CONTRACT OF SALE OF TIMESHARE RECEIVABLES WITH RECOURSE

CONTRACT OF SALE OF TIMESHARE RECEIVABLES WITH RECOURSE

This Contract of Sale of Timeshare Receivables with Recourse (“ Agreement ”) is made this 20th day of June, 2005, by and between RESORT FUNDING LLC , a Delaware limited liability company, with offices at 360 South Warren Street, 6 ^th Floor, Syracuse, New York  13202 (“ Buyer”) , and PREMIERE DEVELOPMENT INCORPORATED , an Arizona corporation with offices at 2111 East Highland, Suite 210, Phoenix, Arizona  85016 (“ Seller ”).

A.

Seller is in the business of marketing and selling timeshare intervals in the form of memberships in Premiere Vacation Club, a multi-site vacation club (“ Club Project ”), consisting of the following Component Sites, as defined herein:

(i)

Varsity Clubs of America: Notre Dame Chapter, located at Mishawaka, Indiana  (“ VCA South Bend Project ”);

(ii)

Varsity Clubs of America: Tucson Chapter, located at Tucson, Arizona (“ VCA Tucson Project ”);

(iii)

Sedona Vacation Club at Los Abrigados, located at Sedona, Arizona (“ Los Abrigados Project ”);

(iv)

Kohl’s Ranch Lodge located in Payson, Arizona (“ Kohl’s Ranch Project ”);

(v)

Golden Eagle Resort in Estes Park, Colorado (“ Golden Eagle Project ”);

(vi)

The Inn at Los Abrigados Resort in Sedona, Arizona (“ Inn at Los Abrigados Project ”);

(vii)

Sea of Cortez Premiere Vacation Club (formerly known as Sea of Cortez Beach Club) in San Carlos, Sonora, Mexico (“ San Carlos Project ”);

(viii)

Rancho Manana Resort in Cave Creek, Arizona (“ Rancho Manana Project ”);

(ix)

The Carriage House Deluxe Suite Hotel, located in Las Vegas, Nevada (“ Carriage House Project ”);

(x)

Bell Rock Inn, located in the Village of Oak Creek, Arizona (“ Bell Rock Inn Project ”);

(xi)

Scottsdale Camelback Resort, located in Scottsdale, Arizona (“ Scottsdale Camelback Resort Project ”);

(xii)

Roundhouse Resort, located in Pinetop, Arizona (“ Roundhouse Project ”); and

(xiii)

Premiere Vacation Club at the Roundhouse Resort, located in Pinetop, Arizona (“ PVC at Roundhouse Project ”).

 

 

 

B.

Seller, in the course of conducting such business, may accept promissory notes, deeds of trust, contracts for deed, installment contracts and other documents from purchasers of Intervals and Club Memberships (collectively, “ Purchasers ”) evidencing and securing the Purchasers’ obligations to make payments to Seller for the unpaid balance of the purchase price of the Club Interests (collectively, “ Contracts ”).

C.

Buyer is engaged, in addition to other activities, in the business of purchasing and financing Contracts.

D.

Seller has agreed to sell to Buyer certain Contracts generated from the sale of Intervals and Club Memberships in the Club Project that meet the criteria set forth below, pursuant to the terms and conditions of this Agreement.

For good and valuable consideration, the receipt of which is acknowledged, and pursuant to the mutual covenants and conditions in this Agreement, the parties agree as follows:

SECTION 1 - DEFINITIONS

In addition to the words and terms elsewhere defined in this Agreement the following words and terms as used in this Agreement have the following meanings:

1.0

Agreement means this Contract of Sale of Timeshare Receivables with Recourse and any modifications, changes, addenda, or additions thereto.   

1.1

Carriage House Project Intervals means those timeshare intervals in the Carriage House Project, and all other rights of usage and other appurtenances of and pertaining to each such timeshare interest.  

1.2

Club means Premiere Vacation Club Incorporated, an Arizona non-profit corporation, which is the owner of certain Unit Weeks located within the Component Sites, which Unit Weeks are conveyed to Seller by the Component Site Developer of such Unit Weeks pursuant to the terms of the Membership Plan and related Project documents.

1.3

Club Interest or Club Memberships means the ownership interest of any Purchaser in the Club Project consisting of such Purchaser’s Club Membership Share and a Club Deed to a corresponding undivided fractional interest in either the Los Abrigados Resort or the Carriage House Project as tenants-in-common with Other Purchasers.

1.4

Club Inventory means timeshare inventory consisting of Unit Weeks from each of the Resorts conveyed to the Club by the Owner of such inventory and set forth in each declaration of annexation for the Club.

1.5

Club Membership Agreement means the “Vacation Club Membership Purchase Agreement” or any other purchase agreement which includes a promissory note or other evidence of indebtedness between Seller and the Purchaser providing for the sale by Seller and the purchase by Purchaser of one or more Club Interests.

