the event that Tammac purchases a
Contract without requiring the Developer to furnish a title insurance policy for
each Contract in an amount at least equal to the total of the Consumer's
obligations under the Contract covering the Unit Week conveyed to the Consumer
and financed by Tammac, the Developer shall pay a placement/processing fee to
Tammac equal to $250.00 for each Contract purchased by Tammac pursuant to the
Amended and Restated Financing Agreement.
(vi) The Amended and Restated Financing
Agreement shall contain such representations and warranties to be made on behalf
of the Developer and such affirmative and negative covenants as shall be
satisfactory to counsel for Tammac and are of the kind and nature generally
utilized in transactions of this type.
(vii) Notwithstanding anything contained
herein to the contrary, for each Contract written by the Developer and purchased
by Tammac at a contract interest rate less than the Acceptable Contract Rate,
then in effect on the date Tammac purchases said Contract, said Contract shall
be discounted on the date each such Contract is purchased by Tammac so as to
yield an equivalent rate to Tammac of the Acceptable Contract Rate then in
effect. To that extent, the amount to be funded by Tammac to the Developer on
each such Contract shall be reduced. Any and all sums paid by the Developer to
Tammac so as to equalize the yield as aforesaid shall be non-refundable under
any and all circumstances.
In the event that a Contract written by the
Developer and purchased by Tammac provides for a contract interest rate greater
than the Acceptable Contract Rate then in effect on the date each payment is
received under the Contract by the Consumer, Tammac shall pay to the Developer,
as and when collected and earned, on a monthly basis, the Interest Rate
Differential, as hereinafter defined. The Interest Rate Differential shall be
computed by subtracting the interest component of each payment of an effected
Contract computed at the Acceptable Contract Rate then in effect from the
interest component of each payment actually received by Tammac on each Contract
written at a rate of interest in excess of the Acceptable Contract Rate. Tammac
shall furnish such documentation to the Developer, on a monthly basis,
identifying each of the Contracts purchased by Tammac which are subject to an
interest rate differential payment ("Interest Rate Differential Payment(s)") as
hereinabove provided, which documentation shall be reasonably satisfactory to
Tammac and the Developer. Tammac shall not be responsible to make any Interest
Rate Differential Payments to the Developer unless and until Tammac receives
good, collected funds required to be paid under said Contracts. The Developer
recognizes and agrees that it shall bear any credit risk in the event that all
or any payments due under a particular Contract are not made and/or received by
Tammac or are otherwise dishonored. In the event that all or any portion of the
Interest Rate Differential Payments are required to be returned to a Consumer or
someone making a claim by or on behalf of the Consumer or the Consumer's
creditor(s), the Developer shall, upon the demand of Tammac, immediately return
all or any portion of the Interest Rate Differential Payment(s) required to be
returned.
Tammac shall be under no obligation to make
Interest Rate Differential Payments to the Developer in connection with the
Acceptable Contracts securing the Loan referred to in Section I above.
(viii) In the event the Developer sells one
Unit Week to two (2) Consumers, whereby one of the Consumers is purchasing the
odd years of a Unit Week and the other consumer is purchasing the even years of
that Unit Week ("Split Week Contracts"), Tammac shall not be obligated to
purchase any Split Week Contracts unless said Split Week Contracts meet Tammac's
lending criteria and guidelines.
(ix) Tammac shall only accept Contracts which
provide that: (i) the amount financed is an amount equal to or greater than
$5,001.00 and the term of which is eighty-four (84) months or less; or (ii) the
amount financed is $5,000.00 or less and the term of which is sixty (60) months
or less.
(x) After the expiration of the commitment
period, which shall expire two years from the execution and delivery to Tammac
by the Developer of the Amended and Restated Financing Agreement or the purchase
by Tammac of $3,000,000.00 of Contracts, whichever occurs first, Developer shall
not have the option of offering Replacement Contracts to Tammac for delinquent
Contracts and Tammac shall be under no obligation to accept any Replacement
Contracts. From and after the expiration of the commitment period, Developer
must repurchase the delinquent Contracts.
