Kirkland's, Inc. / Carl Turner Kirkland

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SSNqJyygBvMHy1UOA409944ot1kYwrGF/RV5okWEJbE6s7/1fQfNIExj2hiYoQ6Y UAoEoyja3yXtjQqJ+iuIQw== 0000950144-08-007399.txt : 20081001 0000950144-08-007399.hdr.sgml : 20081001 20081001152359 ACCESSION NUMBER: 0000950144-08-007399 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20081001 DATE AS OF CHANGE: 20081001 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KIRKLAND CARL CENTRAL INDEX KEY: 0001197874 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: 2059424292 MAIL ADDRESS: STREET 1: 451 INDUSTRIAL LANE CITY: BIRMINGHAM STATE: AL ZIP: 35211 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KIRKLAND'S, INC CENTRAL INDEX KEY: 0001056285 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 621287151 FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-78385 FILM NUMBER: 081099864 BUSINESS ADDRESS: STREET 1: 431 SMITH LANE CITY: JACKSON STATE: TN ZIP: 38301 BUSINESS PHONE: 731-668-2444 MAIL ADDRESS: STREET 1: 431 SMITH LANE CITY: JACKSON STATE: TN ZIP: 38301 FORMER COMPANY: FORMER CONFORMED NAME: KIRKLANDS INC DATE OF NAME CHANGE: 19980219 SC 13D 1 g15134sc13d.htm KIRKLAND'S, INC. / CARL TURNER KIRKLAND Kirkland's, Inc. / Carl Turner Kirkland

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

Kirkland’s, Inc.

(Name of Issuer)

Common Stock, no par value per share

(Title of Class of Securities)

497498 10 5

(CUSIP Number)

Carl Turner Kirkland
431 Smith Lane
Jackson, Tennessee 38301

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

September 22, 2008

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No.		497498 10 5	SCHEDULE 13D	Page		2		of		5 Pages

NAMES OF REPORTING PERSONS

Carl Turner Kirkland

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)

(a) o

(b) o

SEC USE ONLY

SOURCE OF FUNDS (SEE INSTRUCTIONS)

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)

CITIZENSHIP OR PLACE OF ORGANIZATION

United States of America

SOLE VOTING POWER

NUMBER OF

4,802,862*

SHARED VOTING POWER

BENEFICIALLY

OWNED BY

-0-

EACH

SOLE DISPOSITIVE POWER

REPORTING

PERSON

4,802,862*

WITH

SHARED DISPOSITIVE POWER

-0-

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

4,802,862*

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

24.5%

TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)

* Includes options to purchase 15,000 shares of Common Stock which are exercisable within 60 days of September 10, 2008.


CUSIP No.		497498 10 5	SCHEDULE 13D	Page		3		of		5 Pages


Item 1.		Security and Issuer.

This Schedule 13D relates to the common stock, no par value per share (the “Common Stock”) of Kirkland’s, Inc., whose principal executive offices are located at 431 Smith Lane, Jackson, Tennessee 38301 (the “Issuer”).


Item 2.		Identity and Background.

	(a)		The name of the reporting person is Carl Turner Kirkland (the “Reporting Person”).

	(b)		The business address of the Reporting Person is 431 Smith Lane, Jackson, Tennessee 38301.

	(c)		The Reporting Person is the retired Chairman of the Board and current Chairman Emeritus of Kirkland’s, Inc. whose principal business address is 431 Smith Lane, Jackson, Tennessee 38301.

	(d)		The Reporting Person has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

	(e)		The Reporting Person has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

	(f)		The Reporting Person is a citizen of the United States of America.


Item 3.		Source and Amount of Funds or Other Consideration.

The amount of funds used in making the purchase was $6,754,862.40. The source of the funds is described in the following sentences of this Item 3. Kirkland Aviation, Inc., a corporation owned by the Reporting Person and his spouse, obtained a loan from Bank of America in the amount of $4,000,000, which was used by the Reporting Person to partially finance the purchase of 3,464,032 shares of Common Stock as described below in Item 5(c). The loan from Bank of America to the Reporting Person is secured by the aircraft owned by Kirkland Aviation, Inc. In addition, the Reporting Person obtained a loan from Great Midwest Bank in the amount of $3,500,000 to partially finance the purchase of 3,464,032 shares of Common Stock as described below in Item 5(c). The loan from Great Midwest Bank is secured by a mortgage on residential real estate owned by the Reporting Person.


Item 4.		Purpose of Transaction.

The 3,464,032 shares of Common Stock were acquired by the Reporting Person for investment purposes.


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Through his presence on the Board of Directors, the Reporting Person expects to influence the Issuer regarding its current operations and prospects, possible changes in the composition of its board of directors or management, and other matters pertaining to its business. The Reporting Person may in the future acquire additional Common Stock or other securities of the Issuer, in the open market, in privately-negotiated purchases or otherwise and may also, depending on then current circumstances, dispose of all or a portion of the Common Stock beneficially owned by him in one or more transactions. Additionally, the Reporting Person reserves the right from time to time to formulate plans or proposals regarding the Issuer or any of its securities, and to carry out any of the actions or transactions described in paragraphs (a) through (j) of Item 4 of the instructions to Schedule 13D, to the extent deemed advisable by the Reporting Person.

Except as set forth in this statement, the Reporting Person currently has no plans or proposals that relate to or that would result in any of the actions or transactions described in paragraphs (a) through (j) of Item 4 of the instructions to Schedule 13D.


Item 5.		Interest in Securities of the Issuer.

	(a)		The Reporting Person beneficially owns an aggregate of 4,802,862 shares of Common Stock, representing 24.5% of the outstanding shares of Common Stock (based, as to the number of outstanding shares, upon the Issuer’s Form 10-Q filed on September 15, 2008), including options to purchase 15,000 shares of Common Stock which are exercisable within 60 days of September 10, 2008.

	(b)		The Reporting Person has the sole right to vote, or direct the vote, and sole power to dispose of, or direct the disposition of, the 4,802,862 shares of Common Stock owned by the Reporting Person.

	(c)		On September 22, 2008, the Reporting Person acquired 2,547,470 shares of Common Stock from Global Private Equity II Limited Partnership, 829,199 shares of Common Stock from Advent Direct Investment Program Limited Partnership, and 87,363 shares of Common Stock from Advent Partners Limited Partnership. The Reporting Person paid $1.95 per share for the shares of Common Stock. The transaction was a privately negotiated transaction between the Reporting Person and the sellers.

	(d)		Other than the Reporting Person, no other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the 4,802,862 shares of Common Stock owned by the Reporting Person.

	(e)		Not applicable.


Item 6.		Contracts, Arrangements, Understandings or Relationships with Respect to the Issuer.

To the knowledge of the Reporting Person, there are no contracts, arrangements, understandings or relationships (legal or otherwise), including, but not limited to, transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, between the persons enumerated in Item 2, and any other person, with respect to any securities of the Issuer, including any securities pledged or otherwise subject to a contingency the occurrence of which


CUSIP No.		497498 10 5	SCHEDULE 13D	Page		5		of		5 Pages

would give another person voting power or investment power over such securities other than standard default and similar provisions contained in loan agreements.


Item 7.		Materials to be Filed as Exhibits.


Exhibit 99.1 —		Amended and Restated Stock Purchase Agreement dated as of September 10, 2008 by and among the Reporting Person and Global Private Equity II Limited Partnership, Advent Direct Investment Program Limited Partnership and Advent Partners Limited Partnership

Exhibit 99.2 —		Business Loan Agreement between Kirkland Aviation, Inc. and Bank of America, N.A.

Exhibit 99.3 —		Adjustable Rate Note between Carl Kirkland and Great Midwest Bank.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: September 30, 2008


	CARL TURNER KIRKLAND
	/s/ Carl T. Kirkland

EX-99.1 2 g15134exv99w1.htm EX-99.1 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT Ex-99.1

EXHIBIT 99.1

AMENDED AND RESTATED STOCK PURCHASE AGREEMENT

THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of September 10, 2008 by and between Carl Kirkland (“Purchaser”), and the holders of common stock of Kirkland’s, Inc. listed on Exhibit A attached to this Agreement (each, a “Seller,” and collectively, the “Sellers”).

The Purchaser has assigned his right to purchase 285,000 shares of Common Stock in accordance with the provisions of Section 8.06 of that certain Stock Purchase Agreement dated as of September 10, 2008 by and among the Purchaser and Sellers (the “Original Purchase Agreement”).