 

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1.6

Club Membership Share means each Purchaser’s owned share in the Club based on the occupancy period and annual frequency of such Purchaser’s Club Interest as set forth in the Club Membership Agreement and Club Deed in accordance with the Membership Plan.

1.7

Club Project Interval means a timeshare interval owned by the Club or a Purchaser in the form of a deed to an undivided interest in a Component Site, except for the San Carlos Project, where timeshare intervals owned by the Club are in the form of a certificate evidencing a right to use the San Carlos Project.

1.8

Component Site means a timeshare resort in which Purchasers of Intervals are afforded use rights to the buildings together with the other facilities of that Resort through the Club’s ownership of timeshare intervals at that Resort.

1.9

Component Site Developer means the developer of a Component Site, but excludes Component Sites not developed or managed by Seller or Guarantor.

1.10

Declaration collectively means, as amended from time to time:

(a)

that Declaration of Condominium for Varsity Clubs of America: Notre Dame Chapter as recorded in the Public Records of St. Joseph County, Indiana at Document No. 0257469;

(b)

that Declaration of Condominium for Varsity Clubs of America:  Tucson Chapter as recorded in the Public Records of Pima County, Arizona at Docket 10716, Page 683;

(c)

that Declaration of Condominium for the Sedona Vacation Club at Los Abrigados as recorded in the Public Records of Coconino County, Arizona at Document No. 3166134;

(d)

that Declaration of Condominium for Kohl’s Ranch Lodge as recorded in the Public Records of Gila County, Arizona at Document No. 2002-016942;

(e)

that Declaration of Condominium for Golden Eagle Resort Lodge as recorded in the Public Records of Larimer County, Colorado at Reception No. 90006436;

(f)

that Declaration of Condominium for the Inn at Los Abrigados Resort as recorded in the Public Records of Coconino County, Arizona at Instrument No. 98-18102;

(g)

that Reglamento Interno Del Servicio Del Intervalo de Vacaciones dated November 21, 1997 for the Sea of Cortez Beach Club;

(h)

that Declaration of Condominium for the Rancho Manana Resort as recorded in the Public Records of Maricopa County, Arizona at Record No. 2002-1307510; and

(i)

that Declaration of Condominium for the Carriage House Deluxe Suite Hotel as recorded in the public records of Clark County, Nevada, at Instrument No. 19900816-00872.

 

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1.11

Deeds of Trust means any deed of trust executed and delivered by a Purchaser encumbering all of the right, title and interest of each such Purchaser in and to its purchased undivided interest in Los Abrigados Resort or the Carriage House Project as security for such Purchaser’s obligations under any Financed Note Receivable.

1.12

Default Purchase Rate means, on the occurrence and during the continuation of an Event of Default, the interest rate to be used in calculating the Purchase Price, which shall be a rate five percent (5.0%) higher than the Purchase Rate.

1.13

Defaulted Receivable means any Receivable for which a payment has not been made by a Purchaser within thirty (30) days of the due date for the initial payment or which becomes ninety (90) days or more past due with regard to any payment thereafter.

1.14

Effective Date means the date of this Agreement as first set forth above.

1.15

Eligible Receivable means a Contract which satisfies all of the following criteria:

(a)

payments due under the Contract shall be self-amortizing and payable in equal monthly installments; and the maximum term of each such Contract shall not exceed eighty-four (84) months from the first payment due date and delivery of the Contract.  Notwithstanding the foregoing, up to twenty-five percent (25%) of the Eligible Receivables offered for sale on an annual basis may have a term of up to one hundred twenty (120) months;

(b)

the interest rate to the Purchaser is not less than fourteen percent (14%) per annum, such minimum interest rate to be determined so that, on calculation of the weighted average interest rate of all Contracts, such weighted average interest rate shall not be less than fourteen percent (14%) at any time during the term of this Agreement;

(c)

the first payment due date is not more than forty-five (45) days from the date it is offered for sale to Buyer;

(d)

the Contract arises as a result of a bona fide sale and no single Purchaser has purchased more than four (4) Club Interests, as defined in Section 1.20 herein;

(e)

the Purchaser meets credit standards acceptable to Buyer in accordance with the criteria set forth in Exhibit “H” ;

(f)

the Contract is in form and substance satisfactory to Buyer, is validly enforceable in accordance with its terms, and shall become due and payable on the occurrence of an event of default thereunder by Purchaser;

(g)

Purchaser has made a cash down payment of at least ten percent (10%) of the actual purchase price of the Club Interest, exclusive of closing costs and processing fees, and no part of such payment has been made or loaned to Purchaser by Seller or Guarantor or an Affiliate of Seller or Guarantor, nor has the Purchaser received any cash or rebate of any kind;

