Exhibit 10.8
PROMISSORY NOTE
Maximum principal amount of dated as of May 7, 1999
$10,000,000
FOR VALUE RECEIVED, the undersigned SAC Holding Corporation, a Nevada
corporation (the "Maker" or the "undersigned"), promises to pay to the order of
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Oxford Life Insurance Company, an Arizona corporation, ("Payee"), at the
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principal office of the Payee at 2721 North Central Avenue, Phoenix, Arizona
85004 or at such other place or places as the holder hereof may from time to
time designate in writing, the principal sum of up to Ten Million Dollars
($10,000,000), or, if less, the aggregate unpaid principal amount of the Loan
made by Payee to Maker, with Interest on the principal balance outstanding from
time to time, all as hereinafter set forth.
1. Definitions. As used in this Note, each of the following terms shall
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have the following meanings, respectively:
"Accrual Rate": shall mean the annual interest rate of eight and one-
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half percent (8.5%).
"Additional Interest": shall mean and include both Cash Flow
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Contingent Interest and Capital Proceeds Contingent Interest.
"Adjusted Operating Expenses": shall mean Operating Expenses (i) to
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account for all actual or required Operating Expenses as opposed to
escrowed or estimated payments made pursuant to the Senior Loans and (ii)
such other adjustments to Operating Expenses to adjust for seasonal,
extraordinary or non-customary expenses and costs and other abnormalities.
"Affiliate": of any specified Person shall mean (i) any other Person
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controlling or controlled by or under common control with such specified
Person and (ii) any limited partner of such Person if such Person is a
limited partnership, any shareholder of such Person if such Person is a
corporation, or any member of such Person if such Person is a limited
liability company. For the purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such person, directly or indirectly, whether
through the ownership of voting securities, by contract, or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Basic Interest": shall have the meaning given it in Section 2(a) and
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2(b) below.
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"Borrowers": collectively, are the following: Six-A SAC Self-Storage
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Corporation, Six-B SAC Self-Storage Corporation, Six-C SAC Self-Storage
Corporation ,Eight SAC Self-Storage Corporation, Nine SAC Self-Storage
Corporation, Ten SAC Self-Storage Corporation and Eleven SAC Self-Storage
Corporation, each Nevada corporations.
"Capital Proceeds Contingent Interest": shall have the meaning given
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it in Section 2(h)(i) below.
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"Cash Flow Contingent Interest": shall have the meaning given it in
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Section 2(e) below.
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"Catch-Up Payment": shall have the meaning given it in Section 2(d).
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"Debt Papers": shall mean the documents and instruments included
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within the definition of the term "Debt Papers" as provided in Section 14
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below.
"Deferred Interest": shall have the meaning given it in Section 2(a).
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"GAAP": shall mean generally accepted accounting principles as used
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and understood in the United States of America from time to time.
"Gross Income": shall equal Gross Receipts for the applicable twelve
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(12) month period less (i) sale tax and other similar taxes, (ii)
condemnation awards, (iii) casualty or other insurance proceeds, (iv)
proceeds of any borrowing, (v) proceeds of any or sale of any Mortgaged
Properties, (vi) proceeds of any sale of assets outside the ordinary course
of business, (vii) revenues relating to equipment or vehicle rentals and
(vii) any revenue generated other than in connection with the use of the
Mortgaged Properties.
"Gross Receipts": shall mean, for any period all gross receipts,
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revenues and income of any and every kind collected or received by or for
the benefit or account of Maker and the Borrower during such period arising
from the ownership, rental, use, occupancy or operation of the Project or
any portion thereof. Gross Receipts shall include, without limitation, all
receipts from all tenants, licensees and other occupants and users of the
Project or any portion thereof, including, without limitation, rents,
security deposits and the like, interest earned and paid or credited on all
Maker's or the Borrowers' deposit accounts related to the Project, all
proceeds of rent or business interruption insurance, and the proceeds of
all casualty insurance or eminent domain awards to the extent not (i)
applied, or reserved and applied within six (6) months after the creation
of such reserve, to the restoration of the Project in accordance with the
Mortgage, (ii) paid to Holder to reduce the principal amount of the Loan or
(iii) paid to reduce the principal amount of the Senior Loans. Gross
Receipts shall include the net commission payable from U-Haul
International, Inc. for the rental of its equipment (whether or not such
equipment is owned by the Owner of the Mortgaged Property) at any Mortgaged
Property; provided however that such net commissions payable shall not be
included in Gross Receipts until the 15th day of the month following the
month in which such rental occurred, all in accordance with the customary
procedure for the payment of net commission. Gross Receipts shall not
include any capital contributed to Maker, whether in the form of a loan or
equity, or any proceeds from any loan made to Maker. For the purpose of
calculating the permitted Management Fee and the Capital Expenditure
Reserve Deposit, Gross Receipts shall also exclude sales taxes collected by
the Maker in connection with the operation of the Project and held in trust
for payment to the taxing authorities. Further, in calculating the
Management Fee, Gross Receipts shall be further modified as provided for in
the Property Management Agreement. Any receipt included within Gross
Receipts in one period shall not be included within Gross Receipts for any
other period (i.e., no item of revenue or receipts shall be counted twice).
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"Highest Lawful Rate": shall mean the maximum rate of interest which
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the Holder is allowed to contract for, charge, take, reserve, or receive
under applicable law after taking into account, to the extent required by
applicable law, any and all relevant payments or charges hereunder.
"Holder": shall mean at any particular time, the Person which is then
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the holder of this Note.
"Interest": shall mean Additional Interest, Basic Interest and
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Deferred Interest.
"Loan": shall mean the mortgage loan in the amount of up to
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$10,000,000.00 made by Payee to Maker and evidenced by the Note or up to
such amount as may have been advanced by Payee to Maker from time to time.
"Loan Year": shall mean a year commencing on the date of this Note,
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or an anniversary thereof, and ending 365 days (or 366 days in a leap year)
thereafter.
"Management Fee": shall mean the fee paid to the Project Manager
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pursuant to the Property Management Agreement which fee shall in no event
exceed six percent (6.0%) of Gross Receipts.
"Material Adverse Effect": shall mean the likely inability or
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reasonably anticipated inability of Maker to pay the Loan and perform its
other obligations in compliance with the terms of the Debt Papers.
"Maturity Date": shall mean the first to occur of the Stated Maturity
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Date and the earlier date (if any) on which the unpaid principal balance
of, and unpaid Interest on, this Note shall become due and payable on
account of acceleration by the Holder hereof.
"Mortgage": shall mean collectively the Deeds of Trust (and
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Mortgages, and Deeds to Secure Debt), Assignment of Leases and Rents,
Security Agreement and Financing Statement securing the promissory note
representing the Senior Loans, as the same may be amended, modified or
restated from time to time and together with all replacements and
substitutions therefor. The Mortgage is more fully identified in Section
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14 below.
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"Mortgaged Properties": shall mean the properties of the Borrowers
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encumbered by the Senior Loan Documents.
"Net Capital Proceeds": shall have the meaning given it in Section
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2(h)(iv) below.
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"Net Cash Flow": shall mean, for any period, the amount by which the
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Gross Receipts for such period exceed the sum of Interest paid during such
period, Operating Expenses paid for and with respect to such period, and
interest paid under and on account of the Senior Loans during such period;
but Net Cash Flow for any period shall not be less than zero.
"Net Cash Flow Before Debt Service": shall mean, for any period, the
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amount by which the Gross Receipts for such period exceed the Operating
Expenses for and with respect to such period.
