EXHIBIT 10.3
PROMISSORY NOTE

Principal
$5,500,000.00
Loan Date
08-24-2012
Maturity
09-01-2022
Loan No
2066
Call/Coll
0080
Account
Officer
DMD
Initials
References in the boxes above are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing “***” has been omitted due to text length limitations.

Borrower:             YUMA HOSPITALITY PROPERTIES
LIMITED                                                                                                       Lender:  1ST
Bank Yuma
PARTNERSHIP, AN ARIZONA
LIMITED                                                                                                                                
2799 S. 4th Avenue
PARTNERSHIP A.K.A. YUMA
HOSPITALITY                                                                                                                        
Yuma, AZ  85364
PROPERTIES,
LTD                                                                                                                                                                                            
(928) 783-3334
1625 E. NORTHERN AVENUE, STE #105
PHOENIX, AZ  85020
 

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Principal
Amount:  $5,500,000.00                                                                                                                          Date
of Note:  August 24, 2012

PROMISE TO PAY. YUMA HOSPITALITY PROPERTIES LIMITED PARTNERSHIP, AN ARIZONA
LIMITED PARTNERSHIP A.K.A. YUMA HOSPITALITY PROPERTIES, LTD (“Borrower”)
promises to pay to 1st Bank Yuma (“Lender”), or order, in lawful money of the
United States of America, the principal amount of Five Million Five Hundred
Thousand & 00/100 Dollars ($5,500,000.00), together with interest on the unpaid
principal balance from August 24, 2012, until paid in full.

PAYMENT. Borrower will pay this loan in full immediately upon Lender’s demand.
If no demand is made, subject to any payment changes resulting from changes in
the Index, Borrower will pay this loan in 119 regular payments of $32,418.72
each and one irregular last payment estimated at $4,112,497.66. Borrower’s first
payment is due October 1, 2012, and all subsequent payments are due on the same
day of each month after that. Borrower’s final payment will be due on September
1, 2022, and will be for all principal and all accrued interest not yet paid.
Payments include principal and interest. Unless otherwise agreed or required by
applicable law, payments will be applied first to any accrued unpaid interest;
then to principal; then to any unpaid collection costs; and then to any late
charges. Borrower will pay Lender at Lender’s address shown above or at such
other place as Lender may designate in writing.
 
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Wall Street
Journal Prime Rate (the “Index”). The Index is not necessarily the lowest rate
charged by the Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notifying
Borrower. Lender will tell Borrower the current Index rate upon Borrower’s
request .The interest rate change will not occur more often than each Day.
Borrower understands that Lender may make loans based on other rates as well.
The Index currently is 3.250% per annum. Interest on the unpaid principal
balance of this Note will be calculated as described in the “INTEREST
CALCULATION METHOD” paragraph using a rate of 1.000 percentage point over the
Index, adjusted if necessary for any minimum and maximum rate limitations
described below, resulting in an initial rate of 5.000% per annum based on a
year of 360 days. NOTICE: Under no circumstances will the interest rate on this
Note be less than 5.000% per annum or more than the maximum rate allowed by
applicable law. Whenever increases occur in the interest rate, Lender, at its
option, may do one or more of the following: (A) increase Borrower’s payments to
ensure Borrower’s loan will pay off by its original final maturity date, (B)
increase Borrower’s payments to cover accruing interest, (C) increase the number
of the Borrower’s payments, and (D) continue Borrower’s payments at the same
amount and increase Borrower’s final payment.
 
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this Note is computed using this method.
 
EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the
rate specified in this Note plus any additional rate resulting from any other
charges in the nature of interest paid or to be paid in connection with this
Note.
 
PREPAYMENT PENALTY. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Upon prepayment of this Note, Lender is entitled
to the following prepayment penalty: In the event of prepayment, in whole or in
part, a prepayment penalty rate shall be assessed as follows:
1)  
If the prepayment occurs on or before the first anniversary date of this
Promissory Note, the prepayment penalty will be two percent (2%) of the
principal amount prepaid.

2)  
If the prepayment occurs after the first anniversary date, but on or before the
second anniversary date, the prepayment penalty will equal one percent (1%) of
the principal amount prepaid.

Prepayment penalty shall not apply if the prepayment occurs after the second
anniversary date. Except for the foregoing, Borrower may pay all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower’s obligation to continue
to make payments under the payment schedule. Rather, early payments will reduce
the principal balance due and may result in Borrower’s making fewer payments.
Borrower agrees not to send Lender payments marked “paid in full”, “without
recourse”, or similar language. If Borrower sends such a payment, Lender may
accept it without losing any of Lender’s rights under this Note, and Borrower
will remain obligated to pay any further amount owed to Lender. All written
communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes “payment in full” of the
amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: 1st Bank Yuma,
2799 S. 4th Avenue, Yuma, AZ 85364.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased to 18.000% per annum
based on a year of 360 days. However, in no event will the interest rate exceed
the maximum interest rate limitations under applicable law.
 
