EXHIBIT 12
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PROMISSORY NOTE
(Secured)
$50,000,000.00 San Diego, California
June 10, 2004
FOR VALUE RECEIVED, the undersigned The 520 Group, LLC, a California limited
liability company ("Borrower"), promise(s) to pay to the order of ▇▇▇▇▇ Fargo
Bank, National Association ("Lender"), at the Disbursement and Operations Center
in El Segundo, California, or at such other place as may be designated in
writing by Lender, the principal sum of Fifty Million and 00/100ths Dollars
($50,000,000.00) or so much thereof as may from time to time be owing hereunder
by reason of advances by ▇▇▇▇▇▇ to or for the benefit or account of Borrower,
with interest thereon, per annum, at one or more of the Effective Rates
calculated in accordance with the terms and provisions of the Fixed Rate
Agreement attached hereto as Exhibit A and a Fixed Rate Notice described on
Exhibit B attached hereto (based on a 360-day year and charged on the basis of
actual days elapsed). All sums owing hereunder are payable in lawful money of
the United States of America, in immediately available funds.
Interest accrued on this note ("Note") shall be due and payable on the first day
of each month commencing with the first month after the date of this Note.
Borrower shall make principal payments pursuant to Section 2.7 of that certain
Secured Loan Agreement of even date herewith.
The outstanding principal balance of this Note, together with all accrued and
unpaid interest, shall be due and payable in full on July 1, 2007 ("Maturity
Date").
This Note is secured by, among other things, a Securities Pledge and Security
Agreement dated concurrently herewith.
If any interest payment required hereunder is not received by ▇▇▇▇▇▇ (whether by
direct debit or otherwise) on or before the fifteenth (15th) calendar day of the
month in which it becomes due, Borrower shall pay, at ▇▇▇▇▇▇'s option, a late or
collection charge equal to four percent (4%) of the amount of such unpaid
interest payment.
This Note is made pursuant to the Loan Agreement (hereinafter defined). Should a
Default (as defined in the Loan Agreement) occur, the holder of this Note, at
holder's option, may declare all sums owing under this Note immediately due and
payable; provided, however, that if any document related to this Note provides
for automatic acceleration of payment of sums owing hereunder, all sums owing
hereunder shall be automatically due and payable in accordance with the terms of
that document.
If, following a Potential Default, any attorney is engaged by ▇▇▇▇▇▇ to enforce
or defend any provision of this Note, or as a consequence of any Default, with
or without the filing of any legal action or proceeding, then Borrower shall pay
to Lender immediately upon demand all attorneys' fees and all costs incurred by
Lender in connection therewith, together with interest thereon from the date of
such demand until paid at the rate of interest applicable to the principal
balance owing hereunder as if such unpaid attorneys' fees and costs had been
added to the principal.
No previous waiver and no failure or delay by Lender in acting with respect to
the terms of this Note or the Loan Agreement shall constitute a waiver of any
breach, default, or failure of condition under this Note, the Loan Agreement or
the obligations evidenced thereby. A waiver of any term of this Note, the Loan
Agreement or the obligations evidenced thereby must be made in writing and shall
be limited to the express written terms of such waiver. In the event of any
inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by this Note, the terms of this Note
shall prevail.
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If this Note is executed by more than one person or entity as Borrower, the
obligations of each such person or entity shall be joint and several. No person
or entity shall be a mere accommodation maker, but each shall be primarily and
directly liable hereunder. Except as otherwise provided in any agreement
executed in connection with this Note, Borrower waives: presentment; demand;
notice of dishonor; notice of default or delinquency; notice of acceleration;
notice of protest and nonpayment; notice of costs, expenses or losses and
interest thereon; notice of late charges; and diligence in taking any action to
collect any sums owing under this Note or in proceeding against any of the
rights or interests in or to properties securing payment of this Note.
Time is of the essence with respect to every provision hereof. This Note shall
be construed and enforced in accordance with the laws of the State of
California, except to the extent that federal laws preempt the laws of the State
of California, and all persons and entities in any manner obligated under this
Note consent to the jurisdiction of any federal or state court within the State
of California having proper venue and also consent to service of process by any
means authorized by California or federal law.
All notices or other communications required or permitted to be given pursuant
to this Note shall be given to the Borrower or Lender at the address and in the
manner provided for in the Loan Agreement.
The Loan Documents contain or expressly incorporate by reference the entire
agreement of the parties with respect to the matters contemplated therein and
supersede all prior negotiations or agreements, written or oral. The Loan
Documents shall not be modified except by written instrument executed by all
parties. Any reference to the Loan Documents includes any amendments, renewals
or extensions now or hereafter approved by Lender in writing.
