Exhibit 3
4(f) (Fortress)
PLEDGE AND SECURITY AGREEMENT
(STOCK AND WARRANTS)
THIS PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") dated as
of February 8, 2001 is by and among CAPITAL TRUST, INC., a Maryland corporation
("SECURED PARTY"), having an address at 000 Xxxx Xxxxxx, 00xx xxxxx, Xxx Xxxx,
X.X. 00000, PROMETHEUS HOMEBUILDERS LLC, a Delaware corporation ("PLEDGOR"),
having an address at 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, X.X. 00000.
PRELIMINARY STATEMENT
A. Secured Party has agreed to make a loan to LFSRI II SPV
REIT CORP., a Delaware corporation ("ORIGINAL BORROWER") and SENIOR QUARTERS
FUNDING CORP., a Delaware corporation ("NEW BORROWER"; New Borrower,
collectively with Original Borrower, the "BORROWER"), in the aggregate principal
sum of $110,000,000 (the "LOAN") a portion of which has been advanced prior to
the date hereof, in accordance with the provisions of a certain Amended and
Restated Loan Agreement (the "LOAN AGREEMENT") dated of even date herewith,
which Loan shall be evidenced by, and payable, together with interest thereon,
in accordance with the provisions of three promissory notes collectively
referred to therein as the "NOTES". The Notes, the Loan Agreement, this
Agreement and all other documents of any nature whatsoever evidencing, securing
or guaranteeing the Loan in whole or in part, or otherwise executed and
delivered in connection with the Loan or relating thereto, as the same may be
modified or amended from time to time, are hereinafter referred to collectively
as the "LOAN DOCUMENTS".
B. Capitalized terms used and not otherwise defined herein
shall have the respective meanings given to such terms in the Loan Agreement.
C. As of the date hereof, Pledgor is the owner of 224,712
shares of common stock (THE "COMMON STOCK") of THE FORTRESS GROUP, INC., a
Delaware corporation ("COMPANY"), and 28,500 shares of Class AAA convertible
redeemable preferred stock of Company (the "PREFERRED STOCK"), together equaling
approximately 33% of the outstanding shares (assuming the Class AAA convertible
redeemable preferred stock is converted to common stock) of the Company (the
Common Stock together with the Preferred Stock is hereinafter collectively
referred to as the "STOCK") and is entitled to receive dividends and other
distributions on account thereof from time to time declared and paid by Company.
As of the date hereof, Pledgor also owns warrants (the "WARRANTS") to purchase
up to 33,333,333 additional shares of common stock of the Company at $0.01 per
share. The Warrants and the Stock together with the right to receive dividends
and distributions on account of the Stock from time to time are collectively
referred to as, the "INTEREST").
D. Secured Party was willing to make the Loan only if Pledgor
agreed to execute and deliver this Agreement as additional security for the
payment of all principal, interest, additional interest and other sums of any
nature whatsoever which may or shall become due under the Notes, the Loan
Agreement and the other Loan Documents (collectively, the "DEBT") and the
observance and performance by Borrower, Pledgor, and the other members of the
Borrower Control Group of all the terms, covenants and provisions of the Loan
Documents on the part of Pledgor to be observed and performed.
E. Pledgor will derive substantial economic benefit from the
Loan and, therefore, Pledgor desires to execute this Agreement in order to
satisfy the condition described in the foregoing paragraph D.
NOW, THEREFORE, in consideration of Secured Party's agreement
to make the Loan and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Pledgor hereby represents and
warrants to and covenants and agrees with Secured Party as follows:
SECTION 1. SECURITY INTEREST. As security for the due and
punctual payment in full of the Debt and for the due and punctual performance by
Borrower, Pledgor, and the other members of the Borrower Control Group of all of
the terms, covenants and provisions of the Loan Documents (the Debt, the payment
thereof and the performance of the terms, covenants and provisions of the Loan
Documents being hereinafter collectively called the "OBLIGATIONS"), Pledgor
hereby pledges, hypothecates, assigns, and delivers to Secured Party and grants
to Secured Party a security interest in and lien on all of Pledgor's right,
title and interest now owned or hereafter acquired in and to the following
described property (the "COLLATERAL"):
(a) the Interest and any certificates representing the
Interest;
(b) all cash, securities, dividends, distributions, Proceeds,
and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of the Interest, and any fees, commissions or other
compensation payable to Pledgor as a stockholder or warrant holder of
Company (all of the foregoing, collectively, "DISTRIBUTIONS");
(c) all contract rights, general intangibles, rights, claims,
powers, privileges, benefits and remedies arising from or in any way
related to ownership of the Interest, any certificates and other
instruments representing the Interest and the other Collateral
described above in paragraphs 1(a) and (b), including, without
limitation, all rights to vote or consent, or to receive any notice, or
to inspect or review any books, records or other information;
(d) all additions to the Collateral described in the foregoing
clauses (a) through (c) including without limitation any tangible or
intangible in the Company obtained in the future by Pledgor, all
substitutions therefor and all replacements thereof;
(e) all Proceeds of any of the foregoing.
