EXHIBIT 10.50
COLLATERAL SECURITY AGREEMENT
(PROMISSORY NOTES PLEDGE)
WHEREAS, CAPITOL DEVELOPMENT OF ARKANSAS, INC., an Arkansas
corporation, and CAPITOL COMMUNITIES CORPORATION, a Nevada corporation
(hereinafter referred to as the "Pledgor") has borrowed or has agreed to borrow
from BOCA FIRST CAPITOL, LLLP, A FLORIDA LIMITED LIABILITY LIMITED partnership
(hereinafter referred to as "Pledgee") the principal sum of FOUR MILLION AND
NO/100THS DOLLARS ($4,000,000.00); and
WHEREAS, Pledgor is the owner and holder of two promissory notes
executed by West Maumelle Limited Partnership (collectively the "Maumelle
Notes"), an Arkansas limited liability company on March 26, 2002, payable as
follows: Promissory Note 1 has a face value of $1,070,000.00 with an interest
rate of 6.25% per annum, with the entire unpaid principal and all accrued
interest due in full September 22, 2002. Promissory Note 1 was modified on
September 22, 2002, to extend the maturity date to October 31, 2002 for an
extension fee of $10,000.00.
Promissory Note 2 has a face value of $1,000,000.00 with an interest
rate of 6.25% per annum, with the entire unpaid principal and all accrued
interest due in full March 26, 2005.
WHEREAS, the Pledgor has executed a promissory note on April 26, 2002,
and has agreed to execute and to deliver to the Pledgee a promissory note
modification, hereinafter referred to as the "Modified Note", for the principal
amount of FOUR MILLION and NO/100ths DOLLARS ($4,000,000.00) to evidence the
indebtedness arising in connection with the aforesaid loan made or to be made by
Pledgee to Pledgor; and
WHEREAS, the Pledgor has agreed to pledge to Pledgee the Maumelle Notes
as security for the Modified Note;
NOW, THEREFORE, in consideration of the premises and as an inducement
to the Pledgee to lend the principal sum of FOUR MILLION and NO/100s DOLLARS
($4,000,000.00) to Pledgor and in consideration thereof, the Pledgor does hereby
assign, transfer, set over and pledge to Pledgee the Maumelle Notes, with an
aggregate face value of $2,070,000 (herein referred as the "Pledged Maumelle
Notes"), and the Pledgee and the Pledgor hereby agree as follows:
1. Purpose of Pledge. This Pledge is made as collateral security for
the repayment, according to its terms, of the full amount of the Modified Note
including interest thereon.
2. Possession of the Pledged Maumelle Notes. The Pledged Maumelle
Notes shall, immediately upon the execution of this Pledge, be delivered to the
escrow agent named in the Modified Note, free and clear of all liens and
encumbrances and assigned and endorsed to Pledgee. Pledgee shall be entitled to
receive and have delivered to it, any payments, except for extension fees, made
under the terms of the Pledged Maumelle Notes, with any such payments made
hereunder applied first to the interest accruing upon the terms of the Note and
Business Loan Agreement, and any amendments thereof, next to charges, costs, or
expenses then due under this Security Agreement or any other loan documents and
the balance, if any, to principal.
3. Event of Default and Remedies. If any one of the following
events (herein called "Event of Default") shall occur and be continuing:
(a) If the Pledgor defaults in the payment of any installment of
the Note when the same shall have become due, either by the terms thereof, or
otherwise, as herein provided and such default continues beyond any grace period
provided in the Note; or
(b) If the Pledgor becomes in default under the loan agreement
governing the loan represented by the Note; or
(c) If the Corporation or the Pledgor become in default under any
mortgage, security agreement or other document or instrument given to provide or
create collateral security for the Note;
then the Pledged Maumelle Notes, which shall at the time of
receipt thereof be applied to payment of the Note, may be sold, transferred and
delivered in whole or in part, together with any substitutes therefor, or
additions thereto, at any public or private sale, for cash, upon credit, for
present or future delivery, all at the option of Pledgee upon Pledgee's (i)
declaring the Modified Note due and payable under the terms hereof, or declaring
other liability mentioned or referred to in this Pledge as being outstanding and
overdue, and (ii) giving not less than ten (10) days written notice of such sale
to Pledgor by personal delivery, or registered or certified mail, return receipt
requested, addressed to their last known address. All rights and remedies of
Pledgee upon an Event of Default, including any sale, transfer or delivery of
the Pledged Maumelle Notes, shall occur in Palm Beach County, Florida.