"Net Operating Income": shall mean the "Gross Income" generated by
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the Project less Adjusted Operating Expenses, adjusted to reflect a ninety-
five (95%) percent occupancy on a per Mortgaged Property basis for of the
Project.
"Note": shall mean this Promissory Note as it may be amended,
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modified, extended or restated from time to time, together with all
substitutions and replacements therefor.
"Operating Expenses": shall mean, for any period, all cash
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expenditures of Maker or the Borrowers actually paid (and properly payable)
during such period for (i) payments into escrow pursuant to the Debt Papers
for real and personal property taxes; (ii) real and personal property taxes
on the Project (except to the extent paid from escrowed funds); (iii)
premiums for liability, property and other insurance on the Project; (iv)
the Capital Expenditure Reserve Deposit; (v) the Management Fee; (vi) sales
and rental taxes relating to the Project (except to the extent paid from
the Tax and Insurance Escrow Account); and (vii) normal, reasonable and
customary operating expenses of the Project. In no event shall Operating
Expenses include amounts distributed to the partners or shareholder's of
Maker or the Borrowers, payments to Affiliates not permitted under Section
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7(c) below, any payments made on the Loan or any other loan obtained by
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Maker, amounts paid out of any funded reserve expressly approved by Holder,
non-cash expenses such as depreciation, or any cost or expense related to
the restoration of the Project in the event of a casualty or eminent domain
taking paid for from the proceeds of insurance or an eminent domain award
or any reserve funded by insurance proceeds or eminent domain awards.
"Pay Rate": shall mean the annual interest rate of two percent
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(2.0%).
"Pay Rate Interest": shall mean for any period the amount of Basic
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Interest payable for such period less the amount of Deferred Interest which
accrued during such period.
"Person": shall mean any corporation, natural person, firm, joint
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venture, general partnership, limited partnership, limited liability
company, trust, unincorporated organization, government or any department
or agency of any government.
"Present Value": shall have the meaning given such term in Section
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4(c) below.
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"Project": shall mean the real estate, the improvements and the
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personal property encumbered pursuant to the Senior Loan Documents, taken
together collectively.
"Project Manager": shall have the meaning given it in Section 6(j)
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below.
"Property Management Agreement": shall have the meaning given such
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term in Section 6(j) below.
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"Requirements of Law": shall mean, as to any Person, requirements as
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set out in the provisions of such Person's Articles of Incorporation and
Bylaws (in the case of a corporation) partnership agreement and certificate
or statement of partnership (in the case of a partnership) or other
organizational or governing documents, or as set out in any law, treaty,
rule or regulation, or final and binding determination of an arbitrator, or
determination of a court or other federal, state or local governmental
agency, authority or subdivision applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject, or in any private covenant, condition or restriction applicable to
or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Sale": shall mean any direct or indirect sale, assignment, transfer,
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conveyance, lease (except for leases of terms not exceeding 1 year to
tenants in the ordinary course of business complying with standards and in
a form approved by Payee) or disposition of any kind whatsoever of the
Project, or of any portion thereof or interest (whether legal, beneficial
or otherwise) or 25% or more (in the aggregate of all such sales,
transfers, assignments, etc., made at any time or from time to time, taken
together) of all equity interests in Maker.
"Security Documents": shall mean the documents and instruments
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included within the definition of the term "Security Documents" as provided
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in Section 14 below.
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"Senior Loan Documents": shall mean and include, at any time, all
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promissory notes, mortgages and other documents and instruments which
create, evidence or secure all or any part of the Senior Loans.
"Senior Lender" shall mean Wells Fargo Bank, N.A. ("Wells"), GE
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Capital Corporation ("GE") and/or First Union National Bank, N.A. ("First
Union"), as the context may so require, in their respective capacities as
the lenders under the Senior Loans.
"Senior Loans": shall mean, collectively, (i) that certain loan in
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the amount of $32,100,000.00 made by the Wells to the Eleven SAC Self
Storage Corporation; (ii) that certain loan in the amount of $9,626,000.00
made by the GE to the Eight SAC Self Storage Corporation; (iii) that
certain loan in the amount of $8,945,000.00 made by the GE to the Nine SAC
Self Storage Corporation; (iv) that certain loan in the amount of
$10,272,000.00 made by the GE to the Ten SAC Self Storage Corporation; (v)
that certain loan in the amount of $9,675,000.00 made by the First Union to
the Six-A SAC Self Storage Corporation; (vi) that certain loan in the
amount of $9,423,000.00 made by the First Union to the Six-B SAC Self
Storage Corporation; and (vii) that certain loan in the amount of
$10,513,000.00 made by the First Union to the Six-C SAC Self Storage
Corporation.
"Stated Maturity Date": shall mean May 7, 2019, or the date on which
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all of the Property Management Agreements are terminated in accordance with
Section 6 thereof, or on demand by Payee.
"Tax and Insurance Escrow Account": shall mean any impound account
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established pursuant to the Senior Loans, or any of them.
"Triggering Event": shall have the meaning given it in Section
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2(h)(ii) below.
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"Yield Maintenance Premium": shall have the meaning given such term
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in Section 4(b) below.
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2. Interest.
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(a) Basic Interest Rate Prior to Maturity. Prior to the Maturity
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Date, interest ("Basic Interest") shall accrue on the principal balance of
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the Note outstanding from time to time at the Accrual Rate. Such interest
shall be paid as follows: quarterly in arrears, on the
____________________. Maker shall pay to Holder an amount calculated by
applying the Pay Rate to the principal balance outstanding hereunder; and,
the remainder of the Basic Interest accrued hereunder at the Accrual Rate
during such quarter through the last day of such quarter ("Deferred
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Interest") shall be deferred, shall be payable as and at the time provided
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in Section 2(d) below, and commencing on the day payment of Basic Interest
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at the Pay Rate is due for such quarter, interest shall accrue on such
Deferred Interest at the Accrual Rate (and any accrued interest thereon,
shall be considered part of Deferred Interest).
(b) Post-Maturity Basic Interest. From and after the Maturity Date
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interest ("Post Maturity Basic Interest") shall accrue and be payable on
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the outstanding principal balance hereof until paid in full at an annual
rate equal to fifteen percent (15%) and such Post Maturity Basic Interest
shall be payable upon demand.
(c) Computations. All computations of interest and fees payable
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hereunder shall be based upon a year of 360 days for the actual number of
days elapsed.
(d) Deferred Interest. Deferred Interest shall be paid as follows:
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(i) On each quarterly date for the payment of Basic Interest,
Maker shall pay an amount (the "Catch-Up Payment") equal to the lesser
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of (i) the aggregate outstanding Deferred Interest on the last day of
the quarter for which such payment is being made and (ii) ninety
percent (90%) of the result of subtracting from Net Cash Flow Before
Debt Service for that quarter the sum of principal and interest paid
on the Senior Loans by the borrowers thereunder for such period plus
an additional amount equal to twice the Pay Rate Interest for such
period;
(ii) All unpaid Deferred Interest shall be paid on the Maturity
Date; and
(iii) No payment of Deferred Interest may, when added to all
other payments of interest or payments construed as interest, shall
exceed the Highest Lawful Rate.
