EXHIBIT 10-2
FOURTH MODIFICATION AGREEMENT
FOURTH MODIFICATION AGREEMENT
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DATE: September 3, 1997
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PARTIES: Borrower: LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP,
- -------- an Arizona limited partnership
Borrower 2111 East Highland Avenue, Suite 210
Address: Phoenix, Arizona 85016
Bank: BANK ONE, ARIZONA, NA, a national banking association
Bank Western Region Real Estate (AZ1-1328)
Address: P.0. Box 29542
Phoenix, Arizona 85038
RECITALS:
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A. Bank has extended to Borrower credit ("Loan") in the
original principal amount of Five Million and No/100 Dollars ($5,000,000.00)
pursuant to that certain Loan Agreement dated September 9, 1991 ("Loan
Agreement"), and evidenced by that certain Secured Promissory Note, dated
September 9, 1991, which Note was subsequently amended and restated by the terms
of that certain Secured Promissory Note, dated October 4, 1994, and that certain
Secured Promissory Note, dated January 25, 1996 (collectively, the "Note"). The
unpaid principal of the Loan as of the date hereof is $908,166.67.
B. The Loan is secured by, among other things, (i) the Deed of
Trust (With Assignment of Rents and Security Agreement (Variable Rate), dated
September 9, 1991 ("Deed of Trust"), by Borrower, as trustor, for the benefit of
Bank, as beneficiary, recorded on September 10, 1991, in Docket 1421, Page 705,
as Instrument Number 91-19146, records of Coconino County, Arizona, as amended
by that certain First Amendment to Deed of Trust and Collateral Assignment,
dated October 4, 1994, recorded on October 7, 1994, at Docket 1714, Page 561, as
Instrument No. 94-33675, and that certain Second Amendment to Deed of Trust and
Collateral Assignment, dated January 25, 1996, recorded on February 12, 1996, at
Docket 1846, Page 091, as Instrument No. 96-04225, records of Coconino County,
Arizona, (ii) the Collateral Assignment, dated September 9, 1991 (the
"Collateral Assignment"), by Borrower for the benefit of Bank, recorded on
September 10, 1991, in Docket 1421, Page 758, as Instrument No. 91-19147,
records of Coconino County, Arizona, as amended by that certain First Amendment
to Deed of Trust and Collateral Assignment, dated October 4, 1994, recorded on
October 7, 1994, at Docket 1714, Page 561, as Instrument No. 94-33675, and that
certain Second Amendment to Deed of Trust and Collateral Assignment, dated
January 25, 1996, recorded on February 12,
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1996, at Docket 1846, Page 091, as Instrument No. 96-04225, records of Coconino
County, Arizona, (iii) the Repayment Guaranty of ILX Incorporated, an Arizona
corporation, dated January 25, 1996 (the "Repayment Guaranty"), and (iv) the
Security Agreement, dated September 9, 1991, by Borrower for the benefit of Bank
(the "Security Agreement") (the agreements, documents, and instruments securing
the Loan and the Note are referred to individually and collectively as the
"Security Documents").
C. Bank and Borrower have executed and delivered previously
the following agreements ("Modifications") modifying the terms of the Loan, the
Note, the Loan Agreement, and/or the Security Documents: (i) the Modification
Agreement dated October 22, 1993, (ii) the Letter Agreement dated April 18,
1994, (iii) the Modification Agreement dated June 28, 1994, (iv) the Second
Modification Agreement dated October 4, 1994, pursuant to which Bank advanced
additional Loan funds to Borrower, thereby increasing the outstanding unpaid
principal balance of the Loan to $2,000,000.00, (v) the Letter Agreement dated
December 30, 1994, and (vi) the Third Modification Agreement dated January 25,
1996, pursuant to which Bank advanced additional Loan funds to Borrower, thereby
increasing the outstanding unpaid principal balance of the Loan to
$2,485,000.00. (The Note, the Loan Agreement, the Security Documents, any
arbitration resolution, any environmental certification and indemnity agreement,
and all other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan, as modified in the Modifications, are sometimes
referred to individually and collectively as the "Loan Documents". Hereinafter,
"Note", "Loan Agreement", "Deed of Trust", "Repayment Guaranty", "Collateral
Assignment", "Security Agreement", and "Security Documents" shall mean such
documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the
Loan Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
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For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
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Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
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2.1 The Loan Documents are modified as follows:
2.1.1 Upon the execution of this Agreement and the full and
complete satisfaction by Borrower of all conditions precedent required by Bank,
Borrower may obtain and Bank shall be obligated to make, one (1) additional
advance to Borrower in the amount of Eight Hundred Thousand and No/100 Dollars
($800,000.00), which funds shall be used for the purpose
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of acquiring Alan Mishkin's ownership interest in Borrower. Upon the
disbursement of the additional Eight Hundred Thousand and No/100 Dollars
($800,000.00) to Borrower, the outstanding unpaid principal balance of the Loan
shall be One Million Seven Hundred Eight Thousand One Hundred Sixty-Six and
67/100 Dollars ($1,708,166.67).