The parties desire to amend and restate in its entirety the Original Purchase Agreement.

The Sellers desire to sell, and the Purchaser desire to buy, 3,464,032 shares of the Common Stock of Kirkland’s, Inc., a Delaware corporation (the “Company”) for a price per share of $1.95 (“Purchase Price”) on the terms and conditions set forth in this Agreement. In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Notwithstanding that the shares of Common Stock are registered for resale by the Sellers pursuant to two registration statements on Form S-3 (333-152165 and 333-111245), the transactions contemplated by this Agreement are taking place pursuant to the so-called Section 4(1 ¹/2) exemption from the registration requirement of Section 5 of the Securities Act and not pursuant to such registration statements.

The intention of the parties that the Purchaser will request the Company to substitute the Purchaser’s names for the Sellers’ names in the two registration statements by prospectus supplement, post-effective amendment or other available means, consistent with applicable SEC regulations and policy.

ARTICLE I

DEFINITIONS

Section 1.01 Defined Terms. As used in this Agreement, unless the context otherwise requires, the following terms shall have the following meanings:

“Agreement” has the meaning set forth in the Preamble.

“Closing” has the meaning set forth in Section 2.02.

“Closing Date” has the meaning set forth in Section 2.02.

“Company” has the meaning set forth in the Preamble.

“Common Stock” means the common stock of the Company, no par value per share.

“Counterpart Agreement” means that certain Counterpart Agreement, dated as of the date hereof and attached hereto as Exhibit B, pursuant to which Purchaser agrees to be bound by the obligations imposed upon “Shareholders” under the Registration Rights Agreement to the same extent as if it were a “Shareholder” thereunder and to be deemed a “Shareholder” thereunder.

“Original Purchase Agreement” has the meaning set forth in the Preamble.

“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, union, association, court or government agency, board or other entity or instrumentality.

“Purchase Price” has the meaning set forth in the Preamble.

“Purchaser” has the meaning set forth in the Preamble.

“Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement made as of the 15th day of April 2002, among Kirkland Holdings L.L.C., Kirkland’s Inc., SSM Venture Partners, L.P., Joseph R. Hyde, III, Johnston C. Adams, Jr., John H. Pontius, CT/Kirkland Equity Partners, L.P., R-H Capital Partners, L.P., TCW/Kirkland Equity Partners, L.P., Capital Resource Lenders II, L.P., Allied Capital Corporation, The Marlborough Capital Investment Fund, L.P., Capital Trust Investments, Ltd., Global Private Equity II Limited Partnership, Advent Direct Investment Program Limited Partnership, Advent Partners Limited Partnership, Carl Kirkland, Robert Kirkland, Robert Alderson, The Amy Katherine Alderson Trust, The Allison Leigh Alderson Trust, The Carl T. Kirkland Grantor Retained Annuity Trust 2001-1 and Steven Collins, and any additional Shareholders of the Company (as defined in the Registration Rights Agreement), from time to time, which Registration Rights Agreement permits execution by counterpart.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” or “Sellers” has the meaning set forth in the Preamble.

“Shares” means the shares of Common Stock to be sold by the Sellers, and to be purchased by the Purchaser, at the Closing.

ARTICLE II

PURCHASE AND SALE OF THE SHARES

Section 2.01 Purchase and Sale of Shares. Subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, each Seller, severally and not jointly, hereby agrees to sell, convey, deliver, transfer and assign to the Purchaser, a number of Shares equal to the total number of Shares set forth opposite such Seller’s name on Exhibit A

hereto, and the Purchaser hereby agrees to purchase such number of Shares from each Seller to be sold to it by such Seller at a price equal to One and 95/100 Dollars ($1.95) per Share.

Section 2.02 The Closing. The closing of the purchase and sale of the Shares under this Agreement (the “Closing”) shall take place at the offices of the Sellers, 75 State Street, Boston, Massachusetts 02109 as promptly as practicable following the satisfaction of the conditions set forth in Articles V and VI. The date on which the Closing occurs shall be the “Closing Date.” At the Closing, each Seller shall deliver to the Purchaser a stock certificate representing at least the number of Shares to be sold by such Seller to the Purchaser hereunder either (i) endorsed for transfer to the Purchaser or (ii) accompanied by an executed stock power sufficient to transfer such Shares to the Purchaser against payment of the Purchase Price therefore by the Purchaser in cash by wire transfer.

Section 2.03 Original Purchase Agreement Terminated. Sellers and Purchaser acknowledge and agree that the Original Purchase Agreement is hereby terminated by mutual consent and no party shall have any continuing obligation to the other party pursuant to the terms of the Original Purchase Agreement. The mutual agreements and covenants contained in this Agreement shall replace and supersede in their entirety the provisions of the Original Purchase Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Each Seller, severally and not jointly, represents and warrants to the Purchaser as follows:

Section 3.01 Authority and Approvals. Such Seller has the power and authority to enter into, deliver and perform its obligations under this Agreement, and all action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including limited partner approval, if necessary, has been duly and validly taken. The Agreement has been duly and validly executed and delivered by such Seller. Assuming this Agreement constitutes a valid and binding agreement of the Purchaser, this Agreement constitutes a valid and binding agreement of such Seller, enforceable against such Seller in accordance with its terms. Such Seller is not required to give any notice to, make any filing with, or obtain any authorization or consent of, any governmental body or authority in order to consummate the transactions contemplated by this Agreement.

Section 3.02 The Shares. Such Seller is the record and beneficial owner of at least the number of shares of Common Stock proposed to be sold by such Seller under this Agreement. The Shares are validly issued, fully paid and nonassessable. Except for this Agreement and the Registration Rights Agreement, there is no agreement, arrangement or understanding with any other Person regarding the sale or transfer of any Shares held by such Seller. There exist no liens, equitable interests, pledges, warrants, purchase rights, security interests, rights of first refusal, claims, options, proxies, voting arrangements, charges or encumbrances or other restrictions of any kind affecting the Shares held by such Seller. Upon transfer of the Shares

held by such Seller to a Purchaser at the Closing against payment of the Purchase Price, the Purchaser will acquire ownership of such Shares, free and clear of all liens, equitable interests, pledges, warrants, purchase rights, security interests, rights of first refusal, claims, options, proxies, voting arrangements, charges or encumbrances or other restrictions of any kind affecting such Shares, except as set forth in the Registration Rights Agreement.

Section 3.03 Conflicts. The execution, delivery and performance of this Agreement will not (a) contravene, conflict with or result in a violation of the certificate of limited partnership or limited partnership agreement of such Seller; (b) violate, conflict with, or result in the breach, acceleration, default or termination of, or otherwise give any other contracting party the right to terminate, accelerate, modify or cancel any of the terms, provisions, or conditions of any material agreements or instrument to which such Seller is a party or by which it or its assets may be bound; or (c) constitute a violation of any applicable law, rule or regulation, or of any judgment, order, injunctive, award or decree of any court, administrative agency or other governmental authority applicable to such Seller.

Section 3.04 Brokers’ Fees. Such Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Sellers as follows:

Section 4.01 Authorization of Agreement. The Purchaser has the power and authority to enter into and perform its obligations under this Agreement, and all action necessary on the part of the Purchaser to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken. This Agreement has been duly and validly executed and delivered by the Purchaser. Assuming this Agreement constitutes a valid and binding obligation of each of the Sellers, this Agreement constitutes a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms. The Purchaser is not required to give any notice to, make any filing with, or obtain any authorization or consent of, any governmental body or authority in order to consummate the transactions contemplated by this Agreement.

Section 4.02 Experience; Purchase for Investment; Transfers. The Purchaser has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of its investment in the Shares and is able financially to bear the risks thereof. The Purchaser is acquiring the Shares for its own account, for investment only, and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling such Shares in violation of applicable law, and the Purchaser has no present or contemplated agreement, undertaking, arrangement obligation, indebtedness, or commitment providing for the distribution or sale thereof. The Purchaser acknowledges and agrees that the Shares have not been registered under the Securities Act and

may not be sold, pledged or otherwise transferred by the Purchaser without compliance with the registration provisions of the Securities Act or an exemption therefrom.

Section 4.03 Conflicts. The execution, delivery and performance of this Agreement will not (a) violate, conflict with, or result in the breach, acceleration, default or termination of, or otherwise give any other contracting party the right to terminate, accelerate, modify or cancel any of the terms, provisions, or conditions of any material agreements or instrument to which the Purchaser is a party or by which it or its assets may be bound; or (b) constitute a violation of any material applicable law, rule or regulation, or of any judgment, order, injunctive, award or decree of any court, administrative agency or other governmental authority applicable to the Purchaser.

