EXHIBIT 10.7
INTERFUND INVESTMENTS I, LLC
8% SECURED PROMISSORY NOTE
BOCA RATON, FL $____________
ISSUE DATE: ________, 200__
FOR VALUE RECEIVED, InterFund Investment Fund I, LLC., a
Florida limited liability company (the "Company"), hereby promises to pay to the
order of ________ or its permitted successors or assigns (the "Holder") the sum
of Fifty Thousand dollars ($50,000.00) in same day funds, on or before the
Maturity Date (as defined below).
The Company has issued this Note pursuant to a Note Purchase
Agreement, dated as of ____ ____, 200__ (the "Note Purchase Agreement"), between
the Company and Holder. This Note is secured by a Security Agreement (defined
below) collateralizing all of the assets of the Company.
The following terms shall apply to this Note:
1. DEFINITIONS.
"Business Day" means any day other than a Saturday, Sunday or a day on
which either the New York Stock Exchange or commercial banks in the city of New
York are authorized or required by law to close.
"Issue Date" means the date on which this Note is
issued. "Maturity Date" means March 31, 2007.
"Person" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock
company, governmental authority or other entity.
"Prepayment Amount" shall have the meaning set forth in Section 5.
"Scheduled Interest Payment Date" means the first Business Day of each
month following the Issue Date.
"Security Agreement" shall mean a security agreement by and between the
Company and the Collateral Agent dated February 5, 2004.
"Success Fee" shall have the meaning set forth in Section 2 (c).
All definitions contained in this Note are equally applicable to the
singular and plural forms of the terms defined. The words "hereof", "herein" and
"hereunder" and words of similar import referring to this Note refer to this
Note as a whole and not to any particular provision of this Note. Any
capitalized term used herein that is not otherwise defined shall have the
meaning specified in the Note Purchase Agreement.
2. INTEREST/PROFIT PARTICIPATION.
(a) Interest Accrual. This Note shall bear interest on the
unpaid principal amount hereof ("Interest") at an annual rate of eight percent
(8%), computed on the basis of a 360-day year, and calculated using the actual
number of days elapsed since the Issue Date or the day on which interest was
most recently paid, as the case may be.
(b) Payment. During the period beginning on the Issue Date and
ending on the Maturity Date, the Company shall pay Interest that becomes due on
a Scheduled Interest Payment Date by issuing a payment in cash directly to
Holder in the amount of such accrued Interest. The Company shall maintain a
record showing, at any given time, the unpaid principal amount of this Note and
the amount of Interest paid.
(c) Interest/Success Fee. Subject to the terms hereunder, the
Company hereby agrees to pay the Holder, on a pro rata basis with all other
holders of Notes issued in this offering, an amount (the "Success Fee") in
excess of the 8% interest per annum on the face amount of this Note, on a
cumulative basis for the term of this Note (an "8% Cumulative Yield"), set forth
in subparagraph (a) above, as a share of any interest yield or financial fees,
including but not limited to origination fees, late fees, prepayment fees and
exit fees (and specifically including interest paid by the Company's mortgage
borrowers), if any, obtained by the Company from its borrowers, net of all
expenses, including but not limited to interest expense, management fees,
Collateral Agent fees, legal, accounting, administrative overhead, sales expense
and other expenses related to the operation of the Company or including any cash
or extraordinary losses (collectively, the "Net Financial Fees") calculated on
the following basis:
(i) 50% of the Net Financial Fees actually collected by the
Company during the period commencing on the Issue Date and ending on the
Maturity Date; provided, however, if the amount resulting from the preceding
calculation, when aggregated with an 8% Cumulative Yield, would exceed a rate
equal to 10% per annum on the face amount of this Note, on a cumulative basis
for the term of this Note (a "10% Cumulative Yield"), then the Company will pay
an amount equal to the difference between a 10% Cumulative Yield and an 8%
Cumulative Yield (with any excess being distributed or retained by the Company
in accordance with clause (ii) below) (the portion of the Success Fee payable
under this clause (i) is hereinafter referred to as the "Level 1 Portion"); plus
(ii) 20% of the Net Financial Fees actually collected by the
Company during the period commencing on the Issue Date and ending on the
Maturity Date; provided, however, if the amount resulting from the preceding
calculation, when aggregated with a 8% Cumulative Yield plus the Level One
Portion, would exceed a rate equal to 12% per annum on the face amount of this
Note, on a cumulative basis for the term of this Note (a "12% Cumulative
Yield"), then the Company will pay an amount equal to the difference between (A)
a 12% Cumulative Yield and (B) an 8% Cumulative Yield plus the Level One Portion
(with any excess being retained by the Company).