2.1.2 The maturity date of the Loan and the Note is changed
from June 5, 1998, to April 5, 1999. On the maturity date Borrower shall pay to
Bank the unpaid principal, accrued and unpaid interest, and all other amounts
payable by Borrower under the Loan Documents as modified herein.
2.1.3 The term "Timeshare Documents" as used in the Loan
Documents shall include all amendments, modifications, renewals, restatements
and supplements with respect to such Timeshare Documents. Borrower and Bank
acknowledge that the definition of "Timeshare Interval" currently contained in
the Loan Agreement refers to a "1/9325 fractional interest in the fee title of
the Premises" and that as a result of certain amendments and modifications of
the Timeshare Documents, the fractional interest in the fee title to the
Premises with respect to Timeshare Intervals sold on and after August 31, 1997
is a 1/9325 interest in and to the Premises with respect to each "Every Year
Membership" (as defined in the Timeshare Documents) and a 1/18650 interest in
and to the Premises with respect to each "Every Other Year Membership" (as
defined in the Timeshare Documents).
2.1.4 Section 2.7 of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
" 2.7 Servicing Fee. On September 1, 1997, Borrower shall pay
to Lender the sum of $12,000 for the Servicing Fee due for the
succeeding year. On September 1, 1998, Borrower shall pay to Lender the
sum of $7,000 for the Servicing Fee due for the succeeding year (which
fee represents the full annual Servicing Fee of $12,000 prorated for
the number of months, or portions thereof, from September 1, 1998 to
the Maturity Date). The Servicing Fee represents compensation to Lender
for its administration and servicing of the Loan, including, without
limitation, preparation of Releases pursuant to Article VIII below. If
the Loan is fully paid prior to the Maturity Date (other than by reason
of Lender's exercise of any rights and remedies upon an Event of
Default), any Servicing Fee paid by Borrower for the then current year
will be prorated and the portion of the Servicing Fee for the remainder
of such year will be refunded to Borrower."
2.1.5 Section 5.16 of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
" 5.16 Loan-to-Value. At all times during the term of the
Loan, the unpaid principal balance of the Loan shall not exceed sixty
percent (60%) of the value of the Project, as determined by Lender in
its sole discretion based on (i) the Appraisals obtained pursuant to
Section 5.15 hereof or (ii) evaluations of the value of the Project
prepared or obtained by Lender's appraisal department in connection
with any modifications of the Loan Documents. If for any reason the
loan-to-value ratio exceeds said percentage, then
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Borrower shall, within thirty (30) days of receiving written notice of
such noncompliance from Lender, reduce the unpaid principal balance of
the Loan, or deposit sufficient sums with Lender to reduce the
loan-to-value ratio to at or below said percentage. For the purposes of
determining the loan-to-value ratio, the value of the Project as
determined pursuant to any Appraisal or evaluation shall represent the
fractional interest in the Project encumbered by the Deed of Trust
(which may be adjusted by Lender from time to time in its sole
discretion as fractional interests are sold and released) and, unless
otherwise agreed or elected by Lender in its sole and absolute
discretion, shall not include the value of Timeshare Intervals that
have been sold or any amounts received, or to be received with respect
to the sale of such Timeshare Intervals. Borrower acknowledges that in
connection with the Fourth Modification Agreement, dated as of
September 3, 1997, Lender, through its appraisal department has ordered
and will obtain an Appraisal or evaluation of the value of the Project
and Borrower agrees, without limiting this Section 5.16, that if the
results of such Appraisal/ evaluation reflect a loan-to-value ratio of
greater than sixty percent (60%), Borrower will comply with this
Section 5.16."
2.1.6 Section 5.6 of the Loan Agreement is hereby amended to
include the following subsections 5.6(vi) and 5.6(vii):
" (vi) as soon as the same are available, and in any event
within one hundred twenty (120) days after the end of each fiscal year
of Guarantor, Borrower shall furnish to Lender a copy of (A) the
balance sheet of Guarantor as of the end of such fiscal year, (B)
statements of income and expenses of Guarantor for such fiscal year,
and a statement of changes in financial position of Guarantor from the
previous fiscal year (together with comparable figures for the previous
fiscal year), and (C) a cash flow statement of Guarantor, all of which
shall have been audited by an independent Certified Public Accountant,
satisfactory to Lender in its sole discretion, who shall deliver an
unqualified opinion as to such financial statements to Lender. Borrower
shall also provide Lender with such other information with respect to
the condition of Guarantor as Lender may from time to time reasonably
request; and
" (vii) as soon as the same are available, and in any event
within sixty (60) days after the end of each fiscal quarter of
Guarantor, Borrower shall furnish to Lender a copy of all 1OQ reports
of Guarantor filed with the Securities and Exchange Commission."