 

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(h)

no installment is more than thirty (30) days past due on a contractual basis at the time of sale to Buyer, nor becomes more than ninety (90) days past due on a contractual basis thereafter;

(i)

the Unit with respect to the Club Interest purchased has been completed, developed, and furnished in accordance with the Purchase Documents and is in compliance with all applicable restrictions and the Law and the approvals for use and occupancy for which have been duly obtained;

(j)

all amenities at the Component Sites for which the Club Interest purchased is located have been completed and are available for use by all Purchasers and are in compliance with all applicable restrictions and the Law, the approvals for use and occupancy for which have been duly obtained;

(k)

the Purchaser is the sole payor under the Contract and is not an Affiliate of, related to, or employed by Seller or Guarantor;

(l)

the sale of the Interval from which the Contract arises has not been canceled by the Purchaser, any statutory or other applicable cancellation or rescission period has expired, and the sale of the Interval otherwise complies fully with the terms, provisions, and conditions of this Agreement, any other related documents, the Purchase Documents and all Laws; and the Contract is free and clear of adverse claims, liens, and encumbrances and is not currently, nor shall it potentially be in the future, subject to claims of rescission, invalidity, unenforceability, illegality, defense, offset or counterclaim, nor is Seller aware of any threatened claims of rescission, invalidity, unenforceability, illegality, offset, or counterclaim;

(m)

payments are to be in legal tender of the United States;

(n)

the Purchase Documents are valid, genuine, and enforceable against the obligor thereunder and the Purchaser does not have any right of set-off, abatement, or counterclaim, all applicable rescission periods have expired, and such Purchaser has not assigned his interest thereunder;

(o)

the Purchaser is a U.S., Mexican or Canadian citizen and resident, provided, however,  that no more that ten percent (10%) of the Contracts offered to Buyer are Canadian residents, and that the payment method for the Receivable by Mexican citizens is either by automatic credit or debit card charge;

(p)

payments have been and shall be made by the Purchaser thereunder and not by Seller or any Affiliate of Seller or Guarantor on the obligor’s behalf;

(q)

the Purchase Documents shall not contain any provision obligating a Purchaser to pay any prepayment penalty to either Seller or Buyer;

(r)

the Purchaser of the relevant Club Interest has access to a Unit among the Component Sites during any use period reserved by or assigned to such Purchaser, all in accordance with the Purchase Documents;

 

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(s)

the original of the Contract and all related documents have been endorsed by the Seller to Buyer in the manner prescribed by Buyer and delivered to Seller as provided in this Agreement, and the terms thereof and all instruments related thereto shall comply in all respects with all Laws;

(t)

a certificate of occupancy for such Unit (or the building in which the Unit is located) has been issued, and such Unit is not subject to any lien or Claim (other than the lien created by a Contract and the Permitted Exceptions) that has not previously been consented to in writing by Buyer;

(u)

the form of Purchase Documents, including but not limited to the form of promissory note, deed of trust, federal Truth-in-Lending disclosure statement, purchase contract, and other documents and instruments, relating to the Interval purchase transactions giving rise to such Contract have been approved in advance by Buyer in writing;

(v)

the Note Receivable is secured by a pledge and assignment of the Club Membership Agreement Deed of Trust which shall be assigned by the Seller to the Buyer; and

(w)

the maximum outstanding principal balance of such Contract does not exceed $30,000 (or such greater amount as may be approved in writing in advance by Buyer).

1.16

Eligible Receivable Balance means the principal balance owed by the underlying consumer on the Eligible Receivable as of the date the Eligible Receivable is purchased by Buyer.  

1.17

Environmental Indemnity Agreement means the Environmental Indemnity Agreement dated as of the date hereof executed and delivered by the Seller and Guarantor to the Buyer, as the same may be amended from time to time.

1.18

Environmental Law means The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time (“ CERCLA ”), the Resource Conservation and Recovery Act of 1976, as amended from time to time (“ RCRA ”), the Superfund Amendments and Reauthorization Act of 1986, as amended, the federal Clean Air Act, the federal Clean Water Act, the federal Safe Drinking Water Act, the federal Toxic Substances Control Act, the federal Hazardous Materials Transportation Act, the federal Emergency Planning and Community Right to Know Act of 1986, the federal Endangered Species Act, the federal Occupational Safety and Health Act of 1970, the federal Water Pollution Control Act, and any and all comparable statutes or ordinances enacted in the jurisdiction in which the Resort is located, as all of the foregoing laws may be amended from time to time, and any rules or regulations promulgated pursuant to the foregoing; together with any similar local, state, or federal statutes, ordinances, rules, or regulations, either in existence as of the date hereof or enacted or promulgated after the date of this Agreement, that concern the management, control, storage, discharge, treatment, containment, removal, and/or transport of Hazardous Materials or other substances that are or may become a threat to public health or the environment; together with any common law theory involving Hazardous Materials or substances that are (or alleged to be) hazardous to human health or the environment, based on nuisance, trespass,

 

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negligence, strict liability, or other tortious conduct, or any other federal, state, or local statute, ordinance, regulation, rule, policy, or determination pertaining to health, hygiene, the environment, or environmental conditions.