EXHIBITS A and B are attached hereto and incorporated herein by reference.
"BORROWER"
The 520 Group, LLC, a California limited liability
company
By:__________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Manager
By:__________________________________________
▇▇▇▇ ▇▇▇▇▇▇, Manager
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EXHIBIT A
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FIXED RATE AGREEMENT
EXHIBIT A to Promissory Note Secured by Deed of Trust ("Note"), dated June 10,
2004, made by The 520 Group, LLC, a California limited liability company, as
Borrower, to the order of ▇▇▇▇▇ Fargo Bank, National Association, as Lender.
R E C I T A L S
Borrower has requested and Lender has agreed to provide a fixed rate option as a
basis for calculating the effective rate of interest on amounts owing under this
Note. Borrower acknowledges the following: (i) it understands the process of
exercising the fixed rate option as provided herein; (ii) amounts owing under
this Note may bear interest at different rates and for different time periods;
and (iii) absent the terms and conditions hereof, it would be extremely
difficult to calculate ▇▇▇▇▇▇'s additional costs, expenses, and damages in the
event of a Default or prepayment by Borrower hereunder. Given the above,
▇▇▇▇▇▇▇▇ agrees that the provisions herein (including, without limitation, the
Fixed Rate Price Adjustment defined below) provide for a reasonable and fair
method for Lender to recover its additional costs, expenses and damages in the
event of a Default or prepayment by Borrower.
1. RATES AND TERMS DEFINED. Various rates and terms not otherwise defined
herein are defined and described as follows:
"ALTERNATE RATE" is a rate of interest per annum five percent (5%) in
excess of the applicable Effective Rate in effect from time to time.
"APPLICABLE LIBO RATE" is the rate of interest, rounded upward to the
nearest whole multiple of one-hundredth of one percent (.01%), equal to the
sum of: (a) One and One-Half Percent (1.5000%) plus (b) the LIBO Rate,
which rate is divided by one (1.00) minus the Reserve Percentage:
Applicable LIBO Rate = 1.5000% + LIBO Rate
----------------------
(1 - Reserve Percentage)
"BUSINESS DAY(S)" means a day of the week (but not a Saturday, Sunday or
holiday) on which the offices of Lender are open to the public for carrying
on substantially all of Lender's business functions.
"FIXED RATE" is the Applicable LIBO Rate as accepted by Borrower as an
Effective Rate for a particular Fixed Rate Period and Fixed Rate Portion.
"FIXED RATE COMMENCEMENT DATE" means the date upon which the Fixed Rate
Period commences.
"FIXED RATE NOTICE" is a written notice in the form shown on Exhibit B
attached to this Note which requests a Fixed Rate for a particular Fixed
Rate Period and the Fixed Rate Portion.
"FIXED RATE PERIOD" is the period or periods of (a) one (1) month, two (2)
months, three (3) months or six (6) months; or (b) any other period which
ends at the Maturity Date, which periods are selected by Borrower and
confirmed in the Fixed Rate Notice; provided that no Fixed Rate Period
shall extend beyond the Maturity Date.
"FIXED RATE PORTION" is the portion or portions of the principal balance of
this Note which Borrower selects to have subject to a Fixed Rate, each of
which is an amount: (a) equal to the unpaid principal
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EXHIBIT A
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balance of this Note not subject to a Fixed Rate; and (b) is not less than
One Hundred Thousand and 00/100ths Dollars ($100,000.00) and is an even
multiple of Two Hundred Fifty Thousand and 00/100ths Dollars ($250,000.00).
In the event Borrower is subject to a principal amortization schedule under
the terms and conditions of the Loan Documents, the Fixed Rate Portion
shall in no event exceed the maximum outstanding principal balance which
will be permissible on the last day of the Fixed Rate Period selected.
"LIBO RATE" is the rate of interest, rounded upward to the nearest whole
multiple of one-sixteenth of one percent (.0625%), quoted by ▇▇▇▇▇▇ as the
London Inter-Bank Offered Rate for deposits in U.S. Dollars at
approximately 9:00 a.m. California time, for a Fixed Rate Commencement Date
or a Price Adjustment Date, as appropriate, for purposes of calculating
effective rates of interest for loans or obligations making reference
thereto for an amount approximately equal to a Fixed Rate Portion and for a
period of time approximately equal to a Fixed Rate Period or the time
remaining in a Fixed Rate Period after a Price Adjustment Date, as
appropriate.