2.1.7 Paragraph 17(b) of the Repayment Guaranty is hereby
deleted in its entirety and replaced with the following:
" (b) As of the end of each fiscal quarter, a Debt to Equity
Percentage equal to or less than 4.25 to 1.00. "Debt to Equity
Percentage" means the result obtained by dividing (i) Debt of Guarantor
by (ii) Tangible Net Worth. "Debt" means, without limitation, (a) any
indebtedness for borrowed money, (b) all indebtedness evidenced by
bonds, debentures, notes, letters of credit, drafts or similar
instruments, (c) all indebtedness to pay the deferred purchase price of
property or services, but not including accounts payable and accrued
expenses arising in the ordinary course of business, (d) all
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capitalized lease obligations, (e) all Debt of others secured by a lien
on any asset, whether or not such Debt is assumed by Guarantor or
guaranteed by Guarantor, and (f) all Debt of others guaranteed by
Guarantor and all other indebtedness that would appear as a liability
upon a balance sheet of Guarantor prepared in accordance with GAAP."
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantors is materially incomplete, incorrect, or misleading as of
the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
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The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
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Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and
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to perform the Loan Documents as modified herein. The execution and delivery of
this Agreement and the performance of the Loan Documents as modified herein have
been duly authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
4.7 All Timeshare Documents (as defined in the Loan Agreement) remain
in full force and effect and no amendments, modifications, restatements or
supplements have been entered into since the execution of the Loan Agreement,
except as disclosed to Bank in writing concurrently herewith.
4.8 The Fractional Interest in the Project owned by Borrower and
encumbered by the Deed of Trust as of the date hereof is not less than
1800/9325.
5. BORROWER COVENANTS.
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Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity, that Borrower has or in the future may have, whether known or
unknown, (i) in respect of the Loan, the Loan Documents, or the actions or
omissions of Bank in respect of the Loan or the Loan Documents and (ii) arising
from events occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof,
5.3.2 All internal and external costs and expenses incurred by
Bank in connection with this Agreement (including, without limitation, inside
and outside attorneys, appraisal, appraisal review, processing, title, filing,
recording and costs, expenses, and fees); and
5.3.3 A Modification Fee in the amount of Eight Thousand and
No/100 Dollars ($8,000.00).
5.4 Contemporaneously with the execution and delivery of this
Agreement, Borrower has caused to be executed and delivered to Bank the
Memorandum of Modification, dated of even
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date herewith, amending the Deed of Trust to secure repayment of the promissory
note as amended hereunder.
5.5 Contemporaneously with the execution and delivery of this
Agreement, Bank shall obtain at Borrower's sole cost and expense, an LTAA
Endorsement Number 10 (Bringdown) and Endorsement Number 7 (Coverage Increase),
to the title insurance policy insuring the Deed of Trust, which policy is policy
number 65025782-M1 dated September 10, 1991, issued by Transamerica Title
Insurance Company. Such endorsement recognizes the modification of the Loan
Documents herein and is subject only to the exceptions in Schedule B, Part I, of
such policy.
5.6 Contemporaneously with the execution and delivery of this
Agreement, Borrower has delivered to Bank all amendments, modifications,
restatements, or supplements to any or all of the Timeshare Documents (as
defined in the Loan Agreement). All such amendments or supplements shall be in
form satisfactory to Bank in its sole discretion.
5.7 Contemporaneously with the execution and delivery of this
Agreement, Borrower has delivered to Bank a partnership certificate authorizing
Borrower's execution of this Agreement and all other documents and instruments
referred to herein and required by Bank in connection with the transaction
contemplated hereby.
5.8 Contemporaneously with the execution and delivery of this
Agreement, Borrower has caused Guarantor to deliver to Bank a resolution of
Guarantor's Board of Directors authorizing Guarantor's execution of the Consent
and Agreement of Guarantors attached hereto.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
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Bank shall not be bound by this Agreement until each of the following shall have
occurred: (i) Bank has executed and delivered this Agreement, (ii) Borrower has
performed all of the obligations of Borrower under this Agreement to be
performed contemporaneously with the execution and delivery of this Agreement,
(iii) each guarantor of the Loan, if any, has executed and delivered to Bank a
Consent and Agreement of Guarantors, and (iv) if required by Bank, Borrower and
any guarantors have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and indemnity
agreement.
7. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
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The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, and understandings. No
provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Bank and
Borrower.