(e) Cash Flow Contingent Interest. In addition to Basic Interest and
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Deferred Interest, on each date on which Basic Interest is payable
hereunder, Maker shall pay to Holder interest ("Cash Flow Contingent
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Interest") in an amount equal to the amount (if any) by which ninety
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percent (90%) of the result of subtracting from Net Cash Flow Before Debt
Service for that quarter the sum of principal and interest paid on the
Senior Loans for such period plus an additional amount equal to twice the
Pay Rate Interest for such period each calculated as of that date exceeds
the Catch-Up Payment paid on that date by Maker to Holder. Additionally,
at the time of the closing of any impound accounts established pursuant to
the Senior Loan Documents, deposits into which are considered Operating
Expenses, Cash Flow Contingent Interest shall be due to the Holder on the
balances in those accounts except to the extent such balances are paid to
the Senior Lender.
(f) Quarterly Statements; Adjustment of Payments. On the due date for
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each payment of Basic Interest, Maker shall deliver to Holder a certified
statement of operations of the Project for the calendar quarter or other
period with respect to which such Basic Interest is due, showing in
reasonable detail and in a format approved by Holder respective amounts of,
and the method of calculating, the Gross Receipts, Gross Income, Operating
Expenses, Net Cash Flow, Catch-Up Amount and Cash Flow Contingent Interest
for the preceding calendar quarter, as well as (if requested by Holder) all
data necessary for the calculation of any such amounts. Maker shall keep
and maintain at all times full and accurate books of account and records
adequate to correctly reflect all such amounts. Such books and records
shall be available for at least five years after the end of the calendar
quarter to which they relate. Holder shall have the right to inspect, copy
and audit such books of account and records during reasonable business
hours, and upon reasonable notice to Maker, for the purpose of verifying
the accuracy of any payments made on account of Cash Flow Contingent
Interest. The costs of any such audit will be paid by Holder, except that
Maker shall pay all reasonable costs and expenses of any such audit which
discloses that any amount properly payable by maker to Holder hereunder
exceeded by five percent (5%) or more the amount actually paid and
initially reported by maker as being payable with respect thereto.
(g) Prorations of Cash Flow Contingent Interest. Cash Flow Contingent
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Interest shall be equitably prorated on the basis of a 365-day year for any
partial calendar quarter in which the term of the Loan commences or in
which the Note is paid in full. If the payment of Cash Flow Contingent
Interest due on the Maturity Date is made before the delivery to Holder of
the quarterly statement for the then current calendar quarter, then Maker
shall pay to Holder on Maturity Date an estimate of such amount. Maker
shall subsequently deliver to Holder an operating statement as required by
Section 2(f) for the quarter in which the Maturity Date occurred, and an
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appropriate adjustment of the estimated amount previously paid by Maker
shall be made by the parties within ten (10) days after the operating
statement for such final quarter is delivered to Holder.
(h) Capital Proceeds Contingent Interest.
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(i) Capital Proceeds Contingent Interest Defined. Maker shall
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pay to Holder, in addition to Basic Interest, Deferred Interest and Cash
Flow Contingent Interest, at the time or times and in the manner
hereinafter described, an amount equal to ninety percent (90%) of the Net
Capital Proceeds resulting from, or determined at the time of, any of the
Triggering Events described below (collectively, "Capital Proceeds
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Contingent Interest").
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(ii) Events Triggering Payment of Net Capital Proceeds. Capital
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Proceeds Contingent Interest shall be due and payable concurrently with the
occurrence of each and every one of the following events (collectively
"Triggering Events", and individually, a "Triggering Event"):
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(A) Project Sale or Financing. The closing of any Sale of
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the Project (any such event is hereinafter collectively referred to as a
"Sale or Financing");
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(B) Default Occurrence. The occurrence of any Event of
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Default which is not fully cured within the period of time, if any,
expressly provided for cure herein, and the acceleration of the maturity of
the Loan on account thereof (hereinafter collectively referred to as a
"Default Occurrence"); and
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(C) Maturity Occurrence. The occurrence of the Maturity
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Date or the prepayment by Maker (if permitted hereunder) of all principal
and accrued Basic Interest (including, without limitation, Deferred
Interest) and Cash Flow Contingent Interest outstanding on the Loan (the
"Maturity Occurrence").
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(iii) Notice of Triggering Event: Time for Payment of Capital
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Proceeds Contingent Interest. Maker shall notify Holder of the occurrence
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of a Triggering Event, and shall pay Holder the full amount of any
applicable Capital Proceeds Contingent Interest which is payable in
connection therewith, as follows:
(A) In the case of any Sale or Financing or the Maturity
Occurrence, Maker shall give Holder written notice of any such Triggering
Event not less than seventy five (75) days before the date such Triggering
Event is to occur. Any Capital Proceeds Contingent Interest due Holder on
account of any Sale or Financing or the Maturity Occurrence shall be paid
to Holder on the date such Triggering Event occurs.
(B) In the case of a Default Occurrence, no notice of such
a Triggering Event need be given by Maker. In such event, payment of any
and all Capital Proceeds Contingent Interest on account of the Default
Occurrence shall be immediately due and payable upon acceleration of the
maturity of the Loan.
(iv) Determination of Net Capital Proceeds. Prior to the
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occurrence of a Triggering Event (or, in the event of a Default Occurrence,
within a reasonable time thereafter), the "Net Capital Proceeds" resulting
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from such Triggering Event shall be determined as follows:
(A) Net Capital Proceeds From Sale or Financing. Except as
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provided in Section 2(h)(iv)(B) below, in the event of a Sale or Financing,
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"Net Capital Proceeds" shall be the amount which is equal to: (I) either
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(x) the Gross Capital Proceeds (as hereinafter defined) realized from the
Project, or (y) the fair market value of the Project determined pursuant to
Section 2(h)(v) below, if Holder in its discretion requires such a
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determination, minus (II) the sum of: (aa) reasonable brokerage commissions
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(excluding any payments to any Affiliate of Maker to the extent such
payments exceed those which would have been due as commissions to a non-
Affiliate broker rendering identical services), title insurance premiums,
documentary transfer taxes, escrow fees and recording charges, appraisal
fees, reasonable attorneys' fees and costs, and sales taxes (if any), in
each case actually paid or payable by Maker in connection with the Sale or
Financing, plus (bb) all payments of principal and Deferred Interest paid
to Holder an account of this Note from the proceeds of such Sale or
Financing, plus (cc) an amount equal to all payments of principal and
interest on the Senior Loans made from the proceeds of such Sale or
Financing, plus (dd) any amount paid as Yield Maintenance Premium as a
result of such Sale or Financing. For purposes of this Section 2(h),
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"Gross Capital Proceeds" shall mean the gross proceeds of whatever form or
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nature payable directly or indirectly to or for the benefit or account of
Maker in connection with such Sale or Financing, including, without
limitation: cash; the outstanding balance of any financing which will
remain as a lien or encumbrance against the Project or any portion thereof
following such Sale or Financing (but only in the case of a Sale, and not
in the case of an encumbrance); and the cash equivalent of the fair market
value of any non-cash consideration, including the present value of any
promissory note received as part of the proceeds of such Sale or Financing
(valued at a market rate of interest, as determined by an independent
investment banker designated by Holder).
(B) Net Capital Proceeds In Connection With a Default or
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Maturity Occurrence. In the event of a Default Occurrence or the Maturity
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Occurrence when no Sale or Financing has occurred, the "Net Capital
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Proceeds" shall equal: (I) the fair market value of the Project determined
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as of the date of such Triggering Event in accordance with Section 2(h)(v)
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below, minus (II) the sum of (aa) the outstanding principal balance plus
Deferred Interest on the Note plus (bb) the outstanding principal balance
of, and accrued but unpaid interest on, the Senior Loans.
