1
EXHIBIT 10.1
SECURED PROMISSORY NOTE
$3,650,000.00 + Additional Advances San Diego, California
March 7, 1997
FOR VALUE RECEIVED, Nexus Equity VI LLC, a California limited liability
company ("Borrower") promises to pay, in lawful money of the United States of
America, to the order of LIGAND PHARMACEUTICALS INCORPORATED, a Delaware
corporation ("Lender"), at 9393 Towne Centre Drive, San Diego, California 92121,
or at such other place as Lender may designate in writing from time to time, the
principal sum of Three Million Six Hundred Fifty Thousand Dollars
($3,650,000.00) or so much thereof as shall be from time to time disbursed
hereunder, plus such additional advances as may be made pursuant to the terms of
the Loan Agreement (as defined below),of principal with interest on the
disbursed but unpaid principal balance payable at the rate and in the manner
provided below (the "Loan"). This Secured Promissory Note (this "Note") is the
promissory note referred to in the Construction Loan Agreement of even date
herewith between Lender and Borrower (the "Loan Agreement") and is subject to
the terms of the Loan Agreement and is entitled to the benefits of the security
interests and collateral described therein. Initially capitalized terms used in
this Note without definition have the meanings given them in the Loan Agreement.
1. Interest. Interest shall accrue on the disbursed but unpaid principal
balances hereof from the date of disbursement until paid at the rate of eight
and one-half percent (8.5%) per annum. Interest for a portion of any month shall
be calculated on the basis of the actual number of days in the period for which
the calculation is being made.
2. Repayment. Interest accrued on outstanding principal hereunder from
the date hereof through and including the Term Commencement Date (as defined
below) shall be added to principal on the Term Commencement Date, at which time,
the total outstanding principal, with interest thereon calculated pursuant to
Section 1 above, shall be amortized over a ten (10) year period and principal
and interest shall be payable in equal monthly installments beginning on the
Term Commencement Date and thereafter on the first day of each succeeding
calendar month and continuing until the Maturity Date (defined below) at which
time the entire unpaid principal balance hereunder, together with all accrued
but unpaid interest thereon, and all other sums owing under the other Loan
Documents, shall be due and payable in full. The Term Commencement Date is the
date defined in the Lease as the Term Commencement Date. The Maturity Date is
the date which is the tenth (10th) anniversary of the Term Commencement Date.
Each payment shall be credited first to the payment of any late charges or costs
due hereunder, then to the payment of any interest then due and the remainder
shall be credited to principal.
3. Adjustment to Repayment. Lender and Borrower acknowledge that the
monthly installments of Basic Annual Rent (as defined in the Lease) to be paid
by Lender (the "Monthly Rent"), as tenant, to Borrower, as landlord, under the
Lease during an initial period of approximately one (1) year (the "Shortfall
Period") following the Term Commencement Date will not, in all likelihood, be
enough to fund Borrower's monthly payment obligation with respect to (i) the
2
Permanent Loan, (ii) the Loan, and (iii) the fees Borrower is obligated to pay
to Nexus Properties, Inc., a California corporation, pursuant to Section 8.3 of
Borrower's Operating Agreement (the "Nexus Fees"). Therefore, notwithstanding
the provisions of Section 2 above, Lender and Borrower agree that the minimum
monthly payment due hereunder for each month during the Shortfall Period, shall
be the lesser of (i) the regularly scheduled payment of principal and interest
as calculated pursuant to Section 2 above (the "Scheduled Monthly Installment"),
or (ii) the balance of the Monthly Rent less (a) that month's regularly
scheduled installment under the Permanent Loan and (b) that month's regularly
scheduled payment of the Nexus Fees. After such the Shortfall Period, Borrower
shall be obligated to pay the Scheduled Monthly Installment each month during
the balance of the scheduled term of this Note (subject to reamortization as
provided herein). After the Shortfall Period, Lender shall have the right, at
its election, to reamortize the total outstanding principal hereunder, with
accrued but unpaid interest thereon calculated pursuant to Section 1 above, over
the remainder of the scheduled term of this Note and Borrower shall repay the
indebtedness evidenced by this Note pursuant to such reamortization. The
provisions of this Section 3 are not intended as a waiver by Lender of repayment
of any principal disbursed hereunder, any interest thereon or any other sums
which may be due hereunder or under the terms of the other Loan Documents. The
adjusted repayment schedule for principal and interest hereunder during the
Shortfall Period the first year of the term of this Note commencing on the Term
Commencement Date shall not affect Borrower's obligations to timely pay any
other costs or expenses in full which may be due pursuant to the terms of this
Note or the other Loan Documents.
