EXHIBIT 10.51
COLLATERAL SECURITY AGREEMENT
(TRADEARK MEMBERSHIP INTEREST PLEDGE)
WHEREAS, CAPITOL DEVELOPMENT OF ARKANSAS, INC. ("CDA"), 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 of a 35.16% membership interest in
TradeArk Properties, LLC ("TradeArk"), a Michigan limited liability company
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 became a member of TradeArk and executed, as a
member, an operating agreement for the Company dated May 27, 1999. Pledgor has
agreed to pledge to Pledgee CDA's 35.16% membership interest in TradeArk
(hereinafter referred to as "TradeArk Interest") 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 TradeArk Interest 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 TradeArk Interest. Pledgor shall assign
and transfer the TradeArk Interest immediately upon the execution of this
Pledge, and deliver to the escrow agent named in the Modified Note, free and
clear of all liens and encumbrances and assigned to Pledgee. Pledgee shall be
entitled to receive and have delivered to it, any payments, disbursed by the
TradeArk Interest, 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. Notwithstanding, Pledgee agrees that Pledgor may sell and assign its
TradeArk Interest and substitute other collateral equal to such interest, upon
the approval of Pledgee, which shall not be unreasonably withheld.
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 TradeArk Interest, 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 TradeArk Interest, 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 TradeArk Interest by Pledgee. Any sale, as
provided herein, of the TradeArk Interest 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 TradeArk Interest 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 TradeArk Interest, 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 TradeArk Interest 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 liability in case of failure of the
purchaser to take up and pay for the Pledged TradeArk Interest so sold. Upon the
sale of any TradeArk Interest 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,
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Collateral Security Agreement
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 TradeArk Interest. The Pledgee shall release
the Pledged TradeArk Interest 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 TradeArk Interest to the Pledgor until such additional
charges shall have been paid in full; and the Pledgee shall deliver to the
Pledgor the TradeArk Interest 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
TradeArk Interest in the Pledgor free and clear of the lien hereof.
Notwithstanding, Pledgor may substitute other collateral for the pledged
TradeArk Interest, pursuant to Section 2 of the Security Agreement.
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,
independent of this instrument, concerning this, or any of the liabilities,
obligations, indebtedness, or collateral security involved in the said Note.
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Collateral Security Agreement
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 TradeArk Interest, free and clear of any
lien or encumbrances and such TradeArk Interest 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/ Ashley Bloom /s/ Michael G. Todd
---------------- ------------------------------
Ashley Bloom By: Michael G. Todd, President
PLEDGEE:
BOCA FIRST CAPITOL LLLP
By Addison Capital Group LLC,
general partner
/s/ Ashley Bloom
- ----------------
Ashley Bloom /s/ Howard Bloom
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Howard Bloom, Manager
/s/ E. Brandon-Brown
- --------------------
E. Brandon-Brown
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 27h 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
------------
(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 27h 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