Notwithstanding any contrary provision contained herein, as
used in this Agreement, the terms "Collateral" and "Distributions" shall not
include any Money properly released from the Deposit Account or other Collateral
released by Secured Party pursuant to the terms of this Agreement or the Amended
and Restated Deposit Account Agreement.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF PLEDGOR. Pledgor
hereby represents and warrants to Secured Party as of the date hereof as
follows:
(a) No consent of any other person or entity (including,
without limitation, any owner or creditor of Pledgor) which has not
been obtained is required in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
(b) Pledgor is duly organized, validly existing and in good
standing under the laws of the state of its formation and has all
requisite power and authority under the laws of such state and under
its organizational and charter documents to enter into and perform its
obligations under this Agreement.
(c) Pledgor has taken all necessary legal and other action to
authorize the execution, delivery and performance of this Agreement,
and this Agreement constitutes the valid and binding obligation and
agreement of Pledgor, enforceable in accordance with its terms, subject
to limitations as to enforceability imposed by bankruptcy,
reorganization, moratorium, insolvency and other laws of general
application relating to or affecting the enforceability of creditors'
rights and to equitable principles.
(d) Pledgor has not received any notice of default under any
agreement or instrument to which Pledgor is a party or by which Pledgor
or Pledgor's assets may be bound which default would have a material
adverse effect on Pledgor's business, assets, property or financial or
other condition, and Pledgor is not in default under any order,
judgment, award or decree of any court, arbitrator or other
governmental authority binding upon or affecting Pledgor or by which
any of Pledgor's assets may be bound or affected.
(e) Neither the execution and delivery of this Agreement nor
the compliance by Pledgor with the terms and provisions hereof are
events which of themselves, or with the giving of notice or the passage
of time, or both, would constitute, on the part of Pledgor, a violation
of or conflict with, or result in any breach of, or default under, the
terms, conditions or provisions of, or require any consent, permit,
approval, authorization, declaration or filing (other than filings now
or hereinafter made by Pledgor as required under the Securities and
Exchange Act of 1934, as amended, as a result hereof) which has not
been made or obtained under or pursuant to, any statute, law, judgment,
decree, order, rule or regulation applicable to Pledgor, the
organizational and charter documents of Pledgor, if any, or, any other
agreement or instrument to which Pledgor is a party or by which
Pledgor, or Pledgor's assets, are bound, or result in the creation or
imposition of any Lien on any of the assets of Pledgor, no such
condition or event of itself, or with the giving of notice or the
passage of time, or both, will result in the acceleration of the due
date of any obligation of Pledgor or by which any of Pledgor's assets
are bound; provided, however, that the compliance by Pledgor with the
terms and provisions hereof is subject to all applicable Federal and
state securities laws.
(f) There are no judgments presently outstanding and
unsatisfied against Pledgor or any of Pledgor's assets, and neither
Pledgor nor any of Pledgor's assets is a party to or the subject of any
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actions or suits or proceedings in equity or by any governmental
authorities, and no such litigation or proceeding has been threatened
against Pledgor or against any of Pledgor's assets, and no
investigation in contemplation of such litigation or proceeding has
begun or is pending or has been threatened.
(g) Pledgor's principal place of business and chief executive
office is at the location identified in the first paragraph of this
Agreement.
(h) The financial statements of Pledgor and Company furnished
to Secured Party are true, correct and complete in all material
respects and fairly present the financial condition of Pledgor and
Company as at the end of and for the reporting periods covered thereby.
Except as shown on such financial statements, no borrowings have been
made or indebtedness incurred by Pledgor or Company which is
outstanding and which might give rise to a lien or claim against any
assets of Pledgor or Company. Except for Permitted Indebtedness of
Pledgor, there are no liabilities, contingent or otherwise, or any
unrealized or anticipated losses from unfavorable commitments, whether
arising before or after the date of such financial statements, which
are not disclosed in such financial statements. Notwithstanding any of
the foregoing, the representations and warranties set forth in this
Section 2(h) as they relate to the Company are made to Pledgor's actual
knowledge.
(i) As of the date hereof, Pledgor has filed or caused to be
filed all United States, state, local and foreign income tax returns
(if any) which are required to be filed and all United States, state,
local and foreign tax returns other than income tax returns which are
required to be filed and has paid or caused to be paid all taxes shown
on such returns or on any assessment made against it and all other
taxes, fees or other charges imposed on it by any governmental
authority, agency or instrumentality which have become due and payable.