1.19

Event of Default has the meaning set forth in Section 7.

1.20

Financing Statements means the UCC-1 Financing Statements or amendments thereto in form and substance approved by Buyer, filed of record from time to time as required under this Agreement.

1.21

GAAP means generally accepted accounting principles, applied on a consistent basis, set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants or in statements of the Financial Accounting Standards Board which are applicable in the circumstances as of the date in question; and the requisite that such principles be applied on a consistent basis means that the accounting principles in a current period are comparable in all material respects to those applied in a preceding period, with any exceptions thereto noted.

1.22

Governmental Authority and Governmental Authorities means the United States of America and the state, county, and municipality in which the Property is located, and all other governmental authorities having jurisdiction over Seller, Purchaser, the Guarantor, the Property, repair, restoration and renovation of the Improvements, the Resort or the sale, use and occupancy of Intervals.

1.23

Guarantor means ILX Resorts Incorporated, an Arizona corporation.

1.24

Guaranty means that certain Guaranty and Subordination Agreement executed by Guarantor on or of even date herewith, guarantying all of the obligations of Seller to Buyer under this Agreement, as the same may be amended from time to time.

1.25

Hazardous Materials means “hazardous substances”, “hazardous waste”, “hazardous constituents”, “toxic substances”, or “solid waste”, as defined in the Environmental Laws, and any other contaminant or any material, waste, or substance that is petroleum or petroleum based, asbestos, polychlorinated biphenyls, flammable explosives, or radioactive materials.

1.26

Holdback means with respect to any Eligible Receivable, the portion of the Purchase Price for such Eligible Receivable that is not paid on the Purchase Date of any Eligible Receivable.

1.27

 Holdback Fraction means the initial percent obtained by dividing the initial Holdback for an Eligible Receivable by the Purchase Price for such Eligible Receivable.

1.28

Law means any and all applicable federal, state, and local statutes, ordinances, rules, regulations, court orders or other decree of any governmental entity, and other legal requirements of any and every conceivable type to which Seller, Guarantor, Club, any of the Resorts, or any portion thereof, the Resort Documents, this Agreement,

 

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the Related Documents, or all or any portion of the Receivables, as applicable, is or becomes subject from time to time.

1.29

Los Abrigados Intervals means those timeshare intervals in the Los Abrigados Project, and all other rights of usage and other appurtenances of and pertaining to each such timeshare interest.  

1.30

Los Abrigados Partners Limited Partnership “Los Abrigados” means an Arizona limited partnership in the business of marketing timeshare intervals in the Los Abrigados Project.

1.31

Managing Entity means for the Club Project and each Component Site, the entity that is responsible for the operation and maintenance of the Club Project or Component Site in accordance with the Project Documents.

1.32

Membership Plan means the Premiere Vacation Club Membership Plan restated and recorded in the public records of Maricopa County, Arizona, on 12/06/02 as Redord No. 2002-1307518, as the same may be amended or restated from time to time, which document provides for the management, operation, use, and enjoyment of the Club and establishes the benefits and burdens of the Club.

1.33

Note Receivable means the contract, installment notes and related Purchase Documents executed by a Purchaser in favor of Seller in connection with such Purchaser’s acquisition of a Club Interest.

1.34

Obligation means any and all indebtedness, obligations, liabilities, contracts, representations, warranties, and agreements of every kind and nature between Seller and Buyer now existing or hereinafter arising, and now or hereinafter contemplated pursuant to this Agreement, or otherwise.

1.35

Permitted Exceptions means the exceptions to title listed on Exhibit “C “ .

1.36

Person means natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

1.37

Project Documents means any and all documents evidencing or relating to the sale of Club Interests by Seller or Los Abrigados and the operation of the Club Project and the Component Sites, including, without limitation, the Club Membership Agreement, the Membership Plan, the receipt for Club Documents, Component Site Declarations, the public offering statement or prospectus and all exhibits thereto, the declaration, the articles and bylaws of the Managing Entity for the Club Project and the Component Sites, the rules and regulations of the Club Project and the Component Sites, the affiliation agreement(s) with an internal or external exchange program, the Club Project and Component Site management contracts, and such other documents as required to be delivered to Purchasers or filed with a governmental authority by the Law.