"LOAN AGREEMENT" is that certain Secured Loan Agreement dated as of June
10, 2004 between ▇▇▇▇▇▇▇▇ and Lender.
"LOAN DOCUMENTS" are the documents defined as such in the Loan Agreement.
"PRIME RATE" is a base rate of interest which Lender establishes from time
to time and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Any
change in an Effective Rate due to a change in the Prime Rate shall become
effective on the day each such change is announced within Lender.
"REGULATORY COSTS" are, collectively, future, supplemental, emergency or
other changes in Reserve Percentages, assessment rates imposed by the FDIC,
or similar requirements or costs imposed by any domestic or foreign
governmental authority and related in any manner to a Fixed Rate.
"RESERVE PERCENTAGE" is at any time the percentage announced within Lender
as the reserve percentage under Regulation D for loans and obligations
making reference to an Applicable LIBO Rate for a Fixed Rate Period or time
remaining in a Fixed Rate Period on a Price Adjustment Date, as
appropriate. The Reserve Percentage shall be based on Regulation D or other
regulations from time to time in effect concerning reserves for
Eurocurrency Liabilities as defined in Regulation D from related
institutions as though Lender were in a net borrowing position, as
promulgated by the Board of Governors of the Federal Reserve System, or its
successor.
"TAXES" are, collectively, all withholdings, interest equalization taxes,
stamp taxes or other taxes (except income and franchise taxes) imposed by
any domestic or foreign governmental authority and related in any manner to
a Fixed Rate.
"VARIABLE RATE" is a floating rate of interest per annum equal to the Prime
Rate.
2. EFFECTIVE RATE. The "Effective Rate" upon which interest shall be
calculated for this Note shall be one or more of the following:
2.1 Provided no Default exists under the Loan Agreement or any of the Loan
Documents described therein (this Note is one of the Loan Documents):
(a) for those portions of the principal balance of this Note which
are not Fixed Rate Portions, the Effective Rate shall be the
Variable Rate.
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EXHIBIT A
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(b) for those portions of the principal balance of this Note which
are Fixed Rate Portions, the Effective Rate for the Fixed Rate
Period thereof shall be the Fixed Rate selected by Borrower and
set in accordance with the provisions hereof, provided, however,
if any of the transactions necessary for the calculation of
interest at any Fixed Rate requested or selected by Borrower
should be or become prohibited or unavailable to Lender, or, if
in Lender's good faith judgment, it is not possible or practical
for Lender to set a Fixed Rate for a Fixed Rate Portion and Fixed
Rate Period as requested or selected by Borrower, the Effective
Rate for such Fixed Rate Portion shall remain at or revert to the
Variable Rate.
2.2 During such time as a Default exists under the Loan Agreement or any
of the Loan Documents; or from and after the date on which all sums
owing under this Note become due and payable by acceleration or
otherwise; or from and after the date on which the property encumbered
by the Securities Pledge Agreement or any portion thereof or interest
therein, is sold, transferred, mortgaged, assigned, or encumbered,
whether voluntarily or involuntarily, or by operation of law or
otherwise, without ▇▇▇▇▇▇'s prior written consent (whether or not the
sums owing under this Note become due and payable by acceleration); or
from and after the Maturity Date, then at the option of Lender, the
interest rate applicable to the then outstanding principal balance of
this Note shall be the Alternate Rate.
3. SELECTION OF FIXED RATE. Provided no Default, breach or failure of
condition exists under the Loan Documents, or would exist with passage of
time or notice or both, Borrower, at its option and upon satisfaction of
the conditions set forth herein, may request a Fixed Rate as the Effective
Rate for calculating interest on the portion of the unpaid principal
balance and for the period selected in accordance with and subject to the
following procedures and conditions:
3.1 Borrower shall deliver to the Disbursement and Operations Center, ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, with a copy
to: Lender, ▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, or such other addresses as Lender shall designate, an
original or facsimile Fixed Rate Notice no later than 9:00 A.M.
(California time) for each Fixed Rate Portion. Any Fixed Rate Notice
pursuant to this Section 3 is irrevocable.
Lender is authorized to rely upon the telephonic request and
acceptance of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ as ▇▇▇▇▇▇▇▇'s duly
authorized agents, or such additional authorized agents as Borrower
shall designate in writing to Lender. ▇▇▇▇▇▇▇▇'s telephonic notices,
requests and acceptances shall be directed to such officers of ▇▇▇▇▇▇
as Lender may from time to time designate.