Section 4.04 Brokers’ Fees. The Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

ARTICLE V

CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER

The obligation of the Purchaser to purchase the Shares at the Closing is subject to the fulfillment of each of the following conditions, any one or more of which may be waived by the Purchaser.

Section 5.01 Consents. All waivers, consents, approvals and actions of any governmental authority or regulatory body or other Person required to be obtained by the Sellers in connection with this Agreement shall have been obtained.

Section 5.02 No Litigation. No action, suit, or proceeding shall be pending or threatened before any court or other governmental body wherein an unfavorable order would (a) prevent or delay the consummation of any of the transactions contemplated by this Agreement; (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (c) affect adversely the rights or impose any material limitation on the ability of the Purchaser effectively to exercise full rights of ownership of the Shares after Closing.

Section 5.03 Representations and Warranties. The representations and warranties of the Sellers set forth in this Agreement and in any document, instrument or certificate delivered hereunder shall be true and correct in all respects at and as of the date of this Agreement and at and as of the Closing Date.

Section 5.04 Performance of Covenants and Agreements. The Sellers shall have performed in all material respects all of the covenants and agreements to the extent required to be performed by it under this Agreement at or prior to the Closing.

Section 5.05 Adverse Claims. There must not have been made or threatened by any Person any claim asserting that such Person: (a) is the holder or the beneficial owner of, or has

the right to acquire or to obtain beneficial ownership of, any Shares; or (b) is entitled to all or any portion of the Purchase Price payable for the Shares.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF THE SELLERS

The obligations of the Sellers under this Agreement are subject to the fulfillment of each of the following conditions, any one or more of which may be waived:

Section 6.01 Consents. All waivers, consents, approvals and actions of any governmental authority or regulatory body or other Person required to be obtained in connection with the Agreement shall have been obtained.

Section 6.02 No Litigation. No action, suit, or proceeding shall be pending or threatened before any court or other governmental body wherein an unfavorable order would (a) prevent or delay the consummation of any of the transactions contemplated by this Agreement; or (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation.

Section 6.03 Representations and Warranties. The representations and warranties of the Purchaser set forth in this Agreement and in any document, instrument or certificate delivered hereunder shall be true and correct in all respects at and as of the date of this Agreement and at and as of the Closing Date.

Section 6.04 Performance of Covenants and Agreements. The Purchaser shall have performed in all material respects all of the covenants and agreements to the extent required to be performed by it under this Agreement at or prior to the Closing.

ARTICLE VI

TERMINATION

Section 7.01 Termination of Agreement. The parties may terminate this Agreement as provided below:

(a) the parties may terminate this Agreement by mutual written consent at any time prior to the Closing;

(b) the Purchaser may terminate this Agreement by giving written notice to the Sellers any time prior to the Closing (i) in the event any Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Purchaser has notified the Sellers of the breach, and the breach has continued without cure or waiver for a period of thirty (30) days after the notice of breach, (ii) if satisfaction of any of the conditions in Article V becomes impossible and the Purchaser has not waived in writing such condition

(provided that the failure to satisfy the applicable condition or conditions has occurred by reason other than through the failure of the Purchaser to comply with its obligations under this Agreement), or (iii) if the Closing shall not have occurred on or before September 30, 2008 (other than through the failure of the Purchaser to comply fully with its obligations under this Agreement);

(c) the Sellers may terminate this Agreement by giving written notice to the Purchaser at any time prior to the Closing (i) in the event the Purchaser has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Sellers have notified the Purchaser of the breach, and the breach has continued without cure or waiver for a period of thirty (30) days after the notice of breach, (ii) if satisfaction of any of the conditions in Article VI becomes impossible and the Sellers have not waived in writing such condition (provided that the failure to satisfy the applicable condition or conditions has occurred by reason other than through the failure of the Sellers to comply with their obligations under this Agreement); or (iii) if the Closing shall not have occurred on or before September 30, 2008 (other than through the failure of the Sellers to comply fully with their obligations under this Agreement).

Section 7.02 Effect of Termination. Each party’s right of termination under Section 7.01 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If any party terminates this Agreement pursuant to Section 7.01, all further obligations of the parties under this Agreement will terminate, but nothing shall prevent any party from pursuing any of its legal rights or remedies that may be granted to any such party by law against any other party to this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Assignment of Rights under Registration Rights Agreement. In connection with the sale of Shares to the Purchaser hereunder, each Seller hereby transfers to the Purchaser all of such Seller’s rights to cause the Company to register Shares under the Registration Rights Agreement together with all relevant rights thereunder.

Section 8.02 Best Efforts. Each party hereto shall use its commercially reasonable best efforts to satisfy the conditions precedent to the performance by such party of its obligations under this Agreement.

Section 8.03 Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, including, but not limited to, any fees payable to an agent, broker, investment or commercial banker, person or firm acting on behalf of or under the authority of such party who is entitled to any broker’s or finder’s fee or any other commission or fee directly or indirectly in connection with any of the transactions contemplated herein

Section 8.04 Severability. If any provision of this Agreement shall be held invalid or unenforceable, each other provision hereof shall be given effect to the extent possible without such invalid or unenforceable provision and to that extent, the provisions of this Agreement shall be severable.

Section 8.05 Notices. All notices, requests, demands, claims, and other communications hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, postage prepaid, by telecopier or by national overnight delivery service, and addressed to the intended recipient as set forth below:

If to the Sellers:

Steven J. Collins
c/o Advent International
75 State Street, 31st floor
Boston, MA 02109

If to the Purchaser:

Carl Kirkland
431 Smith Lane,
Jackson, TN 38301
Facsimile: (731) 664-9345

Copy to:

J. Robert Walker, Esq.
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
165 Madison Avenue, Suite 2000
Memphis, TN 38103
Facsimile: (901) 577-0785

Any notice given in the manner aforesaid shall be deemed to have been served, and shall be effective for all purposes hereof (a) if sent by registered or certified mail, on the earlier of the second day following the day on which it is posted or the date of its receipt by the party to be notified, (b) if sent by telecopier, the day actually received as evidenced by a written receipt of transmission and (c) if sent by overnight delivery service, the day after such notice has been delivered by the party to said service. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth.

Section 8.06 No Assignment. No party may assign any of its rights or obligations under this Agreement without the prior consent of the other parties, which consent will not be unreasonably withheld, conditioned or delay, provided, however, that the Purchaser may assign any of its rights under this Agreement to any “accredited investor” (as such term is defined in

Regulation D promulgated under the Securities Act) provided that such assignee enters into an agreement with the Sellers on substantially the same terms and conditions as those contained in this Agreement. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties.

Section 8.07 Modifications, Consents and Waivers. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by each of the parties hereto. Any party hereto may waive compliance, with respect to any obligations owed to such party, with any provision of this Agreement. Any waiver hereunder shall be effective only if made in a writing signed by the party to be charged therewith and only in the specific instance and for the purpose for which given. No failure or delay on the part of any party in exercising any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any further exercise thereof or the exercise of any other right, power or privilege.

Section 8.08 Notice of Breach. Each party shall notify, as soon as reasonably practicable, the other parties hereto upon such party’s obtaining actual knowledge of the occurrence of any event, or the failure of any event to occur, that results in a breach of any representation or warranty by such party or a failure by such party to comply with any covenant, condition, or agreement contained herein.

Section 8.09 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of laws thereof.

Section 8.10 No Publicity. Except as may be otherwise required by law, legal process, stock exchange rule, or in any filing with the Securities Exchange Commission or as may be necessary to obtain required consents, neither the Company nor the Sellers shall make any public statement or announcement regarding this Agreement or the transactions contemplated hereby, or disclose that the Purchaser has become a stockholder of the Company without the consent of the Purchaser. The obligations contained in this Section 8.10 shall survive the Closing.

Section 8.11 Delays or Omissions; Remedies Cumulative. Except as expressly provided in this Agreement, no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach or default of another party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any consent of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative.

Section 8.12 Execution in Counterparts. This Agreement may be executed by the parties individually or in counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement. A signature on a counterpart may be a facsimile or an electronically transmitted signature, and such signature shall have the same force and effect as an original signature.

Section 8.13 Headings. Article and section headings used in this Agreement are for convenience only and shall not affect the interpretation or construction of any provision of this Agreement.

Section 8.14 Entire Agreement. This Agreement and the Exhibits hereto contain the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. All exhibits referred to in this Agreement are incorporated herein by reference and made a part hereof.