4. Prepayment. Borrower shall not prepay outstanding principal or other
sums due under this Note at any time prior to the full reconveyance of the Tokai
Deed of Trust unless Borrower has received Lender's prior written approval of
such prepayment. Such approval may be given or withheld by Lender in Lender's
sole and absolute discretion. If such approval is given, it shall apply only to
the specific prepayment identified in Lender's written approval. After the full
reconveyance of the Tokai Deed of Trust, the outstanding principal balance of
this Note may be prepaid in whole or in part by Borrower, without premium or
penalty. Lender shall not be obligated to reamortize the repayment schedule for
this Note pursuant to any prepayment unless Lender, in its sole and absolute
discretion, elects to do so.
5. Security. This Note is secured by the following:
5.1 That certain Construction Deed of Trust, Assignment of Rents
and Leases, Security Agreement and Fixture Filing executed by Borrower and
naming Lender as beneficiary, delivered by Borrower concurrently herewith the
("Deed of Trust") which, as of the date hereof, shall be second in priority to
the Tokai Deed of Trust;
5.2 Financing Statement(s) covering the chattels, fixtures,
equipment and general intangibles installed or used in connection with the
Project; and
2
3
5.3 That certain Assignment of Contracts, Licenses, Permits,
Agreements, Warranties, Plans and Specifications executed by Borrower in favor
of Lender, delivered by Borrower concurrently herewith (the "Assignment").
6. Default.
6.1 Events of Default. The occurrence of any one or more of the
following shall be an event of default under this Note ("Event of Default"):
6.1.1 Borrower's failure to make any payment promptly
when due of principal and/or interest, or any other sums due under any one or
more of (a) the Loan Agreement, (b) this Note, (c) the Deed of Trust, (d) the
Assignment, (e) the other Loan Documents, or (f) any other document or
instrument executed by Borrower securing payment of, or otherwise in any way in
connection with, this Note;
6.1.2 The failure of Borrower to perform any of its
obligations or to make any payments promptly when due of principal, interest, or
other sums due under any one or more of the Tokai Loan Documents or any loan
documents executed by Borrower in connection with the Tokai Loan and/or the
Permanent Loan or any other documents or instruments executed by Borrower with,
or in favor of, any other construction lender for any loan obtained by Borrower
in connection with the Project (collectively, with all of the documents and
instruments referenced in Section 6.1.1 above, the "Documents");
6.1.3 An event of default under any one or more of the
Documents;
6.1.4 An event of default by Borrower under the Lease; or
6.1.5 An event of default under any guaranty executed in
connection with this Note or the Loan; any such guaranty ceases to be in full
force and effect; or any guarantor of any such guaranty asserts that any such
guaranty is not in full force and effect.
6.2 Remedies. Upon an Event of Default, then in addition to any
other rights or remedies available to Lender, Lender may, at its option, declare
the entire outstanding principal balance hereunder and accrued but unpaid
interest hereunder, and all other amounts and/or payments due hereunder, and/or
under the other Loan Documents, immediately due and payable notwithstanding any
stated maturity date therefor and such amounts shall then be immediately due and
payable. If an Event of Default occurs, and Lender elects to accelerate the
Loan, or in the event that this Note is not paid in full on the Maturity Date,
interest thereafter on the unpaid principal balance, accrued interest and costs
incurred shall be payable at the rate set forth in Section 1 above plus five
percent (5%) per annum. If an Event of Default occurs, Lender may also pursue
any other rights or remedies provided hereunder, in any of the other Loan
Documents or conferred upon Lender at law or in equity. Borrower agrees that
acceptance by Lender of any performance which does not
3
4
strictly comply with the terms of this Note shall not be deemed to be a waiver
of any of Lender's rights hereunder.
6.3 Late Payment. Borrower recognizes that any default in making
any payments when due herein will result in Lender incurring additional expense
in servicing the Loan not contemplated hereunder, the exact amount of which will
be extremely difficult to ascertain. Such expense will include, but not be
limited to, processing and accounting charges, in addition to the loss to Lender
of the use of money due, and in frustration to Lender in meeting its other
commitments. Borrower agrees that if for any reason it fails to make any
payments required herein, including the amount due at the Maturity Date, within
fifteen (15) days after the due date, Lender shall be entitled to damages for
the detriment caused thereby, the extent of which damages are extremely
difficult and impractical to ascertain. Borrower therefor agrees that a sum
equal to five percent (5%) of such delinquent payment is a reasonable estimate
of such damages and Borrower agrees to pay such sum upon demand by Lender.