3.2 Borrower may elect (A) to convert advances to a Fixed Rate Portion, or
(B) to convert a matured Fixed Rate Portion into a new Fixed Rate
Portion, provided, however, that the aggregate amount of the advance
being converted into or continued as a Fixed Rate Portion shall, in
the aggregate, be not less than $100,000.00 and is an even multiple of
$250,000.00. The conversion of a matured Fixed Rate Portion back to a
or to a new Fixed Rate Portion shall occur on the last Business Day of
the Fixed Rate Period relating to such Fixed Rate Portion. Each Fixed
Rate Notice shall specify (1) the amount of the Fixed Rate Portion,
(2) the Fixed Rate Period, and (3) the Fixed Rate Commencement Date.
3.3 Upon receipt of a Fixed Rate Notice in the proper form requesting a
Fixed Rate Portion advance under Sections 3.1 and 3.2 above, Lender
shall determine the Fixed Rate applicable to the Fixed Rate Period for
such Fixed Rate Portion. Each determination by Lender of the Fixed
Rate shall be conclusive and binding upon the parties hereto in the
absence of manifest error. Lender shall deliver to Borrower (by
facsimile) an acknowledgment of receipt and confirmation of the Fixed
Rate Notice; provided, however, that failure to provide such
acknowledgment of receipt and confirmation of the Fixed Rate Notice to
Borrower shall not affect the validity of such rate.
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EXHIBIT A
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3.4 If Borrower does not make a timely election to convert all or a
portion of a matured Fixed Rate Portion into a new Fixed Rate Portion
in accordance with Section 3.2 above, such Fixed Rate Portion shall be
automatically converted back to a Variable Rate upon the expiration of
the Fixed Rate Period applicable to such Fixed Rate Portion.
4. FIXED RATE NOTICE. ▇▇▇▇▇▇▇▇'s selection of a Fixed Rate shall be delivered
to Lender in the form of the Fixed Rate Notice shown on Exhibit B attached
to this Note. Lender shall confirm ▇▇▇▇▇▇▇▇'s request made pursuant to such
Fixed Rate Notice. ▇▇▇▇▇▇'s failure to confirm ▇▇▇▇▇▇▇▇'s request made
pursuant to the Fixed Rate Notice shall not release Borrower from
Borrower's obligation to pay interest at the Effective Rate pursuant to the
terms hereof.
5. TAXES, REGULATORY COSTS AND RESERVE PERCENTAGES. Upon ▇▇▇▇▇▇'s demand,
Borrower shall pay to Lender, in addition to all other amounts which may
be, or become, due and payable under this Note and Loan Documents, any and
all Taxes and Regulatory Costs, to the extent they are not internalized by
calculation of a Fixed Rate. Further, at Lender's option, the Fixed Rate
shall be automatically adjusted by adjusting the Reserve Percentage, as
determined by Lender in its prudent banking judgment, from the date of
imposition (or subsequent date selected by ▇▇▇▇▇▇) of any such Regulatory
Costs. Lender shall give Borrower notice of any Taxes and Regulatory Costs
as soon as practicable after their occurrence, but Borrower shall be liable
for any Taxes and Regulatory Costs regardless of whether or when notice is
so given.
6. FIXED RATE PRICE ADJUSTMENT. Borrower acknowledges that prepayment or
acceleration of a Fixed Rate Portion during a Fixed Rate Period shall
result in Lender's incurring additional costs, expenses and/or liabilities
and that it is extremely difficult and impractical to ascertain the extent
of such costs, expenses and/or liabilities. Therefore, on the date a Fixed
Rate Portion is prepaid or the date all sums payable hereunder become due
and payable, by acceleration or otherwise ("Price Adjustment Date"),
Borrower will pay Lender (in addition to all other sums then owing to
Lender) an amount ("Fixed Rate Price Adjustment") equal to the then present
value of (a) the amount of interest that would have accrued on the Fixed
Rate Portion for the remainder of the Fixed Rate Period at the Fixed Rate
set on the Fixed Rate Commencement Date, less (b) the amount of interest
that would accrue on the same Fixed Rate Portion for the same period if the
Fixed Rate were set on the Price Adjustment Date at the Applicable LIBO
Rate in effect on the Price Adjustment Date. The present value shall be
calculated by using as a discount rate the LIBO Rate quoted on the Price
Adjustment Date.