Section 8.15 Survival. All of the representations, warranties, covenants and obligations in this Agreement and any other certificate or document delivered pursuant to this Agreement shall survive the Closing.

Section 8.16 Further Assurances. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.

[Signatures follow]

IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be executed as of the date first above written.

PURCHASER:



/s/ Carl Kirkland
Carl Kirkland

SELLERS:

GLOBAL PRIVATE EQUITY II LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its General Partner
By: Advent International Corporation, its General Partner



/s/ Steven J. Collins
Name:
Title:

ADVENT DIRECT INVESTMENT PROGRAM LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its General Partner
By: Advent International Corporation, its General Partner



/s/ Steven J. Collins
Name:
Title:

ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation, its General Partner



/s/ Steven J. Collins
Name:
Title:

EXHIBIT A


Seller		Shares to be Sold
Global Private Equity II Limited Partnership		2,547,470 shares

Advent Direct Investment Program Limited Partnership		829,199 shares

Advent Partners Limited Partnership		87,363 shares

Total		3,464,032 shares

EX-99.2 3 g15134exv99w2.htm EX-99.2 BUSINESS LOAN AGREEMENT Ex-99.2

EXHIBIT 99.2

Business Loan Agreement

Bank of America, N.A.

This Agreement, dated as of September 10, 2008, is between BANK OF AMERICA, N.A. (the “Lender”) and KIRKLAND AVIATION, INC. (the “Borrower”).

1. TERM LOAN AMOUNT AND TERMS.

1.1 Loan Amount. The Lender agrees to provide a term loan (the “Term Loan”) to the Borrower in the amount of $4,000,000.

1.2 Availability Period. The Term Loan is available (the “Availability Period”) in one or more disbursements from the Lender between the date of this Agreement and September 10, 2009, unless an Event of Default has occurred and is continuing.

1.3 Interest Rate.

(a) LIBOR Fixed Rate. The principal balance of the Term Loan will bear interest at a rate per year equal to the LIBOR Fixed Rate plus one hundred and twenty-five (125) percentage points. The LIBOR Fixed Rate is subject to the following requirements:

(i) The Interest Period (as hereinafter defined) during which the LIBOR Fixed Rate will be in effect will be one (1) month. The interest rate shall change on each Interest Rate Change Date (as hereinafter defined). The first day of the Interest Period must be a Banking Day (as hereinafter defined).

(ii) For purposes hereof, the following terms shall have the meanings indicated:

(a) “Interest Period” shall mean (A) initially, the period commencing on the date of disbursement of the Term Loan and ending the day immediately preceding the first Interest Rate Change Date or (B) subsequently, the period commencing any Interest Rate Change Date and ending on the day immediately preceding the next subsequent Interest Rate Change Date;

(b) “Interest Rate Change Date” shall mean the first day of every month and remain fixed until the next Interest Rate Change Date. If the Interest Rate Change Date in any particular month would otherwise fall on a day that is not a banking day then, at the Bank’s option, the Interest Rate Change Date for that particular month will be the first banking day immediately following thereafter;

(c) “LIBOR Fixed Rate” shall mean the rate of interest per annum equal to the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Lender from time to time) as determined for each Interest Rate Change Date at approximately 11:00 a.m. (London time) two (2) London Banking Days prior to the Interest Rate Change Date for U.S. Dollar deposits (for delivery on the

first day of such Interest Period) with a term of one month, as adjusted from time to time in the Lender’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs. If such rate is not available at such time for any reason, then the rate for that Interest Period will be determined by such alternate method as reasonably selected by the Lender. A “London Banking Day” is a day on which banks in London are open for business and dealing in offshore dollars.

1.4 Repayment Terms.

(a) Interest. The Borrower will pay interest on November 1, 2008, and then monthly thereafter on the first day of each month until payment in full of any principal outstanding under the Term Loan.

(b) Principal. The Borrower will repay principal in 36 successive monthly installments of $23,810 starting October 1, 2010 and continuing thereafter on the first day of each month. On September 10, 2013 the Borrower will repay the remaining principal balance plus any interest then due.

(c) Optional Prepayments. The Borrower may prepay the Term Loan in full or in part at any time in an amount not less than $10,000. Any prepayment will be applied to the installments of principal due under this Agreement in the inverse order of their maturities.

(d) Mandatory Prepayment — Event of Loss. Upon the occurrence of an Event of Loss (as defined in the Aircraft Mortgage) with respect to the Aircraft, the Borrower will pay to the Lender, as a mandatory prepayment of the Term Loan, the Loss Value (as defined in the Aircraft Mortgage) to the extent and in the manner required by the terms of Sections 4.1 and 4.2 of the Aircraft Mortgage. Any prepayment will be applied to the installments of principal due under this Agreement in the inverse order of their maturities.

(e) Effect of Prepayment on Interest Rate Swaps. Any prepayment of the Term Loan, whether voluntary or mandatory, may result in a termination of any interest rate swap agreements between Lender and Borrower and such termination could result in additional amounts owing from Borrower to Lender, as more specifically provided in such agreements to which reference should be made.

2. EXPENSES

2.1 Expenses. The Borrower agrees to reimburse the Lender upon demand, whether or not any loan is made under this Agreement, for:

(a) filing, recording and search fees, appraisal fees, title report fees, documentation fees, and other similar fees, costs and expenses incurred by the Lender.

(b) Any expenses the Lender incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys’ fees, including any allocated costs of the Lender’s in-house counsel.

(c) The cost of periodic appraisals of the collateral securing this Agreement, at such intervals as the Lender may reasonably require. The appraisals may be performed by employees of the Lender or by independent appraisers. Unless an Event of Default has occurred and is continuing, the Borrower will not be required to pay for more than one appraisal in any calendar year.

(d) Any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement or any agreement or instrument required by this Agreement.

3. DISBURSEMENTS, PAYMENTS AND COSTS

3.1 Requests for Credit. Each request for an extension of credit will be made in writing in a manner acceptable to the Lender, or by another means acceptable to the Lender.

3.2 Disbursements and Payments. Each disbursement by the Lender will be made in immediately available funds and will be evidenced by records kept by the Lender. In addition, the Lender may, at its discretion, require the Borrower to sign one or more promissory notes. Each payment made by the Borrower will be made without set-off or counterclaim in immediately available funds not later than 2:00 p.m., central time, on the date called for under this Agreement at the Lender’s office at Bank of America Center Ste Fl 6, 700 Louisiana St., Houston, TX 77002-2700. Funds received on any day after such time will be deemed to have been received on the next Banking Day. Whenever any payment to be made under this Agreement is stated to be due on a day which is not a Banking Day, such payment will be made on the next succeeding Banking Day and such extension of time will be included in the computation of any interest.

3.3 Telephone and Telefax Authorization.

(a) The Lender may honor telephone or telefax instructions for advances or repayments given or purported to be given by any one of the individuals authorized to sign loan agreements on behalf of the Borrower, or any other individual designated by any one of such authorized signers.

(b) The Borrower will indemnify and hold the Lender harmless from all liability, loss, and costs in connection with any act resulting from telephone or telefax instructions the Lender reasonably believes are made by any individual authorized by the Borrower to give such instructions. This paragraph will survive this Agreement’s termination, and will benefit the Lender and its officers, employees, and agents.

3.4 Banking Days. Unless otherwise provided in this Agreement, a “Banking Day” is a day other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or are in fact closed, in the state where the Lender’s lending office is located. All payments and disbursements which would be due on a day which is not a Banking Day will be due on the next Banking Day. All payments received on a day which is not a Banking Day will be applied to the credit on the next Banking Day.

3.5 Additional Costs. The Borrower will pay the Lender, on demand, for the Lender’s costs or losses arising from any statute or regulation, or any request or requirement of a regulatory agency which is applicable to all national banks or a class of all national banks. The costs and losses will be allocated to the Term Loan in a manner determined by the Lender, using any reasonable method. The costs include the following:

(a) any reserve or deposit requirements; and

(b) any capital requirements relating to the Lender’s assets and commitments for credit.

3.6 Interest Calculation. Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360 day year and the actual number of days elapsed. Installments of principal which are not paid when due under this Agreement shall continue to bear interest until paid.