III. CONDITIONS PRECEDENT:
A. Preliminary
Documentation: The closing of the Loan and the modification
of the Financing Agreement shall be subject to
the receipt, review and approval by Tammac, and Tammac's counsel, of the
following:
(i) The existing Consumer Documentation, if
same differs from the Consumer Documentation previously reviewed and approved by
Tammac and its counsel, or a statement to the effect that the existing Consumer
Documentation has not changed;
(ii) The filed certificate or articles of
incorporation and by-laws, as amended to date, for the Developer. This
requirement may be satisfied by a written statement that the certificate or
articles of incorporation and by-laws of the Developer, which are currently in
Tammac's possession, have not been amended or modified in any respect;
(iii) The names and titles of all officers and
directors of the Developer;
(iv) Certificates of good standing for the
Developer, or such other documentation as is reasonably satisfactory to Tammac,
in all jurisdictions in which it is authorized to do business;
(v) Corporate franchise tax searches and/or a
certificate from the Director of Revenue, or such other documentation as is
reasonably satisfactory to Tammac, that no taxes are due to the taxing
authorities with respect to the Developer;
(vi) Continuation uniform commercial code
financing searches for the Developer;
(vi) A completed and signed Environmental
Questionnaire relating to the Resort;
(viii) Federal tax lien, state tax lien and
judgment searches for the Developer;
(ix) Evidence of compliance with all
applicable federal, state and local environmental laws, rules, regulations and
ordinances relating to the Resort;
(x) A listing and copy of all certificates,
permits and licenses required in connection with the operation of the Resort and
the sale and financing of Timeshare Estates;
(xi) Evidence that all applicable approvals
for the use and occupancy of the Resort and the sale of timeshare estates
therein have been obtained and remain valid from all governmental authorities,
agencies or public utility companies having jurisdiction. All such approvals and
permits shall be legally valid and shall remain in full force and effect for so
long as any obligations remain outstanding from the Developer to Tammac;
(xii) Any and all agreements with local, state
or federal governmental or quasi-governmental authorities relating, in any way,
to the use and/or operation of the Resort;
(xiii) A true copy of any management
agreements relating to the management of the Resort;
(xiv) If requested by Tammac, a true copy of
all leases relating to or affecting the Resort;
(xv) A permanent certificate of occupancy or
similar approval certificate issued by the appropriate governmental official(s)
having jurisdiction over the Resort;
(xvi) Evidence of compliance and conformity
with all zoning and land use laws and regulations relating to the Resort;
(xvii) Evidence of the availability of all
utilities, adequate water and sanitary sewer facilities
servicing the Resort;
(xviii) A listing and description of any
pending lawsuits involving the Developer in which the Developer is a defendant
or otherwise defending any claim which is in excess of $10,000.00;
(xix) Written authorizations and/or waivers
from any creditors authorizing the transactions contemplated herein if so
required pursuant to said lender's loan documents; and
(xx) An opinion letter from the Developer's
counsel satisfactory to Tammac and Tammac's counsel.
B. Title Insurance: (i) The Developer shall furnish Tammac with a
mortgage title insurance policy in the amount
of $3,000,000.00 covering the Resort satisfactory to Tammac, the premium for
which shall be payable by the Developer insuring the interest of Tammac to be a
valid second lien on the Resort, free and clear of all defects, liens,
encumbrances and exceptions to title whatsoever, except for exceptions that are
approved by counsel for Tammac.
(ii) At Tammac's request, Developer shall
furnish individual title insurance policies covering each of the Unit Weeks in
which Tammac purchases an interest, satisfactory to Tammac, the premium and cost
of which shall be payable by the Developer, insuring the interest of Tammac to
be a valid first lien on each such Unit Week, free and clear of all defects,
liens, encumbrances and exceptions to title whatsoever, except for exceptions
that are approved by counsel for Tammac.
