SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-2262
COMMERCIAL ASSETS, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1501789
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3410 South Galena Street, Suite 210 80231
Denver, Colorado (Zip Code)
(Address of Principal Executive Offices)
(303) 614-9410
(Registrant's telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___.
As of May 5, 2000, 10,396,529 shares of common stock were outstanding.
<PAGE>
COMMERCIAL ASSETS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Financial Statements:
Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999....................................... 1
Statements of Income for the three months
ended March 31, 2000 and 1999 (unaudited)................. 2
Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 (unaudited)..................... 3
Notes to Financial Statements (unaudited)................. 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 12
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K.......................... 22
(i)
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Real estate, net of accumulated depreciation of $1,821 and $1,329 $ 65,767 $ 64,273
Investments in participating mortgages 2,266 2,148
Investment in real estate joint venture 1,951 1,932
Short-term investments 11,926 12,502
Cash and cash equivalents 12,905 4,664
Investment in and note receivable from Westrec 3,201 3,563
Investment in Asset Investors 1,383 1,396
Investment in home sales company 1,376 --
CMBS bonds 1,746 1,753
Other assets, net 3,487 4,852
---------- ----------
Total Assets $ 106,008 $ 97,083
========== ==========
LIABILITIES
Secured long-term notes payable $ 30,551 $ 20,442
Accounts payable and accrued liabilities 1,550 1,747
Management fees payable to related parties 211 198
---------- ----------
32,312 22,387
---------- ----------
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 615 615
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, 25,000 shares authorized; no shares
issued or outstanding -- --
Common stock, par value $.01 per share, 75,000 shares authorized; 10,393 and
10,393 shares issued; and 10,320 and 10,320 shares outstanding, respectively 104 104
Additional paid-in capital 77,018 77,018
Dividends in excess of accumulated earnings (3,600) (2,600)
Treasury stock, 73 and 73 shares at cost (441) (441)
---------- ----------
73,081 74,081
---------- ----------
Total Liabilities and Stockholders' Equity $ 106,008 $ 97,083
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
---------
2000 1999
---- ----
Rental property operations
<S> <C> <C>
Rental and other property revenues $ 1,783 $ --
Income from participating mortgages and leases 77 587
Property operating expenses (661) --
Depreciation (493) (89)
-------- --------
Income from rental property operations 706 498
-------- --------
Interest and other income 458 701
Interest expense (364) --
General and administrative expenses (121) (133)
Related-party management fees (193) (80)
Equity in loss of home sales company (191) --
Equity in earnings of Asset Investors 11 --
CMBS bonds revenue 39 38
Related-party acquisition fees -- (42)
-------- --------
Net income $ 345 $ 982
========= ========
Basic and diluted earnings per share $ 0.03 $ 0.09
========= ========
Weighted average common shares outstanding 10,320 10,364
Weighted average common shares and common share equivalents outstanding 10,320 10,365
Dividends paid per share $ 0.13 $ 0.13
========= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) Three Months Ended
March 31,
---------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 345 $ 982
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 504 89
Amortization of premium on short-term investments -- 47
Amortization of discount on secured long-term notes payable 79 --
Accrued income on participating mortgages (15) (61)
Equity in earnings of Asset Investors (11) --
Equity in earnings of real estate joint ventures (10) --
Equity in loss of home sales company 191 --
Increase (decrease) in accounts payable and accrued liabilities (198) 67
Increase in other assets (327) (365)
-------- --------
Net cash provided by operating activities 558 759
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate -- (8,323)
Collections on short-term investments 576 4,774
Proceeds from sale of short-term investments -- 2,414
Investments in participating mortgages, net (103) (603)
Investments in real estate joint ventures (19) (24)
Purchase of inventory contributed to home sales company (864) --
Capital replacements and improvements (858) (44)
Collections on note receivable from Westrec 362 --
Dividends from Asset Investors 29 --
Distributions from real estate joint ventures 9 --
Collections on CMBS bonds 7 58
-------- --------
Net cash used in investing activities (861) (1,748)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured long-term notes payable 10,110 --
Dividends paid (1,345) (1,347)
Payment of loan costs (141) --
Principal paydowns on secured long-term notes payable (80) --
-------- --------
Net cash provided by (used in) financing activities 8,544 (1,347)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,241 (2,336)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,664 3,292
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,905 $ 956
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
COMMERCIAL ASSETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Organization
Commercial Assets, Inc. ("CAX" and, together with its subsidiaries, the
"Company") is a Delaware corporation that has interests in manufactured home
communities and has elected to be taxed as a real estate investment trust
("REIT"). Prior to June 10, 1999, CAX was a Maryland corporation. Effective June
10, 1999, the Company's stockholders approved its reincorporation in Delaware.
The Company's common stock, par value $.01, (the "Common Stock") is listed on
the American Stock Exchange under the symbol "CAX."
Prior to 1998, the Company owned subordinate classes of Commercial Mortgage
Backed Securities ("CMBS bonds"). In November 1997, the Company resecuritized
its subordinate CMBS bond portfolio. The sale resulted in the Company receiving
$77,693,000 cash and retaining a residual interest in an owner trust arising
from the resecuritization transaction (see Note K). In the third quarter of
1998, the Company decided to invest in manufactured home communities and as of
March 31, 2000 has invested approximately $70 million in 12 manufactured home
communities (including real estate joint ventures) with 1,850 developed
homesites and 1,360 undeveloped homesites.
The Company's daily operations are performed by a manager pursuant to an
agreement currently in effect through December 31, 2000 ("the Management
Agreement"). Since November 1997, Asset Investors Corporation (together with its
subsidiaries, "Asset Investors") has been the manager. Asset Investors owns 27%
of the Company's Common Stock. The Management Agreement is subject to the
approval of a majority of the Company's independent directors and can be
terminated by either party, without cause, with 60 days' notice. Since the
Company has no employees, the officers of Asset Investors are also officers of
the Company.
B. Proposed Merger with Asset Investors
The Company and Asset Investors have agreed to merge, subject to the approval by
both (a) a majority of Asset Investors' outstanding shares and (b) two-thirds of
the Company's outstanding shares. Asset Investors owns approximately 27% of the
Company's outstanding shares and has agreed to vote these shares in favor of the
merger. Asset Investors will issue 0.4075 shares of its common stock for each
outstanding share of the Company's Common Stock. Alternatively, the Company's
stockholders may elect to receive $5.75 per share in cash for up to 3,549,868
shares of the Company's Common Stock with any remaining shares receiving 0.4075
shares of Asset Investors common stock. Asset Investors and the officers and
directors of Asset Investors and the Company have agreed to elect to receive
shares of Asset Investors common stock for all shares of the Company's Common
Stock that they own.
C. Presentation of Financial Statements
The Condensed Consolidated Financial Statements of the Company have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. These financial statements reflect all
adjustments, consisting of only normal recurring accruals, which, in the opinion
of management, are necessary to present fairly the financial position, results
of operations and cash flows of the Company as of March 31, 2000 for the three
month period then ended, and for all prior periods presented. These statements
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<PAGE>
are condensed and do not include all the information required by generally
accepted accounting principles ("GAAP") in a full set of financial statements.
These financial statements should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
Certain reclassifications have been made in the 1999 Condensed Consolidated
Financial Statements to conform to the classifications used in the current year.
The effect of such reclassifications on amounts previously reported is
immaterial.
D. Summary of Significant Accounting Policies
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The Company's
investment in Asset Investors is recorded under the equity method.
Rental Properties and Depreciation
Rental properties are recorded at cost less accumulated depreciation, unless
considered impaired. If events or circumstances indicate that the carrying
amount of a property may be impaired, the Company will make an assessment of its
recoverability by estimating the future undiscounted cash flows, excluding
interest charges, of the property. If the carrying amount exceeds the aggregate
future cash flows, the Company would recognize an impairment loss to the extent
the carrying amount exceeds the fair value of the property. As of March 31,
2000, management believes that no impairment losses exist based on periodic
reviews. No impairment losses were recognized in the three months ended March
31, 2000 and 1999.
Depreciation is computed using the straight line method over an estimated useful
life of 25 years for land improvements and buildings. Significant renovations
and improvements, which improve or extend the useful life of the asset, are
capitalized and depreciated over the remaining estimated life. In addition, the
Company capitalizes direct and indirect costs (including interest, taxes and
other costs) in connection with the development of additional homesites within
its manufactured home communities. Maintenance, repairs and minor improvements
are expensed as incurred.
Investments in Participating Mortgages
The Company has loans secured by real estate which provide for an interest rate
return plus up to 50% of net profits, cash flows and sales proceeds from the
underlying real estate. The Company accounts for these investments as loans when
(a) the Company does not have an interest in the borrower and either (b) the
borrower has a substantial equity investment in the real estate collateral or
(c) the Company has recourse to other substantial tangible assets of the
borrower. As such, the Company records interest income based on the rate
provided for in the loan and records its share of any net profits or gains from
the sale of the underlying real estate when realized. If the above requirements
are not met, then the loan is accounted for as an equity investment in real
estate under the equity method of accounting.
- 5 -
<PAGE>
Investment in Real Estate Joint Venture
An investment in a real estate joint venture in which the Company does not
control the joint venture's activities is accounted for under the equity method
of accounting.
Investment in Home Sales Company
The Company owns 35% of the nonvoting common stock of a corporation that sells
manufactured homes. This investment is accounted for under the equity method of
accounting.
Investment in and Note Receivable from Westrec
The Company classifies its investment in and note receivable from Westrec as
available-for-sale and carries this at estimated fair value in the financial
statements. The Company believes that the contractual amounts provided for in
the note receivable and the agreement under which the Company can sell its
shares of Westrec common stock approximates fair value at March 31, 2000.
Revenue Recognition
The Company derives its income from the rental of homesites. The leases entered
into by residents for the rental of the site are generally for terms not longer
than one year and the rental revenues associated with the leases are recognized
when earned and due from residents.
Interest on participating mortgages is recorded based upon outstanding balances
and interest rates per the terms of the mortgages. In addition, the Company
evaluates the collectibility of any unpaid interest and provides reserves as
necessary. As of March 31, 2000, there is no reserve for uncollected interest on
the participating mortgages. Rent on ground leases is recognized when earned and
due from the lessee.
Deferred Financing Costs
Fees and costs incurred in obtaining financing are capitalized. Such costs are
amortized over the terms of the related loan agreements and are charged to
interest expense.
Capitalized Interest
Interest is capitalized on development projects during periods of construction
or development. Capitalized interest was $220,000 and $0 during the three months
ended March 31, 2000 and 1999, respectively.
Income Taxes
The Company has elected to be taxed as a REIT as defined under the Internal
Revenue Code of 1986, as amended (the "Code"). In order for the Company to
qualify as a REIT, at least 95% of its gross income in any year must be derived
from qualifying sources.
As a REIT, the Company generally will not be subject to federal income taxes at
the corporate level if it distributes at least 95% of its REIT taxable income to
its stockholders. REITs are also subject to a number of other organizational and
operational requirements. If the Company fails to qualify as a REIT in any
taxable year, its taxable income will be subject to federal income tax at
regular corporate rates (including any applicable alternative minimum tax). Even
- 6 -
<PAGE>
if the Company qualifies as a REIT, it may be subject to certain state and local
income taxes and to federal income and excise taxes on its undistributed income.
Earnings Per Share
Basic earnings per share for the three months ended March 31, 2000 and 1999 are
based upon the weighted-average number of shares of Common Stock outstanding
during each such period. Diluted earnings per share reflect the effect of
dilutive, unexercised stock options of 0 and 1,000 shares for the three months
ended March 31, 2000 and 1999, respectively.
Treasury Stock
Treasury stock is recorded at cost. In addition, the Company purchased 114,000
shares of Asset Investors' common stock during the second quarter of 1999.
Because Asset Investors owns 27% of the Company's Common Stock, the Company is
deemed to have an interest in 48,000 shares of its Common Stock and has also
recorded this as treasury stock.
Statements of Cash Flows
For purposes of reporting cash flows, cash maintained in bank accounts, money
market funds and highly-liquid investments with an initial maturity of three
months or less are considered to be cash and cash equivalents. The Company made
interest payments of $545,000 and $0 during the three months ended March 31,
2000 and 1999, respectively.
Non-cash operating, investing and financing activities for the three months
ended March 31, 2000 and 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
Accrued initial capital expenditures on real estate purchases $ -- $ 300
Acquisitions of real estate by:
Cancellation of notes receivable 1,174 --
Assumption of accounts payable and accrued liabilities, net of
other assets received 63 --
Purchase of inventory and other assets, net of accounts payable and
accrued liabilities assumed, by cancellation of notes receivable 621 --
Investment in home sales company by contribution of inventory and
other assets, net of accounts payable and accrued liabilities
transferred 1,569 --
</TABLE>
E. Short-term Investments
During 1998, the Company acquired short-term investments consisting of
mortgage-backed bonds guaranteed by Federal Home Loan Mortgage Corporation and
Federal National Mortgage Association. These investments are classified as
available-for-sale, and the fair market value at March 31, 2000 approximates the
carrying value of $11,926,000. During the three months ended March 31, 1999, the
Company had $2,414,000 in proceeds from the sale of short-term investments and
realized no gain (loss) from such sales. The Company had no sales during the
three months ended March 31, 2000. The Company determined its basis in the sold
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<PAGE>
investments using the specific identification method.
F. Real Estate
Real estate at March 31, 2000 and December 31, 1999 was (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Land $ 15,290 $ 15,290
Land improvements and buildings 52,298 50,312
---------- ----------
67,588 65,602
Less accumulated depreciation (1,821) (1,329)
---------- ----------
Real estate, net $ 65,767 $ 64,273
========== ==========
</TABLE>
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, clubhouses, maintenance buildings and common amenities.
Two manufactured home communities have been leased to a third party. The first
lease involves a community acquired by the Company at a cost of $1.4 million and
is for a term of 50 years. The Company receives initial annual lease payments
equal to 9% of its cost. The annual lease payments increase by 4% per annum over
the prior year's lease payments until the annual lease payment equals 13% of the
Company's cost. In addition, the Company receives additional rent equal to 50%
of the lessee's net cash flow from the property. In the event of a sale of the
property, the Company receives all proceeds until it has realized its total
purchase price of the property plus a 13% per annum rate of return. The Company
then receives 50% of any sales proceeds in excess of such amount. The Company
terminated the lease on January 1, 2000 by canceling $187,000 in loans to the
lessee.
The other leased community involves two phases and has been leased to the same
third party for 50 years. Annual lease payments on the first phase during 1999
are $890,000 and increases by 4% per annum. There are no lease payments on the
second phase until the sites are ready for homes, at which time, the annual
lease payments on the second phase will be equal to 10% times the costs incurred
in developing this phase. In addition, the lessee pays to the Company additional
rent equal to 50% of the lessee's net cash flow from the property. In the event
of a sale, the Company receives 50% of any sales proceeds in excess of the
Company's cost. The Company terminated the lease on January 1, 2000 by canceling
$186,000 in loans to the lessee.
G. Investments in Participating Mortgages
During 1998, the Company made investments in participating mortgages secured by
three manufactured home communities and adjoining land. The non-recourse notes
accrued interest at 15% per annum and paid interest at 9% per annum through
August 1999, with the pay rate increasing 1% each year thereafter to a maximum
of 12% per annum. The loans were scheduled to mature in 2007 and 2008. The
Company also received additional interest equal to 50% of the net profits and
cash flows from the properties. In August 1999, the Company purchased the three
communities and adjoining land by canceling the participating mortgages and
releasing additional collateral pledged on the mortgages.
The Company also has investments in participating mortgages secured by
individual homes and homesites within two manufactured home communities. These
non-recourse mortgages accrue interest at 10% and pay interest from the cash
flows from the homes and homesites. The Company also receives additional
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<PAGE>
interest equal to 50% of the net profits and cash flows from the homes and
homesites.
As of March 31, 2000, the Company had investments in participating mortgages of
$2,266,000. The Company had income from participating mortgages of $54,000 and
$331,000, respectively, for the three months ended March 31, 2000 and 1999.
H. Investments in Real Estate Joint Ventures
The Company has a $1,322,000 investment in a joint venture involving a
manufactured home community. The Company receives a priority return from the
venture until the Company has received an annual amount equal to 9% times
$1,250,000 for 1999. The Company's subsequent annual priority return increases
by 5% over the prior year's amount. The other venturer then receives a similar
percentage return on $300,000. In the event the property is sold, the Company
receives all proceeds until it has received its investment plus 20% per annum.
The other venturer then receives all proceeds until it has received its
investment plus 20% per annum. Any excess sales proceeds are then shared
equally. The Company did not record any income from this real estate joint
venture during the three months ended March 31, 2000 and 1999.
In November 1999, the Company invested $624,000 in a joint venture involving a
manufactured home community. The Company receives a priority annual return from
the venture equal to 9% times $690,000 through 2000. After 2000, the Company's
priority return increases by 4% annually. Thereafter, the Company receives 20%
of any profits and cash flows of the venture in excess of the above priority
returns. During the three months ended March 31, 2000, the Company recorded
$15,000 in income from this joint venture.
I. Investment in Asset Investors
During 1999, the Company purchased 114,000 shares (approximately 2%) of the
common stock of Asset Investors. The Company has recorded its investment in
Asset Investors under the equity method because Asset Investors manages the
Company and owns approximately 27% of the Company's Common Stock. The Company
recorded $11,000 and $0 in equity in earnings of Asset Investors for the three
months ended March 31, 2000 and 1999, respectively.
J. Investment in Home Sales Company
Effective January 1, 2000, the Company acquired $621,000 of inventory and other
assets, net of accounts payable and accrued liabilities assumed, in exchange for
the cancellation of notes receivable. The Company then contributed all of its
inventory and related home sales assets and liabilities to a home sales company
in exchange for 35% of the nonvoting common stock of the home sales company.
Asset Investors owns the remaining 65% of the home sales company's nonvoting
common stock and certain officers of the Company own all of the home sales
company's voting common stock. The nonvoting common stock represents 99% of all
outstanding shares of the home sales company's capital stock.
During the three months ended March 31, 2000, the Company invested $1,569,000 in
the home sales company and had equity in the losses of the home sales company of
$191,000.
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<PAGE>
K. CMBS Bonds
In November 1997, the Company sold its portfolio of CMBS bonds and retained a
residual interest in the owner trust used in the sale. Since the residual
interest represents the first-loss class of the portfolio and provides credit
support for the senior debt securities, the Company valued the equity interest
at its then estimated fair value of $2,000,000. The net book value at March 31,
2000 is $1,746,000 which the Company believes approximates fair value. The
Company had no sales of CMBS bonds during the three months ended March 31, 2000
and 1999.
L. Investment in and Note Receivable from Westrec
Prior to deciding to acquire manufactured home communities, the Company
evaluated acquiring interests in marinas and, in connection with this, acquired
a 12% interest in Westrec Marina Management, Inc. ("Westrec") and made a loan to
an affiliate of Westrec. In the third quarter of 1998, the Company decided to
invest in manufactured home communities instead of marinas. The Company has
recorded its investment in and note receivable from Westrec at the sum of the
amount for which the Company can re-sell its interest in Westrec plus the
outstanding balance of the note receivable.
M. Secured Long-Term Notes Payable
The following table summarizes the Company's secured long-term notes payable (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
Fixed rate, ranging from 7.4% to 8.3%, fully amortizing, non-recourse
<S> <C> <C>
notes maturing at various dates in 2019 and 2020 $ 22,875 $ 12,815
7.7% fixed rate, partially amortizing, non-recourse note maturing in 2007 2,947 2,950
Recourse, fully amortizing note discounted at 7.00%, maturing in 2002 4,729 4,677
--------- ----------
$ 30,551 $ 20,442
========= ==========
</TABLE>
Real estate assets which secure the long-term notes payable had a net book value
of $62,788,000 at March 31, 2000.
N. Management Fees
The Company operates under a management agreement, pursuant to which the manager
advises the Company on its business and oversees its daily operations, subject
to the supervision of the Company's Board of Directors. Asset Investors has been
the manager since November 1997. The Management Agreement has been extended
through December 31, 2000, except that it will terminate if the Company merges
with Asset Investors. The Management Agreement provides that the manager
receives a "Base Fee," an "Acquisition Fee" and an "Incentive Fee." The Base Fee
is payable quarterly in an amount equal to 1% per annum of the Company's average
net book value of real estate-related assets. The Acquisition Fee equals 0.5% of
the cost of each real estate-related asset acquired. Acquisition Fees are
expensed because such fees are paid to Asset Investors, owner of 27% of the
Company's Common Stock. These fees would be capitalized if they were paid to an
unrelated third party. The Incentive Fee equals 20% of the amount by which the
Company's Funds From Operations, less an annual capital replacement reserve of
at least $50 per developed homesite, exceeds the amount calculated by
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<PAGE>
multiplying the Company's average net worth by a percentage equal to the
Ten-Year United States Treasury rate plus 1%. In general, Funds From Operations
is equal to net income plus depreciation, amortization and acquisition fees.
Management fees during the three months ended March 31, 2000 and 1999 were (in
thousands):
Three Months Ended
March 31,
---------------------------------------
2000 1999
----------------- -----------------
Base Fees $ 193 $ 80
Acquisition Fees -- 42
Incentive Fees -- --
-------- ------
$ 193 $ 122
======== ======
O. Commitments and Contingencies
In connection with the acquisition of a manufactured home community, the Company
entered into an earn-out agreement with respect to 154 unoccupied homesites. The
Company will pay $17,000 to the former owner for each newly occupied homesite.
During the three months ended March 31, 2000 and 1999, the Company paid $86,000
and $0, respectively, for homesites that became occupied. At March 31, 2000,
there were 148 homesites subject to the earnout.
The Company has agreed to acquire from time-to-time homesites subject to ground
leases. The purchase price for each homesite will be equal to the base annual
rent provided for in the ground lease divided by 9%. The Company is not required
to acquire these homesites in groups of less than 10. The maximum number of
homesites the Company might purchase is approximately 500 for total
consideration of approximately $20 million. The Company purchased no homesites
during the three months ended March 31, 2000 or 1999.
The Company has agreed to invest up to an additional $680,000 in a real estate
joint venture in four equal, annual installments of $170,000 beginning in
November 2000.
In connection with the acquisition of a property in November 1999, the Company
entered into an earn-out agreement whereby it will pay the former owner an
amount equal to the increase in the property's net operating income divided by
9.5% until the Company pays a total of $2,160,000. No amount was paid during the
three months ended March 31, 2000.
In September 1999, four of the Company's stockholders, individually and as
purported representatives of the Company's stockholders, except Asset Investors
and its affiliates, filed three purported class action lawsuits in Delaware
against the Company, the members of the board of directors and certain officers
of Asset Investors and the Company. These lawsuits alleged that the defendants
breached their fiduciary duties to the Company's stockholders in connection with
the Company's proposed merger with Asset Investors and the Company's recent
reincorporation in Delaware. In November 1999, these lawsuits were consolidated
into a single lawsuit. In March 2000, the parties entered into a settlement
agreement, subject to the court's approval, which amended the merger agreement
as follows:
o the Company's stockholders, other than Asset Investors and the officers and
directors of Asset Investors and the Company, may elect to receive $5.75 in
cash per share for up to 3,549,868 shares of the Company's Common Stock
with any remaining shares to receive 0.4075 shares of Asset Investors
common stock; and
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<PAGE>
o the percentage of votes of the Company's Common Stock needed to approve the
merger was increased from a simple majority to two-thirds.
P. Operating Segments
The Company began investing in manufactured home communities in August 1998 and
management assesses the performance of the Company as one operating segment.
Q. Common Stock and Dividends
During the three months ended March 31, 2000 and 1999, the Company paid $0.13
and $0.13 per share dividends on Common Stock totaling $1,345,000 and
$1,347,000, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Introduction
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this report and our other filings with the Securities Exchange
Commission under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended, as well as information communicated orally or
in writing between the dates of these SEC filings, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may include projections of our cash flow,
dividends and anticipated returns on real estate investments. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. These factors include: general
economic and business conditions; interest rate changes; financing and
refinancing risks; risks inherent in owning real estate or debt secured by real
estate; future development rate of homesites; competition; the availability of
real estate assets at prices which meet our investment criteria; our ability to
reduce expense levels, implement rent increases, use leverage and other risks
set forth in our SEC filings.
In this report, the words "the Company," "we," "our" and "us" refer to
Commercial Assets, Inc., a Delaware corporation, our predecessor, Commercial
Assets, Inc., a Maryland corporation and, where appropriate, our subsidiaries.
Business
Company Background
We have been a Delaware corporation since June 10, 1999. Prior to this, we were
a Maryland corporation that was formed in August 1993. We have elected to be
treated for United States federal income tax purposes as a real estate
investment trust or "REIT". We are engaged in the ownership, acquisition,
development and expansion of manufactured home communities. Initially, we were a
wholly-owned subsidiary of Asset Investors Corporation. Asset Investors
contributed $75 million to our initial capital and in October 1993, Asset
Investors distributed 70% of our common stock to Asset Investors' stockholders.
Asset Investors currently owns 27% of our outstanding common stock and provides
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management services to us. Our shares of common stock are listed on the American
Stock Exchange, Inc. under the symbol "CAX."
Prior to 1998, we owned subordinate classes of Commercial Mortgage Backed
Securities or "CMBS bonds". CMBS bonds generally are debt instruments that are
backed by mortgage loans on commercial real estate. The principal and interest
payments on the underlying mortgage assets are allocated among the several
classes or "tranches" of a series of CMBS bonds. Our subordinate tranches of
CMBS bonds included "first-loss" tranches, which bore the most risk in the event
of a default on the underlying mortgages and provided credit support for the
more senior tranches. In 1997, we decided to redeploy our assets into other
types of real estate investments in order to reduce the risk of our portfolio.
We restructured our CMBS bonds in November 1997 by selling, redeeming and
resecuritizing our various CMBS bonds from which we received $77.7 million in
cash and retained a small residual interest in two CMBS bonds. During most of
1998, we invested our funds in short-term investments pending our decision as to
the type of real estate assets in which we would invest.
In the third quarter of 1998, we decided to acquire interests in manufactured
home communities. As of March 31, 2000, we held interests as owner, ground
lessor or mortgage lender, including participating mortgages, in 12 manufactured
home communities with a total of 1,850 developed homesites (sites with homes in
place) and 1,360 undeveloped homesites.
Proposed Merger with Asset Investors
In August 1999, we agreed to merge with Asset Investors. Asset Investors has
agreed to issue 0.4075 shares of its common stock for each share of our common
stock. Alternatively, our stockholders may elect to receive $5.75 per share in
cash for up to 3,549,868 shares of our common stock with any remaining shares of
our common stock receiving 0.4075 shares of Asset Investors common stock. Asset
Investors and the officers and directors of Asset Investors and Commercial
Assets have agreed to elect to receive Asset Investors common stock for all
shares of our common stock that they own. The merger requires the approval by a
majority of the outstanding shares of Asset Investors common stock and
two-thirds of the outstanding shares of our common stock. Asset Investors owns
27% of our common stock and has agreed to vote these shares in favor of the
merger.