3.7 Default Rate. Upon the occurrence and during the continuation of any Event of Default under this Agreement, advances under this Agreement will at the option of the Lender bear interest at a rate per annum which is 6% higher than the Lender’s Prime Rate. This will not constitute a waiver of any Event of Default. The “Prime Rate” is the rate of interest publicly announced from time to time by the Lender as its Prime Rate. The Prime Rate is set by the Lender based on various factors, including the Lender’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Lender may price loans to its customers at, above or below the Prime Rate. Any change in the Prime Rate will take effect at the opening of business on the day specified in the public announcement of a change in the Lender’s Prime Rate.

3.8 Interest Compounding. At the Lender’s sole option in each instance, any interest, fees or costs which are not paid when due under this Agreement shall bear interest from the due date at the Lender’s Prime Rate plus 6%. This may result in compounding of interest.

4. COLLATERAL.

4.1 Borrower’s Obligations. The Borrower’s obligations to the Lender under this Agreement will be secured by the Hawker Beechcraft Corporation B200GT aircraft (the “Aircraft”) referred to in the Mortgage. Security Agreement and Assignment (as hereafter amended, modified or replaced, the “Aircraft Mortgage”), between the Borrower and the Lender.

5. CONDITIONS

The Lender must receive the following items, in form and content acceptable to the Lender, before it is required to extend any credit to the Borrower under this Agreement:

5.1 Authorizations. Evidence that the execution, delivery and performance by the Borrower (and any Guarantor) of this Agreement and any instrument or agreement required under this Agreement have been duly authorized.

5.2 Governing Documents. A copy of the Borrower’s charter and bylaws.

5.3 Good Standing. Certificates of good standing for the Borrower from its state of incorporation.

5.4 Aircraft Mortgage. A signed original Aircraft Mortgage, together with a UCC-1 Financing Statement.

5.5 Evidence of Priority. Evidence that security interests and liens in favor of the Lender are valid, enforceable, and prior to all others’ rights and interests, except those the Lender consents to in writing.

5.6 Insurance. Evidence of insurance coverage, as required in the “Covenants” section of this Agreement and the Aircraft Mortgage.

5.7 Guaranty. Continuing and Unconditional Guaranty signed by Carl T. Kirkland and Mary A. Kirkland, individuals residing in the state of Tennessee (the “Guarantor”).

5.8 Payment of Fees. Payment of all accrued and unpaid expenses incurred by the Lender as required by the Section of this Agreement entitled “Fees and Expenses”.

5.9 Other Items. Any other items that the Lender reasonably requires.

6. REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Lender is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewed representation.

6.1 Organization of Borrower. The Borrower is a corporation duly formed and existing under the laws of the state where organized.

6.2 Authorization. This Agreement, and any instrument or agreement required hereunder, are within the Borrower’s powers, have been duly authorized, and do not conflict with any of its organizational papers.

6.3 Enforceable Agreement. This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the Borrower in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable.

6.4 Good Standing. In each state in which the Borrower does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name statutes.

6.5 No Conflicts. This Agreement does not conflict with any law, agreement, or obligation by which the Borrower is bound.

6.6 Financial Information. All financial and other information that has been or will be supplied to the Lender, including the Guarantor’s financial statement(s) dated as of December 31, 2007, is:

(a) sufficiently complete to give the Lender accurate knowledge of the Borrower’s and the Guarantor’s financial condition including all material contingent liabilities.

(b) in compliance with all government regulations that apply.

Since the date of the financial statement specified above, there has been no material adverse change in the assets or the financial condition of the Borrower or the Guarantor.

6.7 Lawsuits. There is no lawsuit, tax claim or other dispute or proceeding pending or threatened against the Borrower, which, if lost, would impair the Borrower’s financial condition or ability to repay the Term Loan or the Borrower’s title to the Aircraft.

6.8 Collateral. All collateral required in this Agreement is owned by the grantor of the security interest free of any title defects or any liens or interests of others.

6.9 Permits, Franchises. The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights and fictitious name rights necessary to enable it to conduct the business in which it is now engaged.

6.10 Other Obligations. The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

6.11 Income Taxes. The Borrower has filed all tax returns required to be filed and has paid, or made adequate provisions for the payment of, all taxes due and payable pursuant to such returns and pursuant to any assessments made against it or any of its property. No tax liens have been filed and no material claims are being asserted with respect to any such taxes. The reserves on the books of the Borrower in respect of taxes are adequate. The Borrower is not aware of any proposed assessment or adjustment for additional taxes (or any basis for any such assessment) which might be material to the Borrower.

6.12 No Event of Default. There is no event which is, or with notice or lapse of time or both would be, an Event of Default under this Agreement.

6.13 Insurance. The Borrower has obtained, and maintained in effect, the insurance coverage required in the “Covenants” section of this Agreement or as otherwise required by the Aircraft Mortgage.

6.14 Jurisdiction of Incorporation. The Borrower is incorporated under the laws of the State of Tennessee and the Borrower’s organizational identification number is 0251966. The Borrower’s exact legal name and chief executive office is correctly set forth on the signature pages hereof. The Borrower has not changed its legal name or form of organization or location in the last five (5) years.

6.15 U.S. Citizenship. The Borrower is a citizen of the United States (as defined in 49 U.S.C. Section 40102(a)(15)) and is eligible to register the Aircraft with the Federal Aviation Administration pursuant to Part 47 of the Federal Aviation Regulations.

7. COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and until the Lender is repaid in full:

7.1 Use of Proceeds. To use the proceeds of the Term Loan only for the purchase of additional shares of KIRKLAND’S INC. stock.

7.2 Financial Information. To provide, or cause to be provided, the following financial information and statements and such additional information as requested by the Lender from time to time:

(a) The financial information from each Guarantor pursuant to Section 16 of each respective Guaranty.

(b) Such additional financial information regarding the Borrower or any Guarantor, pledgor, accommodation party or other obligor with respect to the loan as the Lender shall request.

With respect to any individual, the financial statements required above shall include a properly completed personal financial statement on the Lender’s form with all questions fully answered and all Schedules completed in their entirety, including all requested income/expense information, contingent liabilities disclosure; provided that, if the individual obligor other party uses his/her own automated financial statement, they may supplement the statement with supporting schedules, certifications or other details so that all information requested on the Lender’s financial statement form is provided in lieu of using such form.

With respect to any corporation, limited liability company, partnership or other entity, the financial statements required above shall, in the case of the annual financial statements, be audited, compiled or reviewed by a certified public accountant satisfactory to Lender, as required by Lender and in the case of all other financial statements, shall be certified as true and correct by a duly authorized officer of such obligor.

7.3 Other Debts. Not to have, or allow Guarantor to have outstanding or incur any direct or contingent liabilities (other than those to the Lender), or become liable for the liabilities of others without the Lender’s written consent. This does not prohibit:

(a) Debts in existence on the date of this Agreement disclosed in the Guarantor’s financial statements dated December 31, 2007.

(b) Additional debts which do not exceed a total principal amount in aggregate of $1,000,000 exclusive of residential mortgages.

7.4 Other Liens. Not to create, assume, or allow, or allow Guarantor to create, assume or allow any security interest or lien (including judicial liens) on property the Borrower or Guarantor now or later owns, except:

(a) Mortgages, deeds of trust and security agreements in favor of the Lender.

(b) Liens for taxes not yet due.

(d) Liens outstanding on the date of this Agreement disclosed in the Guarantor’s financial statements dated December 31, 2007.

(e) Additional liens against the assets which secure indebtedness permitted by the preceding Section.

7.5 Notices to the Lender. To promptly notify the Lender in writing of:

(a) any lawsuit over $250,000 against the Borrower (or any Guarantor) or any of the Borrower’s (or any Guarantor’s) property.

(b) any substantial dispute between the Borrower (or any Guarantor) and any government authority.

(c) any Event of Default under this Agreement, or any event which, with notice or lapse of time or both, would constitute an Event of Default.

(d) any material adverse change in the Borrower’s (or any Guarantor’s) financial condition or operations.

(e) any change in the address of the Borrower’s principal residence.

7.6 Inspections and Appraisals. To allow the Lender and its agents to inspect and appraise any of the collateral securing this Agreement and examine, audit and make copies of books and records concerning the collateral at any reasonable time. If any of the collateral, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Lender or its agents to have access to perform inspections, appraisals or audits.

7.7 Compliance with Laws. To comply with the laws, regulations, and orders of any government body with authority over the Borrower.

7.8 Maintenance of Properties. To make any repairs, renewals, or replacements to keep the Borrower’s properties in good working condition.

7.9 Perfection of Liens. To help the Lender perfect and protect its security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens.