(v) Determination of Fair Market Value. The fair market value
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of the Project shall be determined for purposes of this Note as follows:
(A) Partial Sale. In the event of a Sale of a portion of
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the Project, Holder shall select an experienced and reputable appraiser to
prepare a written appraisal report of the fair market value of the Project
in accordance with clause (C) below, and the appraised fair market value
submitted to Holder by such appraiser shall be conclusive for purposes of
this Note.
(B) Other Occurrences. In all other circumstances the fair
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market value of the Project shall be deemed to equal the result of dividing
the Net Cash Flow Before Debt Service for the immediately preceding fiscal
year by ten percent (10%). However, if the Net Cash Flow Before Debt
Service for the immediately preceding fiscal year has been lowered because
of unusually high Operating Expenses during such fiscal year the fair
market value of the Project may, at the option of the Maker be determined
by dividing by ten percent (10%) the mean average of the Net Cash Flow
Before Debt Service of the Project for the 3 immediately preceding fiscal
years of the Project.
(C) Appraisal Standards and Assumptions. In making any
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determination by appraisal of fair market value, the appraiser(s) shall
assume that the improvements then located on the Project constitute the
highest and best use of the property. If the Triggering Event is a Sale or
Financing, the appraiser(s) shall take the sales price into account,
although such sales price shall not be determinative of fair market value.
Each appraiser selected hereunder shall be an independent MAI-designated
appraiser with not less than ten years' experience in commercial real
estate appraisal in the general geographical area where the Project is
located.
(vi) Effect on Holder's Approval Rights. Nothing contained in
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this Section 2(h) shall be deemed or construed to waive, restrict, impair,
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or in any manner affect Holder's rights hereunder or under any provisions
of the Debt Papers to consent (or withhold its consent) to: any prepayment
of the Loan in whole or in part; sales or other transfers of all or any
portion of the Project or any interest therein; sales or other transfers of
any ownership interests in Maker; any refinancing of all or any portion of
the Loan; any junior financing; or, any other matters which require
Holder's consent.
(vii) Statement, Books and Records. With each payment of
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Capital Proceeds Contingent Interest, Maker shall furnish to Holder a
statement setting forth Maker's proposed calculation of Net Capital
Proceeds and Capital Proceeds Contingent Interest and shall provide a
detailed breakdown of all items necessary for such calculation. For a
period of five years after each payment of Capital Proceeds Contingent
Interest, Maker shall keep and maintain full and accurate books and records
adequate to correctly reflect each such item. Said books and records shall
be available for Holder's inspection, copying and audit during reasonable
business hours following reasonable notice for the purpose of verifying the
accuracy of the payments made on account of Capital Proceeds Contingent
Interest. The costs of any such audit will be paid by Holder, except that
Maker shall pay all reasonable costs and expenses of any such audit which
discloses that any amount properly payable by Maker to Holder hereunder
exceeded by five percent (5%) or more the amount actually paid and
initially reported by maker as being payable with respect thereto.
(viii) Negative Capital Proceeds Contingent Interest.
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Notwithstanding any other provision of this Agreement, Holder shall not be
responsible or liable in any respect to Maker or any other Person for any
reduction in the fair market value of the Project or for any contingency,
condition or occurrence that might result in a negative number for Capital
Proceeds Contingent Interest. If at any time it is calculated, Capital
Proceeds Contingent Interest shall be a negative amount, no Capital
Proceeds Contingent Interest shall at that time be payable to Holder, but
Holder shall in no way be liable for any such negative amount and there
shall be no deduction or offset for such negative amount at any time when
Capital Proceeds Contingent Interest shall be subsequently calculated.
(ix) No payment of Capital Proceeds Contingent Interest may, when
added to all other payments of interest or payments construed as interest,
shall exceed the Highest Lawful Rate.
3. Usury Savings Clause. The provisions of this Section 3 shall govern
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and control over any irreconcilably inconsistent provision contained in this
Note or in any other document evidencing or securing the indebtedness evidenced
hereby. The Holder hereof shall never be entitled to receive, collect, or apply
as interest hereon (for purposes of this Section 3, the word "interest" shall be
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deemed to include Basic Interest, Additional Interest and any other sums treated
as interest under applicable law governing matters of usury and unlawful
interest), any amount in excess of the Highest Lawful Rate (hereinafter defined)
and, in the event the Holder ever receives, collects, or applies as interest any
such excess, such amount which would be excessive interest shall be deemed a
partial prepayment of principal and shall be treated hereunder as such; and, if
the principal of this Note is paid in full, any remaining excess shall forthwith
be paid to Maker. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Highest Lawful Rate, Maker and the
Holder shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee, or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) spread the total amount of interest throughout the entire contemplated
term of this Note; provided, that if this Note is paid and performed in full
prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the Highest Lawful
Rate, the Holder shall refund to Maker the amount of such excess or credit the
amount of such excess against the principal of this Note, and, in such event,
the Holder shall not be subject to any penalties provided by any laws for
contracting for, charging, or receiving interest in excess of the Highest Lawful
Rate.
4. Payments.
--------
(a) Interest and Principal. Maker promises to pay to the Holder
----------------------
hereof Basic Interest, Deferred Interest and Additional Interest as, in the
respective amounts, and at the respective times provided in Section 2
---------
hereinabove. Maker also agrees that, on the anniversary date of this
note, Maker will pay to the Holder one-twentieth of the principal of this
Note ($_____________), together with all Basic Interest (and on the
twentieth anniversary, including without limitation, Deferred Interest and
Additional Interest accrued hereunder and not theretofore paid). Each
payment of principal of, Basic Interest (including without limitation,
Deferred Interest), and Additional Interest on, or any other amounts of any
kind with respect to, this Note shall be made by the Maker to the Holder
hereof at its office in Phoenix, Arizona (or at any other place which the
Holder may hereafter designate for such purpose in a notice duly given to
the Maker hereunder), not later than noon, Eastern Standard Time, on the
date due thereof; and funds received after that hour shall be deemed to
have been received by the Holder on the next following business day.
Whenever any payment to be made under this Note shall be stated to be due
on a date which is not a business day, the due date thereof shall be
extended to the next succeeding business day, and interest shall be payable
at the applicable rate during such extension.
(b) Late Payment Charges. If any amount of Interest, principal or
--------------------
any other charge or amount which becomes due and payable under this Note is
not paid and received by the Holder within five business days after the
date it first becomes due and payable, Maker shall pay to the Holder hereof
a late payment charge in an amount equal to five percent (5%) of the full
amount of such late payment, whether such late payment is received prior to
or after the expiration of the ten-day cure period set forth in Section
8(a). Maker recognizes that in the event any payment secured hereby (other
than the principal payment due upon maturity of the Note, whether by
acceleration or otherwise) is not made when due, Holder will incur extra
expenses in handling the delinquent payment, the exact amount of which is
impossible to ascertain, but that a charge of five percent (5%) of the
amount of the delinquent payment would be a reasonable estimate of the
expenses so incurred. Therefore, if any such payment is not received when
due and payable, Maker shall without prejudicing or affecting any other
rights or remedies of the trustee under those certain Junior Deeds of Trust
(or Junior Mortgages, or Junior Deeds to Secure Debt), Assignment of Leases
and Rents, Security Agreement, Financing Statement and Fixture Filing of
even date herewith or Holder pay to Holder to cover expenses incurred in
handling the delinquent payment, an amount calculated at five percent (5%)
of the amount of the delinquent payment.
