Exhibit 10-2
SECURED LINE OF CREDIT
PROMISSORY NOTE
$40,000,000 June 12, 1998
FOR VALUE RECEIVED, ILX RESORTS INCORPORATED, an Arizona corporation,
LOS ABRIGADOS PARTNERS LIMITED PARTNERSHIP, an Arizona limited partnership, and
PREMIERE DEVELOPMENT INCORPORATED, an Arizona corporation (collectively,
"Borrower"), whose address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, do hereby jointly and severally covenant and promise to pay to
the order of LITCHFIELD FINANCIAL CORPORATION, a Massachusetts corporation
"Lender'), at its principal office at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or its assigns, or at such other place as the Lender
may designate to the Borrower in writing from time to time, in legal tender of
the United States, the sum of Forty Million Dollars ($40,000,000) or so much
thereof as may be advanced by Lender to Borrower hereunder along with interest
as provided herein.
Definitions. As used throughout this Promissory Note, the following
capitalized terms shall have the following meanings:
"Amortization Period" shall mean that sixty (60) month period of time
beginning upon the first month after the expiration of the Borrowing
Period.
"Borrowing Period" shall mean that forty-eight (48) month period
beginning the first month after the date of this Promissory Note.
"Change Date" shall mean that date upon which any change in the
Reference Rate occurs.
"Credit Agreement" shall collectively mean that Secured Line of Credit
Lending Agreement executed by and between ▇▇▇▇▇▇ and Borrower of even
date herewith along with all documents referenced therein or executed
in connection therewith.
"Event of Default" shall mean the Borrower's failure to pay when due
any required payment of principal, interest or other sums due hereunder
or upon the occurrence of an event of default as defined under the
Credit Agreement.
"Interest Rate" shall mean, with regard to the first Five Million
Dollars ($5,000,000) of principal advanced hereunder, the Reference
Rate plus one and three-quarters percent (1.75%) per annum; and with
regard to all other principal advanced hereunder, the Reference Rate
plus one and one half percent (1.50%) per annum if (a) borrowings under
this Promissory Note which have not previously been the subject of a
principal advance by ▇▇▇▇▇▇ (i.e. previous borrowings being paid with
funds from this transaction) total at least Five
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Million Dollars ($5,000,000) and are advanced within eight (8) months
from the date of this Promissory Note (the "Initial Five Million"), and
(b) at least Ten Million Dollars ($10,000,000) in new principal is
advanced and outstanding under this Promissory Note for each subsequent
twelve (12) month period (commencing the day following the date on
which the Initial Five Million has been advanced) occurring during the
Borrowing Period. If at the end of any such twelve (12) months period,
the foregoing requirements have not been fulfilled, then the Interest
Rate on all Advances thereafter shall be the Reference Rate plus one
and three-quarters percent (1.75%) per annum.
"Maturity Date" shall mean that date which is one hundred and eight
(108) months from and after the date of this Promissory Note.
"Reference Rate" shall mean that rate of interest which is designated
by the Wall Street Journal, Eastern Edition, as the nation's average
"prime interest' rate on corporate loans at large U.S. money center
commercial banks. If more than one rate is published by the Wall Street
Journal as the "prime rate," the highest of the published rates shall
be used. Should the Wall Street Journal cease reporting said rate of
interest, then the Reference Rate shall be deemed that rate of interest
designated by Citibank, N.A. or its successors as its "prime rate" of
interest.
Interest Rate. The principal amount due hereunder shall bear annual
interest from the date of each advance of principal hereunder at the Interest
Rate. Interest shall accrue on a 360 day per year basis. The Interest Rate may
increase or decrease as provided herein as and when the Reference Rate changes.
With regard to the initial advance of principal hereunder, interest shall begin
to accrue as of the date of said advance. Interest shall similarly begin to
accrue against subsequent advances of principal hereunder as of the date of said
subsequent advance.
Adjustments to Interest Rate. The initial Interest Rate shall be based
upon the Interest Rate calculated on the date of execution of this Promissory
Note. The Interest Rate in effect hereunder shall be adjusted as of each Change
Date to reflect the Reference Rate then in effect. No adjustment that results in
a decrease in the Interest Rate shall take effect during any period in which
Borrower is in default under the terms of this Promissory Note or the Credit
Agreement. Any such decrease shall not become effective until the next regular
adjustment in the Interest Rate after the date that all such defaults have been
cured.
Usury. The Lender does not intend to violate any applicable usury laws.