Industry Background
A manufactured home community is a residential subdivision designed and improved
with sites for the placement of manufactured homes and related improvements and
amenities. Manufactured homes are detached, single-family homes which are
produced off-site by manufacturers and installed on sites within the community.
Manufactured homes are available in a variety of designs and floor plans,
offering many amenities and custom options.
Modern manufactured home communities are similar to typical residential
subdivisions containing centralized entrances, paved streets, curbs and gutters
and parkways. The communities frequently provide a clubhouse for social
activities and recreation and other amenities, which may include golf courses,
swimming pools, shuffleboard courts and laundry facilities. Utilities are
provided by or arranged for by the owner of the community. Community lifestyles,
primarily promoted by resident managers, include a wide variety of social
activities that promote a sense of neighborhood. The communities provide an
attractive and affordable housing alternative for retirees, empty nesters and
start-up or single-parent families. Manufactured home communities are primarily
characterized as "all age" communities and "adult" communities. Adult
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communities typically require that at least 80% of the tenants must be at least
55 years old, and in all age communities there is no age restriction on tenants.
The owner of a home in our communities leases from us the site on which the home
is located. Typically, the leases are on a month-to-month or year-to-year basis,
renewable upon the consent of both parties or, in some instances, as provided by
statute. In some circumstances, we offer a 99-year lease to tenants in order to
enable the tenant to have some benefits of an owner of real property, including
creditor protection laws in some states. These leases can be cancelled,
depending on state law, for non-payment of rent, violation of community rules
and regulations or other specified defaults. Generally, rental rate increases
are made on an annual basis. The size of these rental rate increases depends
upon the policies that are in place at each community. Rental increases may be
based on fixed dollar amounts, percentage amounts, inflation indexes, or they
may depend entirely on local market conditions. We own interests in the
underlying land, utility connections, streets, lighting, driveways, common area
amenities and other capital improvements and are responsible for enforcement of
community guidelines and maintenance. Each homeowner within the manufactured
home communities is responsible for the maintenance of his or her home and
leased site, including lawn care in some communities.
The ownership of manufactured home communities, once fully occupied, tends to be
a stable, predictable asset class. The cost and effort involved in relocating a
home to another manufactured home community generally encourages the owner of
the home to resell it within the community.
Growth and Operating Strategies
We measure our economic profitability based on Funds From Operations or "FFO",
less an annual capital replacement reserve of at least $50 per developed
homesite. This reserve is management's estimate based on its experience in
owning, operating and managing manufactured home communities. We believe that
the presentation of FFO when considered with the financial data determined in
accordance with generally accepted accounting principles, provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to us, nor should it
be considered as an alternative to net income as an indicator of operating
performance. The Board of Governors of the National Association of Real Estate
Investment Trusts, also known as NAREIT, defines FFO as net income or loss,
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization, excluding amortization of financing
costs, and after adjustments for unconsolidated partnerships and joint ventures.
We calculate FFO beginning with the NAREIT definition and include adjustments
for property acquisition fees that were expensed under generally accepted
accounting principles because the fees were paid to Asset Investors, an
affiliate.
We believe that the presentation of FFO provides investors with measurements
which help facilitate an understanding of our ability to make required dividend
payments, capital expenditures and principal payments on our debt. Since FFO
excludes depreciation and other real estate related expenses, FFO may be
materially different from net income. Therefore, FFO should not be considered as
an alternative to net income or net cash flows from operating activities, as
calculated in accordance with generally accepted accounting principles, as an
indication of our operating performance or liquidity.
FFO is not necessarily indicative of cash available to fund our cash needs,
including our ability to make distributions. We use FFO in measuring our
operating performance because we believe that the items that result in a
difference between FFO and net income do not impact the ongoing operating
performance of a real estate company. Also, we believe that other real estate
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companies, analysts and investors utilize FFO in analyzing the results of real
estate companies. Our basis of computing FFO is not necessarily comparable with
that of other REITs.
Our primary objective is to maximize stockholder value by increasing the amount
and predictability of our FFO on a per share basis, less a reserve for capital
replacements. We seek to achieve this objective primarily by:
o improving net operating income from our existing portfolio of manufactured
home communities; and
o acquiring additional communities at values that are accretive on a per
share basis.
Management has adopted specific policies to accomplish our objective of
increasing the amount and predictability of our FFO on a per share basis, less a
reserve for capital replacements. These policies include:
o selectively acquiring manufactured home communities that have potential
long-term appreciation of value through, among other things, rent
increases, expense efficiencies and in-park homesite development;
o developing and maintaining resident satisfaction and a reputation for
quality communities through maintenance of the physical condition of our
communities and providing activities that improve the community lifestyle;
o improving the profitability of our communities through aggressive
management of occupancy, community development and maintenance and expense
controls;
o using debt leverage to increase our financial returns;
o reducing our exposure to interest rate fluctuations by utilizing long-term,
fixed-rate, fully-amortizing debt instead of higher cost, short term debt;
o ensuring the continued maintenance of our communities by providing a
minimum $50 per developed homesite per year for capital replacements;
o seeking to reduce our exposure to downturns in regional real estate markets
by diversifying our portfolio of communities since substantially all of our
properties are in Florida and Arizona; and
o recruiting and retaining capable community management personnel.
Future Acquisitions
In 1998, when we decided to enter the manufactured home community business, we
began to implement a business plan which called for the investment of our
capital in the acquisition of manufactured home communities. We have focused on
identifying acquisition opportunities that we believe provide returns that are
accretive to our stockholders.
Our acquisition of interests in manufactured home communities takes many forms.
In many cases we acquire fee title to the community. When a community has a
significant number of unleased homesites, we seek a stable return from the
community during the development and lease-up phase while also seeking to
participate in future increased earnings after development is completed and the
sites are leased. We seek to accomplish this goal by making loans to development
companies in return for participating mortgages that are non-recourse to the
borrowers and secured by the property. In general, our participating mortgages
earn interest at fixed rates and, in addition, participate in the profits or
revenues from the community. This profit participation right generally entitles
us to 50% of the net income and cash flow generated by the community. As an
alternative, we sometimes enter into ground leases with development companies
having similar terms to our participating mortgages.
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<PAGE>
We believe that acquisition opportunities for manufactured home communities are
attractive at this time because of:
o the increasing acceptability of and demand for manufactured homes, as shown
by the growth in the number of individuals living in manufactured homes;
and
o the continued constraints on development of new manufactured home
communities.
We are actively seeking to acquire additional communities and are currently
engaged in various stages of negotiations relating to the possible acquisition
of a number of communities. The acquisition of interests in additional
communities could also result in our becoming increasingly leveraged as we incur
debt in connection with these transactions.
As of March 31, 2000, we have invested approximately $70 million to acquire
interests in 12 manufactured home communities that are located in Arizona,
Florida and California. These communities have a total of 1,850 developed
homesites (sites with homes in place) and 1,360 undeveloped homesites.
When evaluating potential acquisitions, we consider such factors as:
o the location and type of property;
o the value of the homes located on the leased land;
o the improvements, such as golf courses and swimming pools, at the property;
o the current and projected cash flow of the property and our ability to
increase cash flow; o the potential for capital appreciation of the
property;
o the terms of tenant leases, including the potential for rent increases;
o the tax and regulatory environment of the community in which the property
is located;
o the potential for expansion of the physical layout of the property and the
number of sites;
o the occupancy and demand by residents for properties of a similar type in
the vicinity;
o the credit of the residents in a community;
o the prospects for liquidity through sale, financing or refinancing of the
property;
o the competition from existing manufactured home communities;
o the potential for the construction of new communities in the area; and
o the replacement cost of the property.
Expansion of Existing Communities
We will seek to increase the number of homesites and the amount of earnings
generated from our existing portfolio of manufactured home communities through
marketing campaigns aimed at increasing occupancy. We will also seek expansion
through future acquisitions and expanding the number of sites available to be
leased to residents if justified by local market conditions and permitted by
zoning and other applicable laws. As of March 31, 2000, we held interests in six
communities with 1,360 undeveloped homesites.
Manager
Our daily operations are performed by a manager pursuant to a management
agreement currently in effect through December 31, 2000. The manager also
identifies and performs due diligence on potential manufactured home community
investments for us. Since November 1997, Asset Investors has been our manager.
In addition to being our manager and a principal stockholder, Asset Investors
separately owns, acquires, develops and manages manufactured home communities,
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including providing property management services on our communities.
Consequently, we and Asset Investors are involved in the same industry. The two
companies have agreed that they will make a determination with respect to each
acquisition on a case-by-case basis.
The management agreement was approved by our independent directors and may be
terminated by either party with or without cause at any time upon 60 days'
written notice. The manager provides all personnel and related overhead
necessary to conduct our regular business, and in return, the manager is paid
the following fees:
o Acquisition Fees equal to 0.5% of the cost of each real estate-related
asset acquired by us;
o Base Fees equal to 1% per year of the net book value of our real
estate-related assets;
o Incentive Fees equal to 20% of the amount by which our Funds From
Operations, less an annual capital replacement reserve of at least $50 per
developed homesite, exceeds (a) our average net worth, multiplied by (b) 1%
over the ten year United States Treasury rate.
During the three months ended March 31, 2000 and 1999, we paid the following
fees to Asset Investors (in thousands):
Three Months Ended
March 31,
----------------------------------
2000 1999
--------------- ---------------
Base Fees $ 193 $ 80
Acquisition Fees -- 42
Incentive Fees -- --
-------- ------
$ 193 $ 122
======== ======
Prior to 1999, the Incentive Fee was based on REIT income instead of FFO. The
Incentive Fee for 1999 is calculated the same way as in 1998 except that our
FFO, less an annual capital replacement reserve of at least $50 per developed
homesite, replaces REIT income in the calculation because we believe this is a
better measure of our economic profitability and, therefore, is a more
appropriate incentive for Asset Investors even if increased management fees
result.
We indemnify the manager and its affiliates with respect to all expenses,
losses, damages, liabilities, demands, charges or claims of any nature in
respect of acts or omissions of the manager made in good faith and in accordance
with the standards set forth in the management agreement.
Taxation of the Company
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986,
and we intend to operate in a manner which will allow us to avail ourselves of
the beneficial tax provisions applicable to REITs. Our qualification as a REIT
depends on our ability to meet various requirements imposed by the Internal
Revenue Code, such as specifications relating to actual operating results,
distribution levels and diversity of stock ownership. In addition, our ability
to qualify as a REIT depends in part upon the actions of third parties over
which we have no control, or only limited influence. For instance, our
qualification depends upon the conduct of certain entities with which we have a
direct or indirect relationship, in our capacity as a lender, lessor, or holder
of non-controlling equity interests.
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<PAGE>
If we qualify for taxation as a REIT, we will generally not be subject to
Federal corporate income tax on our net income that is currently distributed to
stockholders. This treatment substantially eliminates the "double taxation"
which would otherwise occur at the corporate and stockholder levels that
generally results from investment in a corporation. If we fail to qualify as a
REIT in any taxable year, we will be subject to Federal income tax at regular
corporate rates on our taxable income, including any applicable alternative
minimum tax. Even if we qualify as a REIT, we may be subject to certain state
and local income and other taxes and to Federal income and excise taxes on our
undistributed income.
RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Comparison of Three Months Ended March 31, 2000 to Three Months Ended March 31,
1999
Rental Property Operations
Income from rental property operations totaled $706,000 during the three months
ended March 31, 2000 compared to $498,000 during the same period in 1999. The
increase was due to our acquisition of manufactured home communities during
1999.
Interest and Other Income
Interest and other income during the three months ended March 31, 2000 was
$458,000 compared to $701,000 for the same period in 1999. The decrease is due
to a reduction in cash and short-term investments used to fund investments in
manufactured home communities during 1999.
Interest Expense
Interest expense was $364,000 for the three months ended March 31, 2000 due to
long-term notes payable secured by our communities. We had no interest expense
during the same period in 1999 as we had no debt until May 1999.
General and Administrative Expenses
Our general and administrative expenses were $121,000 for the three months ended
March 31, 2000 and are comparable to the same period in 1999.
Related-Party Management Fees
During the three months ended March 31, 2000, our management fees were $193,000
compared to $80,000 during the same period in 1999. The increase in management
fees is due to our investments in manufactured home communities during 1999.
These fees are not paid on cash and short-term investments, which is what we
primarily held during the 1999 period.
Equity in Loss of Home Sales Company
During the three months ended March 31, 2000, our equity in the loss of a home
sales company was $191,000. We did not have an investment in this company during
1999.
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<PAGE>
CMBS Bonds
Income from CMBS bonds during the three months ended March 31, 2000 was $39,000
and is comparable to the same period in 1999. This income is from our retained
residual interest in two CMBS bonds.
Related-Party Acquisition Fees
During the three months ended March 31, 1999, we expensed acquisition fees paid
to Asset Investors of $42,000. We paid no acquisition fees during the same
period in 2000 because we acquired no manufactured home communities during the
2000 period. These fees would be capitalized if they had been paid to an
unrelated third party. Because they are paid to Asset Investors, an affiliate,
these fees are expensed under generally accepted accounting principles.
Dividend Distributions
During the three months ended March 31, 2000, we paid dividends totaling
$1,345,000 or $0.13 per share compared to $1,347,000 or $0.13 per share for the
same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and cash equivalents of $12,905,000 and
short-term investments of $11,926,000. Our principal activities that demand
liquidity include our normal operating activities, payments of principal and
interest on outstanding debt, acquisitions of or additional investments in
properties and payments of dividends to stockholders.
During the three months ended March 31, 2000, the net cash provided by operating
activities was $558,000 compared to $759,000 during the same period in 1999. The
decrease was primarily due to a decrease in accounts payable and accrued
liabilities.
Net cash used in investing activities was $861,000 during the three months ended
March 31, 2000, compared to uses of $1,748,000 during the same period in 1999.
The net cash used in the 1999 period was primarily due to acquisitions of
interests in manufactured home communities, net of sales of short-term
investments used to fund such acquisitions. In the 2000 period, capital
replacements and improvements and the purchase of manufactured home inventory
were partially offset by collections on short-term investments and the note
receivable from Westrec.
Net cash provided by financing activities was $8,544,000 during the three months
ended March 31, 2000 compared to uses of $1,347,000 during the same period in
1999. The $9,891,000 increase in the 2000 period was primarily due to $9,969,000
in net proceeds from long-term borrowings.
We had long-term debt of $30,551,000 at March 31, 2000 and expect to meet our
long-term liquidity requirements in excess of 12 months through our cash and
short-term investment balances, long-term secured borrowings, cash generated by
operations and issuance of equity securities.
FUNDS FROM OPERATIONS
We measure our economic profitability based on FFO, less an annual capital
replacement reserve of at least $50 per developed homesite. We believe that the
presentation of FFO when considered with the financial data determined in
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accordance with generally accepted accounting principles, provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily indicative of cash flow or liquidity available to us, nor should it
be considered as an alternative to net income as an indicator of operating
performance. The Board of Governors of NAREIT defines FFO as net income or loss,
computed in accordance with generally accepted accounting principles, excluding
gains and losses from debt restructuring and sales of property, plus real estate
related depreciation and amortization, excluding amortization of financing
costs, and after adjustments for unconsolidated partnerships and joint ventures.
We calculate FFO beginning with the NAREIT definition and include adjustments
for property acquisition fees that were expensed under generally accepted
accounting principles because the fees were paid to Asset Investors, an
affiliate.
We believe that the presentation of FFO provides investors with measurements
which help facilitate an understanding of our ability to make required dividend
payments, capital expenditures and principal payments on our debt. Since FFO
excludes depreciation and other real estate related expenses, FFO may be
materially different from net income. Therefore, FFO should not be considered as
an alternative to net income or net cash flows from operating activities, as
calculated in accordance with generally accepted accounting principles, as an
indication of our operating performance or liquidity.
FFO is not necessarily indicative of cash available to fund our cash needs,
including our ability to make distributions. We use FFO in measuring our
operating performance because we believe that the items that result in a
difference between FFO and net income do not impact the ongoing operating
performance of a real estate company. Also, we believe that other real estate
companies, analysts and investors utilize FFO in analyzing the results of real
estate companies. Our basis of computing FFO is not necessarily comparable with
that of other REITs.
For the three months ended March 31, 2000 and 1999, our FFO was (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
2000 1999
--------------- --------------
<S> <C> <C>
Net income $ 345 $ 982
Real estate depreciation 493 89
Real estate acquisition fees -- 42
Equity in Asset Investors' adjustments for FFO 27 --
------- -------
Funds From Operations (FFO) $ 865 $ 1,113
======= =======
Weighted average common shares outstanding 10,320 10,364
======= =======
</TABLE>
For the three months ended March 31, 2000 and 1999, net cash flows were as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Cash provided by operating activities $ 558 $ 759
Cash used in investing activities (861) (1,748)
Cash provided by (used in) financing activities 8,544 (1,347)
</TABLE>
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YEAR 2000 COMPLIANCE
Year 2000 issues have arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results. The following disclosure provides information
regarding the current status of our Year 2000 compliance program.
Our hardware and software systems are currently Year 2000 compliant. Upon
failure of any system, data included in critical software, such as rent-rolls
and certain record-keeping systems, could be transferred to alternative
commercially available software at a reasonable cost and within a reasonable
time period. Consequently, we would be able to continue our business operations
without any material interruption or material effect on our business, results of
operations or financial condition.
Disruptions in the economy generally resulting from Year 2000 issues could also
materially adversely affect us. Moreover, because a large number of our tenants
may be dependent on social security payments to pay their rents, a failure of
the Social Security Administration to cause their systems to be Year 2000
compliant may result in a material adverse effect on our operations. The Social
Security Administration announced that their systems were Year 2000 compliant
before January 1, 2000. We have received oral representations from our third
party vendors indicating that they are substantially Year 2000 compliant.
We did not experience any Year 2000 problems during the first quarter of 2000.
We believe that the cost of modification or replacement of our less essential
accounting and reporting software and hardware that is not currently compliant
with Year 2000 requirements, if any, will not be material to our financial
position or results of operations.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our principal exposure to market risk is through our short-term investments and
our various debt instruments and borrowings. The following is a list of these
short-term investments, debt instruments and borrowing arrangements.
We invest funds primarily in government securities and other short-term
investments with interest rates of approximately 0.25% above the London
Interbank Offered Rate or "LIBOR". Accordingly, changes in interest rates could
affect the returns from such investments. If LIBOR decreased immediately by 1%,
our annual net income and cash flows would decrease by $248,000, based on the
amount of cash and short-term investments at March 31, 2000. Our primary
objective with respect to our short-term investments is to minimize the risk
that the principal amount of these investments could decrease. Therefore, we
have short-term investments whose principal amount is expected to be less
affected by changes in interest rates than other potential investments.
We have $22.9 million of fixed rate, non-recourse, secured long-term notes
payable that mature in 2019 and 2020. We do not have significant exposure to
changing interest rates on these notes as the rates are fixed and the notes are
fully amortizing.
We have a $4.7 million fixed rate, recourse, secured long-term note payable that
is repayable in three annual installments. The implied interest rate on this
note is 7.0%. We do not have significant exposure to changing interest rates on
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<PAGE>
this note as the rate is fixed and the note is fully amortizing. In the future,
we intend to borrow additional non-recourse, secured, fixed rate, fully
amortizing debt in connection with the refinancing of the existing note payable.
While changes in interest rates would affect the cost of funds borrowed in the
future to refinance the existing debt, we believe that the effect, if any, of
near-term changes in interest rates on our financial position, results of
operations or cash flows would not be material as the existing debt is fixed
rate until June 2002.
We have a $2.9 million, fixed rate, nonrecourse, partially amortizing, secured
long-term note payable that matures in 2007. We do not have significant exposure
to changing interest rates on this note as the rate is fixed and the balance due
at maturity is $2.6 million.
We intend to borrow additional non-recourse, secured, fixed rate, fully
amortizing debt in connection with acquisitions of communities. Accordingly,
changes in interest rates will affect the cost of future borrowings incurred in
connection with future acquisitions.
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of March 12, 1999, between
Commercial Assets, Inc., a Maryland corporation and Commercial
Assets, Inc., a Delaware corporation (incorporated herein by
reference to Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, dated June 10, 1999, Commission File No. 1-2262, filed
on June 10, 1999).
3.1 Amended and Restated Certificate of Incorporation of Commercial
Assets, Inc. (incorporated herein by reference to Exhibit 3.1 to
the Registrant's Current Report on Form 8-K, dated June 10, 1999,
Commission File No. 1-2262, filed on June 10, 1999).
3.2 Amended and Restated By-laws of Commercial Assets, Inc.
(incorporated herein by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K, dated June 10, 1999,
Commission File No. 1-2262, filed on June 10, 1999).
10.1 Promissory Note dated September 1, 1999 between CAX Riverside,
L.L.C. and Minnesota Life Insurance Company.
10.2 Form of Promissory Note to Jackson National Life Insurance Company
entered into in connection with the financing of two manufactured
home communities.
10.2(a) Form of Loan Agreement with Jackson National Life Insurance
Company entered into in connection with the financing of two
manufactured home communities.
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<PAGE>
10.2(b) Form of Deed of Trust, Security Agreement and Financing Statement
with Jackson National Life Insurance Company entered into in
connection with the financing of two manufactured home
communities.
10.2(c) Form of Assignment of Leases and Rents with Jackson National Life
Insurance Company entered into in connection with the financing of
two manufactured home communities.
10.3 Acquisition Agreement dated effective as of January 1, 2000
between CAX Riverside, L.L.C., CADC Holdings, L.L.C., Riverside
Golf Course Investors, Inc. and Community Acquisition and
Development Corporation
27 Financial Data Schedule
(b) Reports on Form 8-K:
The following Current Reports on Form 8-K were filed by the
Registrant during the period covered by this Quarterly Report on
Form 10-Q:
No Current Reports on Form 8-K were filed by the Registrant
during the period covered by this Quarterly Report on Form 10-Q.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMERCIAL ASSETS, INC.
(Registrant)
Date: May 12, 2000 By /s/ David M. Becker
--------------------------------
David M. Becker
Chief Financial Officer
- 23 -
PROMISSORY NOTE
$5,500,000.00 Denver, Colorado
September 1, 1999
1. Agreement to Pay. FOR VALUE RECEIVED, the undersigned, CAX RIVERSIDE,
L.L.C., a Delaware limited liability company (hereinafter referred to
as the "Borrower"), whose mailing address is 3410 S. Galena Street,
Suite 210, Denver, Colorado 80231, hereby agrees and promises to pay to
the order of MINNESOTA LIFE INSURANCE COMPANY, a Minnesota corporation,
its endorsees, successors and assigns (hereinafter referred to as the
"Lender"), at its principal office and mailing address at c/o Advantus
Capital Management, Inc., 400 Robert Street North, St. Paul, Minnesota
55101-2098, or such other place as the Lender may from time to time
designate, the principal sum of Five Million Five Hundred Thousand and
00/100 Dollars ($5,500,000.00), or so much as may from time to time be
disbursed hereon, together with interest on the unpaid principal
balance at the rates provided for herein, payable in lawful money of
the United States of America which shall be legal tender for public and
private debts at the time of payment.
2. Interest Rate. The outstanding principal balance hereof shall bear
interest at the rate of Six and seven-tenths percent (6.7%) per annum
(hereinafter referred to as the "Regular Rate"). Interest shall be
computed on the basis of a three hundred sixty (360) day year,
consisting of twelve (12) successive thirty (30) day months. Interest
for periods of less than one (1) month shall be computed by multiplying
the monthly interest amount as computed above times a fraction, the
numerator of which is the actual number of days elapsed in said period
and the denominator of which is the actual number of days contained in
the month for which the computation is being made.
3. Late Charge. Any payment of principal, interest and/or tax and
insurance escrows not made by the Borrower within five (5) days of the
due date thereof shall be subject to a late payment charge equal to
four percent (4%) of the delinquent payment amount. The late charge
shall apply individually to all payments past due with no daily
adjustment and shall be used to defray the costs of the Lender incident
to collecting such late payment. This provision shall not be deemed to
excuse a late payment or be deemed a waiver of any other rights the
Lender may have including the right to declare the entire unpaid
principal and interest immediately due and payable.
4. Default Rate. Upon the occurrence of an Event of Default hereunder the
interest rate shall thereafter increase and shall be payable on the
whole of the unpaid principal balance at a rate equal to twelve percent
(12%) per annum (hereinafter referred to as the "Default Rate"), which
Default Rate shall be effective as of the date of the occurrence of
such Event of Default. The above increase in the interest rate upon the
occurrence of an Event of Default shall be applicable whether or not
the Lender has exercised its option to accelerate the maturity of this
Note and declared the entire unpaid principal indebtedness to be due
and payable. The Default Rate shall continue until such Event of
Default is cured, payment in full of all indebtedness evidenced by this
Note, or completion of all foreclosure proceedings and redemption
periods, whichever shall occur first.
<PAGE>
5. Monthly Payments. Principal and interest upon this Note shall be paid
as follows:
a. Interest only on the unpaid principal balance at the Regular
Rate shall be due and payable in advance on the date funds are
disbursed hereunder in an amount equal to interest accrued from
and including the date of disbursement hereunder to the last day
of September, 1999.
b. On the first (1st) day of November, 1999, and on the first day
of each month thereafter, principal and interest shall be due
and payable in equal monthly installments of Forty-One Thousand
Six Hundred Fifty-Six and 68/100 Dollars ($41,656.68) until
October 1, 2019 (hereinafter referred to as the "Maturity
Date"), on which date the entire unpaid principal balance
together with all accrued interest, if not sooner paid, shall
become due and payable.
All payments shall be applied first to late charges and Reinvestment
Charge and/or Default Premium, as defined below, if any, second to
interest at the rate then in effect under the terms hereof and third to
principal, provided however, that if any advance made by the Lender as
the result of a default on the part of the Borrower under the terms of
this Note or any instrument securing this Note is not repaid on demand,
any monies received, at the option of the Lender, may first be applied
to repay such advances, plus interest thereon at the Default Rate, and
the balance, if any, shall be applied in accordance with the provisions
hereof.