 

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1.38

Property means the lands on which the Resorts or Component Sites are located, and including any land hereafter added to the Resorts or Component Sites pursuant to the Declarations.  

1.39

Purchase Date  means  the date of  purchase by Buyer of any Eligible Receivable from Seller.

1.40

Purchase Documents means the Receivables and any agreement and related sale documents executed and delivered by a Purchaser to Seller or Los Abrigados with respect to the purchase of a Club Interest which is financed by Purchaser through a Contract (including, without limitation, all loan applications, title insurance policies, financial statements, truth in lending disclosure statements, Real Estate Settlement Procedures Act disclosure statements, credit card authorization forms, and the like) and all guaranties and other documents or instruments evidencing or securing the obligations of the Purchaser or any other person primarily or secondarily liable on such purchase agreement, including, without limitation, all pledge and assignments of Club Membership Agreements and all Deeds of Trust.

1.41

Purchase Price means the present value of the remaining monthly payments due on an Eligible Receivable at the time of sale, discounted at the Purchase Rate.

1.42

Purchase Rate means, for the purposes of calculating the Purchase Price, a floating rate per annum equal to the Prime Rate as published in The Wall Street Journal, Eastern Edition (“ Prime Rate ”), plus two and three-quarters percent (2.75%) but in no event less than seven percent (7.0%) per annum.  The Purchase Rate for each calendar month for Contracts purchased during that month shall be fixed for the duration of the Contracts, and shall be determined by the Prime Rate published prior to and in effect on the first (1st) business day of the month in which the Contract is purchased.

1.43

Purchaser means any Person who purchases one or more Club Interests.

1.44

Receivable means each Contract and the related Purchase Documents which are now or hereafter assigned, endorsed, and delivered to Buyer pursuant to this Agreement, together with:

(a)

All guaranties and other documents or instruments evidencing or securing the obligations of the Purchaser or any other person primarily or secondarily liable on each Contract;

(b)

All files, books and records of Seller pertaining to any of the foregoing; and

(c)

All proceeds from the foregoing.

1.45

Receivable Payments means those payments on Contracts which have been sold, assigned, transferred, or set over to Buyer pursuant to this Agreement.

 

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1.46

Recourse means the obligation of Seller to Buyer pursuant to Section 3 resulting from a Defaulted Receivable

1.47

Related Documents means all other documents and agreements between Seller and Buyer executed or delivered in connection with this transaction, together with any and all renewals, extensions, amendments, restatements, or replacements thereof, whether now or hereafter existing.

1.48

Replacement Note Receivable means an Eligible Receivable, which is assigned to Buyer in replacement of or as a supplement to a Defaulted Receivable.

1.49

Resorts collectively mean the following and mean any one of them as the context permits:

(i)

VCA South Bend Project;

(ii)

VCA Tucson Project;

(iii)

Los Abrigados Project;

(iv)

Kohl’s Ranch Project;

(v)

Golden Eagle Project;

(vi)

Inn at Los Abrigados Project;

(vii)

San Carlos Project;

(viii)

Rancho Manana Project;

(ix)

Carriage House Project;

(x)

Bell Rock Inn Project;

(xi)

Scottsdale Camelback Resort Project;

(xii)

Roundhouse Project; and

(xiii)

PVC at Roundhouse Project.

1.50

Timeshare Act means any and all laws governing timeshares as enacted in the State in which the Component Sites are located.

1.51

Unit means an individual residential dwelling unit within a Resort, together with all furniture, fixtures, and furnishings therein, and together with any and all interest in common elements appurtenant thereto, as provided in the respective Declaration.

1.52

Unit Weeks means specific fee simple interval ownership interests or other occupancy rights, each consisting primarily of a seven (7) day occupancy period in a type

 

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of Unit at a Component Site which is conveyed to the Club by one of the Component Site Developers pursuant to a special warranty deed or with respect to the San Carlos Project by business agreement, and as more particularly described in the Declaration of Annexation attached to the Membership Plan.