(c) No Prepayment. Maker shall have the right to prepay this Note at
-------------
any time, but only subject to the requirements and conditions set forth
below. If under any circumstances whatsoever (other than pursuant to
Section 3 above) this Note is paid in whole or in part, whether
voluntarily, following acceleration after the occurrence of an Event of
Default, with the consent of Holder, by Holder's application of any
condemnation or insurance proceeds to amounts due under the Note, by
operation of law or otherwise, and whether or not such payment prior to the
Stated Maturity Date results from the Holder's exercise of its rights to
accelerate the indebtedness evidenced hereby, then Maker shall pay to the
Holder the Yield Maintenance Premium (defined hereinbelow) in addition to
paying the entire unpaid principal balance of this Note and all Interest
which has accrued but is unpaid except with the written consent of the
Holder.
A Yield Maintenance Premium in an amount equal to the grater of (A)
one percent (1.0%) of the principal amount being prepaid, and (B) the
positive excess of (1) the present value ("PV") of all future installments
of principal and interest due pursuant to Section 4(a) of this Note absent
------------
any such prepayment including the principal amount due at the Stated
Maturity Date (collectively, "All Future Payments"), discounted at an
interest rate per annum equal to the sum of (a) the Treasury Constant
Maturity Yield Index published during the second full week preceding the
date on which such Yield Maintenance Premium is payable for instruments
having a maturity coterminous with the remaining term of this Note, and (b)
One Hundred Forty (140) basis points, over (2) the then outstanding
principal balance hereof immediately before such prepayment [(PV of All
Future Payments) (Principal balance at the time of prepayment) = Yield
Maintenance Premium]. "Treasury Constant Maturity Yield Index" shall mean
the average yield for "This Week" as reported by the Federal Reserve Board
in Federal Reserve Statistical Release H.15 (519). If there is no Treasury
Constant Maturity Yield Index for instruments having a maturity coterminous
with the remaining term of this Note, then the index shall be equal to the
weighted average yield to maturity of the Treasury Constant Maturity Yield
Indices with maturities next longer and shorter than such remaining average
life to the maturity, calculated by averaging (and rounding upward to the
nearest 1/100 of 1% per annum, if the average is not such a multiple) the
yields of the relevant Treasury Constant Maturity Yield Indices (rounded,
if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or
above rounded upward). In the event that any Yield Maintenance Premium is
due hereunder, Holder shall deliver to Maker a statement setting forth the
amount and determination of the Yield Maintenance Premium and, provided
that Holder shall have in good faith applied the formula described above,
Maker shall not have the right to challenge the calculation or the method
of calculation set forth in any such statement in the absence of manifest
error, which calculation may be made by Holder on any day during the thirty
(30) day period preceding the date of such prepayment. Holder shall not be
obligated or required to have actually reinvested the prepaid principal
balance at the Treasury Constant Maturity Yield Index or otherwise as a
condition to receiving the Yield Maintenance Premium. No Yield Maintenance
Premium or premium shall be due or payable in connection with any
prepayment of the indebtedness evidenced by this Note made on or after any
date after June 1, 2005. In addition to the aforesaid Yield Maintenance
Premium if, upon any such prepayment (whether prior to or after any date
that is after June 1, 2005, the aforesaid prior written notice has not been
received by Holder, the Yield Maintenance Premium shall be increased by an
amount equal to the lesser of (i) thirty (30) days' unearned interest
computed in the outstanding principal balance of this Note, so prepaid and
(ii) unearned interest computed on the outstanding principal balance of
this Note so prepaid for the period from, and including, the date of
prepayment through the otherwise Stated Maturity Date of this Note.
Without limiting the scope of the foregoing provisions, the provisions
of this paragraph shall constitute, within the meaning of any applicable
state statute, both a waiver of any right Maker may have to prepay the
Note, in whole or in part, without premium or charge, upon acceleration of
the maturity of the Note, or otherwise, and an agreement by Maker to pay
the prepayment charge described in this Note, whether such prepayment is
voluntary or upon or following any acceleration of this Note, or otherwise,
and for such purpose Maker has separately initialed this provision in the
space provided below, and Maker hereby declares that Holder's agreement to
make the Loan to Maker at the interest rate and for the term set forth in
the Note constitutes adequate consideration, of individual weight, for this
waiver and agreement by Maker.
Notwithstanding the foregoing, or anything else in this Note to the
contrary, it is agreed that in the event this Note becomes due and payable
as a result of the termination of all of the Property Management
Agreements, Maker shall not be subject to the Yield Maintenance Premiums or
other prepayment premiums contemplated herein and Maker shall only be
required to repay the outstanding principal balance of this Note and
accrued but unpaid Basic Interest and Deferred Interest through the date
of such prepayment, it being agreed that in such event, Maker shall not be
required to pay any Capital Proceeds Contingent Interest or Cash Flow
Contingent Interest.
Maker's Initials:_____
5. Representations and Warranties of Maker. Maker represents and warrants
---------------------------------------
to Payee, as of the date hereof, that:
(a) Due Authorization. Maker is a corporation duly organized under
-----------------
the laws of the state of its organization, with the authority to own the
Project and enter into the Debt Papers and consummate the transactions
contemplated thereby;
(b) No Violation. Maker's execution, delivery and performance of its
------------
obligations under the Debt Papers do not and will not violate the articles
of incorporation or by-laws of Maker and will not violate, conflict with or
constitute a default under any agreement to which Maker is a party or by
which the Project is bound or encumbered, or violate any Requirements of
Law to which Maker or the Project is subject;
(c) Consents. No consents, approvals, filings, or notices of, with
--------
or to any Person are required on the part of Maker in connection with
Maker's execution, delivery and performance of its obligations under the
Debt Papers that have not been duly obtained, made or given, as the case
may be;
(d) Enforceability. The Debt Papers are valid, binding and
--------------
enforceable in accordance with their terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally.
(e) Compliance with Laws. Each Mortgaged Property is in compliance
--------------------
in all material respects with all applicable Requirements of Law;
(f) Zoning and Other Laws. The Project and the use thereof as a
---------------------
self-storage facility, separate and apart from any other properties,
constitutes a legal and conforming use under applicable zoning regulations
and each such Project is in compliance in all material respects with all
applicable Requirements of Law;
(g) Litigation. No litigation, investigation or proceeding or notice
----------
thereof before any arbitrator or governmental authority, agency or
subdivision is pending or, to Maker's best knowledge, threatened, against
Maker or the Project;
(h) Utilities; Licenses. All utilities required by Requirements of
-------------------
Law or by the normal and intended use of the Project are installed to the
property line and connected by valid permits and the Maker possesses, or
will possess as and when necessary, all patents, patent rights or licenses,
trademarks, trade names, trade name right, service marks, copyrights,
licenses, permits and consents (or rights thereto) which are required to
conduct its business as it is now conducted or as it is presently proposed
to be conducted, or which are required by any governmental entity or
agency;
(i) Easements. Maker has obtained and has encumbered in favor of
---------
Holder pursuant to the Mortgage all easements, appurtenances and rights of
way necessary for access to and the normal uses of the Project; and
(i) Place of Business. Maker's principal place of business is
-----------------
located at 715 South Country Club Drive, Mesa, AZ 85210, and that address
is its only place of business or its chief executive office.
6. Affirmative Covenants. Maker hereby covenants and agrees that, so long
---------------------
as any indebtedness under the Note remains unpaid, Maker shall:
(a) Use of Proceeds. Use the proceeds of the Loan to repay certain
---------------
indebtedness presently outstanding against the Project and held by Payee.