No tax liens have been filed against Pledgor or against any of its
assets, and no material claims are being asserted against Pledgor or
any of its assets in respect of any taxes.
(j) Pledgor is the sole record and beneficial owner of the
Stock except to the extent any direct or indirect equity owners of
Pledgor is deemed to be a beneficial owner of the Stock. All of the
Stock is validly issued, fully paid and non-assessable.
SECTION 3. Intentionally omitted.
SECTION 4. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
PLEDGOR. Pledgor hereby represents and warrants to Secured Party as follows with
respect to the Interest as of the date hereof:
(a) (i) Pledgor is the sole record and beneficial owner of the
Interest (except to the extent any direct or indirect equity owners in
Pledgor is deemed to be a beneficial owner of the Interest), free and
clear of all Liens, (other than as created hereunder); Pledgor has
legal title to the Interest and good right and lawful authority to
grant a security interest and Lien in the same in the manner hereby
done or contemplated. (ii) The execution and delivery of this Agreement
by Pledgor is not restricted in any way by (x) any agreement or
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instrument to which Pledgor is a party, except such restrictions as
have been waived, by proper steps taken in compliance with such
restrictions or (y) any applicable law governing Pledgor. (iii) The
transferability of the Interest, with respect to the grant of a
security interest and lien in the Collateral to Secured Party or to any
foreclosure sale of the Collateral by Secured Party is not restricted
in any way (x) any agreement or instrument to which Pledgor is a party,
except for such restrictions as have been waived, by proper steps taken
in compliance with such restrictions, and (y) any law governing Company
(other than applicable Federal and state securities laws). (iv) The
Interest is not subject to any option or similar arrangement; and no
consent or approval of any governmental body or regulatory authority,
or of any securities exchange, is necessary to the validity of the
rights created hereunder; and all action has been taken by Pledgor to
create and perfect, in favor of Secured Party, a security interest and
lien in the Interest, and Secured Party has acquired a first priority
perfected security interest and lien therein.
(b) Except for the Warrants, the Preferred Stock and Article
IV of that certain Second Amended and Restated Stockholders Agreement
dated as of February 4, 1999 between Company, Pledgor and the
Stockholders named therein, there are no outstanding or authorized
options, warrants, rights, contracts, rights to subscribe, conversion
rights or other agreements or commitments (collectively, "ADVERSE
RIGHTS") to which Pledgor is a party, providing for the issuance or
acquisition of any Equity Interests in Company.
(c) As to all Collateral acquired by Pledgor on and after the
date hereof, Pledgor shall be the legal and equitable owner of such
Collateral free and clear of all Liens (other than those created
hereunder); each ownership interest or other security comprising such
Collateral will have been duly authorized, validly issued and be fully
paid and non-assessable; Pledgor will have legal title to such
Collateral and good and lawful authority to pledge, assign and deliver
such Collateral in the manner hereby contemplated; and no consent or
approval of any governmental body or regulatory authority, or of any
securities exchange, is or will be necessary to the validity of the
rights created hereunder.
(d) Pledgor shall not, take any action, or fail to take any
action, in contravention of the terms, conditions and provisions of the
Notes, the Loan Agreement, this Agreement or any of the other Loan
Documents.
SECTION 5. COVENANTS.
(a) Entity Status. Pledgor will continue to comply with the
provisions of all of its organizational and governing documents, and
the laws of the state in which such Entity was formed relating to each
such Entity. All customary formalities regarding the Entity existence
of Pledgor will continue to be observed.
(b) Existence. Pledgor shall not (i) take any actions in
violation of its organizational or governing documents or (ii) amend,
modify, waive or terminate its organizational or governing documents.
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(c) Other Actions. Pledgor shall not:
(1) Liens on the Collateral. Incur, create, assume,
become or be liable in any manner with respect to, or permit
to exist, any Lien with respect to any Collateral except Liens
in favor of Secured Party.
(2) Certain Restrictions. Enter into any agreement
which expressly restricts the ability of Pledgor to enter into
amendments, modifications or waivers of any of the Loan
Documents.
(3) Issuance of Equity Interests. Issue or allow to
be created any shareholder, partnership, trust or membership
interests, as applicable, or other Equity Interests in
Pledgor.
(d) Reduction of Distributions. Subject to fiduciary
obligations, Pledgor shall not, directly or indirectly, without prior
written consent of the Secured Party, vote to reduce the annual
dividend payable by the Company.