SECTION 2 - RIGHT TO FINANCE;
SUBJECT MATTER OF SALE AND PAYMENT

2.0

Right to Purchase .  Subject to the provisions hereinafter set forth, Seller shall offer Buyer the first, absolute and exclusive right to purchase or finance Eligible Receivables in an aggregate face amount of up to Thirty Million and No/100 Dollars ($30,000,000.00) and all Eligible Receivables in excess of such amounts such purchase to be in the sole discretion of Buyer (“ Exclusive Right to Purchase ”).  Buyer’s Exclusive Right to Purchase shall terminate thirty-six (36) months from the Effective Date or on the earlier termination of this Agreement.   Notwithstanding the foregoing, Buyer’s Exclusive Right to Purchase with respect to Eligible Receivables shall be satisfied if Seller offers to Buyer through the termination of this Agreement not fewer than 40% of all such Eligible Receivables.  Seller shall not sell, hypothecate, assign, offer, use as collateral, or otherwise finance in any other way, more than 60% of the Eligible Receivables with any Person other than Buyer without first offering to sell such Eligible Receivables to Buyer and in any event only after receipt of the prior written consent of Buyer.  If Buyer gives Seller written notice that it declines to finance or purchase any Eligible Receivables offered by Seller, or Buyer fails to finance within 14 days of submittal any Eligible Receivables offered by Seller, then Seller may arrange for alternative financing or purchase sources for such Eligible Receivables.  The purchase price of Eligible Receivables for determining the aggregate face amount of the thirty million dollars ($30,000,000) available to Seller shall be the Advance Rate as defined in Section 2.4.

2.1

Form of Receivables .  All Receivables purchased shall be in the form attached as Exhibit “B” unless otherwise approved by Buyer in writing.  Concurrently with the transfer of each Receivable, Seller shall transfer and assign or cause to be transferred and assigned to Buyer the related Contract and other Purchase Documents, pursuant to an assignment in the form attached as Exhibit “I” .

2.2

Conditions Precedent to Purchase .  The obligation of Buyer to purchase any Eligible Receivable is subject to satisfaction of all of the following conditions and in accordance with the other terms and conditions in this Agreement:

(a)

Closing Deliveries .  Prior to execution of this Agreement, Buyer shall have received, in form and substance satisfactory to Buyer, all documents, instruments, and information identified on the closing checklist attached as Exhibit “D” .

(b)

Deliveries Prior to Each Sale .  Prior to each sale to Buyer, Buyer shall have received all documents, instruments, and information identified on Exhibit “E” pertaining to the Contracts seller is offering to Buyer.  Requests for purchase shall be made by Buyer not more than on a weekly basis, shall be made at least seven (7) days prior to the requested date of disbursement and shall be in the form of Exhibit “F” .

 

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(c)

Representations and Warranties .  The representations and warranties in this Agreement and in the Related Documents shall be true, correct, and complete in all material respects on and as of the date of sale taking into account any amendments to the exhibits as a result of any disclosures made by Seller to Buyer in writing after the Effective Date and approved by Buyer in writing.

(d)

No Default .  No Event of Default shall have occurred.

(e)

Performance of Agreements .  Seller shall have performed in all material respects all agreements, paid all fees, costs and expenses, and satisfied all conditions which this Agreement or the Related Documents provide shall be paid or performed by it as of such date.

(f)

Governmental Approvals .  Seller shall have obtained all approvals, licenses, permits and consents for (a) Seller’s operation of that portion of the Resort for which sales of Club Interests which are the subject of the requested sale have been made and (b) the sale of Club Interests which generated the Eligible Receivable that are the subject of the requested sale.

2.3

Disbursement .  Within fourteen (14) days after Buyer’s receipt of the documents described in Section 2.2 and provided that all other conditions precedent have been met to Buyer’s satisfaction, Buyer shall disburse to Seller the Purchase Price to which Seller would be entitled for each Eligible Receivable submitted to and accepted by Buyer.  Notwithstanding the foregoing, Buyer’s disbursement of the Purchase Price for any Eligible Receivable shall not be construed as a waiver of any of its rights under this Agreement or the Law.

2.4

Purchase Payments .  Buyer shall pay to Seller, on the purchase of each Eligible Receivable accepted by Buyer, an amount equal as follows:  

(i)

on the Purchase Date , Buyer shall pay to Seller one hundred percent (100%) of the Eligible Receivable Balance for such Eligible Receivable on such date.

(ii) thereafter, Buyer shall pay to Seller, periodically as set forth below, a portion of the Holdback for such Eligible Receivable, (“ Holdback Payments ”).  Such periodic Holdback Payments shall (a) be made on the date twenty-four (24) months after the Purchase Date for such Eligible Receivable and at six month intervals thereafter (the date of each such periodic payment being referred to hereinafter as a “ Payment Date ”) and (b) be in an amount equal to the product of the Holdback Fraction for such Eligible Receivable times the difference between (A) the Purchase Price for such Eligible Receivable, minus (B) the present value on the Payment Date of the remaining monthly payments due on such Eligible Receivable discounted at the Purchase Rate for such Eligible Receivable as in effect on the Purchase Date minus, if any, the aggregate Holdback Payments previously paid,.  Once a portion of the Holdback is paid to the Seller, the remaining Holdback amount shall equal the original Holdback less the aggregate Holdback Payments paid.  

 

Notwithstanding anything herein to the contrary, Seller does not have the right to receive any Holdback payments described in 2.4(ii) above upon the occurrence and during the continuation

 

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of an Event of Default or if Seller owes any amounts to Buyer.  The Buyer shall have the right to offset any Holdback payments by all or a portion of any amount due to Buyer resulting from a Defaulted Receivable or other amounts due under the Loan Documents.

