BENNETT FUNDING INTERNATIONAL, LTD.
August 18, 1994
Mr. Joseph P. Martori
Varsity Clubs of America
2777 E. Camelback Road
Phoenix, Arizona 85016
RE: VARSITY CLUBS: NOTRE DAME
Dear Mr. Martori:
This shall serve as a letter of commitment on the part of Bennett Funding
International, LTD. ("BFIL"), a wholly owned subsidiary of The Bennett Funding
Group, Inc. to (i) purchase from VCA South Bend Incorporated, an Arizona
corporation ("VARSITY"), certain eligible promissory notes and related mortgages
for the purchase of timeshare units ("Notes") at a project known as Varsity
Clubs at Notre Dame and (ii) provide a loan to VARSITY to construct 62 timeshare
units and amenities. This shall also constitute a letter of commitment on the
part of VARSITY to accept the loan and to sell the Notes to BFIL all under the
terms and conditions set forth below.
I. NOTE PURCHASE
1. Seller: The Seller of the Notes shall be VARSITY. No separate or
additional sales or asset ownership entities exist.
2. Purchase Price: BFIL shall purchase from VARSITY, on a continuing basis
for an eighteen (18) month period, the sum of up to
$10,000,000.00 representing the aggregate purchase price
of the Notes, exclusive of the construction Loan as
referenced below. At BFIL's sole discretion, the
commitment may be renewable for an additional eighteen
(18) month period and an additional $10,000,000.00 for a
total of $20,000,000.00 during the three (3) years from
the date of closing. For purposes of calculating the
purchase price of the Notes, a standard discount to
yield thirteen and one half percent (13.5%) for regular
pay Notes and twelve and one half (12.5%) for electronic
funds transfer pay Notes shall be applied.
3. Payment of Upon the acceptance of eligible Notes, BFIL shall pay
Purchase Price: VARSITY eight-five percent (85%) of the aggregate
purchase price of the Notes. The remaining fifteen
percent (15%) of the aggregate purchase price for each
Note shall be paid within thirty (30) days of BFIL's
receipt of full and final payment due under each sold
Note.
4. Notes: VARSITY shall warrant that the Notes sold to BFIL shall
be free and clear of all liens and encumbrances.
5. Expenses: The costs of acquiring title insurance, mortgage
recording and related taxes, UCC-1 filing fees, and all
other similar and necessary expenses shall be paid by
VARSITY. In addition VARSITY shall pay $5,000.00 to BFIL
as an analysis fee on the date of execution of this
letter.
6. Prepayment: In the event that VARSITY or a third party desires to
purchase the Notes on an aggregate portfolio basis, the
repurchase price of the Notes shall include the
principal, all interest accrued to the date of
repurchase, any fees or expenses payable to BFIL, and
premium consisting of the weighted average of the
outstanding principal of the Notes as follows:
Year 1: 7%
Year 2: 6%
Year 3: 5%
Year 4: 4%
Year 5: 3%
Year 6: 2%
Year 7: 1%
It is understood that Notes obligors may prepay their
obligation at any time without penalty.
7. Security: To secure VARSITY's payment and performance under its
recourse obligation, as described in paragraph 11 below:
(a) VARSITY shall execute a Collateral Security
Mortgage for the benefit of BFIL on the land and
property of Varsity Club of Notre Dame,
(b) Guaranty of ILX, Inc. ("Guarantor") shall be
required, said Guaranty shall be absolute and
unconditional and guaranty the full payment and
performance of VARSITY and the recourse obligations
hereunder; and,
(c) Each original promissory note and mortgage deed
shall be assigned, endorsed and delivered to BFIL.
8. Documentation: Primary loan documentation will be prepared by BFIL on
BFIL's standard forms. All documentation must be
satisfactory in all respects to BFIL and must contain
all provisions which it deems necessary to adequately
monitor the ownership and operations of VARSITY.
9. Brokerage Fees: VARSITY hereby acknowledges no brokerage fees are due.
10. Term: Subject to the renewal provisions set forth in paragraph
2 above, the obligation of BFIL to purchase Notes from
VARSITY shall, in no event, extend beyond eighteen (18)
months from the date of the closing.
11. Recourse: The purchase of the Notes shall be full recourse to
VARSITY. Accordingly, any Note that is ninety (90) days
past due or has a first payment default shall be charged
back to VARSITY which must either pay off the remaining
principal balance, at the original discount to yield
percentage, and accrued interest due on the charged-back
Note, or substitute the Note with a new Note of equal or
greater value. In the event that BFIL charges back a
Note to VARSITY, then BFIL agrees to reassign the Note
and related mortgage to VARSITY without warranty.
12. Taxes: All sales tax liability incurred by BFIL as a result of
the purchase of the Notes or upon the stream of payments
generated thereunder shall be paid by VARSITY upon
thirty (30) days notice.
II. CONSTRUCTION LOAN
13. Borrower: VARSITY
14. Loan Amount: $5,000,000.00 at thirteen percent (13%) per annum.
15. Loan Description: Proceeds from the loan shall be used exclusively to
construct 62 timeshare units and related amenities as
well as associated transaction costs. VARSITY certifies
that except for purchase money deeds of trust, which
will be released contemporaneous with the loan closing
no other mortgages, liens or encumbrances have been
filed or are contemplated to be filed against the
property, except as set forth in paragraph 20 (c) below.