(b) Financial Statements. Deliver or cause to be delivered to
--------------------
Holder:
(i) As soon as available and in any event within 90
days after the end of each calendar year, annual financial reports on
the Project showing all income and expenses certified to be accurate
and complete by an officer of the Maker; and
(ii) As soon as available and in any event within 45
days after the end of each of the first three calendar quarters of
each year, (1) a detailed comparative earnings statement for such
quarter and for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, and (2) financial
reports on the Project showing all income and expenses, certified to
be accurate and complete by an officer of the managing general partner
of Maker (or, if Maker is a corporation, of Maker); and
(iii) Promptly, such additional financial and other
information (including, without limitation, information regarding the
Project) as Holder may from time to time reasonably request.
(c) Inspection of Property; Books and Records; Discussions. Keep
------------------------------------------------------
proper books of record and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and,
upon reasonable notice, permit representatives of Holder to examine and
make abstracts from any of its books and records at any reasonable time and
as often as may reasonably be desired by Holder and to discuss the
business, operations, properties and financial and other conditions of
Maker with officers and employees of Maker and with its independent
certified public accountants. In addition, on the last day of each
calendar month on which an Interest payment is due, Maker shall furnish to
Holder a certified statement of operations of the Project for the calendar
month in which such Interest payment is due, showing in reasonable detail
and in a format approved by Holder the Gross Receipts, Operating Expenses,
and Net Cash Flow, as well as (if required by Holder) all data necessary
for the calculation of any such amounts. Maker shall keep and maintain at
all times full and accurate books of account and records adequate to
correctly reflect all such amounts. Such books and records shall be
available for at least five (5) years after the end of the relevant
calendar month. Holder shall have the right to inspect, copy and audit
such books of account and records at Holder's expense, during reasonable
business hours, and upon reasonable notice to Maker, for the purpose of
verifying the accuracy of any principal payments made. The costs of any
such audit will be paid by Holder, except that Maker shall pay all
reasonable costs and expenses of any such audit which discloses that any
amount properly payable by Maker to Holder hereunder exceeded by five
percent (5%) or more the amount actually paid and initially reported by
Maker as being payable with respect thereto.
(d) Notices. Give prompt written notice to Holder of (a) any claims,
-------
proceedings or disputes (whether or not purportedly on behalf of Maker)
against, or to Maker's knowledge, threatened or affecting Maker or the
Project which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect (without in any way limiting the foregoing,
claims, proceedings, or disputes involving in the aggregate monetary
amounts in excess of $15,000 not fully covered by insurance shall be deemed
to be material, exclusive of deductibles in an amount not to exceed
$1,000), or (b) any proposal by any public authority to acquire the Project
or any portion thereof.
(e) Expenses. Pay all reasonable out-of-pocket expenses (including
--------
fees and disbursements of counsel, including special local counsel) of
Holder, incident to any amendments, waivers and renewals relating to the
Debt Papers and the protection of the rights of Holder under the Debt
Papers whether by judicial proceedings or otherwise, including, without
limitation, in connection with bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar proceedings involving Maker or
a "workout" of the Loan. The obligations of Maker under this Section 6(e)
------------
shall survive repayment of the Loan.
(f) Debt Papers. Comply with and observe all terms and conditions of
-----------
the Debt Papers.
(g) INDEMNIFICATION. INDEMNIFY AND HOLD HARMLESS HOLDER AND ITS
---------------
DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS AND AGENTS (THE "INDEMNIFIED
-----------
PARTIES") FROM AND AGAINST ALL DAMAGES AND LIABILITIES (COLLECTIVELY AND
-------
SEVERALLY, "LOSSES") ASSESSED AGAINST ANY OF THEM RESULTING FROM THE CLAIMS
------
OF ANY PARTY RELATING TO OR ARISING OUT OF THE DEBT PAPERS OR THE
TRANSACTIONS CONTEMPLATED THEREBY, EXCEPT FOR LOSSES CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY, AND REIMBURSE
EACH INDEMNIFIED PARTY FOR ANY EXPENSES (INCLUDING THE FEES AND
DISBURSEMENTS OF LEGAL COUNSEL) REASONABLY INCURRED IN CONNECTION WITH THE
INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL OR THREATENED
CLAIM, ACTION OR PROCEEDING ARISING THEREFROM (INCLUDING ANY SUCH COSTS OF
RESPONDING TO DISCOVERY REQUEST OR SUBPOENAS), REGARDLESS OF WHETHER HOLDER
OR SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO. WITHOUT DEROGATING
THE PROVISIONS OF SECTION 20 BELOW, IT IS ACKNOWLEDGED AND AGREED BY MAKER
----------------
THAT THE INDEMNIFICATION RIGHTS OF THE INDEMNIFIED PARTIES HEREUNDER ARE IN
ADDITION TO AND CUMULATIVE WITH ALL OTHER RIGHTS OF THE INDEMNIFIED
PARTIES. WITH REFERENCE TO THE PROVISIONS SET FORTH ABOVE IN THIS SECTION
-------
6(g) FOR PAYMENT BY MAKER OF ATTORNEYS' FEES INCURRED BY THE INDEMNIFIED
----
PARTIES IN ANY ACTION OR CLAIM BROUGHT BY A THIRD PARTY, MAKER SHALL, IF IT
ADMITS LIABILITY HEREUNDER TO ANY INDEMNIFIED PARTY, DILIGENTLY DEFEND SUCH
INDEMNIFIED PARTY AND DILIGENTLY CONDUCT THE DEFENSE. IF HOLDER OR ANY
OTHER SUCH INDEMNIFIED PARTY DESIRES TO ENGAGE SEPARATE COUNSEL, IT MAY DO
SO AT ITS OWN EXPENSE; PROVIDED, HOWEVER, THAT SUCH LIMITATION ON THE
OBLIGATION OF MAKER TO PAY THE FEES OF SEPARATE COUNSEL FOR SUCH
INDEMNIFIED PARTY SHALL NOT APPLY IF SUCH INDEMNIFIED PARTY HAS RETAINED
SAID SEPARATE COUNSEL BECAUSE OF A REASONABLE BELIEF THAT MAKER IS NOT
DILIGENTLY DEFENDING IT AND/OR NOT DILIGENTLY CONDUCTING THE DEFENSE AND SO
NOTIFIES MAKER. THE OBLIGATIONS OF MAKER UNDER THIS SECTION 6(g) SHALL
------------
SURVIVE REPAYMENT IN FULL OF THE INDEBTEDNESS EVIDENCED HEREBY. EXCEPT AS
OTHERWISE PROVIDED, IT IS THE INTENT OF THIS SECTION 6(g) THAT THE MAKER
------------
SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED PARTIES FROM LOSSES
OCCASIONED BY THE ACTS OR OMISSIONS, INCLUDING, WITHOUT LIMITATION,
NEGLIGENCE, OF THE INDEMNIFIED PARTIES.
MAKER'S INITIALS_____
(g) Co-operation. Execute and deliver to Holder any and all
------------
instruments, documents and agreements, and do or cause to be done from time
to time any and all other acts, reasonably deemed necessary or desirable by
Holder to effectuate the provisions and purposes of the Debt Papers.
(h) Requirements of Law. Comply at all times with all Requirements
-------------------
of Law.