6. Security. This Note is given to evidence a loan in the above amount and
is the Note referred to in and secured by:
a. A Mortgage and Security Agreement and Fixture Financing
Statement (hereinafter referred to as the "Mortgage") given by
Borrower, as mortgagor, to Lender, as mortgagee, dated of even
date herewith, encumbering the Borrower's interest in the real
property and all improvements, fixtures, equipment and personal
property thereon located in the County of Hillsborough, State of
Florida (hereinafter referred to as the "Premises"); and
b. An Assignment of Leases and Rents (hereinafter referred to as
the "Assignment of Leases") given by Borrower, as assignor, to
Lender, as assignee, dated of even date herewith, assigning to
Lender all of the rents, issues, profits and leases of the
Premises; and
c. Other collateral security documents (hereinafter referred to as
the "Security Documents") given by Borrower to Lender, all dated
of even date herewith.
Reference is hereby made to the Mortgage, the Assignment of Leases and
the Security Documents (which are incorporated herein by reference as
fully and with the same effect as if set forth herein at length) for a
description of the Premises, a statement of the covenants and
agreements, a statement of the rights and remedies and securities
afforded thereby and all other matters contained therein.
- 2 -
<PAGE>
7. Default and Acceleration. The occurrence of an Event of Default, as
defined in the Mortgage, shall constitute an Event of Default hereunder
(hereinafter referred to as an "Event of Default"), and the entire
unpaid principal balance together with accrued interest at the Default
Rate shall become, without notice, immediately due and payable at the
option of the Lender. No delay or omission on the part of the Lender in
exercising any right hereunder shall operate as a waiver of such right
or of any other remedy under this Note. A waiver on any one occasion
shall not be construed as a bar to or waiver of any such right or
remedy on a future occasion.
8. Prepayment Privilege. The indebtedness evidenced hereby may be prepaid
in accordance with the provisions of this Section 8 and not otherwise.
a. For the purposes hereof, the term "Loan Year" shall mean a
period consisting of twelve (12) consecutive months commencing
on the first (1st) day of October or any anniversary thereof,
the first (1st) Loan Year being the Loan Year commencing the
first (1st) day of October, 1999.
b. Prior to the expiration of the fifth (5th) Loan Year no payments
of principal may be made hereon other than the scheduled monthly
installment payments of principal and interest set forth in
Section 5 hereof.
c. After the expiration of the fifth (5th) Loan Year and prior to
the end of the tenth (10th) Loan Year, the Borrower may prepay
this Note in full but not in part, provided such prepayment is
accompanied by a reinvestment charge (hereinafter referred to as
the "Reinvestment Charge"). The Reinvestment Charge with respect
to the period commencing on the first (1st) day of the sixth
(6th) Loan Year and expiring on the last day of the tenth (10th)
Loan Year shall be equal to the excess, if any, of (i) the
aggregate present value as of the date of such prepayment of
each dollar of principal being prepaid and the amount of
interest that would have been payable in respect of such dollar
if such prepayment had not been made, determined by discounting
such amounts at the Reinvestment Rate, defined below, from the
respective dates on which they would have been payable, over
(ii) one hundred percent (100%) of the principal amount of this
Note being prepaid. "Reinvestment Rate" shall mean the yield to
maturity of the U.S. Treasury Note or Bond for the maturity
(rounded to the nearest month) corresponding to the weighted
average life to maturity of the principal being prepaid or paid
(as reported in the Wall Street Journal on the fifth (5th)
business day preceding the date of prepayment).
d. The Borrower may prepay this Note, in full but not in part, at
any time after the tenth (10th) Loan Year provided such
prepayment is accompanied by a Reinvestment Charge in an amount
equal to five percent (5%) of the principal amount prepaid with
respect to prepayments made in the eleventh (11th) and twelfth
(12th) Loan Years, such Reinvestment Charge thereafter declining
one percent (1%) during each Loan Year thereafter until the same
shall be reduced to one percent (1%), where it shall remain
- 3 -
<PAGE>
until ninety (90) days prior to the Maturity Date.
e. The Borrower may prepay this Note in full but not in part, at
par, and without payment of a Reinvestment Charge during the
period commencing ninety (90) days prior to the Maturity Date.
f. At the option of the Lender, this Note is also subject to
mandatory prepayment upon certain events set forth in the
Mortgage including prepayments required by Lender to be made out
of proceeds of insurance or condemnation awards. In each such
instance, the terms of the Mortgage shall govern with respect to
the requirement for the payment of a Reinvestment Charge or
Default Premium.
g. Any prepayment (other than prepayments pursuant to Subsection
8(f) above) shall be made on a regularly scheduled installment
payment date, shall be made only upon thirty (30) days' advance
written notice to the Lender, and all such prepayments shall be
applied to required monthly installment payments of principal in
the inverse order of their scheduled due dates.
h. Any prepayment of all or any portion of the principal balance of
this Note made prior to the end of the fifth (5th) Loan Year,
for whatever reason (other than prepayments pursuant to
Subsection 8(f) above), whether voluntary or involuntary, shall
constitute an Event of Default hereunder, and, in addition to
the other rights and remedies provided for herein and in the
Mortgage, the Assignment of Leases or any other Security
Document, the Borrower shall be obligated to pay to the Lender a
default prepayment premium (hereinafter referred to as the
"Default Premium") in an amount equal to the sum of (i) four
percent (4%) of the amount of principal prepaid and (ii) the
applicable Reinvestment Charge computed in accordance with
Section 8(c) above.
9. Prepayment Upon An Event of Default. Upon the occurrence of an Event of
Default under this Note and following acceleration of maturity hereof
by the Lender, a tender of payment of or entry of judgment for the
amount necessary to satisfy the entire unpaid principal balance
declared due and payable shall be deemed to constitute an attempted
evasion of the aforesaid restrictions on the right of prepayment and
shall be deemed a prepayment hereunder, and such payment or judgment
must, therefore, include the applicable Reinvestment Charge or Default
Premium payable under the terms hereof in connection with any
prepayment.
10. Costs of Collection. The Borrower agrees that if, and as often as, this
Note is placed in the hands of an attorney for collection or to defend
or enforce any of the Lender's rights hereunder or under the Mortgage,
the Assignment of Leases or any other Security Document securing
payment of this Note, the Borrower will pay to the Lender its
attorneys' fees and all court costs (including attorney's fees and
court costs prior to trial, at trial and on appeal, or in any
bankruptcy proceeding) and other expenses incurred in connection
therewith.
- 4 -
<PAGE>
11. Time. Time is of the essence of this Note and each of the provisions
hereof.
12. Governing Law. This Note shall be governed by the laws of the State of
Florida.
13. Interest Limitation. All agreements between the Borrower and the Lender
are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the
indebtedness evidenced hereby or otherwise, shall the amount paid or
agreed to be paid to the Lender for the use, forbearance, loaning or
detention of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. If from any circumstances whatsoever,
fulfillment of any provisions hereof or of the Mortgage, Assignment of
Leases or any other Security Document at any time given shall exceed
the maximum permissible under applicable law, then, the obligation to
be fulfilled shall automatically be reduced to an amount which complies
with applicable law, and if from any circumstances the Lender should
ever receive as interest an amount which would exceed the highest
lawful rate of interest, such amount which would be in excess of such
lawful rate of interest shall be applied to the reduction of the
principal balance evidenced hereby and not to the payment of interest.
This provision shall control every other provision of all agreements
between the Borrower and Lender and shall also be binding upon and
available to any subsequent holder of this Note.
14. Waivers. The Borrower, endorsers, sureties, guarantors and all other
persons liable for all or any part of the principal balance evidenced
by this Note severally waive presentment for payment, protest, notice
of nonpayment and notice of dishonor. Such parties hereby consent,
without affecting their liability, to any extension or alteration of
the time or terms of payment hereof, any renewal, any release of any or
all of the security given for the payment hereof, any acceptance of
additional security of any kind, and any release of, or resort to any
party liable for payment hereof.
15. Disbursement. Funds representing the proceeds of the indebtedness
evidenced hereby which are disbursed by the Lender by mail, wire
transfer or other delivery to the Borrower, to escrows or otherwise for
the benefit of the Borrower shall, for all purposes, be deemed
outstanding hereunder and to have been received by the Borrower as of
the date of such mailing, wire transfer, or delivery and until repaid,
notwithstanding the fact that such funds may not at any time have been
remitted by such escrows to the Borrower or for its benefit.
16. Captions. The captions to the Sections of this Note are for convenience
only and shall not be deemed part of the text of the respective
Sections and shall not vary, by implication or otherwise, any of the
provisions of this Note.
17. Notices. All notices required or permitted to be given hereunder to the
Borrower or the Lender shall be given in the manner and to the place as
provided in the Mortgage for notices to the Mortgagor or the Mortgagee.
- 5 -
<PAGE>
18. Due-on-Sale-and-Encumbrance Provisions. The Mortgage provides for
certain rights on the part of the Lender to call all outstanding
principal and accrued interest on this Note due and payable in full
together with the Reinvestment Charge or Default Premium then in effect
under the terms of this Note in the event that (a) Borrower should
sell, convey, contract to sell or convey, assign or encumber any
property, real or personal, encumbered by the Mortgage, or (b) any
member interests in the Borrower should be sold, conveyed, assigned or
encumbered, without, in each instance, the prior written consent of the
Lender. Reference to the Mortgage must be made for the terms of these
provisions. Such provisions are incorporated herein by this reference.
19. Partial Non-Recourse to the Borrower. Notwithstanding anything to the
contrary contained herein, the Borrower shall have no liability to pay
the outstanding principal balance of this Note or any interest that may
accrue thereon, all such liability being expressly waived by the
Lender, and the Lender's monetary remedies under this Note, the
Mortgage and the Assignment of Leases shall be limited to the
Borrower's interest in the Premises and the improvements, furnishings,
equipment, leases and rents on which the Mortgage and the Assignment of
Leases constitute a lien. Notwithstanding the foregoing, it is
expressly understood and agreed that the aforesaid limitation on
liability shall in no way effect or apply to the continued liability of
the Borrower and Commercial Assets, Inc. for the payment to the Lender
of: (i) any rents, issues, profits or income which have been prepaid
more than thirty (30) days in advance; (ii) any rents, issues, profits
or income collected by the Borrower from the Premises after the
occurrence of an Event of Default under the terms of this Note, the
Mortgage, the Assignment of Leases or any other instrument securing
this Note; (iii) security deposits made by tenants of the Premises;
(iv) payments of all real estate taxes, special assessments and
insurance premiums; (v) insurance proceeds and condemnation awards,
payments and consideration which the Borrower receives and to which the
Lender is entitled pursuant to the terms of this Note, the Mortgage,
the Assignment of Leases or of any other instrument securing this Note;
(vi) loss or damage suffered by the Lender arising from
misrepresentation or fraud in connection with the loan evidenced by
this Note occurring as the result of the actions or inactions of the
Borrower; (vii) loss or damage suffered by the Lender occurring by
reason of the existence of Hazardous Materials or Wastes, as defined in
Article 9 of the Mortgage, associated with the Premises or occurring by
reason of the failure of the Borrower to observe and perform its
covenants and indemnities respecting the release or discharge of such
Hazardous Materials or Wastes as set forth in both Article 9 of the
Mortgage and in the Indemnity Agreement described in Section 2.9 of the
Mortgage; (viii) reasonable attorney's fees incurred by the Lender as
provided for in this Note, the Mortgage, the Assignment of Leases or
any other instrument securing this Note; (ix) damages arising out of
the Borrower's failure to comply with any of the leases on the
Premises; and (x) damages to the Premises from waste committed or
permitted by the Borrower or from a failure by Borrower to maintain the
Premises in the manner required by the terms of this Note, the
Mortgage, the Assignment and all other instruments securing this Note.
Nothing contained herein shall be deemed to release any entity or
person, including the Borrower and Commercial Assets, Inc., from their
obligations under the terms of any separate Indemnity Agreement or
Guaranty executed in connection with the loan evidenced by this Note.
- 6 -
<PAGE>
20. WAIVER OF JURY TRIAL. NEITHER LENDER, BORROWER, ANY GUARANTOR OR OTHER
PERSON OR ENTITY LIABLE FOR THE INDEBTEDNESS EVIDENCED HEREBY, NOR ANY
ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF LENDER,
BORROWER, ANY GUARANTOR OR ANY SUCH OTHER PERSON OR ENTITY SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER
LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS NOTE, THE
MORTGAGE, ANY OTHER OF THE SECURITY DOCUMENTS, ANY RELATED INSTRUMENT
OR AGREEMENT, ANY COLLATERAL FOR THE PAYMENT HEREOF OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ENTITIES, OR ANY OF
THEM. NEITHER LENDER, BORROWER NOR ANY GUARANTOR OR ANY SUCH OTHER
PERSON OR ENTITY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A
JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE
BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THE PROVISIONS HEREOF
SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH
OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note as
of the date and year first above written.
CAX RIVERSIDE, L.L.C.,
a Delaware limited liability company
By: COMMERCIAL ASSETS, INC.,
a Delaware corporation
By: /s/David M. Becker
-------------------------------
David M. Becker
Its: Chief Financial Officer
Its: Member and Manager
FLORIDA DOCUMENTARY STAMP TAXES REQUIRED TO BE PAID ON ACCOUNT OF THE
INDEBTEDNESS EVIDENCED HEREBY HAVE BEEN PAID AND THE DOCUMENTARY STAMPS SO
PURCHASED HAVE BEEN AFFIXED TO THE MORTGAGE SECURING THIS NOTE.
- 7 -
SCHEDULE OF OMITTED
PROMISSORY NOTE
The Company has also entered into an additional Promissory Note which is
substantially identical to the following Promissory Note in all material
respects except as to the company, interest rate and amount. Listed below are
the material details in which such documents differ from the document filed as
part of this exhibit.
Company Interest Rate Amount
- --------------------------------- -------------------- -----------------
CAX La Casa Blanca, L.L.C. 7.92% $3,840,000.00
<PAGE>
PPM Loan No. 99-0087- AZ
PROMISSORY NOTE
$6,270,000.00 January 19, 2000
1. Promise to Pay. FOR VALUE RECEIVED, the undersigned, CAX RANCHO
MIRAGE, L.L.C., a Delaware limited liability company, ("Maker") hereby promises
to pay to the order of JACKSON NATIONAL LIFE INSURANCE COMPANY, a Michigan
corporation, its successors or assigns ("Noteholder"), the principal sum of Six
Million Two Hundred Seventy Thousand and No/100ths Dollars ($6,270,000.00), with
interest on the unpaid principal balance thereof from the date hereof until
maturity at the rate of Seven and 86/100ths percent (7.860%) per annum
("Interest Rate"), both principal and interest being payable as hereinafter
provided in lawful money of the United States of America at 225 West Wacker
Drive, Suite 1200, Chicago, Illinois 60606 or at such other place as from time
to time may be designated by Noteholder. Interest shall be calculated and paid
on the basis of a 30-day month and 360-day year.
2. Payments. A payment of interest only on the unpaid principal balance
of this Note shall be due and payable in advance on the date hereof in an amount
equal to interest accrued from and including the date hereof through January 31,
2000. Maker agrees to pay Noteholder monthly installment payments of Fifty-One
Thousand Eight Hundred Ninety-Nine and 81/100 Dollars ($51,899.81) of principal
and interest on the first (1st) day of March, 2000 and on the same day of each
succeeding month through and including the first (1st) day of February, 2020
(the "Maturity Date"), on which date all unpaid principal and interest, together
with any other sums due under the terms of this Note, shall be due and payable.
3. Treatment of Payments. All payments of principal, interest, late
charges (as described below), and prepayment premium (as described below), if
any, due under this Note shall be paid to Noteholder by wire transfer or check
or immediately available funds to such bank or place, and in such other manner,
as Noteholder may from time to time designate. If such payment is received by
2:00 p.m., such payment will be credited to Maker's account as of the date on
which received. If such payment is received after 2:00 p.m., such payment will
be credited to Maker's account on the business day next following the date on
which received. Each installment payment under this Note shall be applied first
to the payment of any cost or expense for which Maker is liable hereunder or
under the other Loan Documents, including any unpaid late charge, then to
accrued interest and the remainder to the reduction of unpaid principal. Time is
of the essence as to all payments hereunder.
4. Late Charges. If any monthly installment of principal and/or
interest is not paid in full on or before the tenth day of the month in which
such payment is due, then a charge for late payment ("Late Charge") in the
amount of five percent (5%) of the amount of such installment shall be
immediately assessed and shall be immediately due and payable by Maker. The
<PAGE>
parties hereby recognize that the Late Charge is a reasonable approximation of
an actual loss difficult to estimate. Maker's failure to collect such Late
Charge shall not constitute a waiver of Maker's right to require payment of such
Late Charge for past or future defaults. The Late Charge shall be in addition to
all other rights and remedies available to Noteholder upon the occurrence of a
default under the Loan Documents.
5. Default Interest. Upon the occurrence of (a) an Event of Default (as
defined in the Loan Agreement) or (b) maturity of this Note, interest shall
accrue hereunder at an annual rate (the "Default Rate") equal to the lesser of
(i) eighteen percent (18%) and (ii) the maximum rate allowed by law. The Default
Rate shall accrue on the entire outstanding balance hereof, including, without
limitation, delinquent interest and any and all costs and expenses incurred by
Noteholder in connection therewith.
6. Security. This Note is made pursuant to a Loan Agreement of even
date herewith (the "Loan Agreement") and secured by, among other things, a Deed
of Trust, Security Agreement and Financing Statement (hereinafter called the
"Deed of Trust") of even date herewith in favor of Lawrence C. Petrowski, a
Member of the Bar of the State of Arizona, as Trustee for the benefit of Jackson
National Life Insurance Company evidencing a lien on certain real property in
Pinal County, Arizona, described therein, and evidencing a security interest in
certain personal property, fixtures and equipment described therein. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Loan Agreement.
7. Event of Default. Upon the failure to pay any installment of
principal and/or interest due on this Note as above promised or upon the
occurrence of an Event of Default, Noteholder shall have the option of declaring
the indebtedness evidenced hereby to be immediately due and payable ("the Loan
Acceleration"). After Loan Acceleration, Noteholder shall have the option of
applying any payments received to principal or interest or any other costs due
pursuant to the terms of this Note or the Loan Documents.
8. Prepayment. No prepayment of the principal balance of the Note is
allowed during the first one hundred twenty (120) months of the Loan.
Thereafter, prepayment is permitted at any time, in full but not in part, upon
thirty (30) days' written notice, with payment to Lender of a yield maintenance
premium ("Premium") equal to (i) the greater of 1% of the outstanding principal
balance at the time of prepayment or (ii) the present value on the date of
prepayment of all future principal and interest payments beginning with the
payment due on the second month following the pay-off date, including any
balloon payments assuming payment in accordance with the repayment terms of the
Note less the current outstanding principal balance of the Loan. The interest
rate used in calculating the present value shall be the Treasury Rate, as
defined herein, plus 25 basis points, then divided by twelve. "Treasury Rate"
shall be the yield as reported by Bloomberg L.P. of U.S. Government Treasury
Securities having a maturity date which is the same as the Maturity Date of the
Loan three (3) business days prior to the prepayment of the Loan ("Index"). If
for any reason such index is not published, the Treasury Rate shall be based on
the yields reported in another publication of comparable reliability and
institutional acceptance as selected by the Lender in its sole discretion which
2
<PAGE>
most closely approximates yields in percent per annum of selected U.S. Treasury
securities of varying maturities. If no Treasury Constant Maturities are
published for the specific length of time to the Maturity Date, the index to be
utilized shall be the weighted average of the Treasury Constant Maturities
published for the two periods most nearly corresponding to the Maturity Date. No
Premium shall apply to a payment in full during the last ninety (90) days of the
Loan term or due to taking through condemnation or a casualty where Lender
applies proceeds to pay down the Loan. No involuntary partial prepayment shall
suspend or reduce any required installment payments. If the Loan has been
accelerated, and Borrower wishes to pay the Loan in full, the payment tendered
must include either (i) the applicable prepayment premium, if the payment is
tendered during a period when prepayment is permitted under the Note, or (ii)
the greater of such prepayment premium or 10% of the principal amount owed on
the date of default, if the payment is tendered during a period when prepayment
is prohibited under the Note.
9. Limitation on Personal Liability. Anything contained herein to the
contrary notwithstanding, it is expressly understood and agreed that nothing
herein shall be construed as creating any personal liability on Maker (or, if
Maker is a partnership, any of its general partners) to pay any amount due under
this Note or any other Loan Document except that Maker (and, if Maker is a
partnership, its general partners) shall be liable for and shall indemnify and
defend Noteholder against, and hold Noteholder harmless from and against
Noteholder's costs, expenses (including reasonable attorney's fees), losses and
damages caused by or related to any of the following "Recourse Events"
committed, permitted or omitted by Maker, its agents, employees and/or
contractors: (i) waste to or of the Project or a failure to maintain the Project
as a first class manufactured housing community; (ii) fraud or material
misrepresentation by Maker; (iii) failure to pay, or to make sufficient payments
into the Escrow Account pursuant to Section 3.1 of the Loan Agreement to pay
insurance premiums, taxes, assessments, ground rent or any other lienable
impositions as required under the Loan Documents; (iv) misapplication of tenant
security deposits, insurance proceeds or condemnation proceeds; (v) failure
while in monetary default to pay to Noteholder all rents, income and profits of
and from the Project, net of reasonable and customary operating expenses; (vi)
breach of or failure to perform under the environmental representations,
warranties, covenants or indemnifications described in Section 3.19 of the Loan
Agreement and further agreed to the Environmental Indemnity Agreement; (vii)
destruction or removal of fixtures or personal property securing this Note from
the Project, unless replaced by items of equal value; (viii) Intentionally
Deleted; (ix) failure of the Project to comply with the Americans with
Disabilities Act of 1990, as amended, the Fair Housing Act of 1988, as amended,
or any other similar Building Laws after any Governmental Authority has notified
Maker, its agents, employees and/or contractors of such non-compliance; (x)
failure to pay to Noteholder any rent, income or profits which have been prepaid
more than thirty (30) days in advance if such advance payments exceed 10% of the
total annual rental income; (xi) willful or grossly negligent violation of
applicable law; and (xii) failure of Maker to pay all amounts payable under the
Note in full, together with reasonable attorney fees, if Maker transfers or
encumbers the Project in contravention of the Loan Documents, or (xiii) if Maker
files a voluntary petition under Chapter 11 of the Bankruptcy Code prior to the
one-year anniversary of the transfer of title to the Project to Noteholder by
foreclosure of deed or other conveyance in lieu of foreclosure or otherwise.
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<PAGE>
Nothing set forth herein shall restrict or impede any other right or remedy of
Noteholder upon the occurrence of an Event of Default.
10. Non-Usurious Loan. It is the intent of Noteholder and Maker in this
Note and the other Loan Documents now or hereafter securing this Note to
contract in strict compliance with applicable usury law. In furtherance thereof,
Noteholder and Maker stipulate and agree that none of the terms and provisions
contained in this Note, or in any other instrument executed in connection
herewith including but not limited to the Loan Documents, shall ever be
construed to create a contract to pay for the use, forbearance or detention of
money, or interest at a rate in excess of the maximum interest rate permitted to
be charged by applicable law. Neither Maker nor any guarantors, endorsers or
other parties now or hereafter becoming liable for payment of this Note shall
ever be required to pay interest on this Note at a rate in excess of the maximum
interest that may be lawfully charged under applicable law, and the provisions
of this paragraph shall control over all other provisions of this Note, the Loan
Documents and any other instruments now or hereafter executed in connection
herewith which may be in apparent conflict herewith. Noteholder expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of this Note is accelerated. If the
maturity of this Note is accelerated for any reason or if the principal of this
Note is paid prior to the Maturity Date, and as a result thereof the interest
received for the actual period of existence of this Note exceeds the applicable
maximum lawful rate, Noteholder shall, at its option, either refund the amount
of such excess or credit the amount of such excess against the principal balance
of this Note then outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of such excess
interest. In the event that Noteholder collects monies which are deemed to
constitute interest which would increase the effective interest rate on this
Note to a rate in excess of that permitted to be charged by applicable law, all
such sums deemed to constitute interest in excess of the lawful rate shall, upon
such determination, at the option of Noteholder, be either immediately returned
or credited against the principal balance of this Note then outstanding, in
which event any and all penalties of any kind under applicable law as a result
of such excess interest shall be inapplicable. By execution of this Note Maker
acknowledges that it believes this Note and all interest and fees paid in
connection with the loan represented by this Note, to be non-usurious. Maker
agrees that if, at any time, Maker should believe that this Note or the loan
represented by this Note is in fact usurious, Maker will give Noteholder notice
of such condition and Maker agrees that Noteholder shall have ninety (90) days
in which to make appropriate refund or other adjustment in order to correct such
condition if in fact such condition exists. The term "applicable law" as used in
this Note shall mean the laws of the State of Arizona or the laws of the United
States, whichever allows the greater rate of interest, as such laws now exist or
may be changed or amended or come into effect in the future.
11. Noteholder's Attorney Fees. Should the indebtedness represented by
this Note or any part thereof be collected at law or in equity or through any
bankruptcy, receivership, probate or other court proceedings or if this Note is
placed in the hands of attorneys for collection after default, or if the lien or
priority of the lien represented by the Deed of Trust or the other Loan
Documents is the subject of any court proceeding, Maker and all endorsers,
guarantors and sureties of this Note jointly and severally agree to pay to
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<PAGE>
Noteholder in addition to the principal and interest due and payable hereon
reasonable attorney and collection fees including those incurred by Noteholder
for any appeal.
12. Maker's Waivers. Maker and all endorsers, guarantors and sureties
of this Note and all other persons liable or to become liable on this Note
severally waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate the
maturity of this Note, notice of acceleration, protest and notice of protest,
diligence in collecting, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in part, with or without notice, before
or after maturity.
13. Payment of Taxes and Fees. Maker agrees to pay the cost of any
revenue, tax or other documentary fee or stamps now or hereafter required by law
to be affixed to this Note or the Deed of Trust.
14. Governing Law. This Note and the rights, duties and liabilities of
the parties hereunder and/or arising from or relating in any way to the
indebtedness evidenced by this Note or the transaction of which such
indebtedness is a part shall be governed and construed for all purposes by the
law of the State of Arizona.
15. WAIVER OF TRIAL BY JURY. MAKER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THE LOAN DOCUMENTS OR ANY
ACTS OR OMISSIONS OF NOTEHOLDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION THEREWITH.
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed as
of the day and year first above written.
MAKER:
CAX RANCHO MIRAGE, L.L.C.,
a Delaware limited liability company
By: Commercial Assets, Inc.,
a Delaware corporation, its Sole Member
By: /s/David M. Becker
-------------------------
David M. Becker
Chief Financial Officer
(Taxpayer ID Number) 84-1500766
5
<PAGE>
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 19th day of
January, 2000 by David M. Becker, as the Chief Financial Officer of Commercial
Assets, Inc., a Delaware corporation, the Sole Member of CAX RANCHO MIRAGE,
L.L.C., a Delaware limited liability company.
