PROMISSORY NOTE
HC Government
Realty Holdings, L.P., a Delaware limited partnership,
("Borrower"), FOR
VALUE RECEIVED, promises to pay to the order of BAKER HILL HOLDING
LLC, a New York Limited Liability Company, or its permitted
assigns ("Lender"),
the principal sum of EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS
($800,000) with interest on the outstanding principal amount at the
rates set forth herein.
SECTION 1. - DEFINITIONS.
“Borrower” shall mean HC
Government Realty Holdings, L.P., a Delaware limited
partnership.
"Business Day" shall mean any
day other than a Saturday, Sunday or day which shall be in the
State of New York a legal holiday or day on which banking
institutions are required or authorized to close.
"Default Interest Rate" shall
mean a rate of interest per annum equal to the lesser of either (a)
THREE percent (3%) above the Interest Rate, or (b) the maximum rate
of interest which may be collected from Borrower under applicable
law.
“Deferred Interest Rate”
shall mean a rate of interest equal to eight percent (8%) per
annum.
“Deferred Interest Amount”
shall have the meaning ascribed to it in Section 2.1
hereof.
“General Partner” shall
mean HC Government Realty Trust, Inc., a Maryland
corporation.
"Initial Interest Payment Date"
shall be September 1, 2018.
"Interest Rate" shall mean a
rate of interest equal to fourteen percent (14%) per annum,
inclusive of the Deferred Interest Rate.
"Late Charge" shall mean the
lesser of (a) five percent (5%) of any unpaid amount, or (b) the
maximum late charge permitted to be charged under applicable
law.
“Lender” shall mean Baker
Hill Holding LLC, a New York limited liability
company.
“Make-Whole Payment” shall
have the meaning set forth in Section 2.6.
"Maturity Date" shall mean
August 30, 2020.
"Note" shall mean this
Promissory Note of Borrower in the original principal amount of
EIGHT HUNDRED THOUSAND AND 00/100 DOLLARS ($800,000.00) payable to
Lender.
"Payment Date" shall mean the
first day of each calendar month, commencing on the Initial
Interest Payment Date (or, if any such date is not a Business Day,
then the next Business Day immediately following such
date).
“Person.” Any
individual, partnership, limited liability company, corporation,
trust, unincorporated organization or association, and any
governmental agency or political subdivision thereof.
SECTION 2 - STATED MATURITY; INTEREST AND
PRINCIPAL PAYMENTS.
2.1 Payment
of Interest. Interest on the principal balance of this Note
outstanding shall accrue from the date hereof until paid in full
whether before or after maturity at the “Interest Rate”
as defined above and be payable monthly in arrears commencing on
the Initial Interest Payment Date and on each Payment Date through
the Maturity Date; provided, however, at the
Borrower’s option, payment of the “Deferred Interest
Rate” (as defined above) on the principal balance of this
Note outstanding (the “Deferred Interest
Amount”) may be deferred from time to time until the
Maturity Date. Any Deferred Interest Amount shall accrue and be
compounded at the end of the applicable quarter for the month in
which the election was made on an annual basis and then be subject
to interest at the “Interest Rate.”
For the
avoidance of doubt, the foregoing provision can be illustrated by
the following hypothetical:
Assume:
(i) the principal amount is $1,000,000; (ii) the Interest Rate is
ten percent (10.0%) per annum; (iii) the Deferred Interest Rate is
five percent (5.0%) per annum; (iv) on an Interest Payment Date the
Borrower elects to defer for all three months in a given quarter
fifty percent (50.0%) of its Interest Payment for the quarter in
question. The Interest Amount for the quarter is $24,999.99
($1,000,000 x 10% = $100,000 per year ÷ 360 x 30 = $8,333.33 x
3); $12,500.01 is the Deferred Interest Amount, which is deemed
added to principal at the end of the quarter applicable to the
months the election was made, making the new principal amount of
the Note $1,012,500.01, which thereafter bears interest at the
Interest Rate.
2.2 Payment
on Maturity Date. Notwithstanding anything herein to the
contrary, all outstanding principal and accrued but unpaid interest
under this Note shall be immediately due and payable in full at the
Maturity Date. Upon payment in full of the principal and accrued
interest hereunder, this Note shall be surrendered to Borrower for
cancellation.
