NON-RECOURSE SECURED PROMISSORY NOTE
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US $104,820.55 New York, New York
December 31, 1997
FOR VALUE RECEIVED, the undersigned maker, NATIONAL PROPERTIES
INVESTMENT TRUST, a Massachusetts business trust (the "Borrower"), hereby
unconditionally promises to pay to order of PHILIPS INTERNATIONAL REALTY CORP.,
a Maryland corporation (the "Lender") at its office located at c/o Philips
International, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, or at such other
place as the Lender may specify from time to time, in lawful money of the United
States of America and in immediately available funds, the principal amount of
One Hundred Four Thousand Eight Hundred Twenty United States Dollars and Fifty
Five cents (US $104,820.55) in a single installment on December 31, 1998, (the
"Maturity Date"); provided, however, that if the Lender fails to complete a
public or private equity offering of its securities aggregating in excess of $25
million (an "Offering") by the Maturity Date, the Borrower may, at its option,
extend the Maturity Date to June 30, 1999; provided, further, however, that, in
any case, upon consummation of an Offering, the Maturity Date (whether or not
extended) shall be accelerated to thirty (30) days after the closing date of
such Offering.
Interest shall accrue on the unpaid principal amount of this Note
from the date of this Note until such principal amount is paid in full at the
per annum rate equal to ten (10%) percent (the "Lending Rate"). Interest shall
be payable on the Maturity Date. Any principal amount, interest and other
payments which is not paid when due (whether each is due as stated, by
acceleration or otherwise) shall bear interest, payable on demand, until payment
in full of such amounts at the rate per annum equal to the Lending Rate plus two
(2%) percent (collectively, the "Default Rate"), after as well as before
judgment. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. In no event shall the interest rate on this Note
exceed the maximum interest rate permitted by applicable law. If,
notwithstanding, interest in excess of said maximum rate shall be paid
hereunder, the excess shall be retained by the Lender as a prepayment of all or
part of the unpaid balance of principal or otherwise returned to the Borrower.
The Borrower may prepay this Note, in whole or in part, at any time at
par, without any penalty or premium. Any cash dividends or distributions payable
by the Lender to the Borrower, in its capacity as a shareholder of the Lender,
with respect to the Pledged Shares (as hereinafter defined) shall not be paid to
the Borrower but shall instead be applied as a partial prepayment of this Note.
All partial prepayments shall be applied by the Lender first, to the accrued and
unpaid interest and second, to the outstanding principal. The Lender is hereby
authorized to record the date and amount of each payment or prepayment of
principal hereof on the schedule annexed hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part hereof, and
any such notation shall be conclusive and binding for all purposes absent
manifest error; provided, however, that failure by the Lender to make any such
notation shall not affect the obligations of the Borrower or rights of the
Lender hereunder.
Whenever any payment on this Note shall be stated to be due on a day
which is not a business day, such payment shall be made on the next succeeding
business day and such extension of time shall be included in the computation of
the payment of interest on this Note.