/s/ Lorri Owen
----------------------------------------------
Notary Public in and for said County and State
My Commission Expires:
07/02/2001
6
SCHEDULE OF OMITTED
LOAN AGREEMENT
The Company has also entered into an additional Loan Agreement which is
substantially identical to the following Loan Agreement in all material respects
except as to the company and amount. Listed below are the material details in
which such documents differ from the document filed as part of this exhibit.
Company Amount
- ------------------------------------- ---------------------
CAX La Casa Blanca, L.L.C. $3,840,000.00
<PAGE>
PPM Loan No.: 99-0087-AZ
LOAN AGREEMENT
by and between
JACKSON NATIONAL LIFE INSURANCE COMPANY, as Lender
and
CAX RANCHO MIRAGE, L.L.C., as Borrower
Date: As of January 19, 2000
<PAGE>
LOAN AGREEMENT
This Loan Agreement is made as of this 19th day of January, 2000, by
and between CAX RANCHO MIRAGE, L.L.C., a Delaware limited liability company
("Borrower"), and JACKSON NATIONAL LIFE INSURANCE COMPANY, a Michigan
corporation ("Lender").
RECITALS
A. Borrower is a Delaware limited liability company which has its
principal place of business at 3410 South Galena Street, Suite 210, Denver,
Colorado 80231. Its sole member and manager is Commercial Assets, Inc., a
Delaware corporation. Borrower is the owner of certain real estate, known as
Rancho Mirage Adult Mobile Home Park, located at 2400 East Baseline Road, Apache
Junction, Pinal County, Arizona, consisting of approximately 60 acres, and
legally described in Exhibit A hereto (the "Land"), which is improved with 312
pad spaces, including 310 double wide pad spaces, a clubhouse, lighted tennis
courts, a swimming pool and a 9 hole "pitch and putt" golf course (the
"Improvements").
B. Borrower has applied to Lender for a loan (the "Loan") in the
maximum amount of Six Million Two Hundred Seventy Thousand and No/100ths Dollars
($6,270,000.00) and Lender has agreed to make the Loan on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. DEFINED TERMS. The following terms as used herein shall have the
following meanings:
Affiliated Party: (i) if Borrower or any Affiliated Party is a
general or limited partnership, the general partners thereof and any
person or entity directly or indirectly controlling any general partner
thereof; (ii) if Borrower or any Affiliated Party is a joint venture,
its joint venture partners and any person or entity directly or
indirectly controlling any joint venture partner thereof; (iii) if
Borrower is a corporation or limited liability company, any person or
entity directly or indirectly controlling Borrower; and (iv)
Indemnitor.
Agreement: This Loan Agreement, as originally executed or as
may be hereafter supplemented or amended from time to time in writing.
Application/Commitment: Collectively, the "Application" to PPM
Finance, Inc. for the Loan dated September 2, 1999, and the acceptance
thereof as a commitment dated October 21, 1999.
Appraisal: An appraisal prepared by a member of a national
appraisal organization that has adopted the Uniform Standards of
Professional Appraisal Practice (USPAP) established by the Appraisal
<PAGE>
Standards Board of the Appraisal Foundation. The appraiser shall use
assumptions and limiting conditions established by Lender, and the
appraisal shall be in conformity with Lender's appraisal guidelines and
the requirements of the Application/Commitment.
Building Laws: All federal, state and local laws, statutes,
regulations, codes, ordinances, orders, rules and requirements
applicable to the development, construction, use, operation, management
and maintenance of the Project, including without limitation, all
access, building, zoning, planning, subdivision, fire, traffic, safety,
health, labor, discrimination, environmental, air quality, wetlands,
shoreline, flood plain laws, regulations and ordinances, including,
without limitation, all applicable requirements of the Fair Housing Act
of 1988, as amended, the Americans with Disabilities Act of 1990, as
amended, and all orders or decrees of any court adopted or enacted with
respect thereto applicable to the Project, as any of the same may from
time to time be amended, modified or supplemented.
Deed of Trust: The Deed of Trust, Mortgage, Security Deed,
Deed to Secure Debt or similar instrument described in Section 2.2 of
this Agreement, as originally executed or as may be hereafter
supplemented or amended from time to time in writing.
Default: Any event which, if it were to continue uncured,
would, with notice or lapse of time or both, constitute an Event of
Default (as such term is defined in Section 7.1 of this Agreement).
Default Rate: The default interest rate specified in the Note.
Environmental Indemnity Agreement: The Environmental Indemnity
Agreement described in Section 2.2 of this Agreement, executed by
Borrower and Indemnitor, as originally executed or as may be hereafter
supplemented or amended from time to time in writing.
ERISA: Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder from time to time.
Governmental Approvals: The meaning set forth in Section 4.11
of this Agreement.
Governmental Authority: Any federal, state, county or
municipal government, or political subdivision thereof, any
governmental or quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality, or public body, or any court,
administrative tribunal, or public utility.
Improvements: The meaning set forth in Recital A of this
Agreement.
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<PAGE>
Indemnification Agreement: The indemnification agreement
described in Section 2.2 of this Agreement, executed by Indemnitor, as
originally executed or as may be hereafter supplemented or amended from
time to time in writing.
Include or including: Including but not limited to.
Indemnitor: Commercial Assets, Inc.
Internal Revenue Code: The Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder from time to time.
Knowledge: When used to modify a representation or warranty,
actual knowledge or such knowledge as a reasonable person under the
circumstances should have after diligent inquiry and investigation.
Land: The land legally described in Exhibit A hereto.
Laws: Collectively, all federal, state and local laws,
statutes, codes, ordinances, orders, rules and regulations, including
judicial opinions or precedential authority in the applicable
jurisdiction, as any of the same may from time to time be amended,
modified or supplemented.
Loan Documents: This Agreement, the Environmental Indemnity,
the Indemnification Agreement, the Deed of Trust, the Note, the other
documents and instruments listed in Section 2.2 of this Agreement, and
all other documents and instruments given to Lender from time to time
in connection with or to secure the Loan, as originally executed or as
any of the same may be hereafter supplemented or amended from time to
time, in writing.
Loan Maturity: Maturity Date (as defined in the Note).
Loan Opening Date: The date of the initial disbursement of the
Loan.
Mortgage: The mortgage, deed of trust, security deed, deed to
secure debt or similar instrument described in Section 2.2 of this
Agreement, as originally executed or as may be hereafter supplemented
or amended from time to time in writing.
Note: The mortgage note described in Section 2.2 of this
Agreement, as originally executed or as may be hereafter supplemented
or amended from time to time in writing.
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<PAGE>
Permitted Exceptions: Those matters listed in Exhibit B hereto
to which the interest of Borrower in the Real Property may be subject
and any such other title exceptions, if any, as Lender, or its counsel,
may approve in advance in writing.
Project: The Land together with the Improvements and any and
all other buildings, structures and improvements located or to be
located thereon and all rights, privileges, easements, hereditaments
and appurtenances, thereunto relating or appertaining, including
parking for at least 624 vehicles, but in any event parking in
compliance with any applicable zoning ordinance and tenant leases, and
all personal property, fixtures and equipment required or used (or to
be used) for the operation thereof.
Real Property: That portion of the Project constituting real
property.
Title Insurer: Transnation Title Insurance Company, or such
other title insurance company licensed in the State of Arizona, as may
be approved by Lender in connection with the Loan.
Defined terms may be used in the singular or the plural. When used in the
singular preceded by "a", "an", or "any", such term shall be taken to indicate
one or more members of the relevant class. When used in the plural, such term
shall be taken to indicate all members of the relevant class.
2. TERMS OF LOAN AND DOCUMENTS.
2.1 Agreement to Borrow and Lend. Subject to all of the terms,
provisions and conditions set forth in this Agreement, Lender agrees to make and
Borrower agrees to accept the Loan described in the Recitals of this Agreement.
Borrower agrees to pay all indebtedness evidenced and secured by the Loan
Documents in accordance with the terms thereof.
2.2 Loan Documents. In consideration of Lender's entry into this
Agreement and Lender's agreement to make the Loan, Borrower agrees that it will,
in sufficient time for review by Lender and its counsel prior to the Loan
Opening Date, execute and deliver or cause to be executed and delivered to
Lender the following documents and instruments in form and substance acceptable
to Lender:
(a) A mortgage note from Borrower payable to the order of
Lender in the original principal amount of Six Million Two
Hundred Seventy Thousand and No/100ths Dollars
($6,270,000.00).
(b) A first mortgage deed of trust, on Borrower's fee simple
estate in the Project securing the Note, subject only to the
Permitted Exceptions;
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<PAGE>
(c) An assignment to Lender of all rents, income, issues and
profits of, and all leases, licenses, concessions and other
similar agreements relating to or connected with the Project
which shall be a present first priority absolute assignment of
all present and future leases of all or any part of the
Project, all guarantees thereof and all rents and other sums
payable thereunder;
(d) A security agreement granting Lender a security interest
in all personal property, tangible and intangible, owned or
hereafter acquired by Borrower and relating to the Project,
including bank accounts, accounts receivable, all escrow,
impound or reserve accounts required in the Loan Documents,
and other intangible property, which agreement may be combined
with the Mortgage;
(e) Uniform Commercial Code financing statements, in
duplicate, executed by Borrower as debtor with respect to all
of the personal property;
(f) An indemnity agreement with respect to certain matters
including environmental covenants (the "Environmental
Indemnity");
(g) An indemnity agreement with respect to certain matters
excluded from the non-recourse provisions of the Loan
Documents, executed by Indemnitor;
(h) A borrower's affidavit containing certain warranties and
representations by Borrower;
(i) A certificate regarding personal property containing
certain warranties and representations by Borrower regarding
the personal property included in the Project;
(j) Any other documents required by the
Application/Commitment; and
(k) Such other papers and documents as may be required by this
Agreement or as Lender may reasonably require.
2.3 Terms of the Loan. The Loan will bear interest for the period and
at the rate or rates set forth in the Note, and be payable in accordance with
the terms of the Note. The unpaid principal balance, all accrued and unpaid
interest and all other sums due and payable under the Note or other Loan
Documents, if not sooner paid, shall be paid in full at Loan Maturity.
2.4 Prepayments. Borrower shall have no right to make prepayments of
the Loan in whole or in part except in accordance with the terms of the Note.
2.5 Conditions to Disbursement. Borrower agrees to perform and satisfy
all conditions precedent to the disbursement of the Loan set forth in the
Application/Commitment, including those set forth in Sections 2.4 (Third Party
Reports) and 3 (The Closing) thereof.
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<PAGE>
2.6 Sources and Uses. Borrower shall use the proceeds of the Loan
solely for the purposes set forth in Exhibit C hereto. This sources and uses
statement must be in substantial accordance with the sources and uses statement
attached to the Application/Commitment.
3. BORROWER'S COVENANTS. Borrower further covenants and agrees with
Lender as follows:
3.1 Escrow Deposits. (a) Unless specifically waived by a separate
written agreement, Borrower shall deposit monthly with Lender a sum equal to
one-twelfth (1/12th) of the amount estimated by Lender to be required to pay, at
least thirty (30) days prior to their respective due dates, annual taxes,
assessments, ground rent and insurance premiums for the Project (the "Escrow
Account"). Lender shall not pay interest on or segregate the Escrow Account
unless required to do so under applicable law. If Lender is required to
segregate the Escrow Account, Borrower shall execute such documents as Lender,
in its sole discretion, deems necessary to perfect its security interest in the
Escrow Account. On the Loan Opening Date, Borrower shall make an initial deposit
with Lender of a sum equal to one-twelfth (1/12th) of the estimated annual
property taxes and assessments, a sum equal to one-twelfth (1/12th) of the
annual ground rent, if applicable, and a sum equal to one-twelfth (1/12th) of
the estimated annual insurance premiums, multiplied by the number of months
elapsed in the respective billing periods. For example, if annual taxes and
assessments are paid every six (6) months (in June and December) and the Loan
Opening Date occurs in March, the initial tax impound would be four-twelfths
(4/12ths) of the estimated annual property taxes and assessments; and
(b) The Escrow Account is hereby pledged as additional
security for the Loan and shall be held to be irrevocably applied for the
purposes for which made hereunder and shall not be subject to the direction or
control of Borrower; provided, however, that neither Lender nor any depository
holding such funds shall be liable for any failure to apply to the payment of
taxes, assessments, ground rent or insurance premiums any amount so deposited
unless (i) Borrower shall have requested Lender or said depository in writing to
make application of such funds to the payment of the particular taxes,
assessments, ground rent or insurance premiums as the case may be, accompanied
by the bills therefor, (ii) there shall exist no Default or Event of Default
hereunder or under any of the Loan Documents, (iii) there are sufficient funds
in the Escrow Account to pay the particular taxes, assessments, ground rent or
insurance premiums and (iv) following payment of such taxes, assessments, ground
rent or insurance premiums, the Escrow Account will be "in balance" in the
reasonable opinion of Lender.
3.2 Payment of Taxes. Borrower shall pay all real estate taxes,
assessments and charges of every kind upon the Project before the same become
delinquent; provided, however, that Borrower shall have the right to pay any
such tax, assessment or charge under protest or to otherwise contest any such
tax, assessment or charge but only if (i) such contest has the effect of
preventing the collection of such tax, assessment or charge so contested and
also preventing the sale or forfeiture of the Project or any part thereof or any
6
<PAGE>
interest therein, (ii) Borrower has notified Lender in writing in advance of its
intent to contest such tax, assessment or charge, and (iii) Borrower has
deposited security in form and amount satisfactory to Lender, in its sole
judgment, and increases the amount of such security so deposited promptly after
Lender's request therefor. If Borrower shall fail to commence such contest or,
having commenced such contest, and having deposited such security required by
Lender for its full amount, shall thereafter fail to prosecute such contest in
good faith or with due diligence, or, upon adverse conclusion of any such
contest, shall fail to pay the tax, assessment or charge so contested, Lender
may at its election (but shall not be required to), pay and discharge any such
tax, assessment or charge, and any interest or penalty thereon, and any amounts
so expended by Lender shall be deemed to constitute disbursements of the Loan
proceeds hereunder (even if the total amount of disbursements would exceed the
face amount of the Note), and shall bear interest from the date expended at the
Default Rate and be payable with such interest upon demand. Lender in making any
payment hereby authorized relating to any tax, assessment or charge, may do so
according to any bill, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax, assessment, charge, sale, forfeiture,
tax lien or title or claim thereof.
3.3 Maintenance of Insurance. (a) Insurance Coverage Requirements:
Borrower shall maintain the following insurance coverages, all in forms, with
companies and in amounts satisfactory to Lender:
(i) All risk/open perils special form property insurance must
be in force with limits of 100% replacement cost. Borrower agrees to
furnish upon Lender's request evidence of replacement cost, without
cost to Lender, such as is regularly and ordinarily obtained by
insurance companies to determine such replacement cost. If a
coinsurance clause is in effect, an agreed amount endorsement is
required. Blanket policies must include limits by property location.
The coverage shall insure the Real Property and all tangible personal
property.
(ii) Broad form boiler and machinery coverage, including a
form of business income, must be in force if any such item is located
on or about the Real Property.
(iii) If available, flood insurance must be in force if the
Real Property is located in a special flood hazard area according to
the most current flood insurance rate map issued by the Federal
Emergency Management Agency. The coverage shall include the Real
Property and the tangible personal property.
(iv) A form of business income or rent loss coverage must be
in force in the amount of one year's business income or rental income
from the Property. Blanket policies must include limits by property
location.
(v) Comprehensive/general liability coverage must be in force
with a $3,000,000 combined single limit per occurrence with a minimum
aggregate limit of $5,000,000. Umbrella/excess liability insurance may
7
<PAGE>
be used to satisfy this requirement. Liquor liability coverage must be
in force if alcoholic beverages are or will be sold, served or given on
the Real Property, either in the name of Borrower or in the name of the
tenant which sells, serves or gives such alcoholic beverages.
(vi) Such additional coverages appropriate to the property
type and site location as Lender may require. Additional coverages may
include earthquake, mine subsidence, sinkhole, personal property,
supplemental liability, or coverages of other property-specific risks.
(b) Insurance Procedures:
(i) How Lender Should Be Named. On all property policies and
coverages (including coverage against loss of business or rental
income), Lender must be named as "First Mortgagee" and "Lenders Loss
Payee" under a standard mortgage clause. On all liability policies and
coverages, including any liquor liability coverage maintained by any
tenant, Lender must be named as an "Additional Insured." Lender should
be referred to verbatim as follows: Jackson National Life Insurance
Company and its successors, assigns and affiliates, as their interest
may appear; c/o PPM Finance, Inc., 225 West Wacker Drive, Suite 1200,
Chicago, Illinois 60606, or its Mortgage Correspondent.
(ii) Rating. The insurance carrier must be rated A, Class VII
or better by Best's Rating Service, without regard to its parent's or
any reinsurer's rating.
(iii) Deductible. The maximum deductible on all coverages and
policies is $25,000.
(iv) Notices, Changes and Renewals. All policies must require
the insurance carrier to give Lender a minimum of thirty (30) days
notice in the event of modification, cancellation or non-renewal. Any
vacancy, change of title, tenant occupancy or use, physical damage,
additional improvements or other factors affecting any insurance
contract must be reported to Lender immediately. Borrower must provide
Lender with a paid insurance agent's receipt for all current coverages
unless such bills are paid by Lender from proceeds on deposit in the
Escrow Account established pursuant to Section 3.1. An original or
certified copy of each policy is required on or prior to the Loan
Opening Date and upon renewal. If no such copy is available, Lender
will accept a binder for a period not to exceed 90 days. All binders,
certificates of insurance, and original or certified copies of policies
must name Borrower as a named insured, or as an additional insured,
must include the complete and accurate property address and must bear
the original signature of the issuing insurance agent.
(v) No Other Insurance. Borrower shall not take out separate
insurance concurrent in form or contributing in the event of loss with
that required to be maintained hereunder unless Lender is included
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<PAGE>
thereon under a standard, non-contributory Lender clause acceptable to
Lender. Borrower shall immediately notify Lender whenever any such
separate insurance is taken out and shall promptly deliver to Lender
the original policy or policies of such insurance.
(c) Lender's Right to Obtain Insurance: Notwithstanding this
Section 3.3, in the Event of a Default under this Agreement or a Default under
any of the other Loan Documents, Lender shall have the right (but not the
obligation) to place and maintain insurance required to be placed and maintained
by Borrower hereunder, and use funds on deposit in the Escrow Account for the
payment of insurance to pay for same. Any additional amounts expended therefor
shall constitute additional disbursements of Loan proceeds (even if the total
amount of disbursements would exceed the face amount of the Note), and shall
bear interest from the date expended at the Default Rate and be payable together
with such interest upon demand.
3.4 Mechanics' Liens and Contest Thereof. Borrower will not suffer or
permit any mechanics' lien claims to be filed or otherwise asserted against the
Project and will promptly discharge the same if any claims for lien or any
proceedings for the enforcement thereof are filed or commenced; provided,
however, that Borrower shall have the right to contest in good faith and with
due diligence the validity of any such lien or claim upon furnishing to the
Title Insurer such security or indemnity as it may require to induce the Title
Insurer to insure against all such claims, liens or proceedings; and provided
further that Lender will not be required to make any further disbursements of
the Loan proceeds unless (a) any mechanics' lien claims shown by any title
insurance commitments or interim binders or certifications have been released or
insured against by the Title Insurer or (b) Borrower shall have provided Lender
with such other security with respect to such claim as may be acceptable to
Lender, in its sole discretion.
3.5 Settlement of Mechanics' Lien Claims. If Borrower shall fail
promptly to discharge any mechanics' lien claim filed or otherwise asserted or
to contest any such claims and give security or indemnity in the manner provided
in Section 3.4 hereof, or, having commenced to contest the same, and having
given such security or indemnity, shall thereafter fail to prosecute such
contest in good faith or with due diligence, or fail to maintain such indemnity
or security so required by the Title Insurer for its full amount, or, upon
adverse conclusion of any such contest, shall fail to cause any judgment or
decree to be satisfied and lien to be promptly released, then, and in any such
event, Lender may, at its election, but shall not be required to, (i) procure
the release and discharge of any such claim and any judgment or decree thereon,
without inquiring into or investigating the amount, validity or enforceability
of such lien or claim and (ii) effect any settlement or compromise of the same,
or may furnish such security or indemnity to the Title Insurer, and any amounts
expended by Lender in doing so, including premiums paid or security furnished in
connection with the issuance of any surety company bonds, shall be deemed to
constitute disbursements of the Loan proceeds hereunder (even if the total
amount of disbursements would exceed the face amount of the Note), and shall
bear interest from the date expended at the Default Rate and be payable together
with such interest upon demand.
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<PAGE>
3.6 Maintenance, Repair and Restoration of Improvements. Borrower shall
(i) promptly repair, restore or rebuild any Improvements which may become
damaged or be destroyed; and (ii) keep the Improvements in good condition and
repair, without waste.
3.7 Leases and Lease Reports. (i) Except in the ordinary course of
business and in the exercise of sound business judgment, and at market rents, a
schedule of which has been approved by Lender, and in accordance with the
standard form of lease approved by Lender, Borrower shall not enter into,
modify, amend, waive any material provision of, terminate or cancel any leases
of space in the Project without the prior written consent of Lender, and (ii)
annually, upon request or upon an Event of Default, Borrower shall deliver to
Lender a report showing the status of the leasing of space in the Project
certified by Borrower. Such report shall include information on the amount of
space covered by any letters of intent, leases out for execution, and fully
executed leases; the rental under each lease agreement or proposed lease
agreement; the term of each lease agreement; and a summary of any terms which
vary from the standard form of lease previously approved by Lender. Any new
lease, modification, amendment, waiver of any material provision, termination or
cancellation of any lease of space in the Project without the prior written
consent of Lender shall be deemed by Lender, in its sole discretion, as an Event
of Default. Notwithstanding the foregoing, Borrower shall have the right,
without the prior written consent of Lender, to enter into a lease of a portion
of the Project with a person or party not affiliated with Borrower provided that
the lease is written with only minor modifications or clarifications of the
lease form which has been approved by Lender.
3.8 Compliance With Laws. Borrower shall promptly comply with all
applicable Laws of any Governmental Authority having jurisdiction over Borrower
or the Project, and shall take all actions necessary to bring the Project into
compliance with all applicable Laws, including without limitation all Building
Laws (whether now existing or hereafter enacted).
3.9 Alterations. Without the prior written consent of Lender, Borrower
shall not make any material alterations to the Project (other than completion of
tenant work required in accordance with leases entered into in accordance with
the terms of this Agreement).
3.10 Personal Property. (i) All of Borrower's personal property,
fixtures, furnishings, furniture, attachments and equipment located on or used
in connection with the Project, shall always be located at the Project and shall
also be kept free and clear of all chattel mortgages, conditional vendor's liens
and all other liens, encumbrances and security interests of any kind whatever,
(ii) Borrower will be the absolute owner of said personal property, fixtures,
furnishings, furniture, attachments and equipment, and (iii) Borrower shall,
from time to time, furnish Lender with evidence of such ownership satisfactory
to Lender, including searches of applicable public records.
3.11 Prohibition Against Cash Distributions and Application of Cash
Flow. Borrower shall first apply all cash flow from the Project to pay Project
expenses, including amounts due to Lender pursuant to the Loan Documents. No
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cash flow from the Project shall be distributed to any partners, principals,
members or shareholders of Borrower or applied to the payment of any
obligations, debts or expenses not related to the Project if an Event of Default
has occurred or if there is a reasonable likelihood that such money will be
necessary for the operation of the Project or the payment of principal and
interest due in connection with the Loan within ninety (90) days following any
contemplated cash flow distribution.
3.12 Inspection by Lender. Borrower will cooperate (and will cause the
managing agent to cooperate) with Lender in arranging for inspections of the
Project from time to time by Lender and its agents and representatives.
3.13 Furnishing Information. Borrower shall deliver or cause to be
delivered to Lender annual and (if required) quarterly financial statements for
Borrower and annual financial statements for Indemnitor as soon as available and
in all events no later than one hundred twenty (120) days after the close of
each fiscal year for annual statements and, if Lender required quarterly
statements thirty (30) days after the close of each quarter. The annual and if
(required) quarterly statements shall be certified as true and correct by an
authorized financial officer of Borrower or Indemnitor, as the case may be. If a
Default has occurred or Lender reasonably believes that previously provided
financial statements are inaccurate, the annual statements shall be audited by
certified public accountants acceptable to Lender. Borrower shall also furnish a
current operating statement for the Project (including a rent roll if there are
any leases of the Project or any part thereof), at the time it delivers its
financial statements. Quarterly statements will not initially be required by
Lender.
Additionally, Borrower and Indemnitor will:
(i) promptly supply Lender with such information concerning
their respective affairs and property relating to the
development and operation of the Project as Lender may
hereafter request from time to time;
(ii) at any time during regular business hours permit Lender
or any of its agents or representatives to have access to and
examine all of its books and records regarding the development
and operation of the Project;
(iii) permit Lender to copy and make abstracts from any and
all of such books and records;
(iv) immediately notify Lender if Borrower receives any actual
notice, action or lien notice or otherwise becomes aware that
the Project violates or is alleged to violate any Building
Law, or of a condition or situation on the Property which will
constitute violation of a Building Law (whether now existing
or hereafter enacted). The notice to Lender shall describe
with particularity the Building Law violation and the
Borrower's plan to promptly correct the violation.
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3.14 Documents of Further Assurance. Borrower shall, from time to time,
upon Lender's request, execute, deliver, record and furnish such documents as
Lender may reasonably deem necessary or desirable to (i) perfect and maintain
perfected as valid liens upon the Project, the liens granted by Borrower to
Lender under the Mortgage and the collateral assignments and other security
interests under the other Loan Documents as contemplated by this Agreement, (ii)
correct any errors of a typographical nature or inconsistencies which may be
contained in any of the Loan Documents, and (iii) consummate fully the
transaction contemplated under this Agreement.
3.15 Furnishing Reports. Borrower shall provide Lender promptly after
receipt with copies of all inspections, reports, test results and other
information received by Borrower from time to time from its employees, agents,
representatives, architects and engineers, which in any way relate to the
Project, or any part thereof.
3.16 Operation of Project and Zoning. As long as any portion of the
Loan remains outstanding, the Project shall be operated in a first class manner
as a manufactured housing community. Borrower shall fully and faithfully perform
all of its covenants, agreements and obligations under each of the leases of
space in the Project. Borrower shall not initiate or acquiesce in a zoning
variation or reclassification without Lender's consent.