Accordingly, all agreements between Borrower and Lender are expressly limited so
that in no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof, acceleration of maturity of the unpaid principal balance
hereof, or otherwise, shall the amount paid or agreed to be paid to the Lender
hereunder exceed the maximum rate allowed by applicable law. If, from any
circumstances whatsoever, fulfillment and payment of ▇▇▇▇▇▇▇▇'s obligations, at
the time performance of such obligation shall be due, shall cause the effective
rate of interest upon the sums evidenced hereby to exceed the maximum rate of
interest allowed by applicable law, then, the obligation to be fulfilled
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shall be reduced automatically to the extent necessary to prevent that effective
rate of interest from exceeding the maximum rate allowable under applicable law
and to the extent that the Lender shall receive any sum which would constitute
excessive interest, such sum shall be applied to the reduction of the unpaid
principal balance due hereunder and not to the payment of interest or, if such
excessive interest exceeds the unpaid balance of principal, the excess shall be
refunded to Borrower. This provision shall control every other provision of all
agreements between Borrower and the Lender including, without limitation, the
Credit Agreement.
Borrowing Period. During the Borrowing Period, Borrower shall pay to
Lender at a minimum installment payments of interest only which shall be due and
payable on the first (1st) day of the month following the month of execution of
this Promissory Note and on the first (1st) day of each month thereafter. All
payments received by Lender from Borrower and the Pledged Accounts shall be
applied first to amounts, fees, costs and Lender Expenses due under the Credit
Agreement, then to interest due hereunder, then to principal due hereunder or,
upon the occurrence and continuation of an Event of Default, at the option of
holder, to any other indebtedness owed by Borrower or its affiliates to Lender
or its affiliates. In the event the funds received by ▇▇▇▇▇▇ from the Pledged
Accounts or otherwise are less than the required monthly payment hereunder,
Borrower shall pay the difference immediately upon demand by ▇▇▇▇▇▇.
Amortization Period. Upon commencement of the Amortization Period and
throughout said period, Borrower shall pay to Lender at a minimum equal monthly
payments of principal and interest and, if applicable Lender Expenses, of an
amount which at least will fully amortize the unpaid balance of this Promissory
Note and all the Obligations over the Amortization Period. All such installment
payments shall be due and payable beginning on the first (1st) day of the month
following the beginning of the Amortization Period and on the first (1st) day of
each month thereafter. Such payment shall be due and payable on the first (1st)
day of the first (1st) month of the Amortization Period and on the first (1st)
day of each month thereafter. If not otherwise paid during the Amortization
Period, all principal, accrued but unpaid interest and all other Obligations
outstanding under the Credit Agreement and this Promissory Note shall be due and
payable on or before the Maturity Date. All payments received by Lender from
Borrower and the Pledged Accounts during the Amortization Period shall be
applied first to amounts, fees, costs and Lender Expenses due under the Credit
Agreement, then to interest due hereunder, then to principal due hereunder, or,
upon the occurrence and continuation of an Event of Default, at the option of
the holder, to any other indebtedness owed by Borrower or its affiliates to
Lender or its affiliates. In the event the funds received by ▇▇▇▇▇▇ from the
Pledged Accounts or otherwise are less than the required monthly payment
hereunder, Borrower shall pay the difference immediately upon demand by ▇▇▇▇▇▇.
Voluntary Prepayment. The Borrower is prohibited from prepaying
principal during the Borrowing Period. Thereafter, at any time and from time to
time, subject to the following prepayment fees, Borrower may prepay all or a
portion of this Promissory Note commencing upon the termination of the Borrowing
Period and continuing for a twelve (12) month period thereafter by tendering
with such prepayment a prepayment fee of three percent (3%) of the amount of the
prepayment. Commencing at the beginning of the thirteenth (13th) month after the
termination of
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the Borrowing Period and for a twelve (12) month period thereafter, any such
prepayment shall be accompanied by a prepayment fee of two percent (2%) of the
amount of the prepayment. Commencing at the beginning of the twenty-fifth (25th)
month after the termination of the Borrowing Period and continuing for a period
of twelve (12) months thereafter, any such prepayment shall be accompanied by a
prepayment fee of one percent (1%) of the amount of the prepayment. Thereafter,
there shall be no prepayment fee. In the event Borrower does not tender a
prepayment fee as required herein, Lender may deduct same from the amount of any
tendered prepayment and apply the remainder of the payment against the
Obligations owing under this Promissory Note and the Credit Agreement. Any such
prepayments shall not delay or reduce the next-due monthly installments. The
prepayment fees referenced herein are understood to compensate the Lender for
its costs associated with the Lender's commitment of funds and other expenses
associated with the providing of this credit facility to Borrower. The
prepayment penalties hereunder shall not apply to principal payments which are
collected by the Servicer through the natural payment or pre-payment of the
Pledged Accounts by the Account Debtors during the Borrowing Period or the
Amortization Period, nor shall it apply to the relocation of Pledged Accounts
from this credit facility to any other credit facility between Lender and
Borrower. Such prepayments on Pledged Accounts by Account Debtors shall apply to
▇▇▇▇▇▇▇▇'s installments in the order of their maturity. Moreover, the prepayment
penalties hereunder shall not apply to prepayments from receivables
securitization or other like financing proceeds so long as (a) Lender has been
engaged by Borrower to negotiate and effectuate the contemplated securitization
or other like financing, (b) the receivables which are the subject of the
contemplated securitization or other like financing are aged at least twelve
(12) months or more, and (c) at least Ten Million Dollars ($10,000,000) of
principal continues to be owed and outstanding under this Promissory Note after
the closing and funding of the contemplated securitization or other like
financing.