(e) Transfer. Pledgor shall not Transfer the Interest other
than in compliance with Section 2.6(b) of the Loan Agreement.
SECTION 6. DELIVERY OF COLLATERAL; VOTING RIGHTS;
DISTRIBUTIONS; SUBSTITUTION OF COLLATERAL.
(a) Any and all certificates representing the Collateral
(including without limitation additional or substitute certificates or
instruments representing Distributions or other Collateral that
hereafter may be issued) shall be delivered to the Secured Party in
suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, with
signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form satisfactory to Secured Party.
(b) So long as there shall not have occurred and be continuing
an Event of Default (hereinafter defined), Pledgor shall be entitled to
exercise any and all voting rights and powers relating or pertaining to
the Collateral or any part thereof for any purpose not inconsistent
with the terms and provisions of the Notes, the Loan Agreement, this
Agreement and the other Loan Documents or otherwise in contravention of
any of the terms, covenants and provisions of the Notes, the Loan
Agreement, this Agreement or any of the other Loan Documents.
(c) Except as and to the extent provided herein and in the
Loan Documents, until the Indebtedness is paid in full, Pledgor shall
not receive or be entitled to retain Distributions, if any, paid on the
Collateral. To the extent Pledgor receives any Distributions prohibited
hereunder, Pledgor shall receive same in trust for the benefit of
Secured Party and shall immediately deliver same to Secured Party or
its designated agent (accompanied by proper instruments of assignment
or stock powers executed by Pledgor in accordance with Secured Party's
instructions) to be held subject to the terms, provisions and
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conditions of this Agreement, the Loan Agreement and the Amended and
Restated Deposit Account Agreement.
(d) Upon the occurrence of an Event of Default and so long as
said Event of Default shall continue, at the option of Secured Party,
(i) all rights of Pledgor to exercise the voting and consensual rights
and powers which Pledgor is entitled to exercise pursuant to the
foregoing subparagraph (b) shall cease, and all such rights shall
thereupon and without any further action or notice become vested in
Secured Party who shall have the sole and exclusive right and authority
to exercise (or refrain from exercising) such voting and consensual
rights and powers in its sole discretion, and (ii) Secured Party shall
receive and be entitled to retain any and all Distributions until the
Indebtedness is satisfied. THIS ASSIGNMENT OF VOTING RIGHTS IS COUPLED
WITH AN INTEREST AND IS IRREVOCABLE BY DISSOLUTION OR OTHERWISE. The
exercise of any of the rights and remedies of Secured Party under this
paragraph shall not be or be deemed to be a disposition of Collateral
under Article 9 of the Uniform Commercial Code as in effect in any
applicable jurisdiction (the "UCC") or an acceptance or a retention or
a proposal to accept or retain all or any part of the Collateral in
satisfaction of all or any of the Obligations. Any and all
Distributions received by Secured Party pursuant to the provisions of
this paragraph shall be retained by Secured Party as part of the
Collateral and applied in accordance with the provisions of Section 11
of this Agreement.
SECTION 7. COSTS AND EXPENSES. Pledgor shall pay all costs,
fees, expenses and charges incurred by Secured Party in connection with the
administration and enforcement of this Agreement and the security interest
granted hereunder (including, without limitation, all attorneys' fees and
costs). In addition, Pledgor agrees to pay, and to save Secured Party harmless
from all liability for, any stamp or other taxes which may be payable in
connection with the execution or delivery of this Agreement or the transactions
contemplated hereby. The obligations of Pledgor pursuant to this paragraph shall
survive any termination of this Agreement.
SECTION 8. EVENT OF DEFAULT. The occurrence of any of the
following events shall constitute an event of default (an "EVENT OF DEFAULT")
hereunder:
(a) If any representation or warranty of Pledgor made in this
Agreement, or in any certificate, report, financial statement or other
instrument furnished in connection with this Agreement shall prove
false or misleading in any material respect the effect of which shall
cause or result in a Material Adverse Condition to the Pledgor or the
Company;
(b) If Pledgor shall make a general assignment for the benefit
of creditors;
(c) If a court of competent jurisdiction enters a decree or
order for relief with respect to Pledgor under Title 11 of the United
States Code as now constituted or hereafter amended or under any other
applicable Federal or state bankruptcy, insolvency or other similar
law, rule or regulation, or if such court enters a decree or order
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appointing a receiver, liquidator, assignee, trustee, custodian,
examiner, magistrate, arbitrator, sequestrator (or similar official) of
Pledgor or of any substantial part of its properties, or if such court
decrees or orders the winding up or liquidation of the affairs of
Pledgor;
(d) If Pledgor files a petition for relief or answer or
consent seeking relief under Title 11 of the United States Code as now
constituted or hereafter amended, or under any other applicable Federal
or state bankruptcy, insolvency or other similar law, rule or
regulation, or if Pledgor fails to vigorously and diligently oppose or
otherwise consents to or acquiesces in the commencement or prosecution
of an involuntary case under Title 11 of the United States Code as now
constituted or hereafter amended, or under any other applicable Federal
or state bankruptcy, insolvency or similar law, rule or regulation, or
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, examiner magistrate, arbitrator,
sequestrator (or other similar official) of Pledgor, or of any
substantial part of its properties, or if Pledgor fails generally to
pay its debts as such debts become due, or if Pledgor takes any action
in furtherance of any action described in this subparagraph;
(e) If any Affiliate of Pledgor shall commence any legal
action seeking to cause Pledgor or any Affiliate of Pledgor to take any
of the actions described in subparagraphs (b), (c) or (d) above with
respect to Pledgor;
(f) If Pledgor shall be in default of any other provision
provided herein and such default shall continue for a period of thirty
(30) days after notice from Secured Party; or
(g) If an "Event of Default" (as such term is defined in the
Loan Agreement) occurs.
