$40,000,000.00 February 6, 2003
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, GREEN RIVER AT PALOMINO PARK LLC, a
Colorado limited liability company, whose address is c/o Wellsford Park
Highlands Corp., 6700 Palomino Parkway, Highlands Ranch, Colorado 80130, Attn:
David M. Strong (the "Borrower"), promises to pay $40,000,000.00, together with
interest according to the terms of this secured promissory note (this "Note"),
to the order of AUSA LIFE INSURANCE COMPANY, INC., a New York life insurance
company (together with any future holder, the "Lender"), whose address is c/o
AEGON USA Realty Advisors, Inc., 4333 Edgewood Road, N.E., Cedar Rapids, Iowa
52499-5443.
1. CONTRACT INTEREST RATE
The principal balance of this Note shall bear interest at the rate of the lesser
of (i) Five and Forty-Five One Hundredths percent (5.45%) per annum (the "Note
Rate") and (ii) the Maximum Lawful Rate (as defined herein). Interest shall be
calculated in arrears based on a 360-day year and shall accrue based on the
actual number of days elapsed for any whole or partial month in which interest
is being calculated.
2. SCHEDULED PAYMENTS
2.1 PREPAYMENT OF INTEREST FOR THE MONTH OF FUNDING
Unless the funding of the loan evidenced by this Note (together with all
additional charges, advances and accruals, the "Loan") occurs on the first day
of a calendar month, the Borrower shall prepay, on the date of the funding,
interest due from the date of the funding through and including the last day of
the calendar month in which the funding occurs.
2.2 MONTHLY PRINCIPAL AND INTEREST PAYMENTS
On the first day of April, 2003 and on the first day of each subsequent calendar
month through February, 2013, the Borrower shall pay an installment in the
amount of $225,862.36. Monthly installments of principal and interest shall be
made when due, regardless of the prior acceptance by the Lender of unscheduled
payments.
2.3 FINAL PAYMENT
The Loan shall mature on the first day of March, 2013 (the "Maturity Date"),
when the Borrower shall pay its entire principal balance, together with all
accrued interest and any other amounts owed by the Borrower under this Note or
under any of the other documents entered into now or in the future in connection
with the Loan (the "Loan Documents").
3. BALLOON PAYMENT ACKNOWLEDGMENT
The Borrower acknowledges that the scheduled monthly installments referred to in
Subsection 2.2 will not amortize fully the principal sum of this Note over its
term, resulting in a "balloon" payment at maturity. Any future agreement to
extend this Note or refinance the indebtedness it evidences may be made only by
means of a writing executed by a duly authorized officer of the Lender.
4. APPLICATION OF MONTHLY PRINCIPAL AND INTEREST PAYMENTS
When the Lender receives a monthly principal and interest payment, the Lender
shall apply it first to interest in arrears for the previous month and then to
the amortization of the principal amount of this Note, unless other amounts are
then due under this Note or the other Loan Documents. If other amounts are due
when a regular monthly payment is received, the Lender shall apply the payment
first to accrued interest and then, at its discretion, either to those other
amounts or to principal.
5. DEFAULT INTEREST
If a Default exists (as defined in Section 9 below) the outstanding principal
balance of this Note shall, at the option of the Lender, bear interest at a rate
(the "Default Rate") equal to the lesser of (i) eighteen percent (18%) per annum
and (ii) the maximum rate allowed by law. If interest has accrued at the Default
Rate during any period, the difference between such accrued interest and
interest which would have accrued at the Note Rate during such period shall be
payable on demand. If a court of competent jurisdiction determines that any
interest charged has exceeded the maximum rate allowed by law, the excess of the
amount collected over the legal rate of interest will be applied to the
indebtedness as a principal prepayment without premium, retroactively, as of the
date of receipt, or if such excessive interest exceeds the unpaid balance of
principal of this Note and such other indebtedness, such excess shall be
refunded to the Borrower.