C. Insurance: Fire and other hazard insurance covering the
Resort, including, but not limited to fire and
extended coverage, in such amounts and by such insurance companies as Tammac
shall approve, together with a standard form insurance endorsement in form and
substance satisfactory to Tammac showing Tammac's interest shall be required,
together with the original policies of insurance, if so requested by Tammac.
D. Flood Insurance: If, on the date of the closing of the Amended
and Restated Financing Agreement and the Loan,
any substantial improvements at the Resort are in an area that have been
identified by the Secretary of Housing and Urban Development as having special
flood or mud slide hazards, and on which the sale of flood insurance has been
made available under the National Flood Insurance Act of 1968, as amended, the
Developer will be required to purchase a flood insurance policy satisfactory to
Tammac. In lieu of a flood insurance policy as aforesaid, a certificate
confirming that the Resort is not located within a "special flood hazard area"
shall be furnished to Tammac.
E. Documentation: (i) The Loan Agreement, Promissory Note,
Amended and Restated Financing Agreement, Deed
of Trust covering the Resort, and related documents, including, but not limited
to, the Security Agreements, Certifications and opinion letters of the
Developer's counsel, shall be executed and delivered by the Developer and the
Developer's counsel, as the case may be, in a form and substance as shall be
satisfactory to Tammac and its counsel.
(ii) The necessity for, and form and substance
of each and every document relating to the Amended and Restated Financing
Agreement, the Loan and the security therefor, or incident thereto, and any
proceedings incident thereto, title and evidence thereof, and all questions
relating to the validity and priority of the mortgages or deeds of trust to be
granted by the Developer, shall be determined by and must be satisfactory to
counsel for Tammac.
(iii) Developer's counsel shall provide to
Tammac a legal opinion regarding the Resort, the Loan, the Amended and Restated
Financing Agreement, the Contracts and related documents and various other
matters pertaining to the Loan, the sale and assignment of the Contracts, and
their compliance with all applicable laws, regulations and requirements, all in
form and substance satisfactory to Tammac
and Tammac's counsel.
F. Legal Compliance: (i) The Developer shall, if requested by Tammac
provide evidence in form and substance
satisfactory to Tammac that it has: (a) conducted its business in conformity
with all federal, state and local laws, rules, regulations, orders and
ordinances; and (b) complied in all respects with the applicable provisions of
the Employment Retirement Income Security Act of 1974, 29 USC Section 1001, et
seq., as amended ("ERISA") and all regulations issued thereunder by the United
States Treasury Department, Department of Labor and Pension Benefit Guaranty
Corporation.
(ii) The Developer shall furnish to Tammac
such evidence as Tammac may require to demonstrate current full compliance with
all applicable building, zoning, health, environmental protection and safety
laws, ordinances and regulations (including approval of board of fire
underwriters and local private or public sewer or water utilities) from all
authorities having jurisdiction relating to the Resort. The Developer shall
provide such evidence as Tammac may reasonably require to demonstrate compliance
with the Americans with Disabilities Act, 42 U.S.C. 12101.
(iii) The Developer shall certify or furnish
to Tammac other satisfactory evidence at the time of closing that there is no
action or proceeding pending before any court or administrative agency with
respect to the validity of the mortgage loans or of any laws, ordinances or
regulations, and any certifications or permits, issued thereunder, pertaining to
the Resort or any Collateral. The Developer shall certify or supply other
evidence satisfactory to Tammac that the Developer is not a party to any
existing or pending or threatened litigation.
(iv) In addition to the foregoing, and without
in anyway limiting the generality of the foregoing requirements, if the Resort
is being used for any purpose which has not been previously disclosed to Tammac,
the Developer shall produce a letter issued from the appropriate governmental
officials that the current uses of the Resort are not in violation of any
applicable zoning requirements or restrictions.
