EXHIBIT 10.4
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 a line of credit from BOCA FIRST CAPITOL, LLLP, a Florida limited
liability limited partnership (hereinafter referred to as "Boca Loan" or
"Pledgee") in the amount of FOUR MILLION DOLLARS and NO/CENTS ($4,000,000.00);
WHEREAS, the Pledger has borrowed Three Million Dollars and No/Cents
($3,000,000.00) from private investors, with net proceeds from such investor
loan in the amount of Two Million One Hundred Thousand Dollars and No/Cents
($2,100,000); and
WHEREAS, the Pledger has agreed to pledge to Pledgee TWO MILLION ONE
HUNDRED THOUSAND DOLLARS AND NO/CENTS ($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, junior only to the Pledge Agreement between
the Pledgee and Noble International Investments, Inc. ("Noble"), is made as
collateral security for the repayment, according to its terms, of the full
amount due under this Agreement, the Business Loan dated April 25, 2002, between
Pledger, and Pledgee, the Promissory Note of same date, and any modifications
therein ("Boca Note"), or other Business Loan Documents, (all such documents are
collectively referred to as the "Loan Documents").
2. Possession of the Investor Proceeds. Pledger shall retain possession of the
Property. Pledger 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 Loan Documents, or would result from such action, the
Pledger 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 Pledgee will not object to the cash
substitution. Such Substitute Collateral shall include any improvements,
replacements, accessions, and additions to it. Pledgee 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 Pledgee of such participations but shall not
have to receive approval Pledgee to assign such loan participation interest.
4. Perfected Interest in Substitute Collateral. As long as the Boca Loan is
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 Loan Documents; subject only to the
senior security interest held by Noble in the Collateral subject to this
Agreement 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 Pledger defaults in the payment of any installment
of the Boca Loan 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 Loan Documents; or
(b) If the Pledger becomes in default under the Loan Documents
governing the loan represented by the Boca Note; or
(c) If the Corporation or the Pledger become in default under
any mortgage, security agreement or other document or instrument given to
provide or create collateral security for the Boca Note;
then the Pledged Collateral and any Substitute Collateral, which shall
at the time of receipt thereof be applied to payment of the Boca Note, may be
sold, transferred and delivered in whole or in part, together with any
substitutes thereof, 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 Boca 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 Pledger 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 Pledger 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 Pledgor, 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 senior interest on the Collateral, then to any sums Pledgee may
pay, or incur, in enforcing its rights under the Loan Documents, including the
Boca 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. 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 Boca
Note or the Loan 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 Boca Note, 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 Business Loan Agreement, Mortgage and Security Agreements dated April
25, 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 Boca 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
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, 7100 Camino Real Blvd., Suite 402, Boca Raton, Florida 33433 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/
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By: Michael G. Todd, President
- --------------------
PLEDGEE:
NOBLE INTERNATIONAL
INVESTMENTS, INC.
ACKNOWLEDGEMENT:
STATE OF Arkansas
COUNTY OF Pulaski } ss.
On this 24th day of April 2004, before me, a notary public, personally appeared
Tommy L. Lasiter known to me ( or satisfactory proven) to be the person(s) whose
name (s) Tommy L. Lasiter subscribe to the within instrument and acknowledged
that he executed the same, with the relinquishment and waiver of all the rights
of homestead exemption, statutory redemption, appraisment, curtesy and dower,
for the consideration and purposes theirin mentioned and set forth.
My commission expires:
/s/ Virginia Lingg James
------------------------
Notary Public
[Notary Seal of
Virginia Lingg James]
PLEDGEE: BOCA FIRST CAPITAL LLLP
Addison Capital Group, LLC.,
General Partner
/s/ Howard Bloom
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By: Howard Bloom, Managing Member
/s/ illegible
- ---------------------------------------
Notary on Next Page
State of Florida
County of
The foregoing instrument was acknowledged before me this 19 Day of November 2003
by MICHAEL G. TODD, PRESIDENT OF CAPITOL COMMUNITIES CORPORATION, A NEVADA
CORPORATION, who is personally known to me, or who has produced as
identification.
(Signature of Person Acknowledgment)
-------------------------------------
Printed Name
Notary public
[Seal of Evelyn R.Gregory
Notary Public State of
Florida Commission No.
DD009106
My Commission
Exp. Apr. 9, 2035]
State of
County of
The foregoing instrument was acknowledged before me this 19 day of November,
2004 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.
(Signature of Person Taking Acknowledgment:
Printed Name
Notary Public
[Seal of Evelyn R.Gregory
Notary Public State of
Florida Commission No.
DD009106
My Commission
Exp. Apr. 9, 2035]