(iii) In the event any Success Fee is due to the Holder hereof
pursuant to clauses (i) or (ii) above, the Company shall pay such Success Fee
within 90 days after the Maturity Date of this Note. The Success Fee will be
audited by an accounting firm selected by the Manager, and each Noteholder will
be entitled to a copy of such audit.
(iv) The Success Fee shall be payable irrespective of whether
all or any portion of this Note shall have been repaid (and shall be in addition
to any Prepayment Amount paid by the Company to the Holder).
(d) Interest Reserve. The Company will establish an Interest
Reserve equal to 12 months interest on the Note. The Interest Reserve shall be
maintained at a level equal to 12 months interest for the first 24 months. For
months 24-36, the Interest Reserve will decrease by 1/12 per month until it is
reduced to zero. The Company shall hold and maintain the Interest Reserve.
PRINCIPAL PAYMENT.
(a) The Company shall have no obligation to make principal
payments during the term of this Note until the Maturity Date, at which time,
the Company shall pay in full principal balance outstanding together with
accrued and unpaid interest thereon. The Company shall also have no obligation
to pay the Success Fee during the term of this Note until the Maturity Date, at
which time the Company shall within 90 days of the expiration of the Maturity
Date pay any Success Fee to the extent any such fees might be due as set forth
above.
(b) Notwithstanding Section 3(a), but subject to Section 5
herein, the Company may prepay in part or in full the principal hereunder at any
time without penalty.
(c) On or prior to the Maturity Date, the Holder shall have
the option to rollover the principal of this Note otherwise due at the Maturity
Date together with any Success Fee, in part or in full, by written notice to the
Company of its intention to do so. If the Holder notifies the Company of its
intention to rollover the principal, the Company shall have no obligation to
accept the rollover and may choose to pay off the Note in its sole discretion.
If the Company decides to accept the rollover, the Company will provide the
Holder with written notification of its acceptance and renew this Note for an
extended period not to exceed three years.
4. EVENTS OF DEFAULT.
(a) Acceleration of Indebtedness. In the event that an Event
of Default (as defined below) occurs, subject to the Collateral Agency
Agreement, the Holder may declare, by written notice to the Company (an
"Acceleration Notice"), all unpaid amounts of principal of and interest on this
Note to be immediately due and payable, without presentment, demand, protest or
notice of any kind (other than an Acceleration Notice), all of which are hereby
expressly waived, anything herein or in any other instruments contained to the
contrary notwithstanding, and subject to the Collateral Agency Agreement, the
Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law.
(b) Events of Default. Each of the following events shall be
deemed an "Event of Default":
(i) an Insolvency Event (as defined in the Collateral
Agency Agreement) occurs;
(ii) the Company breaches, in a material respect, any
covenant or other material term or condition of this
Note (including without limitation any payment
obligation hereunder), the Security Agreement, the
Collateral Agency Agreement, the Note Purchase
Agreement or any other Notes of the Company, and such
breach continues for a period of ten (10) Business
Days after written notice by the Holder to the
Company and the Collateral Agent, such period being
known as the Cure Period; or
(iii) any representation or warranty made by the Company
contained in this Note or any other agreement,
document, certificate or other instrument delivered
in connection with the transactions contemplated
hereby or thereby is inaccurate or misleading in any
material respect as of the date such representation
or warranty was made.
(c) Payment of Management Fee in the Event of Default. So long
as no monetary Event of Default exists, the Manager, Capitol Management, LLC,
shall be entitled to receive its management fee of 1.5% per annum of the
principal amount of the Note. In the event of a monetary Event of Default, the
management fee shall continue to accrue but not be payable to Manager until the
Event of Default is cured within the cure period. The Company represents and
warrants that the Manager has been notified of and has agreed to the terms of
this Section 4(c), and the Manager has further agreed, for the benefit of the
Noteholders, not to accept any payment in violation of this Section 4(c).
5. PREPAYMENT.
(a) The Company may, in its sole discretion, determine to
prepay this Note, or any portion thereof subject to subparagraph (b) below, on
or before the Maturity Date by providing a written notice of prepayment to the
Holder and the Collateral Agent of such intent setting forth the amount being
prepaid (a "Prepayment Notice"). Upon receipt of a Prepayment Notice, the
Company shall pay in cash to the Holder (i) the outstanding principal balance
due to the Holder pursuant to this Note, (ii) all accrued and unpaid Interest,
and (iii) the Prepayment Amount on or before the tenth (10th) Business Day
following its receipt of such Prepayment Notice (such tenth Business Day being
referred to herein as the "Prepayment Date").
