EXHIBIT 10.3
COLLATERAL SECURITY AGREEMENT (INVESTOR PROCEEDS PLEDGE)
WHEREAS, CAPITOL DEVELOPMENT OF ARKANSAS, INC., an Arkansas
corporation, and CAPITOL FIRST CORPORATION (formerly known as Capitol
Communities Corporation), a Nevada corporation (hereinafter referred to as the
"Pledger") has borrowed or has agreed to borrow from private investors ("Noble
Note Holders"), represented by NOBLE INTERNATIONAL INVESTMENTS, INC., a Florida
corporation ("Noble") hereinafter referred to as "Pledgee") the principal sum of
THREE MILLION and NO/ lOOths DOLLARS ($3,000,000.00); and
WHEREAS, the Pledger has agreed to pledge to the Noble Note Holders TWO
MILLION ONE HUNDRED THOUSAND AND NO/LOOTHS DOLLARS ($2,100,000.00) ("Investor
Proceeds" or "Collateral") in Investor Proceeds, and any real or personal
property acquired with the Investor Proceeds.
NOW, THEREFORE, in consideration of the Investor Proceed and other good
and valuable thereof, the Pledger does hereby assign, transfer, set over and
pledge to Pledgee the property ("Property") listed on EXHIBIT "A", attached
hereto and made a part hereof, and on any real or personal property acquired
with proceeds from such property, Pledgee and the Pledger 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 due under this Agreement,
the Secured Note Purchase Agreement dated September 11, 2003 between Pledger,
Capitol Development of Arkansas, Inc., Pledgee, and certain investors identified
therein (the "Purchase Agreement"), the Note Purchase Documents (as such term is
defined in the Purchase Agreement) or other Business Loan Documents, (all such
documents are collectively referred to as the "Purchase Documents").
2. Possession of the Investor Proceeds. Pledger shall retain possession of the
Property. Pledgor shall provide Pledgee with a monthly accounting of the
Collateral in possession of the Pledger, if requested.
3. Substitution of Collateral. If no Event of Default has occurred under this
Agreement, or the other Purchase Documents, or would result from such action,
the Pledgor may replace all or any portion of the Collateral with other real or
personal property, subject, however to the written consent of Pledgee in its
sole discretion, which consent may be based upon various factors, including, but
not limited to, the value of the replacement of real or personal property;
provided however, that if such Substitute Collateral is cash in the same amount
or less of the original pledge, that Noble will not object to the cash
substitution. Such Substitute Collateral shall include any improvements,
replacements, accessions, and additions to it. Noble also acknowledges and
agrees that if the Collateral is in the form of a loan to third parties, that
Pledgor may, at its sole discretion, assign loan participation interest in any
such loan. Pledgor shall notify Noble of such participations but shall not have
to receive approval from Noble and/or Pledgee to assign such loan participation
interest.
4. Perfected Interest in Substitute Collateral. As long as the Noble Notes are
outstanding, Pledgor agrees to take such further action and enter into such
further documents and agreements as may be requested by the Pledgee, to provide,
grant, protect and continue a first priority security interest in favor of the
Pledgee on the Collateral and any Substitute Collateral which secures the
obligations under this Agreement and the Purchase Documents. Noble acknowledges
and agrees that Boca First Capital LLLP, a Florida limited liability limited
partnership, shall be granted a junior security interest in the Collateral or
any Substitute Collateral. Pledger hereby irrevocably authorizes Pledgee at any
time and from time to time to file in any Uniform Commercial Code jurisdiction
any Financing Statements and amendments thereto describing the Collateral, and
Pledger agrees to promptly furnish any information necessary for the filing of
such Financing Statements as Pledgee may request. Pledger hereby appoints the
Pledgee as its attorney-in-fact, which appointment is a power coupled with an
interest and is irrevocable, for the purpose of executing any and all Financing
Statements or continuations or amendments thereof, or other documents necessary
to perfect or continue perfection of the rights of the Pledgee hereunder. The
powers conferred on the Pledgee hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers.
5. 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 Noble Notes 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 Noble Notes; or
(b) If the Pledgor becomes in default under the Purchase
Documents or the loan agreements governing the loan represented by the Noble
Notes; 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 Noble Notes;
then the Pledged Collateral and any Substitute Collateral,
which shall at the time of receipt thereof be applied to payment of the Noble
Notes, 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 Noble Notes 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 Collateral, and any Substitute
Collateral, shall occur in Palm Beach County, Florida.