 
 

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EXHIBIT 10.3
PROMISSORY NOTE

 Loan No: 2066                (Continued)      Page 2

 
 

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DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s property or Borrower’s ability to repay this
Note or perform Borrower’s obligations under this Note or any of the related
documents.

Environmental Default. Failure of any party to comply with or perform when due
any term, obligation, covenant or condition contained in any environmental
agreement executed in connection with any loan.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Borrower or on Borrower’s behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution or termination of Borrower’s existence as a
going business or the death of any partner, the insolvency of Borrower, the
appointment of a receiver for any part of Borrower’s property, any assignment
for the benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan. This includes a garnishment of any of
Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
guaranty of the indebtedness evidenced by this Note.

Events Affecting General Partner of Borrower. Any of the preceding events occurs
with respect to any general partner of Borrower or any general partner dies or
becomes incompetent.

Change in Ownership. The resignation or expulsion of any general partner with an
ownership interest of twenty-five percent (25%) or more in Borrower.

Adverse Change. A material adverse change occurs in Borrower’s financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and
if Borrower has not been given a notice of a breach of the same provision of
this Note within the preceding twelve (12) months, it may be cured if Borrower,
after Lender sends written notice to Borrower demanding cure of such default:
(1) cures the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems in
Lender’s sole discretion to be sufficient to cure default and thereafter
continues and completes all reasonable and necessary steps sufficent to produce
compliance as soon as reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender’s attorneys' fees
and Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. However,
Borrower will only pay attorneys' fees of an attorney not Lender’s salaried
employee, to whom the matter is referred after Borrower’s default. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other. (Initial Here   /s/JW    )

GOVERNING LAW. This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of
Arizona without regard to its conflicts of law provisions. This Note has been
accepted by Lender in the State of Arizona.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to
submit to the jurisdiction of the courts of Yuma County, State of Arizona.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower’s loan and the check or preauthorized charge with
which the Borrower pays is later dishonored.
 
 
 

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EXHIBIT 10.3

PROMISSORY NOTE

 Loan No: 2066                (Continued)      Page 3

 
 

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RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether checking,
savings, or some other account). This  includes  all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender’s option, to
administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Note is secured by the following
collateral described in the security instruments listed herein:

(A)  
a  Deed of Trust dated August 24, 2012, to a trustee in favor of Lender on real
property located in YUMA County, State of Arizona.

(B)  
inventory and equipment described in a Commercial Security Agreement dated
August 24, 2012.

ARBITRATION. Borrower and Lender agree that all disputes, claims and
controversies between them whether individual, joint, or class in nature,
arising from this Note or otherwise, including without limitation contract and
tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association in effect at the time the claim is filed, upon request
of either party. No act to take or dispose of any collateral securing this Note
shall constitute a waiver of this arbitration agreement or be prohibited by this
arbitration agreement. This includes, without limitation, obtaining injunctive
relief or a temporary restraining order; invoking a power of sale under any deed
of trust or mortgage; obtaining a writ of attachment or imposition of a
receiver; or exercising any rights relating to personal property, including
taking or disposing of such property with or without judicial process pursuant
to Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any collateral securing this Note, including
any claim to rescind, reform, or otherwise modify any agreement relating to the
collateral securing this Note, shall also be arbitrated, provided however that
no arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. Nothing in this Note shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. 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, and the commencement of an arbitration
proceeding shall be deemed the commencement of an action for these purposes. The
Federal Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Borrower may notify Lender if Lender reports any inaccurate information about
Borrower’s account(s) to a consumer reporting agency. Borrower’s written notice
describing the specific inaccuracy(ies) should be sent to Lender at the
following address: 1st Bank Yuma, 2799 S. 4th Avenue, Yuma, AZ 85364.

GENERAL PROVISIONS. This note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender’s right to
declare payment of this Note on its demand.  If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this Note,
to the extent allowed by law, waive presentment, demand for payment, and notice
of dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party, partner, or guarantor or
collateral; or impair, fail to realize upon or perfect Lender’s security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made. The obligations under this
Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

YUMA HOSPITALITY PROPERTIES LIMITED PARTNERSHIP, AN ARIZONA LIMITED PARTNERSHIP
A.K.A. YUMA HOSPITALITY PROPERTIES, LTD

INNSUITES HOSPITALITY TRUST, General Partner of YUMA HOSPITALITY PROPERTIES
LIMITED PARTNERSHIP, AN ARIZONA LIMITED PARTNERSHIP A.K.A. YUMA HOSPITALITY
PROPERTIES, LTD

By: /s/ James F.
Wirth                                                           
      JAMES F. WIRTH, Trust’s Chairman and Chief Executive Officer of
     INNSUITES HOSPITALITY TRUST