 

2.5

Intentionally Deleted.

2.6

Prepayment .  Should a Receivable be prepaid by a Purchaser, then the difference between the present value of the balance of the Receivable at Seller’s interest rate to the Purchaser specified in the Contract (“ Purchaser PV ”) and the present value of the balance of the Receivable at the Purchase Rate (“ Buyer PV ”) shall be calculated to determine if money is owed to Buyer or to Seller.  If the Purchaser PV exceeds the Buyer PV, Seller shall pay an amount equal to the original discount less the difference between Purchaser PV and Buyer PV to Buyer within ten (10) days of the Purchaser’s prepayment.  If the Buyer PV exceeds the Purchaser PV, and provided that no Event of Default exists and no condition exists that with the giving of notice or the passage of time or both would cause an Event of Default to exist, Buyer shall pay an amount equal to the original Holdback less the difference between Buyer PV and Purchaser PV and less Holdback Payments paid on the Receivable to Seller within ten (10) days of the Purchaser’s prepayment.  Notwithstanding anything to the contrary in the Agreement, should any Receivable be prepaid in full or a chargeback, as defined below, within 90 days of the first payment due date thereunder, Seller shall pay to Buyer a processing fee of one hundred dollars (US$100.00) per Receivable.  Purchasers shall not be obligated to pay any prepayment penalty to either Buyer or Seller.

2.7

True Sale .  The sale of Receivables to Buyer from Seller is a true sale. The purchase of Receivables by Buyer is absolute and, subject to Section 3, Seller has no right to repurchase any Receivables.

2.8

Recharacterization .  Without prejudice to the provisions of Section 2.7 above providing for the absolute transfer of all of Seller’s interest in the Receivables, in order to secure the prompt payment and performance of Seller to Buyer and Buyer’s assignees arising in connection with this Agreement whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, Seller hereby assigns and grants to Buyer a first priority security interest in all Seller’s right, title and interest, whether now owned or hereafter acquired, if any, in, to and under the Receivables and Purchase Documents, and Buyer shall be entitled to file Financing Statements in connection therewith.

SECTION 3 - RECOURSE

3.0

For each Receivable that has become a Defaulted Receivable (“ Chargeback ”), Seller unconditionally agrees to do either of the following:

(a)

Repurchase the Defaulted Receivable for the Repurchase Price (as defined in Section 3.1 below) from Buyer within fifteen (15) days after Buyer delivers notice to Seller requesting repurchase.

 

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(b)

Repurchase the Defaulted Receivable from Buyer and replace the Defaulted Receivable with a new Eligible Receivable acceptable to Buyer, which shall be subject to this Agreement, with a principal balance, term, and interest rate not less than the Defaulted Receivable being replaced, within fifteen (15) days after Buyer delivers notice to Seller requesting repurchase and replacement.

3.1

The repurchase price of any Defaulted Receivable which Seller is required to repurchase pursuant to this Agreement shall be a sum equal to the Buyer PV minus the difference between the original Holdback and the Holdback Payments paid on the Defaulted Receivable, plus accrued interest and late fees and any other costs and expenses as set forth in the Contract (“ Repurchase Price ”).  If Seller elects to replace the Defaulted Receivable, Buyer shall pay Seller the Purchase Price for the replacement Eligible Receivable in accordance with Section 2.  Provided, however, that Buyer shall be entitled to a credit for the Repurchase Price in connection with Seller’s repurchase of the Defaulted Receivable.

3.2

On payment to Buyer of the Repurchase Price, the Defaulted Receivable shall be transferred and assigned to Seller free and clear of any rights of any person claiming through or under Buyer, and without recourse to Buyer.

SECTION 4 - REPRESENTATIONS AND WARRANTIES

Seller, Component Site Developer and Guarantor, as applicable, represent and warrant and shall be deemed continuously to represent and warrant to Buyer the following:

4.0

Existence; Good Standing .  Seller is a validly existing corporation duly formed under the laws of the State of Arizona.  Seller is duly authorized to do business and is in good standing under the laws of such jurisdiction and such other jurisdictions as required to conduct the business in which it is engaged, and has all licenses and permits necessary to conduct the business in which it is engaged.  Club is validly existing Arizona corporation duly formed under the laws of the State of Arizona.  Club is duly authorized to do business and is in good standing under the laws of such state and such other jurisdictions as required to conduct the business in which it is engaged, and has all licenses and permits necessary to conduct the business in which it is engaged.  Los Abrigados is a validly existing Arizona limited partnership formed under the laws of Arizona.  Los Abrigados is authorized to do business and is in good standing under the laws of such other jurisdictions as required to conduct its business and has all licenses and permits necessary to conduct the business in which it is engaged.  Each of the other Component Site Developers is a validly existing Arizona corporation incorporated under the laws of Arizona.  Each of the other Component Site Developers is authorized to do business and is in good standing under the laws of such other jurisdictions as required to conduct its business and has all licenses and permits necessary to conduct its business.  Guarantor is a validly existing corporation incorporated under the laws of Arizona, and is in good standing.