6. LATE CHARGE
If the Lender does not receive any scheduled monthly principal and interest
payment on or before the tenth day of the calendar month in which it is due, the
Lender will send the Borrower notice that a late charge equal to five percent
(5%) of the late payment has accrued. The Borrower shall pay any such late
charge on or before the tenth day of the calendar month following the month
during which the late payment was scheduled to have been received. Interest on
unpaid late charges shall, at the Lender's discretion, accrue at the Note Rate
beginning on the first day of the calendar month following their accrual.
7. PREPAYMENT
This Note may be prepaid upon not less than thirty (30) days' prior written
notice to the Lender. At the time of any prepayment, the Borrower shall pay all
accrued interest on the principal balance of this Note and all other sums due to
the Lender under the Loan Documents. In addition, unless the prepayment is a
"Permitted Par Prepayment" (as defined in Section 8 below), the Borrower shall
remit together with any prepayment a premium (the "Prepayment Premium Amount")
equal to the greater of (A) one percent (1%) of the prepayment and (B) the
amount (the "Yield Protection Amount") calculated in accordance with the next
succeeding paragraph of this Note.
The Yield Protection Amount shall be calculated as follows:
First, the Lender shall determine the annual percentage yield on U.S. Treasury
securities maturing at the end of the term of the Loan (the "Annual Treasury
Instrument Yield"). The Annual Treasury Instrument Yield shall be determined as
of ten (10) Business Days (as defined in the Deed of Trust) before the effective
date of the prepayment. The Lender shall base its determination of the Annual
Treasury Instrument Yield on the yield on U.S. Treasury instruments, as
published in The Wall Street Journal (or, if The Wall Street Journal is not then
being published or if no such reports are then being published in The Wall
Street Journal, as reported in another public source of information nationally
recognized for accuracy in the reporting of the trading of governmental
securities). If no such instruments mature on the exact maturity date of this
Note, the Lender shall interpolate the Annual Treasury Instrument Yield on a
straight-line basis using the yield on the instrument whose maturity date most
closely precedes that of this Note, and the yield on the instrument whose
maturity date most closely succeeds that of this Note.
Second, the Lender shall determine the monthly payment (the "Monthly
Reinvestment Payment"), based on a 360-day year and 30-day months, which would
be payable on a hypothetical interest-only promissory note having a principal
balance equal to the prepaid amount and bearing interest at the rate (the
"Reinvestment Rate") which, when compounded monthly, would produce a yield equal
to the Annual Treasury Instrument Yield.
Third, the Lender shall determine the hypothetical monthly interest-only payment
(based on a 360-day year and 30-day months) which would be payable on a
promissory note having a principal balance equal to the prepaid amount and
bearing interest at this Note Rate (the "Monthly Coupon Rate Payment").
Fourth, the Lender shall determine the present value of a series of monthly
payments, each equal in amount to the amount by which the Monthly Coupon Rate
Payment exceeds the Monthly Reinvestment Payment, received on the first day of
each calendar month from and including the first day of the first full calendar
month immediately following the effective date of prepayment to and including
the Maturity Date, using the Reinvestment Rate as the discount rate. The present
value calculated in this paragraph shall be the Yield Protection Amount.
Voluntary partial prepayments shall be permitted only in minimum amounts of
$500,000. The Prepayment Premium Amount constitutes liquidated damages to
compensate the Lender for reinvestment costs, lost opportunity costs, and the
loss by the Lender of its bargained-for investment in the Loan. The Borrower
agrees that such liquidated damages are not a penalty but are a reasonable
estimate in good faith of the actual damages sustained by the Lender as a result
of such prepayment, which actual damages are impossible to ascertain with
precision.
8. PERMITTED PAR PREPAYMENTS
The Lender shall not charge a prepayment premium on certain prepayments (the
"Permitted Par Prepayments"). Permitted Par Prepayments include:
(a) any prepayment in full of the Loan made no more than 180 days before the
Maturity Date; and (b) any prepayment made as the result of the Lender's
election to apply insurance or condemnation proceeds to the principal balance of
this Note.