(i) Management Agreement. Cause or permit the Project to be
--------------------
initially managed by a subsidiary of U-Haul International, Inc. and to be
at all times managed by a nationally recognized self-storage property
management company (the "Project Manager") approved by the Holder, which
---------------
Project Manager shall be employed pursuant to an agreement (the "Property
--------
Management Agreement") approved by the Holder. In no event shall the fees
--------------------
paid (or required to be paid) to the Project Manager exceed six percent
(6%) of Gross Receipts for any time period. The Maker agrees, upon request
of the Holder, to exercise its right to terminate any Project Manager upon
the occurrence and continuance of (i) an Event of Default, (ii) a Sale of
U-Haul International, Inc. or such Project Manager, (iii) a breach by such
Project Manager of its respective Property Management Agreement, or (iv)
the Net Cash Flow prior to subtracting Interest shall fall twenty percent
(20%) or more for one complete Loan Year.
7. Negative Covenants. Maker hereby agrees that, as long as any
------------------
indebtedness under the Note remains unpaid, Maker shall not, directly or
indirectly:
(a) Indebtedness. Create, incur or assume any Indebtedness except
------------
for: (i) the Loan; (ii) Maker's contingent obligations under the Senior
Loans; (iii) for non-delinquent taxes; and (iv) unsecured debt incurred in
the ordinary course of business.
(b) Consolidation and Merger. Liquidate or dissolve or enter into
------------------------
any consolidation, merger, partnership, joint venture, syndicate or other
combination (except for a merger or consolidation for the purpose of, and
having the effect of changing Maker's jurisdiction of organization).
(c) Transactions with Affiliates. Purchase, acquire or lease any
----------------------------
property from, or sell, transfer or lease any property to, or lend or
advance any money to, or borrow any money from, or guarantee any obligation
of, or acquire any stock, obligations or securities of, or enter into any
merger or consolidation agreement, or any management or similar agreement
with, any Affiliate, or enter into any other transaction or arrangement or
make any payment to (including, without limitation, on account of any
management fees, service fees, office charges, consulting fees, technical
services charges or tax sharing charges) or otherwise deal with, in the
ordinary course of business or otherwise, any Affiliate on terms which are
unreasonably burdensome or unfair, except (i) transactions relating to the
sharing of overhead expenses, including, without limitation, managerial,
payroll and accounting and legal expenses, for which charges assessed
against Maker are not greater than would be incurred by Maker in similar
transactions with non-Affiliates, or (ii) fair and reasonable transactions
between Maker and U-Haul International, Inc. and its related companies.
(d) Sale of Interests in the Project or in the Maker. Without
------------------------------------------------
obtaining the prior written consent of Holder (which Holder may withhold or
condition in its sole and absolute discretion), cause, permit or acquiesce
in any Sale or Financing.
(e) Distributions. Notwithstanding anything to the contrary
-------------
contained in this Note or the Debt Papers, Maker shall not make any
distributions to any of its partners, except for distributions of amounts
not in excess of (i) the Catch-Up Amount for any quarter, (ii) any Net Cash
Flow for any quarter remaining after the payment to Holder of all Interest
and the Catch-Up Amount payable for and with respect to such quarter, and
(iii) upon the Sale or Financing any Net Sale or Financing proceeds
remaining after payment to Holder of the amounts to which Holder is
entitled hereunder in connection therewith.
(f) Business. Engage, directly or indirectly, in any business other
--------
than that arising out of the issuance of this Note, entering into the Debt
Papers, taking the actions required to be performed under the Debt Papers
and operating the Mortgaged Properties.
(g) No Bankruptcy Filing. To the extent permitted by law, without
--------------------
the unanimous consent of the Board of Directors of the Maker (for these
purposes such Board of Directors will not include any committee thereof)
voluntarily file any petition for bankruptcy, reorganization, assignment
for the benefit of creditors or similar proceeding.
(h) No Joint Venture. Engage in a joint venture or become a partner
----------------
with any other Person.
8. Event of Default; Remedies. Any one of the following occurrences
--------------------------
shall constitute an Event of Default under this Note:
(a) The failure by the undersigned to make any payment of principal,
Interest or Yield Maintenance Premium upon this Note as and when the same
becomes due and payable in accordance with the provisions hereof, and the
continuation of such failure for a period of ten (10) days after notice
thereof to the Maker;
(b) The failure by the Maker to deposit in any account established
and maintained pursuant to the Collection Account Agreement any amount
required to be deposited in such account within 2 days of when required
pursuant to the terms of the Collection Account Agreement;
(c) Any representation, warranty or certification made by Maker under
any Debt Paper or in any report, certificate or financial statement
delivered to the Holder under or in connection with any Debt Paper is
materially inaccurate or incomplete as of the date made; provided, however,
that such inaccurate or incomplete representation, warranty or
certification is material and cannot be cured without material prejudice to
the Holder within 30 days written notice thereof to the Maker;
(d) The failure by Maker to perform any obligation under, or the
occurrence of any other default with respect to any provision of, this Note
other than as described in any of the other clauses of this Section 8, and
the continuation of such default for a period of 30 days after written
notice thereof to the Maker;
(e) The occurrence of any Default under the Mortgage, under the
Security Agreement and Assignment (Management Agreement), or under any of
the other Debt Papers;
(f) (i) Maker shall file, institute or commence any case, proceeding
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or Maker shall make a general assignment for the benefit of its creditors;
or (ii) there shall be filed, instituted or commenced against Maker any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of any order for relief or any such
adjudication or appointment, or (B) remains undismissed undischarged for a
period of 60 days; or (iii) there shall be commenced against Maker any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, stayed,
satisfied, or bonded to Holder's satisfaction pending appeal, within 60
days from the first entry thereof; or (iv) Maker shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts described in any of the preceding clauses (i) , (ii) or
(iii); or (v) Maker shall not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due, or shall in
writing admit that it is insolvent;
(g) One or more judgments or decrees in an aggregate amount exceeding
$1,000,000.00 shall be entered against Maker and all such judgments or
decrees shall not have been vacated, discharged, stayed, satisfied, or
bonded to Holder's satisfaction pending appeal within 60 days from the
first entry thereof; or
(h) The occurrence of a Event of Default under the Promissory Notes
evidencing the Senior Loans.
Upon the occurrence of any Event of Default hereunder: the entire unpaid
principal balance of, and any unpaid Basic Interest and Additional Interest then
accrued on, this Note together with the Yield Maintenance Premium, if any, and
other charges payable pursuant to the Debt Papers shall, at the option of the
Holder hereof and without demand or notice of any kind to the undersigned or any
other person, immediately become and be due and payable in full (except that
such acceleration shall occur automatically upon the occurrence of any Event of
Default described in the preceding clause (e) of this Section 8, without further
action or decision by Holder) ; and the Holder shall have and may exercise any
and all rights and remedies available at law or in equity and also any and all
rights and remedies provided in the Mortgage and any of the other Security
Documents.
9. Offset. In addition to (and not in limitation of) any rights of offset
------
that the Holder hereof may have under applicable law, upon the occurrence of any
Event of Default hereunder the Holder hereof shall have the right, immediately
and without notice, to appropriate and apply to the payment of this Note any and
all balances, credits, deposits, accounts or moneys of the Maker then or
thereafter with or held by the Holder hereof.
10. Allocation of Balances or of Payments. At any and all times until
-------------------------------------
this Note and all amounts hereunder (including principal, Interest, and other
charges and amounts, if any) are paid in full, all payments (whether of
principal, Interest or other amounts) made by the undersigned or any other
person (including any guarantor) to the Holder hereof may be allocated by the
Holder to principal, Interest or other charges or amounts as the Holder may
determine in its sole, exclusive and unreviewable discretion (and without notice
to or the consent of any person).
11. Captions. Any headings or captions in this Note are inserted for
--------
convenience of reference only, and they shall not be deemed to constitute a part
hereof, nor shall they be used to construe or interpret the provisions of this
Note.