3.17 Management Agents' and Brokers' Contracts. Borrower shall not
enter into, modify, amend, waive any material provision of, terminate or cancel
any management contracts for the Project without the prior written approval of
Lender. If, in the ordinary course of business, Borrower shall enter into,
modify, amend, waive any provision of, terminate or cancel any contracts or
agreements (other than Management contracts) with agents or brokers, Borrower
shall notify Lender within ten (10) days after such action.
3.18 Furnishing Notices. Borrower shall deliver to Lender copies of all
material notices received or given by Borrower (or its agents or
representatives) in connection with the Project.
3.19 Indemnification. Borrower shall indemnify, defend and hold Lender,
and its officers, directors, employees, shareholders, advisers, and agents
(collectively, "Indemnified Parties") harmless from and against all claims,
injury, damage, loss, costs (including reasonable attorney fees and costs) and
liability of any and every kind incurred by Indemnified Parties by reason of (i)
the operation or maintenance of the Project or any construction at the Project;
(ii) the payment of any brokerage commissions or fees of any kind with respect
to the Application/Commitment or the Loan, and for any reasonable legal fees or
expenses incurred by Lender in connection with any claims for such commissions
or fees; (iii) any other action or inaction by, or matter which is the
responsibility of, Borrower (other than the payments due under the Note); and
(iv) the breach of any material representation or warranty or failure to fulfill
any of Borrower's obligations under this Agreement or any other Loan Document
(other than the payments due under the Note). The foregoing indemnity shall
include the cost of all alterations, repairs and replacements to the Project
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(including without limitation architectural, engineering, legal and accounting
costs), all fines, fees and penalties, and all legal and other expenses
(including reasonable attorney fees), incurred in connection with the Project
being in violation of Building Laws and for the cost of collection of the sums
due under this indemnity, whether or not Borrower is in possession of the
Project. If Lender shall become the owner of or acquire an interest in or rights
to the Project by foreclosure or deed in lieu of foreclosure of the Mortgage or
by other means, the foregoing indemnification obligation shall survive such
foreclosure or deed in lieu of foreclosure or other acquisition of the Project,
unless Lender's own negligent acts or omissions cause what would otherwise be
considered an indemnification obligation by Borrower and/or Indemnitor.
3.20 Organization Documents. Without the prior written consent of
Lender, Borrower shall not permit or suffer any amendment or modification of its
member control agreement or operating agreement, and shall not permit or suffer
the admission of any new member, except as permitted pursuant to Section 6.3.
3.21 Publicity. During the term of the Loan, Lender may issue or
publish releases or announcements stating that the financing for the Project is
being provided by Lender to Borrower, and Borrower hereby consents thereto.
3.22 Lender's Attorney Fees and Expenses. If at any time hereafter
prior to repayment of the Loan in full, Lender employs counsel for advice or
other representation (whether or not any suit has been or shall be filed and
whether or not other legal proceedings have been or shall be instituted and, if
such suit is filed or legal proceedings instituted, through all administrative,
trial, and appellate levels) with respect to the Loan, the Project or any part
thereof, this Agreement or any of the Loan Documents, including any proposed or
actual restructuring of the Loan, or to protect, collect, lease, sell, take
possession of, or liquidate any of the Project, or to attempt to enforce any
security interest or lien on any of the Project, or to enforce any rights of
Lender or any of Borrower's obligations hereunder or those of any other person,
firm or corporation which may be obligated to Lender by virtue of this Agreement
or any other agreement, instrument or document heretofore or hereafter delivered
to Lender by or for the benefit of Borrower, or to analyze and respond to any
request for consent or approval made by Borrower, then, in any such event, all
of the reasonable attorney fees and expenses arising from such services, and all
expenses, costs and charges relating thereto, shall bear interest from the date
expended at the Default Rate and shall be paid by Borrower on demand, and if
Borrower fails to pay such fees, costs and expenses payment thereof by Lender
shall be deemed to constitute disbursement of the Loan proceeds hereunder (even
if the total amount of disbursements would exceed the face amount of the Note)
and shall constitute additional indebtedness of Borrower to Lender, payable on
demand and secured by the Mortgage and other Loan Documents.
3.23 Loan Expenses. Borrower agrees to pay all expenses of the Loan,
including all amounts payable pursuant to Section 3.25 of this Agreement, and
also including all recording charges, title insurance charges, costs of surveys,
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costs for certified copies of instruments, escrow charges, fees, expenses and
charges of architectural/engineering consultants of Lender, fees and expenses of
Lender's attorneys, and all costs and expenses incurred by Lender in connection
with the determination of whether Borrower has performed the obligations
undertaken by Borrower under this Agreement or has satisfied any conditions
precedent to the obligations of Lender under this Agreement. All such expenses,
charges, costs and fees shall be the Borrower's obligation regardless of whether
the Loan is disbursed in whole or in part unless such failure to disburse is due
to Lender's wrongful failure to disburse hereunder. Any and all advances or
payments made by Lender under this Agreement from time to time, or for fees of
architectural and engineering consultants and attorney fees and expenses, if
any, and all other Loan expenses shall, as and when advanced or incurred by
Lender, constitute additional indebtedness evidenced by the Note and secured by
the Mortgage and the other Loan Documents to the same extent and effect as if
the terms and provisions of this Agreement were set forth therein, whether or
not the aggregate of such indebtedness shall exceed the aggregate face amount of
the Note.
3.24 Loan Fees. Borrower agrees to pay the loan fees ("Loan Fees") as
are set forth in the Application/Commitment, subject to the terms and conditions
set forth therein. Borrower shall pay all Loan Fees at the times set forth in
the Application/Commitment and shall pay all expenses incurred by Lender at the
Loan Opening Date and on demand at such subsequent times as Lender may determine
including administrative fees and expenses in connection with any modification
of any of the terms of the Loan. Lender may require the payment of such fees and
expenses as a condition to the disbursement of the Loan.
3.25 Additional Debt. The Lender will consent to a second mortgage on
the Project securing a fixed-rate loan from a lender if the following conditions
are met.
(A) Net operating income from the Project, as determined
by the Lender at the time of the request, is at least
1.25 times total debt service on the Loan and the
secondary financing;
(B) Under the note secured by the second mortgage, level
monthly payments fully amortize principal on or
before the maturity of that note;
(C) Combined principal balance under the notes evidencing
both loans does not exceed the lesser of: i) 75% of
the value of the Project at such times, as
established by the Lender, based on its review of a
then current MAI appraisal performed by an appraiser
approved by the Lender, and ii) $8,662,500;
(D) The interest rate on the loan secured by the second
mortgage reasonably reflects market rates for similar
loans; and
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(E) The documentation of the second mortgage is
satisfactory to Lender. A formal subordination
agreement satisfactory to the Lender in form and
substance will be required. Lender will not agree to
permit the second mortgagee to assume the Loan in the
event of foreclosure of the second mortgage.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to execute this
Agreement and perform the obligations of Lender hereunder, Borrower hereby
represents and warrants to Lender as follows:
4.1 Title. On the Loan Opening Date and thereafter, Borrower will have
good and marketable fee simple title to the Real Property, subject only to the
Permitted Exceptions.
4.2 No Litigation. Except for claims fully covered by insurance, where
the insurance company is defending such claims and such defense is not being
provided under a reservation of rights, and except as disclosed in writing to
Lender prior to the date hereof, there is no pending litigation or unsatisfied
judgment entered of record against Borrower or the Project. No litigation or
proceedings are pending, or to Borrower's knowledge are threatened, against any
Affiliated Party (i) which might affect the validity or priority of the lien of
the Mortgage, (ii) which might affect the ability of Borrower or any Indemnitor
to perform their respective obligations pursuant to and as contemplated by the
terms and provisions of this Agreement and the other Loan Documents, or (iii)
which could materially affect the operations or financial condition of the
Project, Borrower, or any Affiliated Party.
4.3 Due Authorization. The execution and delivery of the Loan Documents
and all other documents executed or delivered by or on behalf of Borrower and
pertaining to the Loan have been duly authorized or approved by Borrower and,
when executed and delivered by Borrower or when caused to be executed and
delivered on behalf of Borrower, will constitute the legal, valid and binding
obligations of the obligor thereon, enforceable in accordance with their
respective terms except as limited by bankruptcy, insolvency, or other laws of
general application relating to the enforcement of creditor's rights, and the
payment or performance thereof will be subject to no offsets, claims or defenses
of any kind or nature whatsoever.
4.4 Breach of Laws or Agreements. The execution, delivery and
performance of this Agreement and the other Loan Documents have not constituted
(and will not, upon the giving of notice or lapse of time or both, constitute) a
breach or default under any other agreement to which Borrower or any Indemnitor
is a party or may be bound or affected, or a violation of any Law which may
affect the Project, any part thereof, any interest therein, or the use thereof,
or Borrower or any Indemnitor.
4.5 Leases. Borrower and its agents have not entered into any leases or
other arrangements for occupancy of space within the Project other than leases
shown on the most recent rent roll furnished to Lender (the "Rent Roll") or
entered into in accordance with the requirements of this Agreement. All leases
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disclosed on the Rent Roll are in full force and effect and to Borrower's
knowledge, there are no existing defaults thereunder other than as disclosed in
writing to Lender.
4.6 Condemnation. (i) No condemnation of any portion of the Project,
(ii) no condemnation or relocation of any roadways abutting the Project, and
(iii) no denial of access to the Project from any point of access to the
Project, has commenced or, to Borrower's knowledge, is contemplated by any
Governmental Authority.
4.7 Condition of Improvements. To the best of Borrower's knowledge, the
foundations and structure of the Improvements are structurally sound and the
various mechanical systems have adequate capacities and are in good working
condition. The Improvements were built in substantial compliance with applicable
plans and specifications furnished to the Lender's engineering consultant, and
the Improvements are in full compliance with all applicable Building Laws.
Certificates of occupancy with respect to the Improvements, and any other
certificates which may be required to evidence compliance with building codes
and permits and approval for full occupancy of the Improvements and all
installations therein have been issued by all appropriate authorities. Borrower
has no knowledge of required capital expenditures or deferred maintenance other
than those that would be normally expected for a building of similar age and
type. No notice of violation of any Building Law has been received.
4.8 Information Correct. All financial statements furnished to Lender
by Borrower or any Affiliated Party fairly present the financial condition of
such persons or entities and were prepared in accordance with a method of
preparation approved by Lender, consistently applied, and all other information
previously furnished by Borrower or any Affiliated Party to Lender in connection
with the Loan are true, complete and correct in all respects except as otherwise
disclosed to Lender in writing and do not fail to state any material fact
necessary to make the statements made not misleading. Neither Borrower nor
Indemnitor has misstated or failed to disclose to Lender any material fact
relating to: (i) the condition, use or operation of the Project, (ii) the status
or any material condition of any tenant or lease at the Project known to it,
(iii) Borrower, (iv) any Indemnitor, or (v) the litigation disclosure provided
by Borrower and Indemnitor, except as disclosed in writing to Lender prior to
the date hereof.
4.9 Material Adverse Change. No material adverse change in the
operations or financial condition of Borrower or Indemnitor has occurred since
the respective effective dates of their financial statements previously
submitted to Lender, and no material adverse change in the condition (physical
or otherwise) of the Project has occurred since the date of the
Application/Commitment.
4.10 Solvency. Neither Borrower, nor, if Borrower is a partnership, any
general partner of Borrower nor any Indemnitor is (a) currently insolvent on a
balance sheet basis, or (b) currently unable to pay its debts as they come due;
and no bankruptcy or receivership proceedings are contemplated or pending as to
any of them.
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4.11 Zoning. The use of the Project (including contemplated accessory
uses) does not violate (i) any Law (including subdivision, zoning, building,
environmental protection and wetlands protection Laws), or (ii) any restrictions
of record, or any agreement affecting the Project or any part thereof. Without
limiting the generality of the foregoing, all consents, licenses and permits and
all other authorizations or approvals (collectively, "Governmental Approvals")
relating to the use and operation of the Project have been complied with.
4.12 Utilities. The Project has adequate water, gas and electrical
supply, facilities, other required public utilities, fire and police protection,
and means of appropriate access between the Project and public highways.
4.13 Brokerage Fees. No brokerage fees or commissions are payable by or
to any person in connection with this Agreement or the Loan to be disbursed
hereunder other than fees payable to Holliday Fenoglio Fowler, L.P., which fees
shall be paid by Borrower.
4.14 Encroachments. Unless otherwise disclosed by the survey required
by Lender, no building or other improvement in the Project encroaches upon any
building line, setback line, side yard line, or any recorded or visible easement
(or other easement of which Borrower has knowledge with respect to the Project).
4.15 Separate Parcel. The Project is taxed separately without regard to
any other property and for all purposes the Project may be mortgaged, conveyed,
and otherwise dealt with as an independent parcel.
4.16 ERISA. The assets of Borrower are not "plan assets" of any
employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue
Code. The transactions contemplated by this Agreement by or with Borrower are
not in violation of state statutes regulating investments of and fiduciary
obligations with respect to "governmental plans", as defined in Section 3(32) of
ERISA.
4.17 No Default. No Default or Event of Default has occurred and is
continuing.
4.18 Trade Name; Principal Place of Business. Borrower uses no trade
name other than its actual name set forth herein. The principal place of
business of Borrower is as stated on page 1 hereof.
4.19 FIRPTA. Borrower is not a "foreign person" within the meaning of
Sections 1445 or 7701 of the Internal Revenue Code.
4.20 RICO. Borrower has not been charged with nor, to its knowledge, is
it under investigation for, possible violations of the Racketeer Influenced and
Corrupt Organizations Act, the Continuing Criminal Enterprise Act, the
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Controlled Substance Act of 1978, or similar laws providing for the possible
forfeiture of any of its respective assets or properties.
4.21 No Casualty. No part of the Project has been damaged by fire or
other casualty except as disclosed in writing to Lender.
4.22 Truth of Recitals. All statements set forth in the Recitals are
true and correct.
5. CASUALTY AND CONDEMNATION.
5.1 Lender's Election to Apply Insurance and Condemnation Proceeds to
Indebtedness. In the event of any loss or damage to any portion of the Project
due to fire or other casualty, or any taking of any portion of the Project by
condemnation or under power of eminent domain, Lender shall have the right, but
not the obligation, to settle insurance claims and condemnation claims or awards
for more than $100,000.00 and if Lender elects not to settle such claim or award
then Borrower shall settle such claim or award and such settlement or award
shall be subject to Lender's prior written approval. Borrower shall have the
right to settle claims or awards for $100,000.00 or less, provided that Lender
shall have the right to settle any claim or award that Borrower has not settled
on or before one hundred twenty (120) days after the date of such loss or prior
to the date of such taking. If (i) no Default exists under the this Agreement,
the Note or the other Loan Documents; (ii) no more than one payment default has
occurred during the preceding twelve months; (iii) no non-monetary default has
occurred that has been noticed and remained uncured beyond the applicable cure
period; (iv) the proceeds received by Lender, together with any additional funds
deposited with Lender by Borrower, are sufficient, in Lender's discretion,
either to restore the Project to its condition before the casualty or to remedy
the condemnation; (v) the Loan-to-value ratio of the Project on completion of
the restoration will be 65% or less, as determined by an Appraisal (unless the
amount of proceeds is less than 3% of the original Loan amount); (vi) Borrower
complies with all conditions set forth in Section 5.2 of this Agreement,
Borrower shall be entitled to use the insurance or condemnation proceeds to
rebuild the Project or to remedy the effect of the condemnation, as the case may
be. The Appraisal required pursuant to the foregoing provision shall be at
Borrower's expense and Borrower is required to provide proof of such payment to
Lender and Lender's Mortgage Correspondent. In all other cases, Lender shall
have the right (but not the obligation) to collect, retain and apply to the
indebtedness of Borrower under this Agreement and the other Loan Documents all
insurance and condemnation proceeds (after deduction of all expense of
collection and settlement, including attorney and adjusters' fees and expenses),
and if such proceeds are insufficient to pay such amount in full, to declare the
balance remaining unpaid on the Note and Mortgage to be due and payable
forthwith and to avail itself of any of the remedies afforded thereby as in the
case of any default beyond applicable cure periods thereunder. Any proceeds
remaining after application to the indebtedness of Borrower under this Agreement
and the other Loan Documents shall be paid by Lender to Borrower or the party
then entitled thereto.
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5.2 Borrower's Obligation to Rebuild and Use of Proceeds Therefor. If
Lender does not elect to or is not entitled to apply fire or casualty insurance
proceeds to the indebtedness, as provided under Section 5.1 of this Agreement,
Lender shall have the right (but not the obligation) to settle, collect and
retain such proceeds, and after deduction of all expenses of collection and
settlement, including attorney and adjusters' fees and expenses, to release the
same to Borrower periodically provided that Borrower shall:
(a) Expeditiously repair and restore all damage to the portion
of the Project in question resulting from such fire or other casualty,
including completion of the construction if such fire or other casualty
shall have occurred prior to completion, so that the Project will be
completed in accordance with the plans and specifications therefor; and
(b) If the proceeds of fire or casualty insurance (and the
undisbursed available Loan proceeds for construction) are, in Lender's
sole judgment, insufficient to complete the repair and restoration of
the buildings, structures and other improvements constituting the
Project, then Borrower shall promptly deposit with Lender the amount of
such deficiency.
Any request by Borrower for a disbursement by Lender of fire or
casualty insurance proceeds and funds deposited by Borrower pursuant to this
Section 5.2 and the disbursement thereof shall be conditioned upon Borrower's
compliance with and satisfaction of the same conditions precedent as would be
applicable in connection with construction loans made by institutional lenders
for projects similar to the Project, including approval of plans and
specifications, submittal of evidence of completion, updated title insurance,
lien waivers, and other customary safeguards.
6. ASSIGNMENTS.
6.1 Lender's Right to Assign. Lender shall have the right to assign,
transfer, sell, negotiate, pledge or otherwise hypothecate this Agreement and
any of its rights and security hereunder, including the Note, Mortgage, and any
other Loan Documents. Borrower hereby agrees that all of the rights and remedies
of Lender in connection with the interest so assigned shall be enforceable
against Borrower by such assignee with the same force and effect and to the same
extent as the same would have been enforceable by Lender but for such
assignment. Borrower agrees that Lender shall have the right to sell
participations in the Loan or to include the Note in a securitized pool of
indebtedness without the consent of Borrower.
6.2 Prohibition of Assignments by Borrower. Borrower shall not assign
or attempt to assign its rights under this Agreement. Borrower will not suffer
or permit any of its interest or rights in the Project to be assigned, sold,
pledged, encumbered, transferred, hypothecated or otherwise disposed of until
the provisions of this Agreement have been fully complied with and the Loan and
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all other sums evidenced by the Note and/or secured by the Mortgage and other
Loan Documents have been repaid in full.
6.3 Transfers of Interests in Borrower . For estate-planning purposes
only, Borrower, or any partner, member or shareholder of Borrower shall be
permitted to make a sale, conveyance, transfer or other vesting of any direct or
indirect interest in Borrower (other than a general partnership interest in
Borrower if Borrower is a partnership) up to an aggregate, over the term of the
Loan, of twenty-five (25%) percent of the total interests in Borrower, without
the prior consent of Lender, provided that any such sale, conveyance, transfer
or other vesting does not change the direct or indirect control or management of
Borrower. Copies of any and all documents evidencing any such sale, conveyance,
transfer or other vesting must be provided to Lender within fifteen (15) days
after the occurrence of said action including, without limitation, a statement
detailing the action and a listing of reallocations and percentages of ownership
interest in Borrower. Notwithstanding the foregoing, any sale, conveyance,
transfer or other vesting of any direct or indirect interest in Borrower, other
than the above said 25% aggregate amount, or for purposes other than
estate-planning, or any change of direct or indirect control or management of
Borrower or any encumbrance of or granting of any security interest in Project
or Borrower, if such event occurs without Lender's written consent (which Lender
may withhold at its sole discretion), shall constitute an event of default under
the Loan Documents. Borrower shall pay Lender's out-of-pocket expenses incurred
in connection with the review of any sale, conveyance, transfer or other vesting
pursuant to this Section 6.3 and pursuant to Section 6.2 hereof.
6.4 Successors and Assigns Subject to the foregoing restrictions on
transfer and assignment contained in this Section 6, this Agreement shall inure
to the benefit of and shall be binding on the parties hereto and their
respective successors and assigns.
6.5 One Time Transfer Right Notwithstanding the foregoing, Lender shall
consent to a one-time transfer of the Project to a purchaser, if the Loan is not
in default and if Lender approves of the proposed buyer's ownership structure,
financial strength, creditworthiness and management capabilities. The transferee
and its principals must assume all of Borrower's liabilities and obligations
under the terms of the Loan Documents including those liabilities and
obligations listed in Section 9.18, clauses (i) through (xii). Borrower and
Indemnitor shall not remain liable for any liabilities and obligations described
in the Loan Documents and at Section 9.18, clauses (i) through (xii) of the Loan
first occurring after such transfer; however, Borrower and Indemnitor shall
remain liable for any liabilities and obligations in the Loan Documents and at
Section 9.18 clauses (i) through (xii) first occurring prior to such transfer.
Such a transfer will be conditioned on the payment of an assumption fee of one
percent (1%) of the then outstanding principal balance. Lender shall not be
obligated to entertain any request from a proposed buyer for the modification of
the Loan Documents.
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7. EVENTS OF DEFAULT.
7.1 The occurrence of any one or more of the following shall constitute
an "Event of Default," as such term is used herein:
(a) If Borrower fails to pay principal or interest under the
Note when due and fails to cure such default within ten (10) days after
written notice thereof from Lender provided; however, Lender's
obligation to provide written notice of monetary default shall be
limited to not more than two times during any consecutive twelve (12)
month period;
(b) If Borrower defaults in the performance of any of its
other covenants, agreements and obligations under this Agreement
involving the payment of money;
(c) If Borrower defaults in the performance of any of its
non-monetary covenants, agreements and obligations under this Agreement
and fails to cure such default within thirty (30) days after written
notice thereof from Lender provided, however, that if such default is
reasonably susceptible of cure, but cannot be cured within such thirty
(30) day period, then so long as Borrower promptly commences cure and
thereafter diligently pursues such cure to completion, the cure period
shall be extended for an additional sixty (60) days, within which
Borrower may complete such cure;
(d) If at any time or times hereafter any representation or
warranty (including the representations and warranties of Borrower set
forth in any Loan Document), statement, report or certificate furnished
to Lender in connection with the Loan is not true and correct in any
material respect;
(e) If any petition is filed by or against Borrower or any
Affiliated Party under the Federal Bankruptcy Code or any similar state
or federal Law, whether now or hereafter existing (and, in the case of
involuntary proceedings, failure to cause the same to be vacated,
stayed or set aside within thirty (30) days after filing);
(f) If any assignment, pledge, encumbrance, transfer,
hypothecation or other disposition is made in violation of Section 6.2
or Section 6.3 of this Agreement;
(g) If Borrower, any general partner of Borrower or any
Guarantor or Indemnitor shall fail to pay any debt owed by it or is in
default under any agreement with Lender or any other party (other than
a failure or default for which the maximum liability of Borrower or
such general partner, Guarantor or Indemnitor does not exceed 25% of
their respective assets) and such failure or default continues after
any applicable grace period specified in the instrument or agreement
relating thereto; or
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(h) If a default occurs under any of the Loan Documents and
continues beyond the applicable grace period, if any, contained
therein.
8. REMEDIES.
8.1 Remedies Conferred Upon Lender. Upon the occurrence of any Event of
Default, including without limitation the filing, by Borrower, of a voluntary
petition under Chapter 11 of the Bankruptcy Code, Lender shall have the right
(but not the obligation) to pursue any one or more of the following remedies
concurrently or successively, it being the intent hereof that all such remedies
shall be cumulative and that no such remedy shall be to the exclusion of any
other:
(a) Declare the Note to be immediately due and payable;
(b) Use and apply any monies deposited by Borrower with
Lender, including amounts in the Escrow Account, regardless of the
purpose for which the same was deposited, to cure any such default or
to apply on account of any indebtedness under this Agreement which is
due and owing to Lender; and
(c) Exercise or pursue any other right or remedy permitted
under this Agreement or any of the Loan Documents or conferred upon or
available to Lender at law or in equity or otherwise.
8.2 Non-Waiver of Remedies. No waiver of any breach or default
hereunder shall constitute or be construed as a waiver by Lender of any
subsequent breach or default or of any breach or default of any other provision
of this Agreement.
8.3 Cash Collateral Account. Upon the occurrence of an Event of
Default, Borrower shall deposit all revenues from the operation of the Project
into an account held by and pledged to Lender ("Cash Collateral Account").
Lender shall not pay interest on any amounts held on deposit in the Cash
Collateral Account, unless required to do so under applicable law. Borrower
shall execute such documents as Lender, in its sole discretion, deems necessary
to perfect its interest in the Cash Collateral Account.
9. GENERAL PROVISIONS
9.1 Captions. The captions and headings of various Articles and
Sections of this Agreement and Exhibits pertaining hereto are for convenience
only and are not to be considered as defining or limiting in any way, the scope
or intent of the provisions hereof.
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9.2 Merger. This Agreement, the Application/Commitment and the Loan
Documents and instruments delivered in connection herewith, as may be amended
from time to time in writing, constitute the entire agreement of the parties
with respect to the Project and the Loan, and all prior discussions,
negotiations and document drafts are merged herein and therein. If there are any
inconsistencies between the Application/Commitment and this Agreement or the
Loan Documents, the terms contained in this Agreement and the other Loan
Documents shall prevail. Neither Lender nor any employee of Lender has made or
is authorized to make any representation or agreement upon which Borrower may
rely unless such matter is made for the benefit of Borrower and is in writing
signed by an authorized officer of Lender. Borrower agrees that it has not and
will not rely on any custom or practice of Lender, or on any course of dealing
with Lender, in connection with the Loan unless such matters are set forth in
this Agreement or the Loan Documents or in an instrument made for the benefit of
Borrower and in a writing signed by an authorized officer of Lender.
9.3 Notices. Any notice, demand, request or other communication which
any party hereto may be required or may desire to give hereunder shall be in
writing, addressed as follows and shall be deemed to have been properly given if
hand delivered, if sent by reputable overnight courier (effective the business
day following delivery to such courier) or if mailed (effective two business
days after mailing) by United States registered or certified mail, postage
prepaid, return receipt requested:
If to Borrower:
CAX Rancho Mirage, L.L.C.
3410 South Galena Street, Suite 210
Denver, Colorado 80231
with a copy to:
Joseph W. Gaynor, P.A.
2637 McCormick Drive
Clearwater, Florida 33758
Attn: Joseph W. Gaynor, Esq.
If to Lender:
Jackson National Life Insurance Company
c/o PPM Finance, Inc.