9. DEFAULT
A default on this Note ("Default") shall exist if (a) the Borrower fails to pay
any required installment of principal and interest on or before the tenth day of
the calendar month in which it is due, (b) the Borrower fails to pay the matured
balance of this Note on the Maturity Date or (c) a "Default" exists as defined
in any other Loan Document. If a Default exists and the Lender engages counsel
to collect any amount due under this Note or if the Lender is required to
protect or enforce this Note in any probate, bankruptcy or other proceeding,
then any expenses incurred by the Lender in respect of the engagement, including
the reasonable fees and reimbursable expenses of counsel and including such
costs and fees which relate to issues that are particular to any given
proceeding, shall constitute indebtedness evidenced by this Note, shall be
payable on demand, and shall bear interest at the Default Rate. Such fees and
expenses include those incurred in connection with any action against the
Borrower for a deficiency judgment after a trustee's sale of the Deed of Trust
(defined below), including all of the Lender's reasonable attorneys' fees,
property appraisal costs and witness fees.
10. ACCELERATION
If a Default exists, the Lender may, at its option, by notice to the Borrower,
declare the unpaid principal balance of this Note to be immediately due and
payable, together with all accrued interest on the indebtedness, all costs of
collection (including reasonable attorneys' fees and expenses) and all other
charges due and payable by the Borrower under this Note or any other Loan
Document, provided, however, that if the Default arises solely as the result of
the failure of the Borrower to make a regular monthly payment of principal and
interest, the Lender shall not accelerate the indebtedness unless the Lender has
given the Borrower notice of its intent to accelerate the Loan, and a cure
period of three (3) Business Days, prior to declaring the indebtedness to be
immediately due and payable.
11. PREPAYMENT FOLLOWING ACCELERATION
Any Default resulting in the acceleration of the indebtedness evidenced by this
Note shall be presumed to be an attempt to avoid the provisions of Section 7 of
this Note, which prohibit prepayment or condition the Lender's obligation to
accept prepayment on the payment of a prepayment premium. Accordingly, if the
indebtedness is accelerated, any amounts tendered to repay the accelerated
indebtedness, or realized by the Lender through its remedies following
acceleration, shall be subject to the prepayment premium that would have been
applicable under Section 7 (calculated from the date of acceleration through the
Maturity Date).
12. SECURITY
This Note is secured by a Deed of Trust, Security Agreement and Fixture Filing
(the "Deed of Trust") granted by the Borrower to the Public Trustee of Douglas
County, the Trustee, for the benefit of the Lender, conveying certain real
property (the "Real Property") located in the Douglas County, Colorado and
granting a security interest in certain fixtures and personal property, and by
an Absolute Assignment of Leases and Rents made by the Borrower to the Lender,
assigning the landlord's interest in all present and future leases (the
"Leases") of all or any portion of the Real Property encumbered by the Deed of
Trust. Reference is made to the Loan Documents for a description of the security
and rights of the Lender. This reference shall not affect the absolute and
unconditional obligation of the Borrower to repay the Loan in accordance with
its terms.
13. RECOURSE TO BORROWER
The Lender agrees that it shall not seek to enforce any monetary judgment with
respect to the indebtedness evidenced by this Note against the Borrower except
through recourse to the Property (as defined in the Deed of Trust), unless the
obligation from which the judgment arises is one of the "Carveout Obligations"
defined in Section 14.