12. Waiver.
------
(a) Maker, for itself and for its successors, transferees and assigns
and all guarantors and endorsers, hereby waives diligence, presentment and
demand for payment, protest, notice of protest and nonpayment, dishonor and
notice of dishonor, notice of the intention to accelerate, notice of
acceleration, and all other demands or notices of any and every kind
whatsoever (except only for any notice of default expressly provided for in
Section 8 of this Note or in the Security Documents) and the undersigned
---------
agrees that this Note and any or all payments coming due hereunder may be
extended from time to time in the sole discretion of the Holder hereof
without in any way affecting or diminishing their liability hereunder.
(b) No extension of the time for the payment of this Note or any
payment becoming due or payable hereunder, which may be made by agreement
with any Person now or hereafter liable for the payment of this Note, shall
operate to release, discharge, modify, change or affect the original
liability under this Note, either in whole or in part, of the Maker if it
is not a party to such agreement.
(c) No delay in the exercise of any right or remedy hereunder shall
be deemed a waiver of such right or remedy, nor shall the exercise of any
right or remedy be deemed an election of remedies or a waiver of any other
right or remedy. Without limiting the generality of the foregoing, the
failure of the Holder hereof promptly after the occurrence of any Event of
Default hereunder to exercise its right to declare the indebtedness
remaining unmatured hereunder to be immediately due and payable shall not
constitute a waiver of such right while such Event of Default continues nor
a waiver of such right in connection with any future Event of Default on
the part of the undersigned.
13. Payment of Costs. The undersigned hereby expressly agrees that upon
----------------
the occurrence of any Event of Default under this Note, the undersigned will pay
to the Holder hereof, on demand, all costs of collection or enforcement of every
kind, including (but not limited to) all attorneys' fees, court costs, and other
costs and expenses of every kind incurred by the Holder hereof, on demand, all
costs of collection or enforcement of every kind, including (but not limited to)
all attorneys' fees, court costs, and other costs and expenses of every kind
incurred by the Holder hereof in connection with the protection or realization
of any or all of the security for this Note, whether or not any lawsuit is ever
filed with respect thereto.
14. The Debt Papers. This Note is unsecured. The Senior Loans are
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secured by, inter alia, certain Deeds of Trust (and Mortgages, and Deeds to
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Secure Debt), Assignment of Leases and Rents, Security Agreement and Financing
Statement, made and granted by subsidiaries of Maker to or for the benefit of
the Senior Holders, respectively, which create liens on real estate in the
Project and which also creates a security interest in personal property located
thereat or utilized in connection therewith, and each and every additional
document or instrument which may at any time be delivered to the Senior Holders
as security under the Senior Loans, as any of the same may at any time or from
time to time be amended, modified or restated, and together with all
substitutions and replacements therefor, are sometimes referred to collectively
herein as the "Security Documents"). Reference should be made to the Mortgage
------------------
and the other Security Documents for a description of the property encumbered
thereby and the nature and extent of the security thereof. This Note, the
Security Documents and all other documents executed in connection with the Note
and the Security Documents are sometimes referred to collectively herein as the
"Debt Papers". This Note, the Mortgage, and the other Debt Papers (if any) are
-----------
hereby incorporated by reference into this Note in their entirety, as though the
complete text of each of them were set out in full here in the body of this
Note. Notwithstanding anything to the contrary set forth herein, this Note is
not indebtedness of, and is not secured, whether directly or indirectly, by any
collateral or property owned or operated by the Borrowers, or any of them.
15. Notices. All notices, demands and other communications hereunder to
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either party shall be made in writing and shall be deemed to have been given
when actually received or, if mailed, on the first to occur of actual receipt or
the third business day after the deposit thereof in the United States mails, by
registered or certified mail, postage prepaid, addressed as follows:
If to the Maker: SAC Holding Corporation
715 South Country Club Drive
Mesa, AZ 85210
If to the Holder: Oxford Life Insurance Company
2721 North Central Avenue
Phoenix, Arizona 85004
Attention: Treasurer
or to either party at such other address as such party may designate as its
address for the receipt of notices hereunder in a written notice duly given to
the other party.
16. Time of the Essence. Time is hereby declared to be of the essence of
-------------------
this Note and of every part hereof.
17. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the internal laws of the State of Arizona.
18. Jurisdiction. In any controversy, dispute or question arising
------------
hereunder or under the other Debt Papers, the Maker consents to the exercise of
jurisdiction over its person and property by any court of competent jurisdiction
situated in the State of Arizona (whether it be a court of the State of Arizona,
or a court of the United States of America situated in the State of Arizona),
and in connection therewith, agrees to submit to, and be bound by, the
jurisdiction of such court upon the Holder's mailing of process by registered or
certified mail, return receipt requested, postage prepaid, within or without the
State of Arizona, to the Maker at its address for receipt of notices under this
Note.
19. HOLDER NOT PARTNER OF MAKER. UNDER NO CIRCUMSTANCES WHATSOEVER SHALL
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THE HOLDER OF THIS NOTE BE DEEMED TO BE A PARTNER OR A CO-VENTURER WITH MAKER OR
WITH ANY OTHER PERSON. MAKER SHALL NOT REPRESENT TO ANY PERSON THAT THE MAKER
AND THE HOLDER HEREOF ARE PARTNERS OR CO-VENTURERS. ANY AND ALL ACTIONS BY THE
HOLDER HEREOF IN EXERCISING ANY RIGHTS, REMEDIES OR PRIVILEGES HEREOF OR IN
ENFORCING THIS NOTE OR THE OTHER DEBT PAPERS WILL BE EXERCISED BY THE HOLDER
SOLELY IN FURTHERANCE OF ITS ROLE AS A SECURED LENDER.
20. Limitation of Personal Liability. Except for fraud or knowing
--------------------------------
misrepresentations, neither Maker nor any partner in Maker shall be liable
personally to pay this Note or the indebtedness evidenced hereby, and the Holder
shall not seek any personal or deficiency judgment on this Note except for fraud
or knowing misrepresentations, and the sole remedy of the Holder hereunder or
under any of the other Debt Papers shall (except for fraud, misappropriation of
funds or knowing misrepresentations) be under the Security Documents for
enforcement thereof or shall otherwise be against the Collateral (defined for
purposes hereof as defined in the Mortgage) and any other property at any time
securing any or all of the Liabilities (defined for purposes hereof as defined
in the Mortgage); provided, however, that the foregoing shall not in any way
diminish or affect (i) any rights the Holder may have (as a secured party or
otherwise) to, against or with respect to the Collateral or any other property
at any time securing any of the liabilities, (ii) any rights of the Holder
against the Maker with respect to any fraud, misappropriation of funds or
knowing misrepresentation, or (iii) any rights of the Holder under or with
respect to any guaranty at any time furnished to the Holder relating to or
concerning any of the Liabilities.
21. JURY TRIAL. THE MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
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JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS NOTE
OR ANY DEBT PAPERS TO WHICH IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS NOTE OR ANY DEBT PAPERS, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
22. Entire Agreement. This Note and the other Security Documents
================
constitute the entire agreement between Maker and Payee. No representations,
warranties, undertakings, or promises whether written or oral, expressed or
implied have been made by the Payee or its agent unless expressly stated in this
Note or the Security Documents.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note,
pursuant to proper authority duly granted, as of the date and year first above
written.
SAC HOLDING CORPORATION
a Nevada corporation
By: /S/ Mark V. Shoen
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Its: President
-----------------------------------