G. Environmental
Compliance: The Developer shall provide Tammac with all
representations, warranties and covenants
required by Tammac so as to protect Tammac from the effects of any environmental
law, statute, ordinance or regulation now or hereafter promulgated by any
federal, state or local government or agency thereof.
H. Exchange Group
Membership: The Developer shall maintain membership in one
or more timeshare exchange services
satisfactory to Tammac, until such time as the Loan has been paid in full and
all Contracts purchased by Tammac from the Developer have been satisfied.
I. Validity of Proposal: (i) The validity of this proposal will be
subject to the accuracy of all information,
representations, exhibits and other materials submitted with or in support of
the Developer's request for the financing of Contracts and the Loan, or other
data, and any change incident thereto shall, at the option of Tammac, void all
obligations of Tammac under the provisions of said proposal.
(ii) Tammac reserves the right to continue its
investigations as to the creditworthiness of the Developer subsequent to the
delivery of this letter and in the event Tammac should discover any information
subsequent to the issuance of this letter which, if discovered prior to the
delivery hereof, would have resulted in rejecting the application for the
extension of credit, then and in that event, Tammac shall have the right to
withdraw this proposal letter.
J. Assignment: This proposal shall not be assignable,
without the prior written consent of Tammac
and any attempt at such assignment without such consent shall be void.
IV. GENERAL CONDITIONS:
The Loan and the Amended and Restated Financing Agreement and related
documents are subject to satisfaction by the Developer of the Conditions
Precedent noted above and the negotiation, execution and delivery of the loan
documentation satisfactory to all parties thereto. This documentation shall
include representations and warranties, the granting of security interests,
covenants and events of default of the kind and nature generally utilized by
Tammac for similar transactions, including without limitation, the following:
A. Cross Default:
A default in either the Amended and Restated Financing Agreement or the
Loan and/or any related documents shall be a default in any other obligations of
the Developer owing to Tammac at any time.
B. Cross-Collateralization:
The Amended and Restated Financing Agreement and the Loan and any other
obligations of the Developer shall be deemed collateralized by the Resort and
all other Collateral hereinabove referred to.
C. Representations and Warranties.
The Loan Documents shall contain such representations and warranties to
be made on behalf of the Developer and shall be satisfactory to counsel for
Tammac and of the kind and nature generally utilized by Tammac in loan
transactions of this type.
D. No Secondary Financing:
So long as any obligations are outstanding to Tammac, there shall be no
secondary financing secured by any of the Collateral, nor any transfer of title
of any of the Collateral, except in the ordinary course of the Developer's
business, without the prior written approval of Tammac.
Notwithstanding anything contained herein to the contrary, provided the
Developer is not in default under the Loan Documents or any other obligations
due to Tammac, whether now existing or hereafter arising, the Developer may
further encumber the Resort by one or more prior deeds of trust secured by the
Resort granted to one or more financial institutions or reputable funding
sources, provided the aggregate principal sum(s) due to said lender(s) is no
more than $2,000,000.00.
E. Financial Information:
The Developer will provide Tammac, within sixty (60) days of the close
of each quarter-annual fiscal period, with quarterly financial statements
certified by the Developer's Chief Financial Officer and within one hundred
twenty (120) days of the close of each fiscal year audited financial statements.
Each such statement shall be in such form and in such detail as shall be
satisfactory to Tammac and shall be prepared by independent certified public
accountants selected by the Developer and satisfactory to Tammac. All such
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied.
The Developer shall also provide to Tammac, on or before the tenth
(10th) day of each month, a detailed aging report setting forth the amount due
and owing on Acceptable Contracts as of the close of the preceeding month,
together with a reconciliation report satisfactory to Tammac showing all
collections, payments and adjustments thereto on the Borrower's books as of the
close of the preceeding month. Tammac shall have the right to make test
verifications of any and all Acceptable Contracts in any manner and through any
medium Tammac considers advisable and Borrower shall render any necessary
assistance to Tammac in that regard.