2.3 Computation
of Interest. Interest under this Note shall be calculated
based on actual days elapsed and a three hundred sixty (360) day
year.
2.4 Method
of Payment. Each payment due hereunder shall not be deemed
received by Lender until received on a Business Day in Federal
funds in lawful money of the United States of America immediately
available to Lender prior to 2:00 p.m. local time at 54 Phipps
Lane, Planview, New York 11803. Any payment received on a Business
Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business
Day for all purposes.
2.5 Application
of Payments. Payments under this Note shall be applied first
to the payment of accrued but unpaid interest, and then to any
Deferred Interest Amount and then to reduction of the outstanding
principal balance. No principal amount repaid may be reborrowed.
All amounts due under this Note shall be payable without setoff or
any other deduction whatsoever.
2.6 Prepayment;
Make-Whole Payment. Borrower may prepay in whole or in part
the outstanding principal balance of this Note. Any such prepayment
shall be accompanied by all accrued but unpaid interest due Lender
at the time of the prepayment, plus a make whole premium (the
“Make-Whole
Payment”) that is 14.0% of the Pro Rata Portion.
“Pro Rata Portion” is the number obtained by
multiplying (i) a sum equal to the original principal amount of
this Note (ii) by the remaining number of whole calendar months
until August 30, 2019, divided by twelve. No Make-Whole Payment
shall be due and payable if prepayment is made after August 30,
2019.
2.7 Interest
Rate Limitation. Nothing contained in
this Note shall be construed or so operate as to require the
Borrower to pay interest at a greater rate than is now lawful or in
such case to contract for, or to make any payment, or to do any act
contrary to applicable law. Should any interest or other
charges paid by the Borrower, or parties liable for the payment of
this Note, in connection with the indebtedness evidenced by this
Note result in the computation or earning of interest in excess of
the maximum legal rate of interest that is legally permitted under
applicable law, then any and all such excess shall be, and the same
hereby is, waived by the Lender, and any and all such excess shall
be automatically credited against and in reduction of the balance
due under this Note, and the portion of said excess that exceeds
the balance due under this Note shall be paid by the Lender to the
Borrower.
SECTION 3 -
DEFAULT
Section 3.1 Events of Default. The
occurrence of any of the following shall constitute an "Event of
Default":
(a) Borrower shall fail
to pay when and as required to be paid herein and pursuant to the
Note, any amount of principal of or interest on the Loan and the
continuance of such failure for ten (10) Days;
(b) Borrower shall (i)
apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or
similar official of itself or of all or a substantial part of its
property, (ii) be generally not paying its debts as such debts
become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Bankruptcy Code
(as now or hereafter in effect), (v) take any action or commence
any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment
of debts, or any other law providing for the relief of debtors,
(vi) fail to contest in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under such Bankruptcy Code or other law, (vii)
take any action under the laws of its jurisdiction of incorporation
or organization similar to any of the foregoing, or (viii) take any
corporate action for the purpose of effecting any of the
foregoing;
(c) Breach of any of
Borrower’s representations, warranties or covenants contained
herein; or
(d) A proceeding or
case shall be commenced, without the application or consent of
Borrower, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution, winding up, or
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of
all or any substantial part of its assets, or (iii) similar relief
in respect of it, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts or
any other law providing for the relief of debtors, and such
proceeding or case shall continue undismissed, or unstayed and in
effect, for a period of sixty (60) days; or an order for relief
shall be entered in an involuntary case under such Bankruptcy Code,
against Borrower or action under the laws of the jurisdiction of
incorporation or organization of Borrower, similar to any of the
foregoing shall be taken with respect to Borrower.
SECTION 4 - DEFAULT; REMEDIES.
4.1 Acceleration.
Upon the occurrence and during the continuance of any Event of
Default, Lender may notify Borrower in writing of such Event of
Default, after which time the Borrower shall have thirty (30) days
(ten (10) days in the instance of a payment default) to cure such
Event of Default. If an Event of Default continues after such
30-day period (or 10-day period in the instance of a payment
default), the Lender may, by written notice to Borrower, declare
immediately due and payable the entire principal amount outstanding
hereunder together with all accrued and unpaid interest due
hereunder.