5. Notice of Default. The Pledgee shall deliver to Pledgor promptly
upon the occurrence of any Event of Default, a written notice thereof,
specifying the nature thereof but failure to promptly deliver such notice shall
not constitute a waiver of any rights of Pledgee under this Agreement. A written
notice from Pledgee to any nominee that an Event of Default exists shall be
sufficient evidence of that fact to such nominee.
6. Sale of Pledged Maumelle Notes by Pledgee. Any sale, as provided
herein, of the Maumelle Notes by Pledgee, or its nominee, may be adjourned from
time to time, if a public sale, by announcement at the time and place appointed
for any such sale, and without further notice, such sale may be made at the time
and place to which the same shall be so adjourned, unless otherwise provided by
law. At such sale, Pledgee, or its nominee, shall be under no duty to sell all
of the Pledged Maumelle Notes on the date fixed in the notice, but beginning on
such date, Pledgee, or its nominee, may sell the same from day to day until all,
or a portion thereof, have been sold to pay all amounts secured by this Pledge.
At any such sale, Pledgee, or any of its employees or assigns, as the case may
be or its nominee, may become the purchaser of the whole, or any part, of the
Pledged Maumelle Notes, free from any trust, claim, right or equity of
redemption of the Pledgor, which are expressly waived and released. In case of
any sale on credit, or for future delivery, the Pledged Maumelle Notes sold may
be retained by the Pledgee, or its nominee, until the selling price is paid by
the purchaser, but neither the Pledgee, nor its nominee, shall incur any
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Collateral Security agreement
liability in case of failure of the purchaser to take up and pay for the Pledged
Maumelle Notes so sold. Upon the sale of any Pledged Maumelle Notes hereunder,
after deducting all costs and expenses of collection, Pledgee, or its nominee,
shall apply the residue of the proceeds of the sale, or sales, so made first to
the payment of any sums Pledgee may pay, or incur, in enforcing its rights under
the Note and/or this Pledge, and second to the payment of any sums the Pledgor
may be, or become liable to pay under any of those instruments, and shall pay
the excess, if any, to the Pledgor. No purchaser at such sale, or sales, except
the Pledgee, or its nominee, shall be responsible for the application of the
purchase money.
7. Waiver. The Pledgor agrees that neither the Pledgee, nor its
nominee, shall be held liable for loss or damage resulting from acts or events
beyond the reasonable control of the Pledgee, or its nominee, and acts of the
Pledgee taken in good faith. In taking, or refraining from taking action
required, or permitted, hereunder, such nominee shall follow the direction of
Pledgee, if given, and Pledgor agrees that such nominee shall not be liable for
any action or omission taken hereunder in good faith pursuant to instructions
from Pledgee.
8. Release of Pledged Maumelle Notes. The Pledgee shall release the
Pledged Maumelle Notes to the Pledgor when the Modified Note shall have been
paid in full; provided, however, that if at such time there shall be due from
Pledgor under this Pledge additional charges which theretofore arose as a result
of the default under any of the aforesaid instruments then Pledgee shall not
release the Pledged Maumelle Notes to the Pledgor until such additional charges
shall have been paid in full; and the Pledgee shall deliver to the Pledgor the
Maumelle Notes pledged under this Pledge and Pledgee shall execute and deliver,
or cause to be executed and delivered, to the Pledgor such instruments as may be
necessary to cancel this Pledge, and revest the Pledged Maumelle Notes in the
Pledgor free and clear of the lien hereof.