225 West Wacker Drive, Suite 1200
Chicago, Illinois 60606
Attn: Manager of Commercial Mortgage Servicing
with a copy to:
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Morrison & Hecker L.L.P.
2800 North Central Avenue
Suite 1600
Phoenix, Arizona 85004
Attn: Lawrence C. Petrowski, Esq.
or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice. Notices given in any other fashion shall be deemed
effective only upon receipt.
9.4 Modification; Waiver. No modification, waiver, amendment, discharge
or change of this Agreement shall be valid unless the same is in writing and
signed by the party against which the enforcement of such modification, waiver,
amendment, discharge or change is sought. Lender reserves the right to charge an
administrative fee for any such modification, waiver, amendment, discharge, or
change of this Agreement.
9.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE INTERNAL LAWS (AS OPPOSED TO THE LAWS OF CONFLICTS) OF THE STATE OF
ARIZONA.
9.6 Acquiescence Not to Constitute Waiver of Lender's Requirements.
Each and every covenant and condition for the benefit of Lender contained in
this Agreement may be waived by Lender.
9.7 Disclaimer by Lender. (a)This Agreement is made for the sole
benefit of Borrower and Lender (and Lender's successors and assigns and
participants, if any), and no other person or persons shall have any benefits,
rights or remedies under or by reason of this Agreement, or by reason of any
actions taken by Lender pursuant to this Agreement. Lender shall not be liable
for any debts or claims accruing in favor of any third parties against Borrower
or others or against the Project. Borrower is not and shall not be an agent of
Lender for any purposes. Except as expressly set forth in the Loan Documents,
Lender is not and shall not be an agent of Borrower for any purposes. Lender, by
making the Loan or taking any action pursuant to any of the Loan Documents,
shall not be deemed a partner or a joint venturer with Borrower or fiduciary of
Borrower.
(b) Any review, investigation or inspection conducted by
Lender, any architectural or engineering consultants retained by Lender or any
agent or representative of Lender in order to verify independently Borrower's
satisfaction of any conditions precedent to the disbursement of the Loan,
Borrower's performance of any of the covenants, agreements and obligations of
Borrower under this Agreement, or the truth of any representations and
warranties made by Borrower hereunder (regardless of whether or not the party
conducting such review, investigation or inspection should have discovered that
any of such conditions precedent were not satisfied or that any such covenants,
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<PAGE>
agreements or obligations were not performed or that any such representations or
warranties were not true), shall not affect, or constitute a waiver by Lender
of, (i) any of Borrower's representations and warranties under this Agreement or
Lender's reliance thereon, or (ii) Lender's reliance upon any certifications
required under this Agreement or any other facts, information or reports
furnished Lender by Borrower hereunder.
(c) By accepting or approving anything required to be
observed, performed, fulfilled or given to Lender pursuant to the Loan
Documents, including any certificate, statement of profit and loss or other
financial statement, survey, appraisal, lease or insurance policy, Lender shall
not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Lender.
9.8 Right of Lender to Make Advances to Cure Borrower's Defaults. If
Borrower shall fail to perform in a timely fashion any of Borrower's covenants,
agreements or obligations contained in this Agreement or the Loan Documents,
Lender may (but shall not be required to) perform any of such covenants,
agreements and obligations. Any funds advanced by Lender in the exercise of its
judgment that the same are needed to protect its security for the Loan are
deemed to be obligatory advances hereunder and any amounts expended (whether by
disbursement of undisbursed Loan proceeds or otherwise) by Lender in so doing,
shall constitute additional indebtedness evidenced and secured by the Note, the
Mortgage and the other Loan Documents, shall bear interest from the date
expended at the Default Rate and be payable together with such interest upon
demand.
9.9 Definitions Include Amendments. Definitions contained in this
Agreement which identify documents, including the Loan Documents, shall be
deemed to include all amendments and supplements to such documents from the date
hereof, and all future amendments and supplements thereto entered into from time
to time to satisfy the requirements of this Agreement or otherwise with the
consent of the Lender. Reference to this Agreement contained in any of the
foregoing documents shall be deemed to include all amendments and supplements to
this Agreement.
9.10 Time Is of the Essence. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
9.11 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
9.12 Waiver of Consequential Damages. In no event shall Lender be
liable to Borrower for consequential damages, whatever the nature of a breach by
Lender of its obligations under this Agreement, or any of the Loan Documents,
25
<PAGE>
and Borrower for itself and all Affiliated Parties hereby waives all claims for
consequential damages.
9.13 Claims Against Lender. Lender shall not be in default under this
Agreement, or under any other Loan Documents, unless a written notice
specifically setting forth the claim of Borrower shall have been given to Lender
within thirty (30) days after Borrower first had knowledge of, or reasonably
should have had knowledge of, the occurrence of the event which Borrower alleges
gave rise to such claim and Lender does not remedy or cure the default, if any
there be, promptly thereafter. If it is determined in any proceedings that
Lender has improperly failed to grant its consent or approval, where such
consent or approval is required by this Agreement or any other Loan Documents,
Borrower's sole remedy shall be to obtain declaratory relief determining such
withholding to have been improper, and for itself and all Affiliated Parties,
Borrower hereby waives all claims for damages or set-off against Lender
resulting from any withholding of consent or approval by Lender.
9.14 Jurisdiction and Venue. With respect to any suit, action or
proceedings relating to this Agreement, the Project, or any of the other Loan
Documents ("Proceedings") each party irrevocably (i) submits to the
non-exclusive jurisdiction of (A) the state and federal courts located in the
State where the Project is located, (B) the federal court for the Northern
District of Illinois and (C) the Circuit Court of Cook County, Illinois, and
(ii) waives any objection which it may have at any time to the laying of venue
of any proceedings brought in any such court, waives any claim that such
Proceedings have been brought in an inconvenient forum and further waives the
right to object, with respect to such Proceedings, that such court does not have
jurisdiction over such party. Nothing in this Agreement shall preclude either
party from bringing Proceedings in any other jurisdiction nor will the bringing
of Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
9.15 Severability. The parties hereto intend and believe that each
provision in this Agreement comports with all applicable local, state and
federal Laws. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Agreement is found by a court of law to be in
violation of any applicable Law, and if such court declaress such portion,
provision, or provisions of this Agreement to be illegal, invalid, unlawful,
void or unenforceable as written, then it is the intent of all parties hereto
that such portion, provision, or provisions shall be given force to the fullest
possible extent that they are legal, valid and enforceable, and that the
remainder of this Agreement shall be construed as if such illegal, invalid,
unlawful, void, or unenforceable portion, provision, or provisions were not
contained herein, and that the rights, obligations, and interests of Borrower
and Lender under the remainder of this Agreement shall continue in full force
and effect.
9.16 Incorporation of Recitals. The Recitals set forth herein and the
Exhibits attached hereto are incorporated herein and expressly made a part
hereof.
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9.17 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR
ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND
AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
9.18 The Loan shall be non-recourse to the Borrower. Notwithstanding
the foregoing, Borrower and, if Borrower is a partnership, its general
partner(s), shall be liable for and shall indemnify and defend Lender against,
and hold Lender harmless from and against Lender's costs, expenses (including
reasonable attorney fees), losses and damages caused by or related to any of the
following "Recourse Events" committed, permitted or omitted by Borrower, its
agents, employees and/or contractors: (i) waste to or of the Project or a
failure to maintain the Project as a first-class manufactured housing community;
(ii) fraud or material misrepresentation by Borrower; (iii) failure to pay, or
to make sufficient payments into the Escrow Account pursuant to Section 3.1
hereof to pay, insurance premiums, taxes, assessments, ground rent or any other
lienable impositions as required under the Loan Documents; (iv) misapplication
of tenant security deposits, insurance proceeds or condemnation proceeds; (v)
failure while in monetary default to pay to Lender all rents, income and profits
of and from the Project, net of reasonable and customary operating expenses;
(vi) breach of, or failure to perform under the environmental warranties,
representations, covenants or indemnifications described in the Environmental
Indemnity Agreement; (vii) destruction or removal of fixtures or personal
property securing the Loan from the Project, unless replaced by items of equal
value; (viii) failure of the Project to comply with the Americans with
Disabilities Act of 1990, as amended, the Fair Housing Act of 1988, as amended,
or any other similar Building Laws after any Governmental Authority has notified
Borrower, its agents, employees and/or contractors of such non-compliance; (ix)
failure to pay to Lender any rent, income or profits which have been prepaid
more than 30 days in advance if such advance payments exceed 10% of the total
annual rental income; (x) willful or grossly negligent violation of applicable
law; and (xi) failure of Borrower to pay all amounts payable under the Note in
full, together with reasonable attorney fees, if Borrower transfers or encumbers
the Project in contravention of the Loan Documents, or (xii) if Borrower files a
voluntary petition under Chapter 11 of the Bankruptcy Code prior to the one-year
anniversary of the transfer of title to the Project to Lender by foreclosure of
deed or other conveyance in lieu of foreclosure or otherwise.
Nothing contained herein shall be construed to prevent Lender from
exercising any remedy allowed by Law or by the terms of this Agreement or any
other Loan Document which does not result in an obligation by Borrower or, if
Borrower is a general partnership, any of its general partners, to pay money.
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<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as
of the day and year first set forth above.
BORROWER:
CAX RANCHO MIRAGE, L.L.C.,
a Delaware limited liability company
By: Commercial Assets, Inc.,
a Delaware corporation, its Sole Member
By: /s/David M. Becker
-----------------------------
David M. Becker
Chief Financial Officer
LENDER:
JACKSON NATIONAL LIFE INSURANCE COMPANY,
a Michigan corporation
By: PPM Finance, Inc., it authorized agent
By: /s/ David M. Zachar
-----------------------------
Print Name: David M. Zachar
Its: Executive Vice President
28
SCHEDULE OF OMITTED
DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT
The Company has also entered into an additional Deed of Trust, Security
Agreement and Financing Statement which is substantially identical to the
following Deed of Trust, Security Agreement and Financing Statement in all
material respects except as to the company. Listed below are the material
details in which such documents differ from the document filed as part of this
exhibit.
Company
- -------------------------------------------
CAX La Casa Blanca, L.L.C.
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Lawrence C. Petrowski, Esq.
Morrison & Hecker L.L.P.
2800 N. Central Avenue
Suite 1600
Phoenix, Arizona 85004-1007
- --------------------------------------------------------------------------------
THIS DOCUMENT IS TO BE RECORDED AS BOTH
A DEED OF TRUST AND FINANCING STATEMENT (FIXTURE FILING)
DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT
THIS DEED OF TRUST is made as of January 19, 2000, between CAX RANCHO
MIRAGE, L.L.C., a Delaware limited liability company ("Trustor"), having a
mailing address of 3410 South Galena Street, Suite 210, Denver, Colorado 80231;
LAWRENCE C. PETROWSKI, a member of the Bar of the State of Arizona, having a
mailing address of Morrison & Hecker L.L.P., 2800 North Central Avenue, Suite
1600, Phoenix, Arizona 85004 ("Trustee"), and JACKSON NATIONAL LIFE INSURANCE
COMPANY, a Michigan corporation, having a mailing address of c/o PPM Finance,
Inc., 225 West Wacker Drive, Suite 1200, Chicago, Illinois 60606
("Beneficiary").
1. DEED OF TRUST AND SECURED OBLIGATIONS.
1.1 Deed of Trust. For purposes of securing payment and performance of the
Secured Obligations defined and described in Section 1.2, Trustor hereby
irrevocably and unconditionally grants, bargains, sells, conveys, mortgages,
warrants, transfers, assigns and pledges, to Beneficiary, with right of entry
and possession, and with power of sale, all estate, right, title and interest
which Trustor now has or may later acquire in and to the following property (all
or any part of such property, or any interest in all or any part of it, as the
context may require, the "Property"):
(a) the real property located in the County of Pinal, State of Arizona
and more particularly described in Exhibit A attached hereto, together with
all existing and future easements and rights affording access to it (the
"Land");
(b) all buildings, structures and improvements now located or later to
be constructed on the Land (the "Improvements");
(c) all existing and future appurtenances, privileges, easements,
franchises and tenements of the Land, including all minerals, oil, gas,
other hydrocarbons and associated substances, sulfur, nitrogen, carbon
dioxide, helium and other commercially valuable substances which may be in,
under or produced from any part of the Land, all development rights and
<PAGE>
credits, air rights, water, water rights (whether riparian, appropriative
or otherwise, and whether or not appurtenant) and water stock, and any land
lying in the streets, roads or avenues, open or proposed, in front of or
adjoining the Land and Improvements;
(d) all existing and future leases, subleases, subtenancies, licenses,
occupancy agreements and concessions ("leases", as defined in the
Assignment of Leases and Rents described in Section 2 herein, executed and
delivered to Lender contemporaneously herewith) relating to the use and
enjoyment of all or any part of the Land and Improvements, and any and all
guaranties and other agreements relating to or made in connection with any
of such leases;
(e) all goods, materials, supplies, chattels, furniture, fixtures,
equipment and machinery now or later to be attached to, placed in or on, or
used in connection with the use, enjoyment, occupancy or operation of all
or any part of the Land and Improvements, whether stored on the Land or
elsewhere, including all pumping plants, engines, pipes, ditches and
flumes, and also all gas, electric, cooking, heating, cooling, air
conditioning, lighting, refrigeration and plumbing fixtures and equipment,
all of which shall be considered to the fullest extent of the law to be
real property for purposes of this Deed of Trust;
(f) all building materials, equipment, work in process or other
personal property of any kind, whether stored on the Land or elsewhere,
which have been or later will be acquired for the purpose of being
delivered to, incorporated into or installed in or about the Land or
Improvements;
(g) all of Trustor's interest in and to the Loan funds, whether
disbursed or not, the Escrow Accounts (as defined in Section 3.1 of the
Loan Agreement) and any of Trustor's funds now or later to be held by or on
behalf of Beneficiary;
(h) all rights to the payment of money, accounts, accounts receivable,
reserves, deferred payments, refunds, cost savings, payments and deposits,
whether now or later to be received from third parties (including all
earnest money sales deposits) or deposited by Trustor with third parties
(including all utility deposits), contract rights, development and use
rights, governmental permits and licenses, applications, architectural and
engineering plans, specifications and drawings, as-built drawings, chattel
paper, instruments, documents, notes, drafts and letters of credit (other
than letters of credit in favor of Beneficiary), which arise from or relate
to construction on the Land or to any business now or later to be conducted
on it, or to the Land and Improvements generally;
(i) all proceeds, including all claims to and demands for them, of the
voluntary or involuntary conversion of any of the Land, Improvements or the
other property described above into cash or liquidated claims, including
proceeds of all present and future fire, hazard or casualty insurance
policies and all condemnation awards or payments now or later to be made by
any public body or decree by any court of competent jurisdiction for any
taking or in connection with any condemnation or eminent domain proceeding,
and all causes of action and their proceeds for any damage or injury to the
Land, Improvements or the other property described above or any part of
2
<PAGE>
them, or breach of warranty in connection with the construction of the
Improvements, including causes of action arising in tort, contract, fraud
or concealment of a material fact;
(j) all books and records pertaining to any and all of the property
described above, including computer-readable memory and any computer
hardware or software necessary to access and process such memory ("Books
and Records");
(k) (i) the agreements described in Exhibit B attached hereto, which
exhibit is incorporated herein by reference; (ii) all other agreements
heretofore or hereafter entered into relating to the construction,
ownership, operation, management, leasing or use of the Land or
Improvements; (iii) any and all present and future amendments,
modifications, supplements, and addenda to any of the items described in
(i) and (ii) above; (iv) any and all guarantees, warranties and other
undertakings (including payment and performance bonds) heretofore or
hereafter entered into or delivered with respect to any of the items
described in clauses (i) through (iii) above; (v) all trade names,
trademarks, logos and other materials used to identify or advertise, or
otherwise relating to the Land or Improvements; and (vi) all building
permits, governmental permits, licenses, variances, conditional or special
use permits, and other authorizations (collectively, the "Permits") now or
hereafter issued in connection with the construction, development,
ownership, operation, management, leasing or use of the Land or
Improvements, to the fullest extent that the same or any interest therein
may be legally assigned by Trustor; and
(l) all proceeds of, additions and accretions to, substitutions and
replacements for, and changes in any of the property described above.
Capitalized terms used above and elsewhere in this Deed of Trust without
definition have the meanings given them in the Loan Agreement referred to in
Section 1.2 below.
1.2 Secured Obligations. This Deed of Trust is made for the purpose of
securing the following obligations (the "Secured Obligations") in any order of
priority that Beneficiary may choose:
(a) Payment of all obligations at any time owing under a Promissory
Note (the "Note") of even date herewith, payable by Trustor as maker in the
stated principal amount of Six Million Two Hundred Seventy Thousand and
No/100ths Dollars ($6,270,000.00) to the order of Beneficiary, which Note
matures and is due and payable in full not later than February 1, 2020; and
(b) Payment and performance of all obligations of Trustor under a Loan
Agreement of even date herewith between Trustor, as borrower, and
Beneficiary, as lender (the "Loan Agreement"); and
(c) Payment and performance of all obligations of Trustor under this
Deed of Trust; and
(d) Payment and performance of any obligations of Trustor under any
Loan Documents (as defined in the Loan Agreement) which are executed by
Trustor, including without limitation the Environmental Indemnity; and
3
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(e) Payment and performance of all future advances and other
obligations that Trustor or any successor in ownership of all or part of
the Property may agree to pay and/or perform (whether as principal, surety
or guarantor) for the benefit of Beneficiary, when a writing evidences the
parties' agreement that the advance or obligation be secured by this Deed
of Trust; and
(f) Payment and performance of all modifications, amendments,
extensions and renewals, however evidenced, of any of the Secured
Obligations.
All persons who may have or acquire an interest in all or any part of the
Property will be considered to have notice of, and will be bound by, the terms
of the Secured Obligations and each other agreement or instrument made or
entered into in connection with each of the Secured Obligations. These terms
include any provisions in the Note or the Loan Agreement which provide that the
interest rate on one or more of the Secured Obligations may vary from time to
time.
2. ASSIGNMENT OF RENTS. As an inducement to Beneficiary to make the loan
evidenced by the Note and the Loan Agreement, Trustor has contemporaneously
herewith executed and delivered to Beneficiary an Assignment of Leases and Rents
with respect to the Property. The terms thereof are incorporated herein by
reference, with the parties acknowledging that the assignment contained therein
is a present and absolute assignment and not a collateral assignment of
Trustor's interest in the Leases and Rents described therein.
3. GRANT OF SECURITY INTEREST.
3.1 Security Agreement. The parties acknowledge that some of the Property
and some or all of the Rents (as defined in the Assignment of Leases and Rents)
may be determined under applicable law to be personal property or fixtures. To
the extent that any Property or Rents may be personal property, Trustor as
debtor hereby grants Beneficiary as secured party a security interest in all
such Property and Rents, to secure payment and performance of the Secured
Obligations. This provision is not in derogation of the absolute assignment of
the Leases and Rents contained in such Assignment of Leases and Rents and
incorporated herein by reference in Section 2. above. This Deed of Trust
constitutes a security agreement under the Uniform Commercial Code as in effect
in the State of Arizona (the "Code), covering all such Property and Rents.
3.2 Financing Statements. Trustor shall execute one or more financing
statements and such other documents as Beneficiary may from time to time require
to perfect or continue the perfection of Beneficiary's security interest in any
Property or Rents. Trustor shall pay all fees and costs that Beneficiary may
incur in filing such documents in public offices and in obtaining such record
searches as Beneficiary may reasonably require. In case Trustor fails to execute
any financing statements or other documents for the perfection or continuation
of any security interest, Trustor hereby appoints Beneficiary as its true and
lawful attorney-in-fact to execute any such documents on its behalf.
3.3 Fixture Filing. This Deed of Trust constitutes a financing statement
filed as a fixture filing under Arizona Revised Statutes (A.R.S.) Sections
47-9313 and 47-9402 as amended or recodified from time to time, covering any of
the Property which now is or later may become fixtures attached to the Land or
the Improvements. The following addresses are the mailing addresses of Trustor,
4
<PAGE>
as debtor under the Code, and Beneficiary, as secured party under the Code,
respectively:
Trustor: CAX Rancho Mirage, L.L.C.
3410 South Galena Street, Suite 210
Denver, Colorado 80231
with a copy to:
Joseph W. Gaynor, P.A.
2637 McCormick Drive
Clearwater, Florida 33758
Attn: Joseph W. Gaynor, Esq.
Federal Tax Identification No: 84-1500766
Beneficiary: Jackson National Life Insurance Company
c/o PPM Finance, Inc.
225 West Wacker Drive
Suite 1200
Chicago, Illinois 60606
Attn: Commercial Mortgage Servicing Manager
4. REPRESENTATIONS, COVENANTS AND AGREEMENTS.
4.1 Good Title. Trustor covenants that it is lawfully seized of the
Property, that the Property is unencumbered except for the Permitted Exceptions
(as defined in the Loan Agreement), and that it has good right, full power and
lawful authority to convey and mortgage the same, and that it will warrant and
forever defend the Property and the quiet and peaceful possession of the same
against the lawful claims of all persons whomsoever.
4.2 Insurance. In the event of any loss or damage to any portion of the
Property due to fire or other casualty, or a taking of any portion of the
Property by condemnation or under the power of eminent domain, the settlement of
all insurance and condemnation claims and awards and the application of
insurance and condemnation proceeds shall be governed by Section 5 of the Loan
Agreement.
4.3 Stamp Tax. If, by the laws of the United States of America, or of any
state or political subdivision having jurisdiction over Trustor, any tax is due
or becomes due in respect of the issuance of the Note, or recording of this Deed
of Trust, Trustor covenants and agrees to pay such tax in the manner required by
any such law. Trustor further covenants to hold harmless and agrees to indemnify
Beneficiary, its successors or assigns, against any liability incurred by reason
of the imposition of any tax on the issuance of the Note or recording of this
Deed of Trust.
4.4 Changes in Taxation. In the event of the enactment after this date of
any law of the State in which the Property is located or any political
subdivision thereof deducting from the value of land for the purpose of taxation
any lien thereon, or imposing upon Beneficiary the payment of the whole or any
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part of the taxes or assessments or charges or liens herein required to be paid
by Trustor, or changing in any way the laws relating to the taxation of
mortgages or deeds of trust or debts secured by mortgages or deeds of trust or
the Beneficiary's interest in the Property, or the manner of collection of
taxes, so as to affect this Deed of Trust or the Secured Obligations, then
Trustor, upon demand by Beneficiary, shall pay such taxes or assessments, or
reimburse Beneficiary therefor; provided, however, that if in the opinion of
counsel for Beneficiary (i) it might be unlawful to require Trustor to make such
payment or (ii) the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by law, then Beneficiary may elect,
by notice in writing given to Trustor, to declare all of the Secured Obligations
to be and become due and payable sixty (60) days from the giving of such notice.
4.5 Subrogation. Beneficiary shall be subrogated to the liens of all
encumbrances, whether released of record or not, which are discharged in whole
or in part by Beneficiary in accordance with this Deed of Trust or with the
proceeds of any loan secured by this Deed of Trust.
4.6 Notice of Change. Trustor shall give Beneficiary prior written notice
of any change in: (a) the location of its place of business or its chief
executive office if it has more than one place of business; (b) the location of
any of the Property, including the Books and Records; and (c) Trustor's name or
business structure. Unless otherwise approved by Beneficiary in writing, all
Property that consists of personal property (other than the Books and Records)
will be located on the Land and all Books and Records will be located at
Trustor's place of business or chief executive office if Trustor has more than
one place of business.
4.7 Releases, Extensions, Modifications and Additional Security. From time
to time, Beneficiary may perform any of the following acts without incurring any
liability or giving notice to any person: (i) release any person liable for
payment of any Secured Obligation; (ii) extend the time for payment, or
otherwise alter the terms of payment, of any Secured Obligation; (iii) accept
additional real or personal property of any kind as security for any Secured
Obligation, whether evidenced by deeds of trust, mortgages, security agreements
or any other instruments of security; (iv) alter, substitute or release any
property securing the Secured Obligations; (v) consent to the making of any plat
or map of the Property or any part of it; (vi) join in granting any easement or
creating any restriction affecting the Property; or (vii) join in any
subordination or other agreement affecting this Deed of Trust or the lien of it.
5. DEFAULTS AND REMEDIES.
5.1 Events of Default. An "Event of Default," as defined in the Loan
Agreement, shall constitute an Event of Default hereunder.
5.2 Remedies. At any time after an Event of Default, Beneficiary shall be
entitled to invoke any and all of the rights and remedies described below, in
addition to all other rights and remedies available to Beneficiary at law or in
equity. All of such rights and remedies shall be cumulative, and the exercise of
any one or more of them shall not constitute an election of remedies.
(a) Acceleration. Beneficiary may declare any or all of the Secured
Obligations to be due and payable immediately.
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(b) Receiver. Beneficiary shall, as a matter of right, without notice
and without giving bond to Trustor or anyone claiming by, under or through
Trustor, and without regard for the solvency or insolvency of Trustor or
the then value of the Property, to the extent permitted by applicable law,
be entitled to have a receiver appointed for all or any part of the
Property and the Rents, and the proceeds, issues and profits thereof, with
the rights and powers referenced below and such other rights and powers as
the court making such appointment shall confer, and Trustor hereby consents
to the appointment of such receiver and shall not oppose any such
appointment. Such receiver shall have all powers and duties prescribed by
applicable law and all other powers which are necessary or usual in such
cases for the protection, possession, control, management and operation of
the Property, and such rights and powers as Beneficiary would have, upon
entering and taking possession of the Property under subsection (c) below.
(c) Entry. Beneficiary, in person, by agent or by court-appointed
receiver, may enter, take possession of, manage and operate all or any part
of the Property, and may also do any and all other things in connection
with those actions that Beneficiary may in its sole discretion consider
necessary and appropriate to protect the security of this Deed of Trust.
Such other things may include: taking and possessing all of Trustor's or
the then owner's Books and Records; entering into, enforcing, modifying or
canceling leases on such terms and conditions as Beneficiary may consider
proper; obtaining and evicting tenants; fixing or modifying Rents;
collecting and receiving any payment of money owing to Trustor; completing
any unfinished construction; and/or contracting for and making repairs and
alterations. If Beneficiary so requests, Trustor shall assemble all of the
Property that has been removed from the Land and make all of it available
to Beneficiary at the site of the Land. Trustor hereby irrevocably
constitutes and appoints Beneficiary as Trustor's attorney-in-fact to
perform such acts and execute such documents as Beneficiary in its sole
discretion may consider to be appropriate in connection with taking these
measures, including endorsement of Trustor's name on any instruments.