4.2 Default
Interest Rate, Late Charges.
(a)
After an Event of
Default and until the Default is cured, the Default Interest Rate
shall apply, in place of the then-applicable Interest Rate, to all
amounts outstanding under the Loan. Such Default Interest shall be
compounded on the quarterly anniversary of such Event of Default
until the Event of Default is cured or the Note is paid in
full.
(b)
If any monthly
installment due hereunder is not received by Lender on or before
the fifth (5th) day following each Payment Date or if any other
amount payable under this Note or any other Loan Document is not
received by Lender within five (5) days after the date such amount
is due, counting from and including the date such amount is due,
Borrower shall pay to Lender, immediately and without demand by
Lender, the Late Charge on such outstanding monthly installment or
other amount due. Borrower acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in
servicing and processing the Loan, and that it is extremely
difficult and impractical to determine those additional expenses.
Borrower agrees that any such Late Charges payable pursuant to this
Section 3.2(b)
represents a fair and reasonable estimate, taking into account all
circumstances existing on the first Payment Date, of the additional
expenses Lender will incur by reason of such late payment. Any such
Late Charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Section 3.2(a).
4.3 Remedies.
The remedies of Lender as provided herein, or at law or in equity
shall be cumulative and concurrent, and may be pursued singly,
successively, or together at the sole discretion of Lender, and may
be exercised as often as occasion therefor shall occur. The failure
at any time to exercise any right or remedy shall not constitute a
waiver of the right to exercise the right or remedy at any other
time.
SECTION 5 - WAIVER.
Presentment for
payment, demand, notice of dishonor, protest, and notice of
protest, stay of execution and all other defenses to payment
generally are hereby waived by Borrower.
SECTION 6 - GOVERNING LAW; SUBMISSION TO
JURISDICTION; WAIVER OF JURY TRIAL; SEVERABILITY; USURY,
ETC.
6.1 Governing
Law. This Note shall be governed by, and construed in
accordance with, the substantive law of the State of New York
without regard to the application of choice of law principles. Any
and all actions, proceedings, etc. shall be venued in the County of
Nassau, State of New York.
6.2 SUBMISSION
TO JURISDICTION/SERVICE OF PROCESS. BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN OR FOR NASSAU COUNTY NEW YORK FOR THE
PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR
BASED UPON THIS NOTE, THE SUBJECT MATTER HEREOF, ANY OTHER LOAN
DOCUMENT AND THE SUBJECT MATTER THEREOF. BORROWER TO THE EXTENT
PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH
SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS
ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF
SUCH COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT
OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS NOTE OR THE SUBJECT MATTER
HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES
THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED
BY A LENDER IN STATE COURT TO FEDERAL COURT, OR TO REMAND AN ACTION
INSTITUTED IN FEDERAL COURT TO STATE COURT AND (C) HEREBY WAIVES
THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY
OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY
OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER. BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH
NOTICES ARE TO BE GIVEN TO IT PURSUANT TO SECTION 7 HEREOF. BORROWER
AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE
OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF LENDER. FINAL
JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION, SUIT OR PROCEEDING
SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION
(X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR
TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF
THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWER THEREIN
DESCRIBED, OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO
THE LAWS OF SUCH OTHER JURISDICTION
6.3 WAIVER
BY JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS
NOTE, OR ANY OTHER STATEMENTS OR ACTIONS OF THE
LENDER.
6.4 Severability.
If any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and
effect.
SECTION 7 - NOTICES.
All
notices, demands and other communications ("notice") under or concerning
this Note shall be in writing. Each notice shall be addressed to
the intended recipient at its address set forth below and shall be
deemed given on the earliest to occur of (1) the date when the
notice is delivered to the addressee; or (2) the third (3rd)
Business Day after the notice is deposited in the United States
mail with postage prepaid, registered mail, return receipt
requested. The Borrower or the Lender may change the address by
notice to the other in accordance with this Section 7.
SECTION 8 – EXCULPATION.