The loan shall mature thirty-six (36) months from the
date of the distribution of the final loan proceeds.
During the term of the loan, VARSITY shall pay interest
only to BFIL on a monthly basis on the outstanding
balance of the loan.
16. Release Fees: VARSITY shall pay release fees in the amount of
$2,180.00 for each interval unit sold at VARSITY. The
release fees shall be applied to principal on a monthly
basis. Payment of interest during the term of the loan
shall be recalculated on a monthly basis based on the
principal reduction.
17. Loan Conversion: It is clearly understood that this letter of commitment
is being issued on the basis of VARSITY's intention to
sell timeshare intervals and that the projections and
forecasts provided by VARSITY were specifically relied
upon by BFIL as an inducement to execute this letter of
commitment. Accordingly, in the event VARSITY fails,
within one (1) year after the issuance of a certificate
of occupancy, to meet seventy-five percent (75%) of the
projections and forecasts relative to the sale of
timeshare intervals, BFIL reserves the right to convert
the loan to a conventional sixty (60) month amortized
mortgage at the interest rate set forth above.
18. Security: To secure VARSITY's payments and performance under the
construction loan:
(a) VARSITY shall execute a Mortgage for the benefit of
BFIL which shall be a first-priority position on the
land and property of VARSITY; and,
(b) The guaranty of ILX, Inc. shall be required, such
Guaranty shall be absolute and unconditional and
guaranty the full payment and performance of VARSITY
for the obligations hereunder.
III. GENERAL CONDITIONS
19. Closing Conditions: (a) BFIL must be satisfied that the financial
information delivered accurately represents the
business and financial condition of VARSITY and the
results of operations for the periods covered by
such information; and that there has been no
material adverse change in the business, assets or
financial condition of VARSITY since the date the
most recent financial information is delivered to
BFIL;
(b) The execution and delivery of documentation
satisfactory to BFIL containing representations and
warranties, conditions, covenants, and events of
default as reasonably required by BFIL;
(c) Evidence to BFIL of the receipt by VARSITY of all
necessary regulatory approvals and compliance with
all local, state and federal laws applicable to each
transaction;
(d) BFIL's receipt of satisfactory evidence of
appropriate partnership and corporate approval of
all proposed transactions as well as an opinion of
counsel satisfactory to BFIL, which opinion shall
opine as to the approval mechanism for timeshare
interval sales in Indiana;
(e) Delivery of satisfactory title insurance for the
mortgage provided to BFIL; and,
(f) One percent (1%) closing fee ($50,000.00), which
shall be disbursed from the loan proceeds at
closing.
20. Special Conditions: (a) VARSITY shall grant BFIL the right of first refusal
to purchase all Notes generated in connection with
VARSITY;
(b) VARSITY shall grant BFIL or its assigns the right to
solicit the obligors under the purchased Notes
concerning travel- related services offered by BFIL
or its assigns; and
21. Governing Law: All documents shall be governed by the laws of the State
of New York without regard to the principles of
conflicts of laws.
22. Indemnification: Except in instances of BFIL's gross negligence or
misconduct, VARSITY agrees to indemnify and hold BFIL
and its shareholders, directors, agents, officers,
subsidiaries and affiliates harmless from and against
any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of
action, and reasonable costs and expenses incurred,
suffered, sustained or required to be paid by an
indemnified party by reason of or resulting from the
transactions contemplated hereby.
VARSITY agrees that the contents of this letter are confidential and are
provided solely for the purpose described herein, subject to any requirements
relating to federal securities laws or regulation. This letter may not be relied
on by any third-party without BFIL's prior written consent and VARSITY shall not
deliver, display or otherwise disclose the contents of this letter to any
third-party without BFIL's prior written consent. Neither this letter nor the
proposals herein may be assigned by VARSITY. Pursuant to the opinion of counsel
as required in paragraph 19 (d) above, the proposals contained herein are
expressly contingent upon VARSITY receiving preliminary approval to sell
timeshares in the State of Indiana. This letter supersedes all previous
negotiations, proposals, and understandings of any nature whatsoever.
This letter may be executed in one or more counterparts (which may be originals
or copies sent by facsimile transmission), each of which counterparts shall be
an original, but all of which together shall constitute one and same document.
If the foregoing represents your concurrence with the proposed financing
structures, please so indicate by signing and delivering to BFIL at the above
address of BFIL an executed copy of this letter along with a check in the amount
of $5,000.00 on or before 5:00 P.M. (EST) September 2, 1994. Your failure to
return an executed copy of this letter within this time frame shall result in
the termination of BFIL's intent to lend.
Very truly yours,
BENNETT FUNDING
INTERNATIONAL, LTD.
MICHAEL A. BENNETT
Michael A. Bennett
Deputy Chief Executive Officer
Accepted and agreed to this
22nd day of August, 1994
ILX INCORPORATED AND
VARSITY CLUBS OF AMERICA, INC.
By: JOSEPH P. MARTORI
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Title: CHAIRMAN
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