7.10 Cooperation. To take any action reasonably requested by the Lender to carry out the intent of this Agreement.

7.11 Insurance.

(a) Insurance Covering Collateral. To maintain all risk property damage insurance policies covering the Aircraft as required by the Aircraft Mortgage. Each insurance policy must be in an amount acceptable to the Lender. The insurance must be issued by an insurance company acceptable to the Lender and must name the Lender as loss payee.

(b) General Business Insurance. To maintain insurance as is usual for the business the Borrower is in, including, but not limited to the insurance required by the Aircraft Mortgage.

(c) Evidence of Insurance. Upon the request of the Lender, to deliver to the Lender a copy of each insurance policy, or, if permitted by the Lender, a certificate of insurance listing all insurance in force.

7.12 Additional Negative Covenants. Not to, nor allow Guarantor to, without the Lender’s written consent:

(a) sell, assign, lease, transfer or otherwise dispose of all or a substantial part of the Borrower’s or Guarantor’s assets.

(b) sell, assign, lease, transfer or otherwise dispose of the Aircraft or any interest therein

(c) transfer, in a calendar year, any of the Borrower’s, or any Guarantor’s, assets to a trust with an aggregate fair market value in excess of $250,000.

(d) engage in any business activities substantially different from the Borrower’s present business.

(e) liquidate or dissolve the Borrower’s business.

(f) enter into any consolidation, merger, pool, joint venture, syndicate, or other combination, or become a partner in a partnership, a member of a joint venture or a member of a limited liability company.

8. DEFAULT

If any of the following events (“Events of Default”) occurs, the Lender may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay the entire Term Loan immediately and without prior notice. If an event which, with notice or the passage of time, will constitute an Event of Default has occurred and is continuing, the Lender has no obligation to make advances or extend additional credit under this Agreement. In addition, if any Event of Default occurs, the Lender shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with this Agreement, as well as all rights and remedies available at law or in equity. If an Event of Default occurs under the Section entitled “Bankruptcy,” then the entire Term Loan outstanding under this Agreement will automatically be due immediately.

8.1 Failure to Pay. The Borrower fails to make a payment under this Agreement when due.

8.2 Lien Priority. The Lender fails to have an enforceable first lien (except for any prior liens to which the Lender has consented in writing) on or security interest in any property given as security for the Term Loan or any guaranty thereof.

8.3 False Information. The Borrower (or any Guarantor) has given the Lender false or misleading information or representations.

8.4 Death or Legal Incompetency. Any Guarantor dies or becomes legally incompetent.

8.5 Bankruptcy. The Borrower (or any Guarantor) files a bankruptcy petition, a bankruptcy petition is filed against the Borrower (or any Guarantor), or the Borrower (or any Guarantor) makes a general assignment for the benefit of creditors. The default will be deemed cured if any bankruptcy petition filed against the Borrower (or any Guarantor) is dismissed within a period of 45 days after the filing; provided, however, that the Lender will not be obligated to extend any additional credit to the Borrower during that period.

8.6 Receivers; Termination. A receiver or similar official is appointed for the Borrower’s (or any Guarantor’s) business, or the business is terminated or any Guarantor is liquidated or dissolved.

8.7 Judgments. Any judgments or arbitration awards are entered against the Borrower (or any Guarantor), or the Borrower (or any Guarantor) enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of $250,000 or more in excess of any insurance coverage, provided that the insurer has issued a letter of responsibility for payment up to the amount of insurance coverage.

8.8 Government Action. Any government authority takes action that the Lender believes materially adversely affects the Borrower’s (or any Guarantor’s) financial condition or ability to repay the Term Loan.

8.9 Material Adverse Change. A material adverse change occurs in the Borrower’s (or any Guarantor’s) business condition (financial or otherwise), operations, properties or prospects, or ability to repay the Term Loan.

8.10 Cross-default. Any default occurs under any agreement in connection with any credit the Borrower (or any Guarantor) or any of the Borrower’s related entities or affiliates has obtained from anyone else or which the Borrower (or any Guarantor) or any of the Borrower’s related entities or affiliates has guaranteed in the amount of $250,000 or more in the aggregate if the default consists of failing to make a payment when due or gives the other lender the right to accelerate the obligation.

8.11 Default Under Related Documents. Any guaranty, subordination agreement, security agreement, mortgage, deed of trust, or other document required by this Agreement is violated or no longer in effect.

8.12 Other Bank Agreements. The Borrower (or any Guarantor) or any of the Borrower’s related entities or affiliates fails to meet the conditions of, or fails to perform any obligation under any other agreement the Borrower (or any Guarantor) or any of the Borrower’s related entities or affiliates has with the Lender or any affiliate of the Lender which continues beyond any applicable grace period, or demand is made by the Lender or any affiliate of the Lender on any obligation owing to the Lender or such affiliate under any other agreement the Borrower (or any Guarantor) or any of the Borrower’s related entities or affiliates has with the Lender or any affiliate of the Lender.

8.13 Swap Default. An event occurs which gives the Lender or an affiliate of the Lender the right or option to terminate any swap contract entered into by the Borrower with the Lender or any such affiliate.

8.14 Change of Ownership. The Guarantor(s) cease to own, directly or indirectly, 100% of the capital ownership of the Borrower.

8.15 Other Breach Under Agreement. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article 8. This includes any failure or anticipated failure by the Borrower to comply with any financial covenants set forth in this Agreement, whether such failure is evidenced by financial statements delivered to the Lender or is otherwise known to the Borrower or the Lender.

9. ENFORCING THIS AGREEMENT; MISCELLANEOUS.

9.1 Accounting Standards. Except as otherwise stated in this Agreement, all financial information provided to the Lender and all financial covenants will be made in accordance with accounting principles applied consistently with those applied in the preparation of Guarantor’s financial statements dated December 31, 2007.

9.2 Illinois Law. THIS AGREEMENT IS GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.

9.3 Successors and Assigns. This Agreement is binding on the Borrower’s and the Lender’s successors and assignees. The Borrower agrees that it may not assign this Agreement without the Lender’s prior consent. The Lender may sell participations in or assign the Term Loan, and may exchange financial information about the Borrower with actual or potential participants or assignees.

9.4 Severability; Waivers. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Lender retains all rights, even if it makes a loan after default. If the Lender waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing.

9.5 Administration Costs. The Borrower will pay the Lender for all reasonable costs incurred by the Lender in connection with administering this Agreement.

9.6 Attorneys’ Fees. The Borrower shall reimburse the Lender for any reasonable costs and attorneys’ fees incurred by the Lender in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment, waiver, “workout” or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys’ fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. In the event that any case is commenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Lender is entitled to recover costs and reasonable attorneys’ fees incurred by the Lender related to the preservation, protection, or enforcement of any rights of the Lender in such a case. As used in this paragraph, “attorneys’ fees” includes the allocated costs of the Lender’s in-house counsel.

9.7 One Agreement. This Agreement and any related security or other agreements required by this Agreement, collectively:

(a) represent the sum of the understandings and agreements between the Lender and the Borrower concerning this credit; and

(b) replace any prior oral or written agreements between the Lender and the Borrower concerning this credit; and

(c) are intended by the Lender and the Borrower as the final, complete and exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail.

9.8 Indemnification. The Borrower will indemnify and hold the Lender harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended or committed by the Lender to the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this Agreement, any such document, or any such credit, except for any such loss, liability, damages, judgments or costs arising directly from the Lender’s gross negligence or willful misconduct. This indemnity includes but is not limited to attorneys’ fees (including the allocated cost of in-house counsel). This indemnity extends to the Lender, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Borrower’s obligations to the Lender. All sums due to the Lender hereunder shall be obligations of the Borrower, due and payable immediately without demand.

9.9 No Future Commitment. The Borrower acknowledges that the Lender has made no commitment to extend any additional credit to the Borrower or to continue the credit provided hereunder after this Agreement expires or is terminated as provided herein.

9.10 Notices. All notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other addresses as the Lender and the Borrower may specify from time to time in writing. Notices sent by first class mail shall be deemed delivered on the earlier of actual receipt or on the fourth business day after deposit in the U.S. mail.

9.11 Headings. Article and Section headings are for reference only and will not affect the interpretation or meaning of any provisions of this Agreement.

9.12 Counterparts. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, will be deemed an original but all such counterparts will constitute but one and the same agreement.