SECTION 9. REMEDIES UPON DEFAULT. Upon the occurrence and
during the continuation of an Event of Default, Secured Party may, in addition
to any other rights or remedies which Secured Party may have, immediately and
without demand exercise with respect to the Collateral any and all rights and
remedies granted to a secured party under the UCC.
SECTION 10. SALE OF COLLATERAL.
(a) Sale of the Collateral may be made at any public or
private sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery, as Secured Party shall
deem appropriate. Secured Party shall be authorized at any such sale,
in its sole discretion, to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are
purchasing the Collateral then being sold for their own account for
investment and not with a view to the distribution or resale thereof,
and upon consummation of any such sale Secured Party shall have the
right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on
the part of Pledgor, and Pledgor hereby waives, to the extent permitted
by law, all right of redemption, stay or appraisal which Pledgor now
has or may at any time in the future have under any rule of law or
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statute now existing or hereafter enacted. To the extent that notice of
sale shall be required to be given by law, Secured Party shall give
Pledgor ten (10) days' notice in the manner herein specified of Secured
Party's intention to make any such public or private sale or sale at
any broker's board or on any such securities exchange. Such notice, in
case of public sale, shall state the time and place fixed for such
sale, and, in the case of sale at a broker's board or on a securities
exchange, shall state the board or exchange at which such sale is to be
made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. In case of private
sale, such notice shall state the time after which the Collateral will
be sold. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as Secured
Party may fix in the notice of such sale. At any such sale, the
Collateral, or any portion thereof, may be sold as Secured Party may in
its sole discretion determine. To the extent permitted by law, Secured
Party may bid, which bid may be in whole or in part, in the form of
cancellation of indebtedness, for and purchase for the account of
Secured Party or its nominee the whole or any part of the Collateral.
Secured Party shall not be obligated to make any sale of the Collateral
if Secured Party shall determine not to do so, regardless of the fact
that notice of sale of the Collateral may have been given. Secured
Party may, without notice of publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same
was so adjourned. In case sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by Secured Party until the sales price is paid by the
purchaser or purchasers thereof, but Secured Party shall not incur any
liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in the case of any such
failure, such Collateral may be sold again upon like notice. As an
alternative to exercising the power of sale herein conferred upon it,
Secured Party may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral, or any portion
thereof, pursuant to a judgment or decree of a court or courts of
competent jurisdiction. Pledgor agrees, to the extent permitted by law,
that any sale or other disposition of any of the Collateral in
accordance with the foregoing procedures shall be deemed to be
commercially reasonable under the UCC and otherwise proper.
(b) In connection with any disposition of the Collateral, if
Secured Party elects to obtain the advice of any one or more
independent nationally known investment banking firms which are member
firms of the New York Stock Exchange (or other nationally recognized
exchange), with respect to the method or manner of sale or disposition
of any of the Collateral, the best price reasonably obtainable therefor
and any other details concerning such sale or disposition, Pledgor
agrees, to the extent permitted by law, that any sale or other
disposition of any of the Collateral in reliance on such advice shall
be deemed to be commercially reasonable under the UCC and otherwise
proper.
(c) Pledgor understands that compliance with federal or state
securities laws may very strictly limit the course of conduct of
Secured Party if Secured Party were to attempt to dispose of all or any
part of the Collateral and may also limit the extent to which or the
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manner in which any subsequent transferee of the Collateral may dispose
of the same. Pledgor agrees that in any sale of any of the Collateral,
Secured Party is hereby authorized to comply with any such limitation
or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including, without limitation, compliance with such procedures as may
restrict the number of prospective bidders and purchasers or further
restrict such prospective bidders or purchasers to persons who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or
of the purchaser by any governmental regulatory authority or official,
and Pledgor further agrees that such compliance shall not result in
such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall Secured Party be liable or
accountable to Pledgor for any discount allowed by reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.