Notwithstanding
anything to the contrary contained in this Note, no present or
future general partner, officer or limited partner of the Borrower
or present or future shareholder, director, officer or advisor of
the General Partner or any of their members, shareholders,
partners, directors or officers shall have any personal liability,
directly or indirectly, under or in connection with this Note, or
any amendment, made at any time, and Lender hereby forever and
irrevocably waives and releases any and all such personal
liability. This limitation of liability provided in this paragraph
is in addition to, and not in limitation of, any limitation of
liability applicable to such parties provided by law or by any
other contract, agreement or instrument.
SECTION 9 - MISCELLANEOUS.
9.1 Costs.
If, and as often as, this Note is referred to an attorney for the
collection of any sum payable hereunder, or to defend or enforce
any of Lender's rights hereunder, or to commence an action,
cross-claim, third-party claim or counterclaim by Lender against
Borrower relating to this Note, Borrower agrees to pay to Lender
all costs incurred in connection therewith including reasonable
attorneys' fees (including such fees incurred in appellate,
bankruptcy or insolvency proceedings), with or without the
institution of any action or proceeding, and in addition all costs,
disbursements and allowances provided by law.
9.2 Modification.
Neither this Note nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified orally, but only by an
instrument in writing executed by the party against which
enforcement of the termination, amendment, supplement, waiver or
modification is sought.
9.3 Successors.
As used herein, the terms "Borrower" and "Lender" shall be deemed
to include their respective permitted successors and assigns
whether by voluntary action of the parties or by operation of law.
All of the rights, privileges and obligations hereof shall inure to
the benefit of and bind such permitted successors and assigns. This
Note may not be assigned without the written consent of both
Borrower and Lender.
9.3 Business
Purpose. The undersigned represents and agrees that this
Note evidences indebtedness arising from the regular conduct of
Borrower's business (which is carried on for the purpose of
profit), and that the indebtedness evidenced hereby constitutes a
business loan and is not usurious under the laws of the State of
New York.
9.4 No
Waiver. No failure or delay by Lender in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
Without limiting the foregoing, no disbursement by Lender after a
default by Borrower hereunder shall constitute a waiver of any of
the Lender's remedies established or referred to hereunder or shall
obligate Lender to make any further disbursement. No waiver,
consent or approval of any kind by Lender shall be effective unless
(and it shall be effective only to the extent) expressly set out in
a writing signed and delivered by Lender. No notice to or demand on
Borrower in any case shall entitle Borrower to any other notice or
demand in similar or other circumstances, nor shall such notice or
demand constitute a waiver of the rights of Lender to any other or
further actions. In its sole discretion, Lender may, at any time
and from time to time, waive any one or more of the requirements
contained herein, but such waiver in any instance or under any
particular circumstances shall not be considered a waiver of such
requirement or requirements in any other instance or under any
other circumstance.
9.5 Indebtedness.
Borrower shall not incur, and shall not consent to any subsidiary
or affiliate Borrower incurring, any debt in a material amount that
is senior to Lender without written consent of Lender, provided, however, the foregoing shall
not apply to primary mortgages on new property
acquisitions.
9.6 Tax
Treatment. The Borrower and Lender will each treat this Note
and amounts borrowed thereunder as debt and the relationship
between the Borrower and Lender are that of debtor and creditor, in
each case for all U.S. federal, state and local tax purposes and
will report consistently with such intent.
[The remainder of this page is intentionally left
blank;
Signatures appear on the following page]
IN
WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note as of the date first set forth above.
BORROWER:
HC
Government Realty Holdings, L.P.
By:
/s/ Robert R.
Kaplan
Name:
Robert R. Kaplan
Title:
Authorized Signatory
COMMONWEALTH
OF VIRGINIA
CITY OF
RICHMOND
On
the 30th
day of August, 2018, before me, the undersigned, ROBERT R. KAPLAN,
who is personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed
the same in his capacity, and that by his signature on the
instrument, the limited partnership named therein became
bound.
_______________________________
Notary
Public
My
commission expires on
Signature
Page to
Promissory
Note
HC
Government Realty Holdings, L.P. and
Baker
Hill Holding LLC
Address
for Notices:
HC
Government Realty Holdings, L.P.
1819
Main Street, Suite 212
Sarasota,
FL 34236
Baker
Hill Holding LLC
54
Phipps Lane
Plainview,
NY 11803