(b) For purposes hereof, "Prepayment Amount" shall mean : (i)
commencing upon Closing and terminating 12 months from Closing, the Company
shall pay the Holder a prepayment amount, on a pro rata basis with all other
holders of Notes issued in this offering, equal to 2% of the face value of this
Note (or a portion thereof); (ii) month 13 through month 24 from the Closing,
the Company shall pay a prepayment amount, on a pro rata basis with all other
holders of Notes issued in this offering, equal to 1% of their investment (or
portion thereof); and (iii) month 25 through 36 from the Closing, the Company
shall pay no prepayment amount.
(c) The Prepayment Amount shall not be less than a redemption
of a minimum of 1/8 times the outstanding principal amount of this Note.
6. SECURITY
All interest, principal payments or other amounts due under
this Note or to become due are secured by the SECURITY AGREEMENT, executed
simultaneously herewith, securing all of the assets of the Company.
7. MISCELLANEOUS.
(a) Failure to Exercise Rights not Waiver. No failure or delay
on the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude any other or further
exercise thereof. All rights and remedies of the Holder hereunder are cumulative
and not exclusive of any rights or remedies otherwise available.
(b) Notices. Any notice, demand or request required or
permitted to be given by the Company or the Holder pursuant to the terms of this
Agreement shall be in writing and shall be deemed delivered (i) when delivered
personally or by verifiable facsimile transmission, unless such delivery is made
on a day that is not a Business Day, in which case such delivery will be deemed
to be made on the next succeeding Business Day, (ii) on the next Business Day
after timely delivery to an overnight courier and (iii) on the Business Day
actually received if deposited in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed as follows:
to the Company:
Ashley Bloom, Treasurer
InterFund Investment Fund I, LLC
7100 W. Camino Real
Suite 402
Boca Raton, FL 33433
(561) 392-0404
to the Holder:
to the address on the last page of the Note Purchase
Agreement.
A party may from time to time change its address for notices by giving at least
10 days' written notice of such changed address to the other party hereto.
(c) Amendments. No amendment, modification or other change to,
or waiver of any provision of, this Note may be made unless such amendment,
modification, change or waiver is set forth in writing and is executed and
delivered by the Company and the Holder. Any amendment or modification to this
Note, and any waiver of any of the terms hereof shall be subject to the
Collateral Agency Agreement.
(d) Transfer of Note. The Holder may not sell, transfer or
otherwise dispose of all or any part of this Note (including without limitation
pursuant to a pledge) to any person or entity unless such sale, transfer or
disposition complies with the applicable requirements of the Note Purchase
Agreement. As part of any permitted transfer of the Note, the transferee shall
also become bound by the terms of the Note Purchase Agreement. THIS NOTE HAS NOT
BEEN REGISTERED FOR SALE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND
THEREFORE ABSOLUTELY NO SALE, PLEDGE, ASSIGNMENT OR OTHER TRANSFER MAY OCCUR
WITHOUT STRICT COMPLIANCE WITH THE NOTE PURCHASE AGREEMENT.
(e) Lost or Stolen Note. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of this Note, and (in the
case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Note, if mutilated, the Company shall execute and deliver to the Holder a new
Note identical in all respects to this Note.
(f) Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of Florida, without giving
effect to the conflict of law provisions thereof.
(g) Successors and Assigns. The terms and conditions of this
Note shall inure to the benefit of and be binding upon the respective successors
(whether by merger or otherwise) and permitted assigns of the Company and the
Holder. The Company may not assign its rights or obligations under this Note
except as specifically required or permitted pursuant to the terms hereof and of
the Purchase Agreement. Any transferee of all or any part of the Note shall also
become party to the Note Purchase Agreement.
(h) Waiver. The Company and all other makers and endorsers of
this Note hereby forever waive presentment, protest, notice of dishonor, [notice
of non-payment] and, except as expressly set forth herein, all other notices in
connection with the delivery, acceptance, performance or enforcement of this
Note.
[Signature Page to Follow]
IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS NOTE TO BE SIGNED IN ITS NAME BY
ITS DULY AUTHORIZED OFFICER ON THE DATE FIRST ABOVE WRITTEN.
INTERFUND INVESTMENT FUND I, LLC.
By:____________________________
Name: Ashley Bloom
Title: Treasurer of Managing Member