In order to secure the obligations of the Borrower under this Note, the
Borrower hereby pledges, assigns and grants the Lender a first priority security
interest and lien in four thousand (4,000) shares of common stock, $.01 par
value per share (the "Common Stock"), of the Lender, currently owned
beneficially and of record by the Borrower (including, without limitation, all
income, cash, dividends or other distributions received therefrom, and all
proceeds thereof, including, without limitation, proceeds received from any sale
thereof, and all products, substitutions, additions, changes and replacements
thereof (all of the same being herein referred to as the "Pledged Shares"). The
Borrower, the Lender and Boston EquiServe Trust Company, the transfer agent for
the Common Stock (the "Transfer Agent"), shall enter into an agreement whereby
the Transfer Agent agrees (i) upon the occurrence of a default hereunder, to
comply with any order or instruction from the Lender directing sale, transfer or
redemption of all or part of the Pledged Shares and remit the proceeds thereof,
if any, to the Lender, without further consent by Xxxxxxxx, (ii) that the
Pledged Shares shall be treated as a financial asset under Article 8 of the New
York Uniform Commercial Code (the "UCC"), and (iii) the Pledged Shares will not
be sold, encumbered, transferred or otherwise disposed of by Borrower without
the express consent of the Lender; provided, however, that upon the consummation
of an Offering, the Borrower shall be able to sell the Pledged Shares provided
that the net proceeds from such sale shall be used to repay in full all amounts
owing under this Note. In the event that stock certificates representing the
Pledged Shares are issued to the Borrower, the Borrower agrees to promptly
deliver to the Lender one or more stock certificates representing such Pledged
Shares, registered in its name, together with an undated stock power duly
executed in blank. The Borrower agrees that at any time and from time to time,
at its expense, the Borrower will promptly execute and deliver all further
instruments and documents, and take all further action, that may be reasonably
necessary or desirable, or that the Lender may reasonably request. The Lender
may exercise in respect of the Pledged Shares, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party in default under the UCC, and the Lender may also,
without notice except as specified below, sell the Pledged Shares or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Lender's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Lender may deem
commercially reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least five (5) days' notice to the Borrower of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Pledged Shares regardless of notice of sale having
been given and the Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
The Borrower represents and warrants to the Lender that (i) the Borrower
is a business trust duly organized and validly existing and in good standing
under the laws of the State of Massachusetts, (ii) the Borrower is duly
qualified to do business as a foreign corporation or entity and is in good
standing in each jurisdiction (other than the state of its respective
incorporation or organization) in which the conduct of its respective business
or the ownership or operation of its respective properties or assets makes such
qualification necessary, except where the failure to so qualify would not have a
material adverse effect on the financial condition, operations or prospects of
the Borrower, (iii) the Borrower has full power, capacity and authority to (a)
own its respective properties and assets and carry on its respective business as
now conducted, and (b) execute and deliver this Note and to incur and perform
the obligations provided for herein and therein, (iv) no consent or approval of
any governmental authority or other third party is or will be required as a
condition to the enforceability of this Note, and the Borrower is and will be in
compliance in all material respects with all laws and regulatory requirements to
which it is subject, (v) this Note has been duly executed and delivered by the
Borrower and is enforceable against
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the Borrower in accordance with its terms, (vi) the Borrower will not use any of
the proceeds of this Note for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying "margin stock" or "margin securities"
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), or in a manner which would breach of contravene any of
Regulations G, T, U, or X of the Board of Governors of the Federal Reserve
System, as in effect from time to time, (vii) the Borrower is the legal and
beneficial owner of the Pledged Shares, free and clear of any liens, adverse
claims, security interests, options or other charges or encumbrances, and (viii)
the pledge of the Pledged Shares creates a valid and perfected continuing first
priority lien and security interest in the Pledged Shares, securing the
indefeasible payment and performance of the obligations hereunder.
If at any time (i) there occurs a default in the payment by the Borrower
of principal or interest pursuant to this Note which is not cured within fifteen
(15) days, (ii) any representation or warranty made to the Lender by the
Borrower in this Note was when made untrue in any material respect or materially
misleading, (iii) the Borrower becomes insolvent under any applicable law, (iv)
the Borrower commences or has commenced against it any bankruptcy or insolvency
proceeding or has a trustee or receiver appointed for it or its assets, and any
such non-consensual event continues for ninety (90) days undismissed, unstayed,
unbonded or undischarged, or (v) there occurs a material default in the
performance of any other obligation of the Borrower under this Note
(collectively, a "Default"), the Lender shall give written notice thereof to the
Borrower; provided, however, that, upon the occurrence of an event specified in
clauses (iii) or (iv) above, no notice shall be required. Immediately upon the
occurrence of an event specified in clauses (iii) or (iv) above, or immediately
upon the Lender giving the Borrower notice regarding the occurrence of an event
specified in clauses (i), (ii) or (v) above, the Lender shall be entitled to
retain any and all payments previously made pursuant to this Note and all
amounts owing pursuant to this Note shall immediately become due and payable.
Any amount not paid when due shall continue to bear interest from the due date
at the Default Rate or the highest rate then permitted by law (if the Default
Rate is then in excess of the maximum rate).