9.13 Consent to Jurisdiction. To induce the Lender to accept this Agreement, the Borrower irrevocably agrees that, subject to the Lender’s sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT WILL BE LITIGATED IN COURTS HAVING SITUS IN CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN CHICAGO, ILLINOIS, WAIVES PERSONAL SERVICE OF PROCESS UPON THE BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO THE BORROWER AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT.

9.14 Waiver of Jury Trial. THE BORROWER AND THE LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THIS AGREEMENT OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST THE LENDER OR ANY OTHER PERSON INDEMNIFIED UNDER THIS AGREEMENT ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.

This Agreement is executed as of the date stated at the top of the first page.

BANK OF AMERICA, N.A.

KIRKLAND AVIATION, INC.

By:

/s/ Patricia Conroy

By:

/s/ Carl T. Kirkland

Name:

Patricia Conroy

Name:

Carl T. Kirkland

Title:

Assistant Vice President

Title:

President

Address where notices to the Lender are to be sent:

Address where notices to the Borrower are to be sent:

Bank of America Center Ste Fl 6
700 Louisiana St.
Houston, Texas 77002-2700
Attention: David Creasey
Facsimile No.: (713) 247-6027

106 High Point Road
Jackson, Tennessee 38305
Attention: Carl T. Kirkland
Facsimile No.: (______) ______-______

With a copy to:

477 South Third Street, Suite 200
Geneva, Illinois 60134
Attention: Corporate Aircraft Finance Division
Facsimile No.: (630) 262-1249


(1)		USA PATRIOT ACT NOTICE

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. The Bank will ask for the Borrower’s legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or other related persons.


(2)		AFFILIATE SHARING NOTICE

From time to time the Bank may share information about the Obligor’s experience with Bank of America Corporation (or any successor company) and its subsidiaries and affiliated companies (the “Affiliates”), including, but not limited to, the Bank of America Companies listed in notice #3 below. The Bank may also share with the Affiliates credit-related information contained in any applications, from credit reports and information it may obtain about the Obligor from outside sources.

If the Obligor is an individual, the Obligor may instruct the Bank not to share this information with the Affiliates. The Obligor can make this election by (1) calling the Bank at 1.888.341.5000, (2) visiting the Bank online at www.bankofamerica.com, selecting “Privacy & Security,” and then selecting “Set Your Privacy Preferences,” or (3) contacting the Obligor’s client manager or local banking center. To help the Bank complete the Obligor’s request, the Obligor should include the Obligor’s name, address, phone number, account number(s) and social security number.

If the Obligor makes this election, certain products or services may not be made available to the Obligor. This request will apply to information from applications, consumer reports and other outside sources only. Through the normal course of doing business, including servicing the Obligor’s accounts and better serving the Obligor’s financial needs, the Bank will continue to share transaction and account experience information, as well as other general information among the Affiliates.


(3)		AFFILIATE MARKETING NOTICE — YOUR CHOICE TO LIMIT MARKETING

•		The Bank of America companies listed below are providing this notice #3.

•		Federal law gives you the right to limit some but not all marketing from all the Bank of America affiliated companies. Federal law also requires us to give you this notice to tell you about your choice to limit marketing from all the Bank of America affiliated companies.

•		You may limit all the Bank of America affiliated companies, such as the banking, loan, credit card, insurance and securities companies, from marketing their products or services to you based upon your personal information that they receive from other Bank of America companies. This information includes your income, your account history, and your credit score.

•		Your choice to limit marketing offers from all the Bank of America affiliated companies will apply for at least 5 years from when you tell us your choice. Before your choice to limit marketing expires, you will receive a renewal notice that will allow you to continue to limit marketing offers from all the Bank of America affiliated companies for at least another 5 years.

•		You may tell us your choice to limit marketing offers and you may tell us the choices for other customers who are joint account holders with you.

•		This limitation will not apply in certain circumstances, such as when you have an account or service relationship with the Bank of America company that is marketing to you.

•		For individuals with business purpose accounts, this limitation will only apply to marketing to individuals and not marketing to a business.


To limit marketing offers, contact us at 800.282.2884 Effective October 1, 2008 Bank of America Companies:

Banks and Trust Companies Bank of America, N.A. LaSalle Bank National Association LaSalle Bank Midwest National Association Credit Card Bank of America Consumer Card Services, LLC Bank of America Fleet Credit Card Services, L.P.		Brokerage and Investments BACAP Alternative Advisors, Inc. Bank of America Capital Advisors LLC Banc of America Investment Advisors, Inc. Banc of America Investment Services, Inc. Banc of America Securities LLC LaSalle Financial Services, Inc. U.S. Trust Hedge Fund Management, Inc. UST Securities Corp.

Insurance and Annuities BA Insurance Services, Inc. Banc of America Agency of Texas, Inc. Banc of America Insurance Services, Inc., dba Banc of America Insurance Agency in New York State		Real Estate HomeFocus Services, LLC Administrative Services LaSalle Healthcare Administrative Services, LLC
General Fidelity Insurance Company General Fidelity Life Insurance Company LaSalle Financial Services, Inc.		Merchant Services BA Merchant Services, LLC LaSalle Merchant Services, LLC

EX-99.3 4 g15134exv99w3.htm EX-99.3 ADJUSTABLE RATE NOTE Ex-99.3

EXHIBIT 99.3

Loan: 0317701088
MIN: 100095300101111456

ADJUSTABLE RATE NOTE
(1 Year Treasury Index — Rate Caps)

THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY INTEREST RATE AND MY MONTHLY PAYMENT. THIS NOTE LIMITS THE AMOUNT MY INTEREST RATE CAN CHANGE AT ANY ONE TIME AND THE MAXIMUM RATE I MUST PAY.


SEPTEMBER 12, 2008 [Date]		AVON, [City]		COLORADO [State]

17 CHATEAU LANE, #303, AVON, COLORADO 81620

[Property Address]

1. BORROWER’S PROMISE TO PAY

In return for a loan that I have received, I promise to pay U.S. $ 3,500,000.00 (this amount is called “Principal”), plus interest, to the order of the Lender. The Lender is BLUE SKY MORTGAGE, LLC

I will make all payments under this Note in the form of cash, check or money order.

I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the “Note Holder.”

2. INTEREST

Interest will be charged on unpaid principal until the full amount of Principal has been paid. I will pay interest at a yearly rate of 6.750 %. The interest rate I will pay will change in accordance with Section 4 of this Note.

The interest rate required by this Section 2 and Section 4 of this Note is the rate I will pay both before and after any default described in Section 7(B) of this Note.

3. PAYMENTS

(A) Time and Place of Payments.

I will pay principal and interest by making a payment every month.

I will make my monthly payment on the first day of each month beginning on NOVEMBER 1, 2008

I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. Each monthly payment will be applied as of its scheduled due date and will be applied to interest before Principal. If, on OCTOBER 01, 2038, I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the “Maturity Date.”

I will make my monthly payments at

P.O. BOX 1040
VAIL, COLORADO 81658

or at a different place if required by the Note Holder.


MULTISTATE ADJUSTABLE RATE NOTE-ARM 5-2-Single Family-Fannie Mae/Freddle Mac		UNIFORM INSTRUMENT

(Page 1 of 5)

0317701088

(B) Amount of My Initial Monthly Payments

Each of my initial monthly payments will be in the amount of U.S. $22,700.94. This amount may change.

(C) Monthly Payment Changes

Changes in my monthly payment will reflect changes in the unpaid principal of my loan and in the Interest rate that I must pay. The Note Holder will determine my new interest rate and the changed amount of my monthly payment in accordance with Section 4 of this Note.

4. INTEREST RATE AND MONTHLY PAYMENT CHANGES

(A) Change Dates

The interest rate I will pay may change on the first day of OCTOBER, 2013, and on that day every 12th month thereafter. Each date on which my interest rate could change is called a “Change Date.”

(B) The Index

Beginning with the first Change Date, my interest rate will be based on an Index. The “Index” is the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board. The most recent Index figure available as of the date 45 days before each Change Date is called the “Current Index.”

If the Index is no longer available, the Note Holder will choose a new index, which is based upon comparable information. The Note Holder will give me notice of this choice.

(C) Calculation of Changes

Before each Change Date, the Note Holder will calculate my new interest rate by adding FOUR AND NO /100 percentage points ( 4.000%) to the Current Index. The Note Holder will then round the result of this addition to the nearest one-eighth of one percentage point (0.125%). Subject to the limits started in Section 4(D) below, this rounded amount will be my new interest rate until the next Change Date.