(d) Cure; Protection of Security. Beneficiary may cure any breach or
default of Trustor, and if it chooses to do so in connection with any such
cure, Beneficiary may also enter the Property and/or do any and all other
things which it may in its sole discretion consider necessary and
appropriate to protect the security of this Deed of Trust. Such other
things may include: appearing in and/or defending any action or proceeding
which purports to affect the security of, or the rights or powers of
Beneficiary under, this Deed of Trust; paying, purchasing, contesting or
compromising any encumbrance, charge, lien or claim of lien which in
Beneficiary's sole judgment is or may be senior in priority to this Deed of
Trust, such judgment of Beneficiary to be conclusive as between the parties
to this Deed of Trust; obtaining insurance and/or paying any premiums or
charges for insurance required to be carried under the Loan Agreement;
otherwise caring for and protecting any and all of the Property; and/or
employing counsel, accountants, contractors and other appropriate persons
to assist Beneficiary. Beneficiary may take any of the actions permitted
under this Section 5.2(d) either with or without giving notice to any
person. Any amounts expended by Beneficiary under this Section 5.2(d) shall
be secured by this Deed of Trust.
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(e) Uniform Commercial Code Remedies. Beneficiary may exercise any or
all of the remedies granted to a secured party under the Code.
(f) Foreclosure; Lawsuits. Beneficiary shall have the right, in one or
several concurrent or consecutive proceedings, to foreclose the lien hereof
upon the Property or any part thereof, for the Secured Obligations, or any
part thereof, by any proceedings appropriate under applicable law,
including utilization of the power of sale granted hereunder. Beneficiary
or its nominee may bid and become the purchaser of all or any part of the
Property at any foreclosure or other sale hereunder, and the amount of
Beneficiary's successful bid shall be credited on the Secured Obligations.
Without limiting the foregoing, Beneficiary may proceed by a suit or suits
in law or equity, whether for specific performance of any covenant or
agreement herein contained or contained in any of the other Loan Documents
(as defined in the Loan Agreement), or in aid of the execution of any power
herein granted, or for any foreclosure under the judgment or decree of any
court of competent jurisdiction, or for damages, or to collect the
indebtedness secured hereby, or for the enforcement of any other
appropriate legal, equitable, statutory or contractual remedy. Trustee may
sell the Property at public auction in one or more parcels, at
Beneficiary's option, and convey the same to the purchaser in fee simple,
Trustor to remain liable for any deficiency for which Trustor shall be
personally liable.
(g) Other Remedies. Beneficiary may exercise all rights and remedies
contained in any other instrument, document, agreement or other writing
heretofore, concurrently or in the future executed by Trustor or any other
person or entity in favor of Beneficiary in connection with the Secured
Obligations or any part thereof, without prejudice to the right of
Beneficiary thereafter to enforce any appropriate remedy against Trustor.
Beneficiary shall have the right to pursue all remedies afforded to a
beneficiary under applicable law, and shall have the benefit of all of the
provisions of such applicable law, including all amendments thereto which
may become effective from time to time after the date hereof. In the event
any provision of any statutes which is specifically referred to herein may
be repealed, Beneficiary shall have the benefit of such provision as most
recently existing prior to such repeal, as though the same were
incorporated herein by express reference.
(h) Power of Sale for Personal Property. Under this power of sale,
Beneficiary shall have the discretionary right to cause some or all of the
Property, which constitutes personal property, to be sold or otherwise
disposed of in any combination and in any manner permitted by applicable
law.
(i) For purposes of this power of sale, Beneficiary may elect to
treat as personal property any Property which is intangible or which can be
severed from the Land or Improvements without causing structural damage. If
it chooses to do so, Beneficiary may dispose of any personal property in
any manner permitted by Chapter 9 of the Code, including any public or
private sale, or in any manner permitted by any other applicable law.
(ii) In connection with any sale or other disposition of such
Property, Trustor agrees that the following procedures constitute a
commercially reasonable sale: Beneficiary shall mail written notice of the
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sale to Trustor not later than ten (10) days prior to such sale. Upon
receipt of any written request, Trustor will make the Property available to
any bona fide prospective purchaser for inspection during reasonable
business hours. Notwithstanding, Beneficiary shall be under no obligation
to consummate a sale if, in its judgment, none of the offers received by it
equals the fair value of the Property offered for sale. The foregoing
procedures do not constitute the only procedures that may be commercially
reasonable.
(i) Single or Multiple Foreclosure Sales. If the Property consists of
more than one lot, parcel or item of property, Beneficiary may:
(1) designate the order in which the lots, parcels and/or items
shall be sold or disposed of or offered for sale or disposition; and
(2) elect to dispose of the lots, parcels and/or items through a
single consolidated sale or disposition to be held or made under or in
connection with judicial proceedings, or by virtue of a judgment and decree
of foreclosure and sale, or pursuant to the power of sale contained herein;
or through two or more such sales or dispositions; or in any other manner
Beneficiary may deem to be in its best interests (any foreclosure sale or
disposition as permitted by the terms hereof is sometimes referred to
herein as a "Foreclosure Sale;" and any two or more such sales,
"Foreclosure Sales").
If it chooses to have more than one Foreclosure Sale, Beneficiary at its option
may cause the Foreclosure Sales to be held simultaneously or successively, on
the same day, or on such different days and at such different times and in such
order as it may deem to be in its best interests. No Foreclosure Sale shall
terminate or affect the liens of this Deed of Trust on any part of the Property
which has not been sold, until all of the Secured Obligations have been paid in
full.
5.3 Application of Foreclosure Sale Proceeds. The proceeds of any
Foreclosure Sale shall be applied in the following manner:
(a) First, to pay the portion of the Secured Obligations attributable
to the expenses of sale, costs of any action and any other sums for which
Trustor is obligated to reimburse Beneficiary hereunder or under the other
Loan Documents;
(b) Second, to pay the portion of the Secured Obligations attributable
to any sums expended or advanced by Beneficiary under the terms of this
Deed of Trust which then remain unpaid;
(c) Third, to pay all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose; and
(d) Fourth, to remit the remainder, if any, to the person or persons
entitled to it.
5.4 Application of Rents and Other Sums. Beneficiary shall apply any and
all Rents collected by it in the manner provided in the Assignment of Leases and
Rents of even date herewith executed by Trustor in favor of Beneficiary. Any and
all sums other than Rents collected by Beneficiary or a receiver and proceeds of
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a Foreclosure Sale which Beneficiary may receive or collect under Section 5.2
shall be applied in the following manner:
(a) First, to pay the portion of the Secured Obligations attributable
to the costs and expenses of operation and collection that may be incurred
by Beneficiary or any receiver;
(b) Second, to pay all other Secured Obligations in any order and
proportions as Beneficiary in its sole discretion may choose; and
(c) Third, to remit the remainder, if any, to the person or persons
entitled to it.
Beneficiary shall have no liability for any funds which it does not actually
receive.
5.5 Additional Remedies Under Power of Sale. To the extent permitted by
applicable law, Trustee may adjourn from time to time any trustee's sale by it
to be made under or by virtue of this Deed of Trust by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by law, Trustee, without further notice or
publication, may make such sale at the time and place to which the same shall be
so adjourned.
(a) Upon the completion of any sale or sales made by Trustee under or
by virtue of this Deed of Trust, Trustee, or an officer of any court
empowered to do so, shall execute and deliver to the purchaser or
purchasers a good and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all estate, right, title
and interest in and to the property and rights sold. Trustee is hereby
irrevocably appointed the true and lawful attorney of Trustor, in its name
and stead, to make all necessary conveyances, assignments, transfers and
deliveries of the Property and rights so sold, and for that purpose Trustee
may execute all necessary instruments of conveyance, assignment and
transfer, and may substitute one or more persons with like power, Trustor
hereby ratifying and confirming all that Trustee or such substitute or
substitutes shall lawfully do by virtue hereof. Any such sale or sales made
under or by virtue of this Deed of Trust, whether made under the power of
sale herein granted or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law
or in equity, of Trustor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against Trustor and
against any all persons claiming or who may claim the same, or any part
thereof from, through or under Trustor.
(b) In any action by Beneficiary to recover a deficiency judgment
following a foreclosure or trustee's sale, and to the extent permitted by
applicable law, the successful bid amount at that sale shall be deemed
conclusively to be the fair market value of the Property sold at that sale,
which value shall be binding against Trustor in any proceedings to
determine or establish the fair market value of that portion of the
Property. To the extent permitted by applicable law, the successful bid at
any foreclosure or trustee's sale shall be the preferred alternative means
of determining and establishing the fair market value of the portion of the
Property sold at the sale. To the extent permitted by applicable law,
Trustor hereby waives any right to have the fair market value of the
Property determined by a judge or jury in any action seeking a deficiency
judgment, including without limitation, a hearing to determine fair market
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value pursuant to A.R.S. Sections 12-1566, 33-814, 33-725, or 33-727.
6. RELEASE OF LIEN. If Trustor shall fully pay and perform all of the Secured
Obligations and comply with all of the other terms and provisions hereof and the
other Loan Documents to be performed and complied with by Trustor, then
Beneficiary shall release this Deed of Trust and the lien thereof by proper
instrument upon payment, performance and discharge of all of the Secured
Obligations and payment by Trustor of any filing fee in connection with such
release.
7. MISCELLANEOUS PROVISIONS.
7.1 Additional Provisions. The Loan Documents fully state all of the terms
and conditions of the parties' agreement regarding the matters mentioned in or
incidental to this Deed of Trust. The Loan Documents also grant further rights
to Beneficiary and contain further agreements and affirmative and negative
covenants by Trustor which apply to this Deed of Trust and the Property.
7.2 Giving of Notice. Any notice, demand, request or other communication
which any party hereto may be required or may desire to give hereunder shall be
given as provided in Section 9.3 of the Loan Agreement.
7.3 Remedies Not Exclusive. No action for the enforcement of the lien or
any provision hereof shall be subject to any defense which would not be good and
available to the party interposing same in an action at law upon the Note.
Beneficiary shall be entitled to enforce payment and performance of any of the
Secured Obligations and to exercise all rights and powers under this Deed of
Trust or other agreement or any laws now or hereafter in force, notwithstanding
some or all of the Secured Obligations may now or hereafter be otherwise
secured, whether by deed of trust, pledge, lien, assignment or otherwise.
Neither the acceptance of this Deed of Trust nor its enforcement, whether by
court action or other powers herein contained, shall prejudice or in any manner
affect Beneficiary's right to realize upon or enforce any other security now or
hereafter held by Beneficiary, it being agreed that Beneficiary shall be
entitled to enforce this Deed of Trust and any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. No waiver of any default of the Trustor hereunder shall be
implied from any omission by Beneficiary to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect any default other than the default specified in the express waiver and
that only for the time and to the extent therein stated. No acceptance of any
payment of any one or more delinquent installments which does not include
interest at the Default Rate from the date of delinquency, together with any
required late charge, shall constitute a waiver of the right of Beneficiary at
any time thereafter to demand and collect payment of interest at such Default
Rate or of late charges, if any.
7.4 Waiver of Statutory Rights. To the extent permitted by law, Trustor
hereby agrees that it shall not and will not apply for or avail itself of any
appraisement, valuation, stay, extension or exemption laws, or any so-called
"Moratorium Laws," now existing or hereafter enacted, in order to prevent or
hinder the enforcement or foreclosure of this Deed of Trust, but hereby waives
the benefit of such laws. Trustor for itself and all who may claim through or
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under it waives any and all right to have the property and estates comprising
the Property marshaled upon any foreclosure of the lien hereof and agrees that
any court having jurisdiction to foreclose such lien may order the Property sold
as an entirety. Trustor hereby waives any and all rights of redemption from sale
under the power of sale contained herein or any order or decree of foreclosure
of this Deed of Trust on its behalf and on behalf of each and every person,
except decree or judgment creditors of Trustor, acquiring any interest in or
title to the Property subsequent to the date of this Deed of Trust.
7.5 Estoppel Affidavits. Trustor, within five (5) days after written
request from Beneficiary, shall furnish a written statement, duly acknowledged,
setting forth the unpaid principal of, and interest on, the Secured Obligations
and stating whether or not any offset or defense exists against such Secured
Obligations, and covering such other matters as Beneficiary may reasonably
require.
7.6 Merger. No merger shall occur as a result of Beneficiary's acquiring
any other estate in or any other lien on the Property unless Beneficiary
consents to a merger in writing.
7.7 Binding on Successors and Assigns. This Deed of Trust and all
provisions hereof shall be binding upon Trustor and all persons claiming under
or through Trustor, and shall inure to the benefit of Beneficiary and its
successors and assigns.
7.8 Captions. The captions and headings of various paragraphs of this Deed
of Trust are for convenience only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.
7.9 Severability. If all or any portion of any provision of this Deed of
Trust shall be held to be invalid, illegal or unenforceable in any respect, then
such invalidity, illegality or unenforceability shall not affect any other
provision hereof or thereof, and such provision shall be limited and construed
as if such invalid, illegal or unenforceable provision or portion thereof was
not contained herein.
7.10 Effect of Extensions of Time and Amendments. If the payment of the
Secured Obligations or any part thereof be extended or varied or if any part of
the security be released, all persons now or at any time hereafter liable
therefor, or interested in the Property, shall be held to assent to such
extension, variation or release, and their liability and the lien and all
provisions hereof shall continue in full force, the right of recourse, if any,
against all such persons being expressly reserved by Beneficiary,
notwithstanding such extension, variation or release. Nothing in this Section
7.10 shall be construed as waiving any provision contained herein or in the Loan
Documents which provides, among other things, that it shall constitute an Event
of Default if the Property be sold, conveyed, or encumbered.
7.11 Beneficiary's Lien for Service Charge and Expenses. At all times,
regardless of whether any proceeds of the loan secured hereby have been
disbursed, this Deed of Trust secures (in addition to the amounts secured
hereby) the payment of any and all commissions, service charges, liquidated
damages, expenses and advances due to or incurred by Beneficiary in connection
with such loan; provided, however, that in no event shall the total amount
secured hereby exceed two hundred percent (200%) of the face amount of the Note.
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7.12 Applicable Law. This Deed of Trust shall be governed by and construed
under the internal laws of the State of Arizona.
7.13 Limitation of Liability. The provisions of Section 9.18 of the Loan
Agreement are hereby incorporated by reference.
7.14 Due on Sale Clause. As more fully set forth in Section 6.2 of the Loan
Agreement, the assignment, sale, conveyance, pledge, transfer or encumbrance of
the Property, or any interest therein, or the transfer of an interest in
Trustor, except for the permitted transfers set forth in Section 6.3 of the Loan
Agreement, without prior written consent of Beneficiary, shall constitute an
Event of Default.
7.15 Time is of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Trustor under this Deed of
Trust, the Note and the other Loan Documents.
7.16 Recordation. Trustor forthwith upon the execution and delivery of this
Deed of Trust, and thereafter from time to time, will cause this Deed of Trust,
and any security instrument creating a lien or evidencing the lien hereof upon
the Property, or any portion thereof, and each instrument of further assurance,
to be filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect the lien hereof upon, and the interest of Beneficiary in, the Property.
Trustor will pay all filing, registration or recording fees and taxes,
and all expenses incident to the preparation, execution and acknowledgment of
this Deed of Trust, any deed of trust supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and all federal, state, county and municipal stamp taxes, duties, impositions,
assessments and charges arising out of or in connection with the execution and
delivery of the Note, this Deed of Trust, any Deed of Trust supplemental hereto,
any security instrument, any other Loan Documents or any instrument of further
assurance.
7.17 Modifications. This Deed of Trust may not be changed or terminated
except in writing signed by both parties. The provisions of this Deed of Trust
shall extend and be applicable to all renewals, amendments, extensions,
consolidations, and modifications of the other Loan Documents, and any and all
references herein to the Loan Documents shall be deemed to include any such
renewals, amendments, extensions, consolidations or modifications thereof.
7.18 Independence of Security. Trustor shall not by act or omission permit
any building or other improvement on any premises not subject to the lien of
this Deed of Trust to rely on the Property or any part thereof or any interest
therein to fulfill any municipal or governmental requirement, and Trustor hereby
assigns to Beneficiary any and all rights to give consent for all or any portion
of the Property to rely on any premises not subject to the lien of this Deed of
Trust or any interest therein to fulfill any municipal or governmental
requirement. Trustor shall not by act or omission impair the integrity of the
Property as a single zoning lot, and as one or more complete tax parcels,
separate and apart from all other premises. Any act or omission by Trustor which
would result in a violation of any of the provisions of this Section 7.18 shall
be void.
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7.19 Concerning the Trustee. Trustee shall be under no duty to take any
action hereunder except as expressly required hereunder or by law, or to perform
any act which would impose upon Trustee any expense or liability, or require the
Trustee to institute or defend any suit in respect hereof, unless properly
indemnified to Trustee's reasonable satisfaction. Trustee, by acceptance of this
Deed of Trust, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation in lieu
thereof for any services rendered by Trustee hereunder. Trustee may resign at
any time upon giving thirty (30) days' notice to Beneficiary. In the event of
the death, removal, resignation, or refusal or inability to act of Trustee or
any duly appointed successor Trustee, or in Beneficiary's sole discretion for
any reason whatsoever, Beneficiary, without notice and without specifying any
reason therefor and without applying to any court, may select and appoint a
successor trustee by an instrument recorded wherever this Deed of Trust is
recorded and all powers, rights, duties and authority of Trustee hereunder shall
thereupon become vested in such successor. Such successor trustee shall not be
required to give bond for the faithful performance of the duties of Trustee
hereunder unless required by Beneficiary. The procedure provided for in this
Deed of Trust for the appointment of a successor for the Trustee shall be in
addition to and not in exclusion of any other provisions for such an
appointment, by law or otherwise.
8. Trustee's Costs. Trustor shall pay all costs, fees and expenses incurred by
Trustee and Trustee's agents and counsel in connection with Trustee's
performance of its duties hereunder and all such costs, fees and expenses shall
be secured by this Deed of Trust.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first written above.
TRUSTOR
CAX RANCHO MIRAGE, L.L.C.,
a Delaware limited liability company
By: Commercial Assets, Inc.,
a Delaware corporation, its Sole Member
By: /s/David M. Becker
---------------------------
David M. Becker
Chief Financial Officer
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STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 19th day of
January, 2000 by David M. Becker, as the Chief Financial Officer of Commercial
Assets, Inc., a Delaware corporation, the Sole Member of CAX RANCHO MIRAGE,
L.L.C., a Delaware limited liability company.
/s/Lorri J. Owen
----------------------------------------------
Notary Public in and for said County and State
My Commission Expires:
7/2/2001
15
SCHEDULE OF OMITTED
ASSIGNMENT OF LEASES AND RENTS
The Company has also entered into an additional Assignment of Leases and Rents
which is substantially identical to the following Assignment of Leases and Rents
in all material respects except as to the company. Listed below are the material
details in which such documents differ from the document filed as part of this
exhibit.
Company
- -------------------------------------------
CAX La Casa Blanca, L.L.C.
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Lawrence C. Petrowski
Morrison & Hecker L.L.P.
2800 N. Central Avenue
Suite 1600
Phoenix, Arizona 85004-1007 PPM Loan No. 99-0087
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT (this "Assignment") is made this 19 day of January,
2000, by and from CAX RANCHO MIRAGE, L.L.C., a Delaware limited liability
company, having its principal place of business at 3410 South Galena Street,
Suite 210, Denver, Colorado 80231 ("Assignor"), to and for the benefit of
JACKSON NATIONAL LIFE INSURANCE COMPANY, a Michigan corporation, having offices
at c/o PPM Finance, Inc., 225 West Wacker Drive, Suite 1200, Chicago, Illinois
60606 ("Assignee").
RECITALS:
A. Assignor is the owner of certain real property located in Pinal County,
State of Arizona, more particularly described in Exhibit A attached
hereto ("Property").
B. Assignee has made a loan to Assignor pursuant to a loan agreement (the
"Loan Agreement") of even date herewith. The Loan is evidenced by a
promissory note ("Note") of even date herewith in the original
principal amount of Six Million Two Hundred Seventy Thousand and
No/100ths Dollars ($6,270,000.00) and secured by a Deed of Trust,
Security Agreement and Financing Statement ("Deed of Trust") of even
date herewith and recorded contemporaneously herewith. The obligations
of Assignor under the Loan Agreement, the Note, the Deed of Trust and
the other Loan Documents are referred to herein as the "Obligations".
C. Assignor is required as a condition to the making of the Loan to
transfer and assign to Assignee absolutely and unconditionally, all of
Assignor's right, title and interest in, to and under the Leases and
Rents, defined in Section 1 below.
AGREEMENT:
NOW, THEREFORE, as an inducement for the making of the Loan, Assignor
hereby represents, warrants, covenants and agrees as follows:
1. Definitions. As used herein, the following terms shall have the following
meanings:
"Event of Default" means an Event of Default, as defined in
the Loan Agreement.
"Leases" means all leases, subleases, rental contracts,
occupancy agreements, licenses and other arrangements (in each case
whether existing now or in the future) pursuant to which any person or
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entity occupies or has the right to occupy or use any portion of the
Property, and includes (a) any supplement, modification, amendment,
renewal or extension of any Lease and (b) any security or guaranty for
any Lease.
"Lessees" means the lessees under the Leases or any subtenants
or occupants of the Property.
"Rents" means all rents, issues, income, revenues, royalties,
profits and other amounts now or in the future payable under any of the
Leases, including those past due and unpaid.
Capitalized terms used in this Assignment and not otherwise defined are used as
defined in the Loan Agreement.
2. Assignment. As security for the payment and performance of the Obligations,
Assignor hereby absolutely and unconditionally transfers, sets over and assigns
to Assignee all present and future right, title and interest of Assignor in, to
and under the Leases and the Rents, together with all advance payments, security
deposits and other amounts paid or payable to or deposited with Assignor under
any of the Leases and all other rights and interests of Assignor under or in
respect of any of the Leases. This Assignment is intended to be and is an
absolute present assignment from Assignor to Assignee and not the mere passage
of a security, interest or a provision of additional security, it being intended
hereby to establish a complete and present transfer of all Leases and Rents with
the right, but without the obligation, to collect all Rents.
3. License. Except as hereinafter set forth, Assignor shall have a license to
collect the Rents accruing under the Leases as they become due ("License"), but
not in advance, and to enforce the Leases. The License is revocable, at
Assignee's option, in the event there occurs an Event of Default. Assignor
covenants and agrees that in exercising its License it shall hold all Rents in
trust and shall apply the same first to the payment of the reasonable expenses
of owning, maintaining, repairing, operating and renting the Property and then
to payment of the Obligations.
4. Bankruptcy of Lessee. In the event there is an Event of Default and if a
Lessee under a Lease files or has filed against it any petition in bankruptcy or
for reorganization or undertakes or is subject to similar action, Assignor shall
provide to Assignee a copy of any written notice of such bankruptcy received by
Assignor, and Assignee shall have the right to exercise the rights which would
otherwise inure to the benefit of Assignor in such proceedings, including,
without limitation, the right to seek "adequate protection" of its interests, to
compel rejection of any Lease, and to seek such claims and awards as may be
sought or granted in connection with the rejection of such Lease, provided that
Assignee must first provide Assignor with written notice of its intent to
exercise such rights within fifteen (15) days of Assignee's receipt of the
notice of bankruptcy. Unless otherwise consented to by Assignee in writing,
Assignee's exercise of any of the rights provided in this section shall preclude
Assignor from the pursuit and benefit thereof without any further action or
proceeding of any nature. Assignee, however, shall not be obligated to make
timely filings of claims in any bankruptcy, reorganization or similar action, or
to otherwise pursue creditor's rights therein.
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5. Representations and Warranties. Assignor hereby represents and warrants to
Assignee that: (a) Assignor is the absolute owner of the entire lessor's
interest in each of the Leases, with absolute right and title to assign the
Leases and the Rents; (b) the Leases are valid, enforceable and in full force
and effect and have not been modified, amended or terminated, or any of the
terms and conditions thereof waived, except as stated herein; (c) there are no
outstanding assignments or pledges of the Leases or of the Rents and no other
party has any right, title or interest in the Leases or the Rents; (d) there are
no existing defaults or any state of facts which, with notice or lapse of time,
or both, would constitute a default under the provisions of the Leases on the
part of either party; (e) no Lessee has any defense, set-off or counterclaim
against Assignor; (f) except as otherwise reflected in the Rent Roll (as defined
in the Loan Agreement) each Lessee is in possession and paying rent and other
charges under its Lease and as provided therein; (g) there are no unextinguished
rent concessions, abatements and/or other amendments relating to the Lessees
and/or the Leases, and no Lessee has any purchase option or first refusal right
or any right or option for additional space with respect to the Property, except
as reflected in the Rent Roll; (h) Assignor has not accepted prepayments of
installments of rent or any other charges under any Lease for a period of more
than one (1) month in advance; and (i) all work required to be performed by
Assignor, as landlord, as of the date hereof under any Lease has been completed
in accordance with the provisions of the Lease.
6. New Leases and Lease Terminations and Modifications. Except as expressly
permitted in the Loan Agreement, Assignor shall not enter into, cancel,
surrender or terminate, amend or modify any Lease, or make any subsequent
assignment or pledge of a Lease, or consent to subordination of the interest of
any Lessee in any Lease, without the prior written consent of Assignee. Any
attempt to do so without the prior written consent of Assignee shall be null and
void. Assignor shall not, without Assignee's prior written consent, (a) execute
any other assignment or pledge of the Leases, of any interest therein, or of any
Rents, or agree to a subordination of any Lease to any deed of trust or other
encumbrance now or hereafter affecting the Property; or (b) permit a material
alteration of or addition to the Property by any Lessee, unless the right to
alter or enlarge is expressly reserved by Lessee in the Lease. Assignor hereby
covenants not to accept rent under any Lease more than one month in advance of
its due date.
7. Cancellation of Lease. In the event that any Lease permits cancellation
thereof on payment of consideration and the privilege of cancellation is
exercised, the payments made or to be made by reason thereof are hereby assigned
to Assignee to be applied, at the election of Assignee, to the Obligations in
whatever order Assignee shall choose in its discretion or to be held in trust by
Assignee as further security, without interest, for the payment of the
Obligations.
8. Assignor to Ensure Continued Performance under Leases. Assignor shall perform
all of its covenants as Lessor under the Leases, and shall not permit any
release of liability of any Lessee or any withholding of rent payments by any
Lessee. Upon Assignee's request, or at any time notices of default for more than
five Leases in any 30 day period have been sent, Assignor shall promptly deliver
to Assignee copies of any and all notices of default Assignor has sent to any
Lessee. Assignor shall enforce at Assignor's expense remedies available to
Assignor under upon any Lease any Lessee's default in accordance with sound
business practice. Assignor shall deliver to Assignee copies of all papers
served in connection with any such enforcement proceedings and shall consult
with Assignee, its agents and attorneys with respect to the conduct thereof;
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provided that Assignor shall not enter into any settlement of any such
proceeding without Assignee's prior written consent.