SECTION 11. APPLICATION OF MONIES. All monies (including,
without limitation, Distributions) received or collected by Secured Party
pursuant to this Agreement shall be held as Collateral by Secured Party and
after the occurrence of an Event of Default shall be applied by Secured Party
first, to the payment of all costs incurred in the collection of such monies
(including attorneys' fees and expenses) and second, to the payment of the
Indebtedness in such order and priority as Secured Party may in its sole
discretion determine. The balance, if any, of such monies remaining after
payment in full of such costs and the Obligations shall be remitted to Pledgor
or as otherwise directed by a court of competent jurisdiction.
SECTION 12. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor
hereby appoints Secured Party, effective upon an Event of Default and during the
continuation thereof, as the attorney-in-fact of Pledgor for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest. Without limiting the generality of the foregoing, upon an
Event of Default and during the continuation thereof, Secured Party shall have
the right and power to receive, endorse and collect all checks and other orders
for the payment of money made payable to Pledgor representing any Distribution
or any part of any thereof and to give full discharge for the same.
SECTION 13. NO WAIVER. No failure or delay on the part of
Secured Party in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power preclude any other or further exercise thereof or the exercise of any
other right or power hereunder nor shall Secured Party's waiver of any right or
remedy against Pledgor release or relieve Pledgor from its obligations
hereunder. No modification or waiver of any provision of this Agreement nor
consent to any departure by Pledgor therefrom shall be effective unless the same
shall be in writing and signed by Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on Pledgor in any case shall, of itself, entitle
Pledgor to any other or further notice or demand in similar or other
circumstances. If any notice is required by law to be given to Pledgor or the
Company by Secured Party, five (5) days' notice given by registered mail, return
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receipt requested, and addressed to such party at the address set forth herein
shall be deemed for all purposes to be reasonable notice.
SECTION 14. DURATION OF SECURED PARTY'S RIGHTS AND
TERMINATION. Until the Indebtedness shall have been paid in full, all rights,
powers and remedies granted to Secured Party under this Agreement shall continue
to exist and may be exercised by Secured Party at any time and from time to
time. Upon payment in full of the Indebtedness, Secured Party shall reassign and
redeliver, without recourse or warranty and at the expense of Pledgor, or cause
to be so reassigned and redelivered, to Pledgor or to such person or persons as
Pledgor shall designate, against receipt, such of the Collateral, if any, as
shall not have been sold or otherwise applied by Secured Party pursuant to the
terms hereof and still be held by Secured Party hereunder, together with
appropriate instruments of reassignment and release.
SECTION 15. AGREEMENTS OF PLEDGOR. Until the Indebtedness is
paid and performed in full, Pledgor covenants and agrees with Secured Party as
follows:
(a) Pledgor shall furnish or cause to be furnished to Secured
Party from time to time, at the request of Secured Party, such
information concerning Pledgor or Company (to the extent available to
Pledgor) as Secured Party may reasonably request;
(b) Except for the Permitted Indebtedness, Pledgor shall not
make any loans to shareholders of Pledgor or set aside any funds for
any such purpose;
(c) Except as created hereby and the Permitted Indebtedness,
Pledgor shall not create any mortgage, pledge, title retention lien, or
other Lien or incur any indebtedness (directly or as a guarantor) or
any Lien, with respect to any assets now owned or hereafter acquired by
Pledgor, or to take or fail to take any other action whatsoever, in
contravention of Section 5 of this Agreement or otherwise inconsistent
with the terms and provisions of the Notes, the Loan Agreement, this
Agreement or any of the other Loan Documents;
(d) Pledgor shall not in any manner further encumber, sell,
transfer or convey, or permit to be further encumbered, sold,
transferred or conveyed in any manner, the Collateral other than in
compliance with Section 2.6(b) of the Loan Agreement;
SECTION 16. LIMITATION ON DUTIES AND LIABILITIES OF SECURED
PARTY; INDEMNIFICATION.
(a) Beyond the exercise of reasonable care in the custody of
any Collateral in its possession, Secured Party shall have no duty as
to any Collateral or as to the preservation of rights against prior
parties or any other rights pertaining thereto. Secured Party shall
have no duty as to any Collateral, to ascertain or take action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other
rights pertaining to any Collateral. Secured Party shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords other collateral of the
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same type in its possession. Except for gross negligence and willful
misconduct, Secured Party shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of Secured Party or any
agent, bailee or custodian selected by Secured Party in good faith or
for taking any necessary steps to preserve rights against any parties
with respect to any Collateral or for the collection of any proceeds of
any Collateral or for any invalidity, lack of value or uncollectability
of any of the Collateral.