14. CARVEOUT OBLIGATIONS
The "Carveout Obligations" are (a) the obligation to repay any portion of the
indebtedness evidenced by this Note that arises from any of the "Carveouts" (as
defined below), (b) the obligation to repay the entire indebtedness evidenced by
this Note, if the Lender's exculpation of the Borrower from personal liability
under this Section has become void as set forth below, (c) the obligation to
indemnify the Lender in respect of its actual damages suffered in connection
with any of the Carveouts, and (d) the obligation to defend and hold the Lender
harmless from and against any claims, judgments, causes of action or proceedings
arising from any of the Carveouts. The "Carveouts" are:
(i) fraud or material written misrepresentation;
(ii) waste of the Property (which shall include damage, destruction or disrepair
of the Real Property caused by a willful act or grossly negligent omission of
the Borrower, but shall exclude ordinary wear and tear in the absence of gross
negligence);
(iii) misappropriation of tenant security deposits (including proceeds of tenant
letters of credit), insurance proceeds or condemnation proceeds;
(iv) failure to pay property taxes, assessments or other lienable impositions;
(v) failure to pay to the Lender all rents, income and profits, net of
reasonable and customary operating expenses, received in respect of a period
when the Loan is in default (including the last month's rent, if collected in
advance, under any lease in force at the time of default);
(vi) removal from the Real Property of fixtures or Personal Property, unless
replaced in a commercially reasonable manner;
(vii) the out-of-pocket expenses of enforcing the Loan Documents following
default, not including expenses incurred after the Borrower has agreed in
writing to transfer the Real Property to the Lender by the Lender's choice of
either an uncontested foreclosure or delivery of a deed in lieu of foreclosure;
(viii) terminating or amending a Lease in violation of the Loan Documents; and
(ix) any liability of the Borrower under the Environmental Indemnity Agreement
(as defined in the Deed of Trust).
The Lender's exculpation of the Borrower from personal liability for the
repayment of the indebtedness evidenced by this Note shall be void without
notice if the Borrower (A) voluntarily transfers or creates any material
voluntary lien on the Property in violation of the Loan Documents, or (B) files
a voluntary petition for reorganization under Title 11 of the United States Code
(or under any other present or future law, domestic or foreign, relating to
bankruptcy, insolvency, reorganization proceedings or otherwise similarly
affecting the rights of creditors), and has not offered, prior to the filing, to
enter into the Lender's choice of either an agreement to permit an uncontested
foreclosure, or an agreement to deliver a deed in lieu of foreclosure within
sixty (60) days of the Lender's acceptance of the offer. After the Lender
accepts such an offer, default by the Borrower in fulfilling the terms of the
accepted offer shall trigger personal liability for the entire indebtedness. No
such offer shall be conditioned on any payment by the Lender, on the release of
any obligor from any Obligation (as defined in the Deed of Trust), or on any
other concession.
15. SEVERABILITY
If any provision of this Note is held to be invalid, illegal or unenforceable in
any respect, or operates, or would if enforced operate to invalidate this Note,
then that provision shall be deemed null and void. Nevertheless, its nullity
shall not affect the remaining provisions of this Note, which shall in no way be
affected, prejudiced or disturbed.
16. WAIVER
Except to the extent that such rights are expressly provided in this Note, the
Borrower waives demand, presentment for payment, notice of intent to accelerate,
notice of acceleration, protest, notice of protest, dishonor and of nonpayment
and any and all lack of diligence or delays in collection or enforcement of this
Note. Without affecting the liability of the Borrower under this Note, the
Lender may release any of the Property, grant any indulgence, forbearance or
extension of time for payment, or release any other person now or in the future
liable for the payment or performance of any obligation under this Note or any
of the Loan Documents.
The Borrower further (a) waives any homestead or similar exemption; (b) waives
any statute of limitation; (c) agrees that the Lender may, without impairing any
future right to insist on strict and timely compliance with the terms of this
Note, grant any number of extensions of time for the scheduled payments of any
amounts due, and may make any other accommodation with respect to the
indebtedness evidenced by this Note; (d) waives any right to require a
marshaling of assets; and (e) to the extent not prohibited by applicable law,
waives the benefit of any law or rule of law intended for its advantage or
protection as a debtor or providing for its release or discharge from liability
under this Note, excepting only the defense of full and complete payment of all
amounts due under this Note and the Loan Documents.
17. VARIATION IN PRONOUNS
All the terms and words used in this Note, regardless of the number and gender
in which they are used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context or sense of this Note or any paragraph or clause herein
may require, the same as if such word had been fully and properly written in the
correct number and gender.
18. WAIVER OF JURY TRIAL
THE BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS NOTE OR ANY OTHER LOAN
DOCUMENT OR (B) ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND THE BORROWER AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.