9. Default of Assignor.
9.1. Remedies. If an Event of Default occurs, Assignor's License to collect
Rents shall immediately cease and terminate. Assignee shall thereupon be
authorized at its option to enter and take possession of all or part of the
Property, in person or by agent, employee or court appointed receiver, and to
perform all acts necessary for the operation and maintenance of the Property in
the same manner and to the same extent that Assignor might reasonably so act. In
furtherance thereof, Assignee shall be authorized, but under no obligation, to
collect the Rents arising from the Leases, and to enforce performance of any
other terms of the Leases including, but not limited to, Assignor's rights to
fix or modify rents, sue for possession of the leased premises, relet all or
part of the leased premises, and collect all Rents under such new Leases.
Assignor shall also pay to Assignee, promptly upon any Event of Default: (a) all
rent prepayments and security or other deposits paid to Assignor pursuant to any
Lease assigned hereunder; and (b) all charges for services or facilities or for
escalations which have theretofore been paid pursuant to any such Lease to the
extent allocable to any period from and after such Event of Default. Assignee
will, after payment of all proper costs, charges and any damages including,
without limitation, those payable pursuant to Section 10 hereof, apply the net
amount of such Rents to the Obligations. Assignee shall have sole discretion as
to the manner in which such Rents are to be applied, the reasonableness of the
costs to which they are applied, and the items that will be credited thereby.
9.2. Notice to Lessee. Assignor hereby irrevocably authorizes each Lessee,
upon demand and notice from Assignee of the occurrence of an Event of Default,
to pay all Rents under the Leases to Assignee. Assignor agrees that each Lessee
shall have the right to rely upon any notice from Assignee directing such Lessee
to pay all Rents to Assignee, without any obligation to inquire as to the actual
existence of an Event of Default, notwithstanding any notice from or claim of
Assignor to the contrary. Assignor shall have no claim against any Lessee for
any Rents paid by Lessee to Assignee. At such time as no Event of Default
exists, Assignee may give each Lessee written notice of such cure and,
thereafter, until further notice from Assignee, each such Lessee shall pay the
Rents to Assignor.
9.3. Assignor's Possession After Default. Following the occurrence of an
Event of Default, if Assignor is in possession of the Property and is not
required to surrender such possession hereunder, Assignor shall pay monthly in
advance to Assignee, on Assignee's entry into possession pursuant to Section 9.1
hereof, or to any receiver appointed to collect the Rents, the fair and
reasonable value for the use and occupancy of the Property or such part thereof
as may be in the possession of Assignor. Upon default in any such payment,
Assignor shall forthwith vacate and surrender such possession to Assignee or
such receiver and, in default thereof, Assignor may be evicted by summary or any
other available proceedings or actions.
9.4. Assignment of Defaulting Assignor's Interest in Lease. Assignee shall
have the right to assign Assignor's right, title and interest in and to the
Leases to any person acquiring title to the Property through foreclosure or
otherwise. Such assignee shall not be liable to account to Assignor for the
Rents thereafter accruing.
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9.5. No Waiver. Assignee's failure to avail itself of any of its rights
under this Assignment for any period of time, or at any time or times, shall not
constitute a waiver thereof. Assignee's rights and remedies hereunder are
cumulative, and not in lieu of, but in addition to, any other rights and
remedies Assignee has under the Loan Agreement, the Note, the Deed of Trust and
any other Loan Documents. Assignee's rights and remedies hereunder may be
exercised as often as Assignee deems expedient.
9.6. Costs and Expenses. The cost and expenses (including any receiver's
fees and fees) incurred by Assignee pursuant to the powers contained in this
Assignment shall be immediately reimbursed by Assignor to Assignee on demand,
shall be secured hereby and shall bear interest from the date incurred at the
Default Rate. Assignee shall not be liable to account to Assignor for any action
taken pursuant hereto, other than to account for any Rents actually received by
Assignee.
10. Indemnification of Assignee. Assignor hereby agrees to indemnify, defend,
protect and hold Assignee harmless from and against any and all liability, loss,
cost, expense or damage (including reasonable attorney fees) that Assignee may
or might incur under the Leases or by reason of this Assignment. Such
indemnification shall also cover any and all claims and demands that may be
asserted against Assignee under the Leases or this Assignment. Nothing in this
section shall be construed to bind Assignee to the performance of any Lease
provisions, or to otherwise impose any liability upon Assignee, including,
without limitation, any liability under covenants of quiet enjoyment in the
Leases in the event that any Lessee shall have been joined as party defendant in
any action to foreclose the Deed of Trust and shall have been barred thereby of
all right, title, interest, and equity of redemption in the Property. This
Assignment imposes no liability upon Assignee for the operation and maintenance
of the Property or for carrying out the terms of any Lease before Assignee has
entered and taken possession of the Property. Any loss or liability incurred by
Assignee by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Assignee's request, be
reimbursed by Assignor. Such reimbursement shall include interest at the Default
Rate provided in the Note, costs, expenses and reasonable attorney fees.
Assignee may, upon entry and taking of possession, collect the Rents and apply
them to reimbursement for any such loss or liability. The provisions of this
Section 10 shall survive repayment of the Obligations and any termination or
satisfaction of this Assignment.
11. Additions to, Changes in and Replacement of Obligations. Assignee may take
security in addition to the security already given Assignee for the payment of
the Obligations or release such other security, and may release any party
primarily or secondarily liable on the Obligations, may grant or make
extensions, renewals, modifications or indulgences with respect to the
Obligations or the Deed of Trust and replacements thereof, which replacements of
the Obligations or the Deed of Trust may be on the same terms as, or on terms
different from, the present terms of the Obligations or the Deed of Trust, and
may apply any other security held by it to the satisfaction of the Obligations,
without prejudice to any of its rights hereunder.
12. Power of Attorney. In furtherance of the purposes of this Assignment,
Assignor hereby appoints Assignee as Assignor's attorney-in-fact, with full
authority in the place of Assignor, at the option of Assignee at any time after
the occurrence and during the continuance of an Event of Default, and in the
name of Assignor or Assignee, to (a) collect, demand and receive the Rents and
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<PAGE>
other amounts payable under any Lease, (b) bring suit and take other action to
enforce the Leases, (c) enforce, supplement, modify, amend, renew, extend,
terminate and otherwise administer the Leases and deal with Lessees in relation
to the Leases, (d) give notices, receipts, releases and satisfactions with
respect to the Leases and the Rents and other amounts payable under any Lease,
and (e) take such other action as Assignee may reasonably deem necessary or
advisable in connection with the exercise of any right or remedy or any other
action taken by Assignee under this Assignment.
13. No Mortgagee in Possession; No Other Liability. The acceptance by Assignee
of this Assignment, with all of the rights, power, privileges and authority so
created, shall not, prior to entry upon and taking of possession of the Property
by Assignee, be deemed or construed to: (a) constitute Assignee as a mortgagee
in possession nor thereafter or at any time or in any event obligate Assignee to
appear in or defend any action or proceeding relating to the Leases or to the
Property; (b) require Assignee to take any action hereunder, or to expend any
money or incur any expenses or perform or discharge any obligation, duty or
liability under the Leases; or (c) require Assignee to assume any obligation or
responsibility for any security deposits or other deposits delivered to Assignor
by Lessees and not assigned and delivered to Assignee. Assignee shall not be
liable in any way for any injury or damage to person or property sustained by
any person in or about the Property.
14. Termination of Assignment. When Assignor pays Assignee the full amount of
the Obligations, and such payment is evidenced by a recorded satisfaction or
release of the Deed of Trust, this Assignment shall terminate.
15. Miscellaneous.
15.1. Severability. If any term of this Assignment or the application
hereof to any person or set of circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Assignment, or the application of such
provision or part thereof to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
term of this Assignment shall be valid and enforceable to the fullest extent
consistent with applicable law.
15.2. Captions. The captions or headings at the beginning of each section
hereof are for the convenience of the parties only and are not part of this
Assignment.
15.3. Counterparts. This Assignment may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
be construed together and shall constitute one instrument. It shall not be
necessary in making proof of this Assignment to produce or account for more than
one such counterpart.
15.4. Notices. All notices or other written communications hereunder shall
be given in the manner set forth in the Loan Agreement.
15.5. Modification. No amendment, modification or cancellation of this
Assignment or any part hereof shall be enforceable without Assignee's prior
written consent.
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15.6. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the state in which the Property is located.
15.7. Successors and Assigns; Gender. The terms, covenants, conditions and
warranties contained herein and the powers granted hereby shall run with the
land, shall inure to the benefit of and bind all parties hereto and their
respective heirs, executors, administrators, successors and assigns, and all
subsequent owners of the Property, and all subsequent holders of the Note and
the Deed of Trust, subject in all events to the provisions of the Deed of Trust
and the Loan Agreement regarding transfers of the Property by Assignor. In this
Assignment, whenever the context so requires, the masculine gender shall include
the feminine and/or neuter and the singular number shall include the plural and
conversely in each case. If there is more than one party constituting Assignor,
all obligations of each Assignor hereunder shall be joint and several.
15.8. Expenses. Assignor shall pay on demand all costs and expenses
incurred by Assignee in connection with the review of Leases, including
reasonable fees and expenses of Assignee's outside counsel.
16. Limitation on Personal Liability. Reference is hereby made to the portion of
the Note entitled "Limitation on Personal Liability" which provision is hereby
incorporated herein by reference to the same extent as if it were set forth
herein.
17. WAIVER OF TRIAL BY JURY. ASSIGNOR HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THIS ASSIGNMENT, OR ANY ACTS OR OMISSIONS OF
ASSIGNEE IN CONNECTION THEREWITH.
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IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed as of the day and year first above written.
ASSIGNOR:
CAX RANCHO MIRAGE, L.L.C.,
a Delaware limited liability company
By: Commercial Assets, Inc.,
a Delaware corporation, its Sole Member
By: /s/David M. Becker
-----------------------------
David M. Becker
Chief Financial Officer
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 19th day of
January, 2000 by David M. Becker, as the Chief Financial Officer of Commercial
Assets, Inc., a Delaware corporation, the Sole Member of CAX RANCHO MIRAGE,
L.L.C., a Delaware limited liability company.
/s/Lorri J. Owen
--------------------------------
Notary Public in and for said County and State
My Commission Expires:
7/2/2001
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ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated effective as of January 1, 2000
(the "Agreement"), by and among CAX Riverside, L.L.C., a Delaware limited
liability company ("Purchaser"), CADC Holdings, L.L.C., a Georgia limited
liability company ("CADC LLC"), Riverside Golf Course Investors, Inc., a Florida
corporation ("Riverside") and Community Acquisition and Development Corporation
("CADC" and, together with CADC LLC and Riverside, the "Sellers").
WHEREAS, CADC LLC owns 98% of the outstanding limited
liability company interests (the "Interests") in Riverside Golf Course
Community, L.L.C., a Delaware limited liability company ("the LLC") and
Riverside and CADC each owns 1% of the outstanding Interests in the LLC; and
WHEREAS, the Sellers desire to sell all of their Interests,
and Purchaser desires to purchase all of the Sellers' Interests upon the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements set forth in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
PURCHASE AND SALE; CLOSING
I.1 Purchase and Sale. The Sellers agree to sell to Purchaser
and Purchaser agrees to purchase, all of the Sellers' Interests at the Closing
(as herein defined) upon the terms and subject to the conditions set forth in
this Agreement.
I.2 Consideration. The consideration for the Interests (the
"Consideration") shall be ONE DOLLAR AND NO CENTS ($1.00) in cash. The
Consideration shall be payable by Purchaser at the Closing in (i) cash or (ii)
such other form as the Sellers and Purchaser may agree to before Closing.
I.3 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place as of January 1, 2000 (the
"Closing Date") at 10:00 a.m. Denver time, or on such other date as the parties
hereto agree.
<PAGE>
I.4 Deliveries by the Sellers at the Closing. (a) At the
Closing, the Sellers shall deliver to Purchaser an executed Assignment and
Assumption of Limited Liability Company Interest Agreement in substantially the
same form as Exhibit A hereto. (b) At the Closing, the Sellers shall also
deliver to the Purchaser certificates executed by officers of the Sellers
authorized to so certify on behalf of the Sellers, to the effect that all of the
representations and warranties of the Sellers contained herein at Article II are
true and correct as of the Closing Date.
I.5 Deliveries by the Purchasers at the Closing. At the
Closing, the Purchaser shall deliver to the Sellers a certificate executed by an
officer of the Purchaser authorized to so certify on behalf of the Purchaser, to
the effect that all of the representations and warranties of the Purchaser
contained herein at Article III are true and correct as of the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers represents and warrants to the Purchaser
that as of the date hereof:
II.1 Authority. Such Seller has the right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
such Seller and, assuming the due authorization, execution and delivery hereof
by the Purchaser, constitutes a valid and binding obligation of such Seller,
enforceable against it in accordance with its terms, except as such
enforceability may be subject to the effects of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors and of general principles of equity.
II.2 No Conflict; Consents and Approvals. The execution and
delivery by such Seller of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
(i) conflict with, or result in any violation of any provision of the
organizational documents of such Seller, (ii) violate or conflict with or result
in a breach or termination of or default under, any material agreement
(including the limited liability company agreement of the LLC), instrument,
license, judgment, order, write, injunction, decree, statute, law, ordinance,
rule or regulation applicable to the Seller or any of the property or assets of
such Seller or (iii) result in a default (or an event which with notice or lapse
of time or both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation or imposition of any Lien on any material asset of such Seller such as
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would reasonably be expected to materially impair the validity or enforceability
of this Agreement or the ability of such Seller to perform in any material
respect, its obligations under this Agreement. No consent, approval or
authorization of, or declaration, filing or registration with any court,
administrative agency or commission or other governmental or regulatory
authority or any other person or entity is required to be made or obtained by or
with respect to such Seller in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
II.3 Ownership. Such Seller is the owner, beneficially and of
record, of the Interests as set forth in the recitals hereto free and clear of
all Liens. As used in this Agreement, "Lien" means any mortgage, pledge, lien,
encumbrance, charge, adverse claim or restriction of any kind affecting title or
resulting in an encumbrance against property, real or personal, tangible or
intangible, or a security interest of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, any third
party option or other agreement to sell and any filing of or agreement to give,
any financing statement under the Uniform Commercial Code (or equivalent
statute) of any jurisdiction).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers that as
of the date hereof:
III.1 Authority. It has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement by the Purchaser, and the
payment by the Purchaser of the Consideration has been duly authorized by the
Purchaser and no further action is necessary on the part of the Purchaser. This
Agreement has been duly and validly executed and delivered by the Purchaser and,
assuming the due execution and delivery by the Sellers, constitutes a valid and
binding obligation of the Purchaser, enforceable against it in accordance with
its terms.
III.2 No Conflict; Consents and Approvals. The execution and
delivery by the Purchaser of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the terms hereof will
not, (i) conflict with, or result in any violation of any provision of the
Certificate of Limited Liability Company or Limited Liability Company Agreement
of the Purchaser, (ii) violate or conflict with or result in a breach or
termination of or default under, any material agreement, instrument, license,
judgment, order, writ, injunction, decree, statute, law, ordinance, rule or
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regulation applicable to the Purchaser or any of the property or assets of the
Purchaser or (iii) result in a default (or an event which with notice or lapse
of time or both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation or imposition of any Lien on any material asset of the Purchaser such
as would reasonably be expected to materially impair the validity or
enforceability of this Agreement or the ability of the Purchaser to perform in
any material respect, its obligations under this Agreement. No consent, approval
or authorization of, or declaration, filing or registration with any court,
administrative agency or commission or other governmental or regulatory
authority or any other person or entity is required to be made or obtained by or
with respect to the Purchaser in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
III.3 Diligence Review. Without limiting the Purchaser's right
to rely on the representations and warranties contained in Article II hereof,
the Purchaser acknowledges that it has had the opportunity to review such
financial and other data as it has requested of the Sellers, and that it has had
the opportunity to conduct such due diligence investigations as it deemed
appropriate.
ARTICLE IV
COVENANTS
IV.1 Conduct of Business. From the date hereof through the
Closing, except as expressly permitted or contemplated by this Agreement, unless
the Purchaser shall otherwise agree in writing prior to the taking of any action
prohibited by the terms of this Section, the Sellers shall cause each of the LLC
to conduct its operations and business in the ordinary and usual course of
business and consistent with past practice. Without limiting the generality of
the foregoing, and except as otherwise expressly permitted by this Agreement,
prior to the Closing, without the prior written consent of the Purchaser, the
Sellers shall not permit the LLC to: (a) issue, sell, pledge or dispose of,
grant or otherwise create or agree to issue, sell, pledge or dispose of, grant
or otherwise create any equity interest, any debt or any securities convertible
into or exchangeable for any equity interest; (b) purchase, redeem or otherwise
acquire or retire, or offer to purchase, redeem or otherwise acquire or retire,
any equity interest (including any options with respect to any equity interest
and any security convertible or exchangeable into any equity interest); (c)
declare, set aside, make any distribution, payable in cash, stock, property or
otherwise, with respect to any of its equity interests, or subdivide,
reclassify, recapitalize, split, combine or exchange any of its equity
interests; (d) incur or become contingently liable with respect to any
indebtedness or guarantee any such indebtedness or issue any debt securities or
incur any other obligation or liability outside the ordinary course of business;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
4
<PAGE>
assets of, or by any other manner, any business or any corporation, partnership,
association or other business entity; (f) mortgage or otherwise encumber or
subject to any lien of its properties or assets; (g) other than with respect to
tenant leases in the ordinary course of business consistent with past practice,
sell, transfer or assign any of its assets or properties; (h) other than with
respect to tenant leases in the ordinary course of business consistent with past
practice, enter into any contract not terminable within 30 days; (i) other than
with respect to tenant leases in the ordinary course of business consistent with
past practice, pay or settle any claim or liability, or enter into, amend or
terminate any transaction, contract, commitment or arrangement to which the LLC
is a party.
IV.2 Further Assurances. Each party hereto agrees to use its
best efforts to obtain all consents and approvals and to do all other things
necessary for the consummation of the transactions contemplated by this
Agreement. The parties agree to take such further action to deliver or cause to
be delivered to each other at the Closing and at such other times thereafter as
shall be reasonably agreed by such additional agreements or instruments as any
of them may reasonably request for the purpose of carrying out this Agreement
and the transactions contemplated hereby.
ARTICLE V
CONDITIONS
V.1 Conditions to Each Party's Obligations Under this
Agreement. The respective obligations of each party under this Agreement shall
be subject to the fulfillment at or prior to the Closing Date of the following:
(a) Injunctions. At the Closing Date, (i) there shall
be no injunction, restraining order, decision or decree of any nature of any
United States or foreign court or governmental entity or body of competent
jurisdiction that is in effect that restrains or prohibits the consummation of
the transactions contemplated hereby and (ii) there shall be no suit,
proceeding, or governmental investigation threatened or pending before any
United States or foreign governmental entity or body of competent jurisdiction
which seeks to restrain or prohibit the consummation of the transactions
contemplated hereby in whole or material part, or to obtain damages or other
relief in connection with the transactions contemplated hereby.
(b) Regulatory Approvals. All necessary approvals,
authorizations and consents of all governmental entities required to consummate
the transactions contemplated by this Agreement shall have been obtained and
shall remain in full force and effect and all waiting periods relating to such
approvals, authorizations or consents shall have expired.
5
<PAGE>
V.2 Conditions to Obligations of the Purchaser. The
obligations of the Purchaser are subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) All proceedings to be taken by the Sellers in
connection with the transactions contemplated by this Agreement and all
documents, instruments and certificates to be delivered by the LLC in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to each of the Purchaser and its counsel.
(b) All representations and warranties of the Sellers
contained herein at Article II shall be true and correct at the Closing as if
made as of the Closing Date.
(c) There shall not have occurred as of the Closing
Date any material adverse condition with respect the business, properties,
financial condition or prospects of the LLC.
(d) There shall not be in effect as of the Closing
Date any writ, judgment, injunction, decree or similar order of any court
restraining, or enjoining or otherwise preventing consummation of any of the
transactions contemplated by this Agreement.
V.3 Conditions to Obligations of the Seller. The obligations
of the Sellers are subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) All proceedings to be taken by the Purchaser in
connection with the transactions contemplated by this Agreement and all
documents, instruments and certificates to be delivered by the LLC in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to the Sellers and their counsel.
(b) All representations and warranties of the
Purchaser contained herein at Article III are true and correct at the Closing as
if made as of the Closing Date.
(c) There shall not be in effect as of the Closing
Date any writ, judgment, injunction, decree or similar order of any court
restraining, or enjoining or otherwise preventing consummation of any of the
transactions contemplated by this Agreement.
6
<PAGE>
ARTICLE VI
MISCELLANEOUS
VI.1 Survival. The representations, warranties, covenants and
agreements made by the Sellers and the Purchaser in this Agreement, or in any
certificate delivered by the Sellers or the Purchaser will survive until the
first anniversary of the Closing Date.
VI.2 Notices. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given if
delivered, telecopied or mailed, by certified mail, return receipt requested,
first-class postage prepaid, to the parties at the following address:
If to the Sellers, to:
c/o Community Acquisition and Development Corporation
2 Ponds Edge Drive
P.O. Box 500
Chadds Ford, Pennsylvania 19317
Attention: President
Telephone: (610) 388-9600
Fax: (610) 388-9616
If to the Purchaser, to:
c/o Commercial Assets, Inc.
3410 South Galena Street, Suite 210
Denver, Colorado 80231
Attention: David Becker
Telephone: (303) 614-9422
Fax: (303) 614-9401
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Michael V. Gisser
Telephone: (213) 687-5000
Fax: (213) 687-5600
7
<PAGE>
VI.3 Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
VI.4 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
VI.5 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
VI.6 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same Agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to each party.
VI.7 Entire Agreement. This Agreement represents the entire
Agreement of the parties with respect to the subject matter hereof and shall
supersede any and all previous contracts, arrangements or understandings between
the parties hereto with respect to the subject matter hereof.
VI.8 Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of the State of Delaware,
without reference to rules relating to conflicts of law.
VI.9 No Third Party Beneficiaries. No person or entity other
than the parties hereto is an intended beneficiary of this Agreement or any
portion hereof.
[Signature page follows]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
COMMUNITY ACQUISITION AND DEVELOPMENT
CORPORATION, a Delaware corporation
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
President
CADC HOLDING, L.L.C., a Georgia
limited liability company
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
Managing Member
RIVERSIDE GOLF COURSE INVESTORS,
INC., a Florida corporation
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
President
CAX RIVERSIDE, L.L.C., a Delaware
limited liability company
By: Commercial Assets, Inc., a
Delaware corporation,
Its Managing Member
By: /s/David M. Becker, 1/19/00
----------------------------
David M. Becker
Chief Financial Officer
9
<PAGE>
ASSIGNMENT AND ASSUMPTION
OF LIMITED LIABILITY COMPANY INTEREST
ASSIGNMENT AND ASSUMPTION OF LIMITED LIABILITY COMPANY
INTEREST, dated as of January 1, 2000 (this "Assignment"), by and among
Community Acquisition and Development Corporation, a Delaware corporation
("CADC"), Riverside Golf Course Investors, Inc., a Florida corporation
("Riverside"), CADC Holdings, L.L.C., a Delaware limited liability company
("CADC Holdings" and, together with CADC and Riverside, the "Assignors"), and
CAX Riverside, L.L.C., a Delaware limited liability company (the "Assignee").
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed thereto in the Acquisition Agreement, dated as of January 1, 2000 (the
"Acquisition Agreement"), by and among the Assignee and the Assignors.
WHEREAS, the Assignors hold interests (the "LLC Interests") in
Riverside Golf Course Community, L.L.C., a Delaware limited liability company
(the "LLC"); and
WHEREAS, pursuant to the Acquisition Agreement, the Assignors
have agreed to transfer, and the Assignee has agreed to accept from the
Assignors, the Assignors' LLC Interests in exchange for $1 (the "Consideration")
in cash, as provided therein.
NOW, THEREFORE, in consideration of the foregoing and the
covenants of the parties set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
subject to the terms and conditions set forth herein, the parties hereby agree
as follows:
1. In consideration of the transfer to the Assignors of the
Consideration pursuant to the Acquisition Agreement, the Assignor hereby
unconditionally and irrevocably transfer, assign, contribute and set over to the
Assignee all of the Assignors' rights, title and interests in and to the LLC
Interests, including, without limitation, (i) all of the Assignors' interests in
the capital of the LLC, and the Assignors' interests in all profits and
distributions of any kind to which the Assignors shall at any time be entitled
in respect of the LLC Interests; (ii) all other payments, if any, due or to
become due to the Assignors in respect of the LLC Interests, under or arising
out of the limited liability company agreement of the LLC, whether as
contractual obligations, damages, insurance proceeds, condemnation awards or
otherwise; and (iii) all present and future claims, if any, of the Assignors
against the LLC or its members or former managers under or arising out of the
limited liability company agreement of the LLC (or the operating agreement or
regulations of any predecessors of the LLC) for monies loaned or advanced, for
services rendered or otherwise.
10
<PAGE>
2. Assignee hereby accepts the LLC Interests and agrees to assume the
Assignors' obligations under the liability company agreement of the LLC with
respect to the LLC Interests from and after the date hereof.
3. This Assignment shall take effect as of the Closing. This Assignment
shall inure to the benefit of and be binding upon the Assignors and the Assignee
and their respective successors and assigns.
4. This Assignment shall be construed and enforced in accordance with
the laws of the State of Delaware, without regard to its principles of conflict
of laws.
This Assignment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the day and year first written above.
ASSIGNORS:
COMMUNITY ACQUISITION AND DEVELOPMENT
CORPORATION, a Delaware corporation
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
President
CADC HOLDING, L.L.C., a Georgia
limited liability company
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
Its Managing Member
11
<PAGE>
RIVERSIDE GOLF COURSE INVESTORS, INC.,
a Florida corporation
By: /s/Joseph W. Gaynor
----------------------------
Joseph W. Gaynor
Its President
ASSIGNEE:
CAX RIVERSIDE, L.L.C.,
a Delaware limited liability company
By: Commercial Assets, Inc., a Delaware
Its Managing Member
By: /s/David M. Becker
----------------------------
David M. Becker
Chief Financial Officer
12
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 12905
<SECURITIES> 11926
<RECEIVABLES> 0
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<CURRENT-ASSETS> 27055
<PP&E> 67588
<DEPRECIATION> (1821)
<TOTAL-ASSETS> 106008
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<BONDS> 30551
0
0
<COMMON> 104
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<TOTAL-LIABILITY-AND-EQUITY> 106008
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