Term and Maturity. If not otherwise paid, all unpaid principal and
accrued but unpaid interest plus any other sums due hereunder shall be
immediately due and payable on or before the Maturity Date. This Promissory Note
is subject to acceleration upon the occurrence of an Event of Default or as set
forth below and in the Credit Agreement.
Default and Acceleration. This Promissory Note shall be payable in full
and all of the Obligations outstanding shall immediately become accelerated and
due and payable in full without notice, demand or presentment upon the
occurrence of an Event of Default. Time is of the essence in connection with
▇▇▇▇▇▇▇▇'s obligations under this Promissory Note and under the Credit
Agreement. Provided, however, that with regard to events referenced above that
involve the payment of cash or funds by Borrower pursuant to the Credit
Agreement, Lender shall not assert its remedies under this Promissory Note until
Lender provides Borrower with notice of the occurrence of said Event of Default
and Borrower fails to cure such within four (4) Business Days after the receipt
of said notice. Provided, further, that with regard to events referenced above
that do not involve the payment of funds to Lender by Borrower pursuant to the
Credit Agreement, Lender shall not assert its remedies under this Promissory
Note until Lender provides Borrower with notice of the occurrence of said Event
of Default and Borrower fails to cure such within twenty (20) days after the
receipt of said notice. Borrower covenants and agrees that Borrower shall pay
all costs and expenses
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incurred by ▇▇▇▇▇▇ and its successors and assigns in enforcing and/or collecting
this Promissory Note and/or the Obligations, including, without limitation,
reasonable attorneys' fees, and court and litigation costs, whether incurred
out-of-court, in work-out discussions, in restructuring and renegotiation
discussions or in litigation, including appeals and bankruptcy proceedings.
Default Interest. Upon the occurrence of an Event of Default and
continuing until ▇▇▇▇▇▇ acknowledges in writing that said Event of Default has
been cured or waived, all principal and interest owing and outstanding under
this Promissory Note or otherwise shall immediately begin bearing interest until
paid in full at a rate equal to the lesser of four hundred (400) basis points
above the otherwise applicable interest rate, or the maximum rate of interest
which Borrower may by law pay or Lender may charge and collect.
Security and Collateral for Repayment. This Promissory Note is secured
by Pledged Accounts, and the Collateral as set forth and defined in the Credit
Agreement and Pledge and Security Agreement of even date herewith.
Waivers. All parties to this Promissory Note, whether Borrower,
principal, surety, guarantor, endorser, or any other party, hereby waive
presentment for payment, demand, protest, notice of protest, notice of
non-payment, and notice of dishonor, impairment of recourse and impairment of
security. The failure of the holder of this Promissory Note to exercise any
right hereunder shall not preclude the holder from exercising any other right
which the holder may be entitled to exercise upon the happening of such event
and the failure to exercise any right hereunder which the holder may be entitled
to exercise shall not constitute a waiver of the right to exercise said right or
any other right upon the subsequent occurrence of any such event nor shall any
waiver by the Lender of any such right or rights on any one occasion be deemed a
bar to or waiver of the same right or rights on any future occasion. All
endorsers, guarantors, sureties or other persons who may now or hereafter be
liable for the payment of this Promissory Note, by endorsing, guaranteeing or
assuming this Promissory Note, consent to all of the terms and conditions herein
contained and agree that this Promissory Note may be modified, extended or
renewed in whole or in part, without notice, including (a) the impairment,
substitution, exchange or release at any time or times of all or any part of any
security or collateral security now or hereafter furnished, (b) the release of,
or the impairment of the right of recourse against Borrower or any endorser,
guarantor, surety or any other person now or hereafter liable hereon, (c) the
substitution of, renewal or extension of this Promissory Note, (d) the
modification of any terms hereof, or other agreement now or hereafter given in
connection with or as security for this Promissory Note, and (e) any change in
the rate of interest, if any, hereon or the imposition of any fees whether
authorized under this Promissory Note, or any note, mortgage, security
agreement, loan agreement, or any other agreement now or hereafter given in
connection with or as security for this Promissory Note.