Acceptance of such late charge by Lender shall in no event constitute a waiver
of Borrower's default with respect to such overdue amount nor prevent the Lender
from exercising any of the other rights and remedies granted hereunder. The
acceptance by Lender of any payment under this Note after the date that such
payment is due shall not constitute a waiver of the right to require prompt
payment when due of any succeeding payments or to declare a default as herein
provided for any failure to so pay. Acceptance by Lender of the payment of a
portion of any installment at any time that such installment is due and payable
in its entirety shall neither cure nor excuse the default caused by failure to
pay the whole of such installment and shall not constitute a waiver of Lender's
right to require full payment when due of all future or succeeding installments.
7. Restrictions on Transfer or Encumbrance; Acceleration. The Deed of
Trust provides in part:
"Neither the Trust Estate nor any part thereof or interest therein shall
be encumbered, sold (including sale by contract or installment sale),
conveyed, or otherwise transferred either by Trustor or by operation of
law, without Beneficiary's prior written consent, nor without
Beneficiary's prior written consent shall there be any change in the
ownership of any stock in a corporate Trustor, in the ownership of any
general partnership interest in any general or limited partnership
Trustor, in the ownership of any membership interest in a limited
liability company or in the ownership of any beneficial interests in any
other Trustor which is not a natural person or persons. Any such action
without Beneficiary's prior written consent shall constitute an event of
default hereunder and shall be deemed to increase the risk to
Beneficiary, and Beneficiary may, at its option, declare all sums
secured hereby immediately due and payable notwithstanding any stated
maturity date therefor or may, in its sole and absolute discretion,
consent to such change in title, occupancy or ownership."
8. Collection Expenses. Borrower shall reimburse Lender on demand for
all reasonable and necessary attorneys' fees and other costs and expenses
incurred in collecting or enforcing this
4
5
Note and protecting or realizing on any collateral, together with interest at
the default rate provided in Section 6.2 above. Without limitation, such fees
and costs shall include attorneys' and other fees, costs and expenses incurred
with or without suit and in any appeal, any proceedings, bankruptcy action,
state receivership, and any post-judgment collection proceedings.
9. Waivers. Borrower waives diligence, presentment and demand for
payment, notice of dishonor, protest and notice of protest.
10. Governing Law. This Note shall be construed, enforced and otherwise
governed by the laws of the internal State of California.
11. Binding Effect. This Note shall bind the successors and assigns of
Borrower and all endorsers hereto and shall inure to the benefit of Lender, and
Lender's successors and assigns. This Note may not be modified except by written
agreement signed by both Lender and Borrower.
12. Notices. Any notice to Borrower under this Note shall be to
Borrower's address in the Loan Agreement and shall be deemed received as set
forth therein.
13. Maximum Interest Rate. In no event shall the interest rate on this
Note be higher than the maximum rate permitted by applicable law, if any. All
agreements between Borrower and Lender herein are expressly limited so that in
no 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 Lender for the use, forbearance or
detention of the money to be advanced hereunder exceed the highest lawful rate
permissible under the applicable usury law. If, from any circumstances
whatsoever, fulfillment of any provision hereof or any other agreement relating
to this Note, shall involve transcending the limit of validity prescribed by law
which a court of competent jurisdiction may deem applicable thereto, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit of such
validity, and if from any circumstance, Lender shall ever receive as interest an
amount in excess of such maximum interest rate, if any, such amount shall be
refunded to Borrower. This provision shall control every other provision of all
agreements between Borrower and Lender.
14. Severability. The invalidity of any one or more covenants, phrases,
clauses, sentences or paragraphs of this Note shall not affect the remaining
portions of this Note or any part thereof, and the same shall be construed as if
such invalid covenants, phrases, clauses, sentences or paragraphs, if any had
not been inserted herein.
15. Time of Essence. Time is of the essence herein.
16. Guaranty. Borrower's payment obligations under this Note are
unconditionally guaranteed by each of Michael J. Reidy, R. Darrell Gary and
Nexus Properties, Inc., a California corporation.
5
6
17. Authority. Each person signing this document on behalf of Borrower
warrants that such person is duly authorized to sign and deliver this Note on
behalf of Borrower and that this Note is binding on Borrower in accordance with
its terms.
BORROWER:
NEXUS EQUITY VI LLC, a California
limited liability company
By: Nexus Properties, Inc., a California
corporation
Its: Manager
By: /s/ Michael J. Reidy
------------------------------------
Michael J. Reidy
Chief Executive Officer
6