(b) The pledge and assignment of the Collateral and grant of a
security interest is for collateral purposes only, and, prior to its
foreclosure thereon, Secured Party shall neither by virtue of this
Security Agreement, by the receipt of Distributions, by exercise of
voting rights or by the exercise of any of its rights or remedies
hereunder be deemed to be a member, interest holder, partner or
stockholder, as applicable, of Company or to have any liability for the
debts, obligations or liabilities of Company, Pledgor, or any other
member, interest holder, partner or stockholder, as applicable, of
Company. Without limiting the generality of the foregoing, by accepting
the pledge, assignment and security interests described herein, Secured
Party does not thereby assume any debts, obligations, responsibilities,
covenants, agreements or liabilities of Pledgor in connection with the
Collateral or of Pledgor to Company or to any third parties dealing
with Company.
(c) Pledgor shall indemnify and hold harmless Secured Party
from and against any and all liability, loss, or damage that Secured
Party may suffer or incur and which arises out of or results from
claims of third parties, including another stockholder, member,
interest holder or partner, as applicable, based on the rights or
obligations of Company or a stockholder, member, interest holder or
partner, as applicable, of Company under the Company's organizational
and charter documents, this Agreement, or acceptance of Distributions
or the exercise of any of the rights or remedies of Secured Party
hereunder; any claim of any alleged obligation, liability or duty on
the part of Company to perform or discharge any of the terms,
covenants, or provisions of the Company's organizational and charter
documents or any liability or obligation of Company or Pledgor;
together with all costs and expenses (including, without limitation,
court costs and attorneys' fees and costs) paid or incurred in
connection therewith; or any receipt of Distributions from Company or
anyone else. Pledgor shall reimburse Secured Party upon demand for the
full amount of any indemnity to which Secured Party may be entitled
hereunder and the full amount of the indemnity obligation shall be
considered to be an Obligation and shall be secured hereby.
(d) Pledgor upon demand shall pay to Secured Party the amount
of any and all reasonable expense, including the reasonable fees and
disbursements of counsel and of any experts and agents, which Secured
Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Pledgor to perform or
observe any of the provisions hereof.
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(e) All costs and expenses, including reasonable attorneys'
fees and costs, incurred or paid by Secured Party in exercising any
right, power or remedy conferred in this Agreement, or in the
enforcement thereof, shall become a part of the Debt and shall bear
interest from the date incurred or paid by Secured Party at the Default
Rate (as such term is defined in the Loan Agreement).
SECTION 17. SECURITY INTEREST ABSOLUTE. All rights of Secured
Party and the security interests hereunder, and all obligations secured hereby,
shall be absolute and unconditional, irrespective of any lack of validity or
enforceability of the other Loan Documents; any change in the time, manner or
place of payment of, or in any other term of, all or any of the Obligations or
any other amendment or waiver of or any consent to any departure from the Loan
Documents; any exchange, release or non-perfection of any other collateral for
the Indebtedness, or any release or amendment or waiver of or consent to
departure from any of the Loan Documents; or any other circumstance (other than
payment and performance of the Obligations in full) that might otherwise
constitute a defense available to, or a discharge of Pledgor or any other
obligor under any of the Loan Documents, or any third party grantor of
collateral for the Obligations or any part thereof.
SECTION 18. NOTICE. Any notice, request, demand, statement,
authorization, approval or consent made hereunder shall be in writing and shall
be hand delivered or sent by Federal Express, or other reputable national
courier service, or by postage pre-paid registered or certified mail, return
receipt requested, and shall be deemed given (i) when received at the following
addresses if hand delivered or sent by Federal Express, or other reputable
national courier service, and (ii) three (3) business days after being
postmarked and addressed as follows if sent by registered or certified mail,
return receipt requested:
If to Secured Party:
Capital Trust, Inc.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxx XxxxXxxxxx
With copies to:
Capital Trust, Inc.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxx and Loan Administrator
and
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxx X. Xxxxxxx, Esq.
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If to Pledgor:
c/o Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxx X. Xxxxx
With copies to:
c/o Lazard Freres Real Estate Investors L.L.C.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxxxx X. Reitenberg, Esq.
and
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Each party may designate a change of address by notice to the other parties,
given at least fifteen (15) days before such change of address is to become
effective.
SECTION 19. FURTHER ASSURANCES.