6. 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. A written notice from Pledgee to any nominee that an Event of
Default exists shall be sufficient evidence of that fact to such nominee.
Notwithstanding any provision to the contrary in this Agreement, Pledgor shall
have ten (10) days to cure any default after notice of such default.
7. Sale of Pledged Collateral By Pledgee. Upon Event of Default, the Pledgee
shall be entitled to the Collateral. Any sale, as provided herein, of the
Collateral or any Substitute Collateral 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 Collateral or any Substitute Collateral 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 Collateral or any
Substitute Collateral, free from any trust, claim, right or equity of redemption
of the Pledger, which are expressly waived and released. In case of any sale on
credit, or for future delivery, the Pledged Collateral or any Substitute
Collateral 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 Collateral or any Substitute Collateral so sold. Upon
the sale of any Pledged Collateral or any Substitute Collateral 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
Purchase Documents, including the Noble Notes and/or this Pledge, and second to
the payment of any sums the Pledger 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. Waiver or acquiescence in any default, or failure to insist
upon strict performance by Pledgor of any warranties or agreements in this
Collateral Security Agreement, shall not constitute a waiver of any subsequent
or other default or failure. Pledgee's acceptance of partial or delinquent
payments or its exercise or failure to exercise any right or remedy shall not
constitute a modification of this Collateral Security Agreement or of the Noble
Notes or the Purchase Documents. The taking of this Collateral Security
Agreement shall not waive or impair any other security Pledgee may have or
hereafter acquire for the payment of the Noble Notes, nor shall the taking of
any such additional security waive or impair this Collateral Security Agreement
but Pledgee may resort to any security it may have in the order it may deem
proper, and notwithstanding any collateral security, Pledgee shall retain its
rights under the Control and Security Agreement dated September 11, 2003 and its
right of setoff against the Pledgor.
8. Release of Pledged Collateral and Any Substitute Collateral. The
Pledgee shall release the Pledged Collateral and any Substitute Collateral to
the Pledgor when the Noble Notes 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
Collateral or Substitute Collateral to the Pledgor until such additional charges
shall have been paid in full; and the Pledgee shall execute and deliver to the
Pledgor, or cause to be executed and delivered, to the Pledgor such instruments
as may be necessary to cancel this Pledge, and reinvest the Pledged Collateral
and/or Substitute Collateral in the Pledgor free and clear of the lien hereof.
9. Notices. All communications provided for hereunder shall be
addressed to Capitol First Corporation, 7100 Camino Real Blvd., Suite 402, Boca
Raton, Florida 33433, if to Capitol Development of Arkansas, Inc., 10605
Maumelle Blvd., Maumelle, Arkansas 72113, if to the Pledgor; and if to the
Pledgee at 6501 Congress Avenue, Suite 100, Boca Raton, Florida 33487 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 Pledger 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 Noble Notes due and payable, by suit, or
in any lawful manner, or resort to any other security for the payment of the
said Noble Notes, this Pledge being additional, cumulative, and concurrent
security for the payment of the said Notes. 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 Noble Notes.
13. Business Loan Agreement. This Pledge is subject to the provisions
of Exhibit "A" of that certain Secured Note Purchase Agreement and Exhibit "B"
of that certain Control and Security Agreement both dated September 11, 2003,
and entered into by and between Pledger and Pledgee, and any amendments and
modifications thereof.
14. Representation and Warranty of Pledgor. Pledger represents and
warrants that Pledger owns and holds the Collateral and any Substitute
Collateral, free and clear of any lien or encumbrances; except for a junior lien
held by Boca First Capital LLLP. In the presence of:
IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge,
this 19 day of November 2003.
PLEDGOR:
CAPITOL COMMUNITIES CORPORATION
/s/ Michael G. Todd
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Michael G. Todd, President
- --------------------------------------------------------------------------------
PLEDGOR:
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
In the presence of:
/s/ Michael G. Todd
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- --------------------- By: Michael G. Todd, President
- ---------------------
PLEDGEE:
NOBLE INTERNATIONAL
INVESTMENTS, INC.
Notary on Next Page
State of Flordia
County of Palm Beach
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The foregoing instrument was acknowledged before me this 19th day of November,
2003 by MICHAEL G. TODD, PRESIDENT OF CAPITOL COMMUNITIES CORPORATION, A NEVADA
CORPORATION, who is
Printed Name Notary Public
personally known to me, or who has produced _______________ as identification.
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 19th day of November
2003, 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/ illegible
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(Signature of Person taking Acknowledgment)