Choice of Laws. This Promissory Note is to be construed and enforced in
accordance with the laws of the State of Colorado. In the event of any dispute
concerning the interpretation, application or enforcement of this Promissory
Note, or any other document executed in connection herewith, the sole and
exclusive venue for same shall be the District Court in and for the County of
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Jefferson, State of Colorado. Borrower hereby consents to the jurisdiction of
said Court.
Severability. In the event that any one or more of the provisions
contained in this Promissory Note or in any other loan document executed in
connection herewith shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Promissory Note or any other loan
document executed in connection herewith and in lieu of such invalid, illegal or
unenforceable provision there shall be added automatically as part of this
Promissory Note a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and unenforceable
thereafter.
Binding Effect. This Promissory Note and all covenants, promises and
agreements contained herein or associated herewith shall be binding upon and
inure to the benefit of the respective legal representatives, personal
representatives, devisees, heirs, successors and assigns of the Lender and the
Borrower. The term "Lender" shall be deemed to mean the holder of this
Promissory Note from time to time.
Authorization. The individual who is executing this Promissory Note on
behalf of the Borrower personally covenants, warrants and represents that he or
she has the full power, authority and legal right to execute and deliver this
Promissory Note and all other documents executed and delivered in connection
herewith, that all requisite authority and action necessary to bind the Borrower
has previously been taken, and that this Promissory Note and all documents
executed in connection herewith constitute legal, valid and binding obligations
of the Borrower.
No Joint Venture. The parties hereto covenant and agree that the
relationship between ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall be strictly construed as a
relationship between a debtor and a secured party and never as a joint venture
or similar relationship between ▇▇▇▇▇▇ and Borrower. Lender shall not be
obligated to perform or discharge any obligation or duty of Borrower with
respect to (a) the operation of the mortgaged property or (b) the performance of
any obligations under any leases affecting the mortgaged property. Borrower
covenants and agrees to hold harmless, defend and indemnify the Lender from and
against any liability arising with respect to (a) ▇▇▇▇▇▇▇▇'s operation of the
mortgaged property or (b) ▇▇▇▇▇▇▇▇'s performance of any of its covenants or
obligations under any of the leases pertaining to the mortgaged property.
Multiple Borrower. Should more than one entity or individual execute
this Promissory Note, then each and every such entity or individual recognizes
and agrees that they shall be jointly and severally responsible for all
financial or other obligations of whatever nature evidenced hereby or under any
other document executed by and between Borrower and ▇▇▇▇▇▇.
Capitalized Terms. Capitalized terms not otherwise defined herein shall
have those meanings assigned to them in the Credit Agreement of even date
herewith.
JURY WAIVER. MAKER HEREBY WAIVES MAKER'S RIGHT TO A JURY TRIAL IN THE
EVENT OF ANY DISPUTE OR LITIGATION ARISING HEREUNDER OR UNDER ANY
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RELATED DOCUMENTS EXECUTED IN CONNECTION HEREWITH. MAKER COVENANTS AND AGREES
THAT THE SOLE AND EXCLUSIVE JURISDICTION AND VENUE FOR ALL LITIGATION ARISING IN
CONNECTION WITH THE ENFORCEMENT, COLLECTION OR ADMINISTRATION OF THIS PROMISSORY
NOTE SHALL REST EXCLUSIVELY IN JEFFERSON COUNTY, COLORADO AND MAKER WAIVES ALL
RIGHTS TO ASSERT OTHERWISE.
"Borrower":
ILX RESORTS INCORPORATED,
an Arizona corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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LOS ABRIGADOS PARTNERS LIMITED
PARTNERSHIP, an Arizona limited partnership
By: ILE SEDONA INCORPORATED,
an Arizona corporation, its sole general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President
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PREMIERE DEVELOPMENT INCORPORATED,
an Arizona corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: President
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