By initialing this provision where indicated below, ▇▇▇▇▇▇▇▇ confirms that
▇▇▇▇▇▇'s agreement to make the loan evidenced by this Note at the interest
rates and on the other terms set forth herein and in the other Loan
Documents constitutes adequate and valuable consideration, given individual
weight by Borrower, for this agreement.
▇▇▇▇▇▇▇▇'S INITIALS: ____________
7. PURCHASE, SALE AND MATCHING OF FUNDS. Borrower understands, agrees and
acknowledges the following: (a) Lender has no obligation to purchase, sell
and/or match funds in connection with the use of a LIBO Rate as a basis for
calculating a Fixed Rate or Fixed Rate Price Adjustment; (b) a LIBO Rate is
used merely as a reference in determining a Fixed Rate and Fixed Rate Price
Adjustment; and (c) Borrower has accepted a LIBO Rate as a reasonable and
fair basis for calculating a Fixed Rate and a Fixed Rate Price Adjustment.
▇▇▇▇▇▇▇▇ further agrees to pay the Fixed Rate Price Adjustment, Taxes and
Regulatory Costs, if any, whether or not Lender elects to purchase, sell
and/or match funds.
8. MISCELLANEOUS. As used in this Exhibit, the plural shall mean the singular
and the singular shall mean the plural as the context requires. Addresses
for the Fixed Rate Notice shall be the same as those for notices under the
Loan Agreement executed in connection with this Note.
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EXHIBIT A
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This Agreement is executed concurrently with and as part of this Note referred
to and described first above.
"BORROWER"
The 520 Group, LLC, a California limited liability
company
By:________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Manager
By:________________________________________
▇▇▇▇ ▇▇▇▇▇▇, Manager
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EXHIBIT B
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FIXED RATE NOTICE Loan No. 100441
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TODAY'S DATE: LOAN MATURITY DATE: July 1, 2007
------------------------- --------------------
TO: ▇▇▇▇▇ FARGO BANK, N.A. LOAN ADMINISTRATOR: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
DISBURSEMENT AND OPERATIONS CENTER --------------------
FAX # (▇▇▇) ▇▇▇-▇▇▇▇ or RELATIONSHIP MANAGER: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ ------------------
ATTENTION: RATE OPTION DESK
================================================================================
BORROWER INTEREST RATE OPTION REQUEST
Rate Quote Line (▇▇▇) ▇▇▇-▇▇▇▇ ▇:▇▇▇ Use One Form Per Transaction
LOAN #: 100441 BORROWER NAME: The 520 Group, LLC
------------------- -----------------------------------
RATE SET DATE: FIXED RATE COMMENCEMENT DATE: (1350)
----------------- --------------
FIXED RATE PERIOD (TERM): (i.e. 1, 2, 3 months, etc. as allowed per Note)
-------
INDEX: LIBO RATE: % + 1.5000% = % (1350)
---------------- --------------- --------------- -----------------
Quote Spread Applicable Rate
FIXED RATE PORTION EXPIRING ON: $
--------------------- ----------------------
1. AMOUNT ROLLING OVER: $ FROM OBLGN#:
-------------- --------
(5522)
2. ADD: AMT TRANSFERRED
FROM VARIABLE RATE
PORTION $ FROM OBLGN#: TO OBLGN#:
-------------- -------- -------
(5522) (5020)
3. ADD: AMT TRANSFERRED
FROM OTHER FIXED RATE
PORTION $ FROM OBLGN#: TO OBLGN#:
-------------- -------- -------
(5522) (5020)
ADD: AMT TRANSFERRED
FROM OTHER FIXED RATE
PORTION $ FROM OBLGN#: TO OBLGN#:
-------------- -------- -------
(5522) (5020)
4. LESS: AMT TRANSFERRED
TO VARIABLE RATE
PORTION $ FROM OBLGN#: TO OBLGN#:
-------------- -------- -------
(5522) (5020)
$ TOTAL FIXED RATE PORTION: $
-----------------------------------------------------
Borrower confirms, represents and warrants to Lender, (a) that this selection of
a Fixed Rate is subject to the terms and conditions of the Note, Fixed Rate
Agreement and Loan Documents (as applicable), and (b) that terms, words and
phrases used but not defined in this Notice have the meanings attributed thereto
in the Note, Fixed Rate Agreement and Loan Documents (as applicable), and (c)
that no breach, failure of condition, or Default has occurred or exists, or
would exist after notice or passage of time or both, under the Note or Loan
Documents.
REQUESTED BY (as allowed per documents): TELEPHONE #:( )
----------------- -----------
PRINT NAME: FAX #:( )
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