4.1

Authority .

(a)

Seller .  Seller has (and, at the time of entry into the Contracts, had) the power and authority to own its property and transact the business in which it is engaged or

 

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presently proposes to engage and to execute, deliver, and perform under the Contracts, this Agreement and Related Documents, the execution, delivery, and performance of which have been duly authorized by all requisite action required by Law and by its articles of incorporation and bylaws.  Each Component Site Developer has (and, at the time of entry into the Contracts, had) the power and authority to own its property and transact the business in which it is engaged or presently proposes to engage and to execute, deliver, and perform under the Contracts, this Agreement and Related Documents, the execution, delivery, and performance of which have been duly authorized by all requisite action required by Law and by its articles of incorporation and bylaws.  The execution, delivery, and performance of this Agreement and the Related Documents by Seller does not and will not constitute a breach or violation of Seller’s articles of incorporation or bylaws; any other instrument or contract to which Seller is a party or any Law by which Seller is bound; or any documents relating to the Resorts or the Club Interests.  The execution, delivery and performance of this Agreement by each Component Site Developer does not and will not constitute a breach or violation of such Component Site Developer’s applicable entity documents; an other instrument or contract to which such Component Site Developer is a party or any Law by which such Component Site Developer is bound.

(b)

Guarantor .  Guarantor has the power and authority to execute, deliver, and perform under the Guaranty, the execution, delivery, and performance of which has been duly authorized by all requisite action required by Law and by its articles of incorporation and bylaws.  The execution, delivery, and performance of the Guaranty by Guarantor does not and will not constitute a breach or violation of Guarantor’s articles of incorporation or bylaws; any other instrument or contract to which Seller is a party or any Law by which Seller is bound; or any documents relating to the Resort or the Club Project Intervals, Los Abrigados Intervals or Carriage House Intervals.

4.2

Other Agreements .  Neither Seller, Guarantor nor any Component Site Developer is in default under any indenture, mortgage, deed of trust, agreement, or other instrument to which it is a party. The execution, delivery, and compliance with this Agreement and the Related Documents will not (i) to the best of Seller’s knowledge, violate the Law, or (ii) conflict or be inconsistent with, or result in any default under, any contract, agreement, or commitment to which Seller is bound.

4.3

Enforceability .  Each of the Contracts and other Purchase Documents, this Agreement and each of the Related Documents are valid, binding, and enforceable in accordance with their terms and do not require the consent or approval of any governmental body, agency, or authority.

4.4

Litigation and Proceedings .  Except as disclosed in Exhibit “G” , there are no actions, suits, proceedings, orders, or injunctions pending or, to the best of Seller’s knowledge, threatened against or affecting Seller, Club, any Component Site Developer, Guarantor, the Managing Entity, or any Affiliate of Seller or Guarantor, the Property or the Resort, at law or in equity, or before or by any governmental authority.  Neither Seller nor Guarantor has received any notice from any court or governmental authority alleging that such Person or any Affiliate of Seller, Guarantor, or the Managing Entity has violated the Timeshare Act or any Law.

 

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4.5

Taxes .  Seller, Club and each Component Site Developer has filed all tax returns, income or otherwise, which are required to be filed by it and has paid, or will pay prior to delinquency, all taxes (including all interest and penalties, if any) due pursuant to such returns or pursuant to any assessment received by it, and there is no unassessed tax or tax deficiency proposed or threatened against it or Guarantor.  All ad valorem taxes and other taxes and assessments against the Club Project, each Component Site, Club Interest and the Collateral have been paid or are current and will be paid when due and Seller knows of no basis for any additional taxes or assessments against the Club Project, each Component Site, Club Interest or the Collateral.  Seller shall collect and pay all applicable sales or rental tax respecting the sale or rental of the Club Interests.

4.6

Financial Statements .  Guarantor’s financial statements fairly present the financial condition and (if applicable) results of operations of Guarantor as of the date or dates of the financial statements and for the periods covered by the financial statements.  All such financial statements, if any, were prepared in accordance with GAAP.  There has been no material adverse change in the financial condition of Guarantor from the financial condition shown in the financial statements.  Guarantor is able to pay all of its debts as they become due, and Guarantor shall maintain such solvent financial condition, giving effect to all obligations, absolute and contingent, of Guarantor.  Guarantor’s obligations under the Loan Documents