V. MISCELLANEOUS:
A. Obligations of Tammac: All obligations on the part of Tammac in
connection with the subject transactions, and
all matters with respect to title, covenants, restrictions, lien searches
affecting the Collateral, as well as with respect to the validity and priority
of the liens of Tammac, and the form and substance of all documents necessary to
effect the consummation of the subject transactions shall be determined by and
must be satisfactory to Tammac and its counsel.
B. Legal Fees and Expenses: (i) The acceptance of this proposal letter
shall constitute the Developer's unconditional
agreement to pay all fees, expenses and charges with respect to the subject
transactions as outlined herein (whether or not the closing of the transactions
ever occurs), including without limiting the generality thereof, recording and
filing fees, insurance premiums, search fees, the fees and expenses of counsel
for Tammac, the fees and expenses of Tammac's inspectors or appraisers, if any
and other fees or assessments payable in connection with the transactions.
Notwithstanding anything contained herein to the contrary, the Developer's
obligation to pay or reimburse Tammac for Tammac's legal fees shall be capped at
$5,000.00.
(ii) The interest of the Developer and Tammac
are or may be different and may conflict. Tammac's attorneys shall represent
only Tammac and not the Developer. The Developer therefore, is advised to employ
an attorney (or attorneys) of its choice to represent its interests.
C. Applicable Law: Notwithstanding the place of acceptance of
this proposal, or the place of execution of
any of the Loan Documents, this proposal shall be deemed made and accepted in
Wilkes-Barre, Pennsylvania, and the Developer agrees by the acceptance hereof
that the validity and interpretation of this proposal and the instruments of
indebtedness and instruments of security contemplated herein shall be governed
by the laws of the Commonwealth of Pennsylvania, unless such documents shall
expressly provide otherwise.
D. Changes and Amendment: No changes in the provisions of this proposal
letter shall be valid or binding unless
acknowledged and confirmed in writing by the undersigned officer of Tammac.
E. Closing Date: The closing date of the Loan and the execution
and delivery of the Amended and Restated
Financing Agreement and all related documents must occur no later than sixty
(60) days from the date of the Developer's acceptance of this proposal letter.
F. Term of Proposal: Subject to the aforementioned terms and
conditions, and there being no material
adverse change in the financial condition of the Developer prior to closing, the
proposal to make the Loan shall remain in full force and effect for a period of
seventy-five (75) days from the date of this proposal letter, and the proposal
to purchase Contracts pursuant hereto, the Amended an Restated Financing
Agreement and related documents as aforesaid shall remain in full force and
effect until twenty-four (24) months from the date of the closing of the Loan
and execution and delivery of the Amended and Restated Financing Agreement and
related documents by and between all parties, provided same is accepted in full
by the Developer within fifteen (15) days from the date of this letter. If not
so accepted, this proposal shall be deemed to have expired and shall be null and
void and of no effect.
I believe this proposal outlines our
conversations and I look forward to working with you on these transactions.
Please indicate your acceptance of this proposal letter by executing the
enclosed copy and returning same to me, whereupon this proposal letter shall
constitute a binding agreement in accordance with its terms.
Very truly yours,
TAMMAC FINANCIAL CORP.
BY: Andy G. Roosa
----------------------------
ANDY G. ROOSA, President
The undersigned authorized representative of ILX Incorporated, an
Arizona corporation, has read the above proposal letter, and on behalf of ILX
Incorporated agrees to and accepts the terms and conditions as outlined. On
behalf of ILX Incorporated, Tammac is authorized to have its counsel commence
the necessary documentation at its earliest convenience.
ILX INCORPORATED, an Arizona Corporation
By: Joseph P. Martori, President Dated: July 27, 1994
-------------------------------- ------------------------
JOSEPH P. MARTORI, President