If a Default occurs, the Lender shall have, in addition to its other
rights, the right to setoff and/or recoupment against the amounts owing under
this Note any amount owing by the Lender in any capacity to the Borrower in any
capacity. All rights and remedies of the Lender under applicable law and this
Note are cumulative and not exclusive. No single, partial or delayed exercise by
the Lender of any right or remedy shall preclude full and timely exercise by the
Lender at any time of any right or remedy of the Lender without notice. No
waiver shall be effective unless made specifically in writing by the Lender.
The Borrower hereby waives diligence, presentment, protest, demand and
notice of every kind and, to the fullest extent permitted by law, the right to
plead any statute of limitations as a defense to any demand hereunder. The
non-exercise by the Lender of any of its rights under this Note in any
particular instance shall not constitute a waiver hereof in that or any
subsequent instance. The acceptance by the Lender of any partial payment shall
not constitute a waiver of any default or of any of the Lender's rights under
this Note. This Note may not be changed or terminated orally. This Note shall
bind the heirs, legal representatives, successors and assigns of the undersigned
and shall enure to the benefit of the Lender and its successors and assigns.
The Borrower promises to pay all costs and expenses, including all
reasonable attorneys' fees and disbursements, incurred in the collection and
enforcement of this Note. The Borrower hereby agrees to indemnify the Lender,
its officers, directors, employees, agents, counsel or representatives and to
hold the Lender and such other parties harmless from any loss, liability, cost
or expense that the Lender may sustain or incur as a consequence of, in
connection with, arising out of or relating to this Note.
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Any and all payments by the Borrower under this Note shall be made (i)
without setoff, defenses or counterclaim, and (ii) free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of the Lender, taxes imposed on or in respect of its income (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings,
penalties and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder to the Lender, upon receipt of a certificate from the
Lender (i) the sum payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable to additional
sums payable under this paragraph), the Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
Any notice, request, demand, statement, authorization, approval or
consent required or permitted under this Note shall be in writing and shall be
made by, and deemed duly given upon, (a) deposit in the United States mail,
postage prepaid, registered or certified, return receipt requested, such mailing
to be effective five (5) business days after mailing, (b) personal delivery, (c)
delivery by an overnight courier of recognized reputation (such as Federal
Express) or (d) transmission by telecopier as provided above or to such other
address as either party may specify by notice given in accordance with this
paragraph.
Each provision of this Note shall survive until all amounts due are paid
to the Lender's satisfaction and are not subject to any preference period, shall
be interpreted as consistent with existing law and shall be deemed amended to
the extent necessary to comply with any conflicting law. If a court deems any
provision invalid, the remainder of this Note shall remain in effect. Singular
number includes plural and neuter gender includes masculine and feminine as
appropriate.
This Note shall be governed by, and construed an interpreted in
accordance with, the laws of the State of New York, without regard to its
conflicts of law provisions.
In any action or other legal proceeding relating to this Note, the
Borrower (i) consents to the personal jurisdiction of any State or Federal court
located in the State of New York, (ii) waives objection to the laying of venue,
(iii) waives personal service of process, (iv) consents to service of process by
registered or certified mail directed to the Borrower at the last address shown
in the Lender's records relating to this Note, with such service of process to
be deemed completed five (5) days after mailing, and (v) waives any right to
trial by jury with respect to this Note or to assert any counterclaim or setoff
or recoupment with respect to this Note. In any proceeding, a copy of this Note
kept in the Lender's course of business shall be admitted into evidence as an
original.
This Note constitutes the entire and final agreement between the
parties, and supersedes all prior written agreements and all prior,
contemporaneous or subsequent oral agreements of the parties regarding all
issues addressed in this Note.
Notwithstanding anything contained herein to the contrary, the
obligations of the Borrower shall be "non-recourse" obligations, meaning that
the Borrower shall not be personally liable for any obligations hereunder and
that the Xxxxxx's remedies against the Borrower shall be limited to proceeding
against the Pledged Shares.
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IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and
delivered as of the day and year and at the place first above written.
NATIONAL PROPERTIES INVESTMENT TRUST
By:/s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
Title: Managing Trustee
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