9. Notices. All communications provided for hereunder shall be
addressed to Capitol Communities Corporation 900 N. Federal Highway, Suite 410,
Boca Raton, Florida 33432, if to Capitol Development of Arkansas, Inc., 10605
Maumelle Blvd., Maumelle, Arkansas 72113 the Pledgor at and to the Pledgee at
900 North Federal Highway, Suite 410, Boca Raton, FL 33432 or to such other
address with respect to any of the parties as such party shall notify the other
in writing.
10. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
11. Successors and Assigns, etc. All of the covenants and provisions
in this Pledge by, or for the benefit of, the Pledgee and the Pledgor shall bind
and inure to the benefit of their respective successors, heirs, executors,
administrators and assigns.
12. Additional Security. This Pledge is without prejudice to the right
of Pledgee to enforce collection of the Modified Note due and payable, by suit,
or in any lawful manner, or resort to any other security for the payment of the
said Note, this Pledge being additional, cumulative, and concurrent security for
the payment of the said Note. The enumeration of certain rights, privileges and
options in this Pledge as vested in Pledgee and its successors and assigns, is
not and shall not be construed as a waiver of, nor to impair in any way other
rights of Pledgee and its successors or assigns, either at law or in equity,
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Collateral Security Agreement
independent of this instrument, concerning this, or any of the liabilities,
obligations, indebtedness, or collateral security involved in the said Note.
13. Business Loan Agreement. This Pledge is subject to the provisions
of Exhibit A of that certain Business Loan Agreement dated the date hereof and
entered into by and between Pledgor and Pledgee, and any amendments and
modifications thereof.
14. Representation and Warranty of Pledgor. Pledgor represent and
warrant that Pledgor owns and holds the Maumelle Notes, free and clear of any
lien or encumbrances and such Maumelle Notes are being pledged hereunder.
IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge,
this 27th day of September, 2002.
In the presence of: PLEDGOR:
CAPITOL COMMUNITIES CORPORATION
/s/ Ray Baptista /s/ Michael G. Todd
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Ray Baptista By: Michael G. Todd, President
In the presence of: PLEDGOR:
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
/s/ Ray Baptista /s/ Michael G. Todd
---------------- ------------------------------
Ray Baptista By: Michael G. Todd, President
PLEDGEE:
BOCA FIRST CAPITOL LLLP
By Addison Capital Group LLC,
general partner
/s/ E.A. Brandon-Brown /s/ Howard Bloom
- --------------------- ------------------------------
E.A. Brandon-Brown Howard Bloom, Manager
Notary on Next Page
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Collateral Security Agreement
State of Florida
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County of Palm Beach
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The foregoing instrument was acknowledged before me this 27th day of
September 2002 by MICHAEL G. TODD, PRESIDENT OF CAPITOL COMMUNITIES CORPORATION,
A NEVADA CORPORATION, who is personally known to me, or who has produced
______________________ as identification.
/s/ Ruth Gregory
----------------
(Signature of Person Taking Acknowledgment)
Ruth Gregory
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(Name of Acknowledger Typed, Printed or
Stamped)
(Title or Rank)
(Serial Number, if any)
State of Florida
------
County of Palm Beach
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The foregoing instrument was acknowledged before me this 27th day of
September, 2002, by MICHAEL G. TODD, PRESIDENT OF CAPITOL DEVELOPMENT OF
ARKANSAS, INC., AN ARKANSAS CORPORATION, who is personally known to me, or who
has produced ______________________ as identification.
/s/Ruth Gregory
(Signature of Person Taking Acknowledgment)
Ruth Gregory
------------
(Name of Acknowledger Typed, Printed or
Stamped)
(Title or Rank)
(Serial Number, if any)
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Collateral Security Agreement