19. OFFSET RIGHTS
In addition to all liens upon and rights of setoff against the money,
securities, or other property of the Borrower given to the Lender by law, the
Lender shall have a lien upon and a right of setoff against all money,
securities, and other property of the Borrower, now or hereafter in possession
of or on deposit with the Lender, whether held in a general or special account
or deposit, or safe-keeping or otherwise, and, following a Default, every such
lien and right of setoff may be exercised without demand upon, or notice to the
Borrower. No lien or right of setoff shall be deemed to have been waived by any
act or conduct on the part of the Lender, or by any neglect to exercise such
right of setoff or to enforce such lien, or by any delay in so doing, and every
right of setoff and lien shall continue in full force and effect until such
right of setoff or lien is specifically waived or released by an instrument in
writing executed by the Lender.
20. COMMERCIAL LOAN
The Borrower hereby represents and warrants to the Lender that the Loan was made
for commercial or business purposes, and that the funds evidenced by this Note
will be used solely in connection with such purposes.
21. REPLACEMENT OR BIFURCATION OF NOTE
If this Note is lost or destroyed, the Borrower shall, at the Lender's request,
execute and return to the Lender a replacement promissory note identical to this
Note, provided the Lender delivers to the Borrower an affidavit to the foregoing
effect. Upon delivery of the executed replacement Note, the Lender shall
indemnify the Borrower from and against its actual damages suffered as a result
of the existence of two Notes evidencing the same obligation. No replacement of
this Note under this Section shall result in a novation of the Borrower's
obligations under this Note. In addition, the Lender may at its sole and
absolute discretion require that the Borrower execute and deliver two separate
promissory notes, which shall replace this Note as evidence of the Borrower's
obligations. The two replacement notes shall, taken together, evidence the exact
obligations set forth in this Note. The replacement notes shall be independently
transferable. If this Note is so replaced, the Lender shall return this Note to
the Borrower marked to evidence its cancellation.
22. GOVERNING LAW
This Note shall be construed and enforced according to, and governed by, the
laws of Colorado without reference to conflicts of laws provisions which, but
for this provision, would require the application of the law of any other
jurisdiction.
23. TIME OF ESSENCE
In the performance of the Borrower's obligations under this Note, time is of the
essence.
24. Agreement Concerning Interest
The Deed of Trust now or hereafter existing are hereby expressly limited so that
in no contingency or event whatsoever, whether by acceleration of the maturity
of this Note or otherwise, shall the amount paid or agreed to be paid to the
Lender for the use, forbearance or detention of the sums evidenced by this Note
exceed the maximum amount permissible under Colorado law. If, from any
circumstances whatsoever, the performance or fulfillment of any provision of
this Note, or of the Deed of Trust, at the time performance of such provision
shall be due, shall exceed the limit of validity prescribed by law, then, IPSO
FACTO, the obligation to be performed or fulfilled shall be reduced to the limit
of such validity, and, if from any such circumstance, the Lender shall ever
receive anything of value which is deemed to be interest by Colorado law which
would exceed the highest lawful rate, an amount equal to any excessive interest
shall be applied to the reduction of the principal amount of this Note or on
account of any other principal indebtedness of the Borrower to the Lender and to
the payment of interest thereon or, if such excessive interest exceeds the
unpaid balance of principal of this Note and such other indebtedness, such
excess shall be refunded to the Borrower.
25. NO ORAL AGREEMENTS
THIS NOTE AND ALL THE OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF
THE BORROWER AND THE LENDER AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE LOAN AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE BORROWER AND
THE LENDER. THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND THE LENDER.
THE PROVISIONS OF THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY BE AMENDED OR
REVISED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE BORROWER AND THE LENDER.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed as
of the date first above written.
BORROWER:
GREEN RIVER AT PALOMINO PARK LLC, a Colorado limited liability
company
By: Wellsford Park Highlands Corp., a Colorado corporation, its
manager
By: /s/ David M. Strong
-------------------
David M. Strong
Vice President