The Note Holder will then determine the amount of the monthly payment that would be sufficient to repay the unpaid principal that I am expected to owe at the Change Date in full on the Maturity Date at my new interest rate in substantially equal payments. The result of this calculation will be the new amount of my monthly payment.

(D) Limits on Interest Rate Changes

The interest rate I am required to pay at the first Change Date will not be greater than 8.750% or less than 4.750%. Thereafter, my interest rate will never be increased or decreased on any single Change Date by more than two percentage points (2.0%) from the rate of interest. I have been paying for the preceding 12 months. My interest rate will never be greater than 12.750%.

(E) Effective Date of Changes

My new interest rate will become effective on each Change Date. I will pay the amount of my now monthly payment beginning on the first monthly payment date after the Change Date until the amount of my monthly payment changes again.

(F) Notice of Changes

The Note Holder will deliver or mail to me a notice of any changes in my interest rate and the amount of my monthly payment before the effective date of any change. The notice will include information required by law to be given to me and also the title and telephone number of a person who will answer any question I may have regarding the notice.

5. BORROWER’S RIGHT TO PREPAY

I have the right to make payments of Principal at any time before they are due. A payment of Principal only is known as a “Prepayment.” When I make a Prepayment, I will tell the Note Holder in writing that I am doing so. I may not designate a payment as a Prepayment if I have not made all the monthly payments due under the Note.

(Page 2 of 5)

I may make a full Prepayment or partial Prepayments without paying a Prepayment charge. The Note Holder will use my Prepayments to reduce the amount of Principal that I owe under this Note. However, the Note Holder may apply my Prepayment to the accrued and unpaid interest on the Prepayment amount, before applying my Prepayment to reduce the Principal amount of the Note. If I make I partial Prepayment, there will be no changes In the due dates of my monthly payment unless the Note Holder agrees in writing to those changes. My partial Prepayment may reduce the amount of my monthly payments after the first Change Date following my partial Prepayment. However, any reduction due to my partial Prepayment may be offset by an interest rate Increase.

6. LOAN CHARGES

If a law, which applies to this loan and which sets maximum loan charges, is finally interpreted so that the interest or other loan charges collected or to be collected in connection with this loan exceed the permitted limits, then: (a) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (b) any sums already collected from me which exceeded permitted limits will be refunded to me. The Note Holder may choose to make this refund by reducing the Principal I owe under this Note or by making a direct payment to me. If a refund reduces Principal, the reduction will be treated as a partial Prepayment.

7. BORROWER’S FAILURE TO PAY AS REQUIRED.

(A) Late Charges for Overdue Payments

If the Note Holder has not received the full amount of’ any monthly payment by the end of FIFTEEN (15) calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5.00% of my overdue payment of principal and interest. I will pay this late charge promptly but only once on each late payment.

(B) Default

If I do not pay the full amount of each monthly payment on the date it is due. I will be in default.

(C) Notice of Default

If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

(D) No Waiver By Note Holder

Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.

(E) Payment of Note Holder’s Costs and Expenses

If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys’ fees.

8. GIVING OF NOTICES

Unless applicable law requires a different method, any notice that must be given to me under this Note will be given by delivering it or by mailing it by first class mail to me at the Property Address above or at a different address If I give the Note Holder a notice of my different address.

Any notice that must be given to the Note Holder under this Note will be given by delivering it or by mailing it by first class mail to the Note Holder at the address stated in Section 3(A) above or at a different address If I am given a notice of that different address.

9. OBLIGATIONS OF PERSONS UNDER THIS NOTE

If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, Including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.

(Page 3 of 5)

10. WAIVERS

I and any other person who has obligations under this Note waive the rights of Presentment and Notice of Dishonor. “Presentment” means the right to require the Note Holder to demand payment of amounts due. “Notice of Dishonor” means the right to require the Note Holder to give notice to other persons that amounts due have not been paid.

11. UNIFORM SECURED NOTE

This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the protections given to the Note Holder under this Note, a Mortgage, Deed of Trust, or Security Deed (the “Security Instrument”), dated the same date as this Note, protects the Note Holder from possible losses which might result If I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note. Some of those conditions are described as follows:

If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if such exercise is prohibited by Applicable Law. Lender also shall not exercise this option if: (a) Borrower causes to be submitted to Lender information required by Lender to evaluate the intended transferee as if a new loan were being made to the transferee; and (b) Lender reasonably determines that Lender’s security will not be impaired by the loan assumption and that the risk of a breach of any covenant or agreement in this Security Instrument is acceptable to Lender.

To the extent permitted by Applicable Law, Lender may charge a reasonable fee as a condition to Lender’s consent to the loan assumption. Lender may also require the transferee to sign an assumption agreement that is acceptable to Lender and that obligates the transferee to keep all the promises and agreements made in the Note and in this Security Instrument. Borrower will continue to be obligated under the Note and this Security Instrument unless Lender releases Borrower in writing.

If Lender exercises the option to require immediate payment in full, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.

WITNESS THE HANDS(S) AND SEAL(S) OF THE UNDERSIGNED


/s/ CARL KIRKLAND		(Seal)
CARL KIRKLAND		Borrower

/s/ MARY KIRKLAND		(Seal)
MARY KIRKLAND		Borrower

(Page 4 of 5)

INTEREST — ONLY ADDENDUM
TO ADJUSTABLE RATE PROMISSORY NOTE

LOAN NUMBER: 0317701088

PROPERTY ADDRESS: 17 CHATEAU LANE, #303, AVON, COLORADO 81620

THIS ADDENDUM is made this 12TH day of SEPTEMBER, 2008, and is incorporated into and intended to form a part of the Adjustable Note (the “Note”) dated the same date as this Addendum executed by the undersigned and payable to BLUE SKY MORTGAGE, LLC

(the Lender).

THIS ADDENDUM supersedes Sections 3(A), 3(B), 4(C) and 7(A) of the Note. None of the other provisions of the Note are changed by this Addendum.

3. PAYMENTS

(A) Time and Place of Payments

I will pay interest by making payments every month for the first 120 payments (the “Interest-Only Period”) in the amount sufficient to pay interest as it accrues. I will pay principal and interest by making payments every month thereafter for the next 240 payments in an amount sufficient to fully amortize the outstanding principal balance of the Note at the end of the Interest-Only Period over the remaining term of the Note in equal monthly payments.

I will make my monthly payments on the first day of each month beginning on NOVEMBER 1, 2008. I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. Each monthly payment will be applied as of its scheduled due date and will be applied to interest before principal. If, on October 01, 2038, I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the “Maturity Date.”

I will make payments at PO BOX 1040

VAIL, COLORADO 81658

or at a different place if required by the Note Holder.

(B) Amount of My Initial Monthly Payments

Each of my initial monthly payments will be in the amount of U.S. $19,687.51. This payment amount is based on the original principal balance of the Note. This payment amount may change.

4. INTEREST RATE AND MONTHLY PAYMENT CHANGES

Before each Change Date, the Note Holder will calculate my new interest rate by adding FOUR AND NO/100 percentage point(s) (4.000%) to the Current Index for such Change Date. The Note Holder will then round the result of this addition to the nearest one-eighth of one percentage point (0.125%). Subject to the limits stated in Section 4(D), this rounded amount will be my new interest rate until the next Change Date.

Page 1 of 2

During the Interest-Only Period, the Note Holder will then determine the amount of the monthly payment that would be sufficient to repay accrued interest. This will be the amount of my monthly payment until the earlier of the next Change Date or the end of the Interest-Only Period unless I make a voluntary prepayment of principal during such period. If I make a voluntary prepayment of principal during the Interest-Only Period, my payment rate on the lower principal balance. At the end of the Interest-Only Period and on each Change Date thereafter, the Note Holder will determine the amount of the monthly payment that would be sufficient to repay in full the unpaid principal that I am expected to owe at the end of the Interest-Only Period or Change Date, as applicable, in equal monthly payments over the remaining term of the Note. The result of this calculation will be the new amount of my monthly payment. After the end of the Interest-Only Period, my payment amount will not be reduced due to voluntary prepayments.

7. BORROWER’S FAILURE TO PAY AS REQUIRED

(A) Late Charge for Overdue Payments

If the Note Holder has not received the full amount of any monthly payment by the end of 15 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5.000% of my overdue payment of interest for the first 120 payments, 5.000% of my overdue payment of principal and interest thereafter. I will pay this late charge promptly but only once on each late payment.

Dated: 9/12/08


/s/ CARL KIRKLAND
CARL KIRKLAND

/s/ MARY KIRKLAND
MARY KIRKLAND

Page 2 of 2

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