(a) Pledgor will, at Pledgor's expense and in such manner and
form as Secured Party may require, execute, deliver, file and record
any financing statement, specific assignment or other paper and take
any other action necessary or desirable, or that Secured Party may
request, in order to create, preserve, perfect or validate any security
interest, or to enable Secured Party to exercise and enforce its rights
hereunder with respect to any of the Collateral, or better to assure
and confirm unto Secured Party its rights, powers and remedies
hereunder. To the extent permitted by applicable law, Pledgor hereby
authorizes Secured Party to execute and file, in the name of Pledgor or
otherwise, UCC financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing
statement relating to this Agreement) which Secured Party in its sole
discretion may deem necessary or appropriate to further perfect its
rights under this Agreement. Pledgor hereby consents and agrees that
the issuer of the Collateral or any registrar or transfer agent for any
of the Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of Secured Party to effect any
transfer pursuant to the provisions hereof, notwithstanding any other
notice or direction to the contrary heretofore or hereafter given by
Pledgor or any other party to such issuer, registrar or transfer agent.
(b) Pledgor agrees that Pledgor will not change (i) Pledgor's
name, identity or organizational structure in any manner, or (ii) the
location of Pledgor's principal place of business or chief executive
office unless Pledgor shall have given Secured Party not less than
thirty (30) days' prior written notice thereof which notice must state
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in bold print that the notice is being sent for the purpose of allowing
Secured Party to determine whether or not to amend any UCC Financing
Statements filed in connection with this Agreement.
(c) Pledgor agrees to do such further reasonable acts and
things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as Secured Party may at any
time request in connection with the administration or enforcement of
this Agreement (including, without limitation, to aid Secured Party in
the sale of all or any part of the Collateral) or related to the
Collateral or any part thereof or in order better to assure and confirm
unto Secured Party its rights, powers and remedies hereunder.
SECTION 20. CUMULATIVE RIGHTS AND REMEDIES. All remedies
afforded to Secured Party by reason of this Agreement are separate and
cumulative remedies and it is agreed that no one of such remedies shall be
deemed to be in exclusion of any other remedies available to Secured Party and
shall not in any manner limit or prejudice any other legal or equitable remedies
which Secured Party may have. The rights, powers and remedies given to Secured
Party by this Agreement shall be in addition to all rights, powers and remedies
given to Secured Party by virtue of any statue or rule of law and all such
rights, powers and remedies are cumulative and not alternative, and may be
exercised and enforced successively or concurrently.
SECTION 21. PARTIES BOUND. This Agreement shall be binding
upon and inure to the benefit of Pledgor and Secured Party and their respective
successors and assigns.
SECTION 22. SEVERABILITY. If any term, covenant or provision
of this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, this Agreement shall be construed without such term, covenant or
provision.
SECTION 23. NO ORAL CHANGE. This Agreement may only be
modified, amended, changed, discharged or terminated by an agreement in writing
signed by the parties hereto against whom enforcement is sought.
SECTION 24. GOVERNING LAW. This agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws.
SECTION 25. HEADINGS. Section headings used herein are for
convenience only and shall not affect the construction of this Agreement.
SECTION 26. "PLEDGOR". The term "Pledgor" as used herein
shall, if this Agreement is signed by more than one pledgor, mean "the pledgors
and each of them" and each obligation of Pledgor herein contained shall be the
joint and several undertaking of all such pledgors, except where expressly
stated to the contrary in this Agreement.
SECTION 27. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, and each such counterpart shall for all purposes be
deemed to be an original, and all such counterparts together shall constitute
but one and the same agreement.
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SECTION 28. FORTRESS PLEDGE. Notwithstanding the provisions of
this Agreement to the contrary, so long as no Event of Default shall have
occurred and be continuing, Pledgor shall have the right, from time to time, in
good faith to enter into agreements, exchanges of interests or other
restructuring arrangements with Company and its other shareholders, in which
event Secured Party shall release its Collateral under this Agreement in
exchange for a pledge of such Equity Interests in Company or such other rights
as Pledgor obtains.
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IN WITNESS WHEREOF, Secured Party, Pledgor and Company have
duly executed this Agreement the date first above written.
SECURED PARTY: CAPITAL TRUST, INC.
By:/s/ Xxxxxx XxxxXxxxxx
-------------------------------------------------
Name: Xxxxxx XxxxXxxxxx
Title: Managing Director
PLEDGOR: PROMETHEUS HOMEBUILDERS LLC
By: LF Strategic Realty
Investors II L.P., Its Managing Member
By: Lazard Freres Real Estate
Investors L.L.C., its General Partner
By: /s/ Xxxx X. Xxxxx
-------------------------------------------------
Name: Xxxx X. Xxxxx
Title: Principal and Chief Financial Officer
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