8. BINDING EFFECT.
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The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
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This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
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This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
11. ARBITRATION.
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11.1 Binding Arbitration. Bank, Borrower and each guarantor executing a
consent and Agreement of Guarantors with respect to this Agreement hereby agree
that all controversies and claims arising directly or indirectly out of this
Agreement and the Loan Documents, shall at the written request of any party be
arbitrated pursuant to the applicable rules of the American Arbitration
Association. The arbitration shall occur in the State of Arizona. Judgment upon
any award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. The Federal Arbitration Act shall apply to the construction and
interpretation of this arbitration agreement.
11.2 Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars. When any party files a
claim in excess of this amount, the arbitration decision shall be made by the
majority vote of three arbitrators. No arbitrator shall have the power to
restrain any act of any party.
11.3 Provisional Remedies; Self Help; and Foreclosure. No provision of
Section 11.1 shall limit the right of any party to exercise self help remedies,
to foreclose against any real or personal property collateral, or to obtain any
provisional or ancillary remedies (including but not limited to injunctive
relief or the appointment of a receiver) from a court of competent jurisdiction.
At Bank's option, it may enforce its right under a mortgage by judicial
foreclosure, and under a deed of trust either by exercise of power of sale or by
judicial foreclosure. The institution and maintenance of any remedy permitted
above shall not constitute a waiver of the rights to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding.
DATED as of the date first above stated.
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LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited
partnership
By: ILE Sedona Incorporated, an Arizona
corporation, General Partner
By:
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Nancy J. Stone
Vice President
"BORROWER"
BANK ONE, ARIZONA, NA, a national
banking association
By:
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Donna Morris
Assistant Vice President
"BANK"
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MODIFICATION OF GUARANTY AND
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CONSENT AND AGREEMENT OF GUARANTORS
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With respect to the Fourth Modification Agreement, dated September 3, 1997
("Agreement"), between LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona
limited partnership ("Borrower") and BANK ONE, ARIZONA, NA, a national banking
association ("Bank"), the undersigned (individually and, if more than one,
collectively "Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading
the Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Repayment Guaranty, dated January 25, 1996
("Guaranty"), by the undersigned for the benefit of Bank, as modified herein,
and (B) any other agreements, documents, or instruments securing or otherwise
relating to the Guaranty (including, without limitation, any arbitration
resolution and any environmental certification and indemnity agreement
previously executed and delivered by the undersigned), as modified herein. The
Guaranty and such other agreements, documents, and instruments, as modified
herein, are referred to individually and collectively as the "Guarantor
Documents". All capitalized terms used herein and not otherwise defined shall
have the meaning given to such terms in the Agreement.
2. Guarantor consents to the modification of the Loan
Documents and all other matters in the Agreement. Guarantor agrees to the
arbitration provisions set forth in Section 11.1 of the Agreement.
3. Guarantor fully, finally, and forever releases and
discharges Bank and its successors, assigns, directors, officers, employees,
agents, and representatives from any and all actions, causes of action, claims,
debts, demands, liabilities, obligations, and suits of whatever kind or nature,
in law or equity, that Guarantor has or in the future may have, whether known or
unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the Loan
Documents, or the Guarantor Documents and (ii) arising from events occurring
prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note,
the Loan Agreement, the Deed of Trust, the Collateral Assignment, the Security
Agreement, the Security Documents, and the Loan Documents in the Guarantor
Documents shall be deemed to refer to such agreements, documents, and
instruments as modified by the Agreement. Accordingly, the Guarantor Documents
are modified to, among other things, (i) increase the outstanding unpaid
principal amount of indebtedness of Borrower to Bank from $908,166.67 to
$1,708,166.67, (ii) amend the Financial Statement provisions set forth in
Section 5.6 of the Loan Agreement, and (iii) amend the Financial Covenants set
forth in Paragraph 17(b) and 18 of the Guaranty.
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5. Guarantor reaffirms the Guarantor Documents and agrees that
the Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Guaranty and the
obligations of Guarantor in the Guaranty.
6. Guarantor represents and warrants that the Loan Documents,
as modified by the Agreement, and the Guarantor Documents, as modified by this
Consent and Agreement of Guarantors, are the legal, valid, and binding
obligations of Borrower and the undersigned, respectively, enforceable in
accordance with their terms against Borrower and the undersigned, respectively.
7. Guarantor represents and warrants that Guarantor has no
claims, counterclaims, defenses, or off sets with respect to the enforcement
against Guarantor of the Guarantor Documents.
8. Guarantor represents and warrants that there has been no
material adverse change in the financial condition of any Guarantor from the
most recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of
Guarantors may be executed in one or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
document. Signature and acknowledgment pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantors to physically form one document.
DATED as of the date of the Agreement.
ILX INCORPORATED, an Arizona corporation
By:
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Nancy J. Stone
President
"GUARANTOR"
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