SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 29, 1999
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 1-12875 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 EAST MAIN STREET 23219
RICHMOND, VIRGINIA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Item 5. Other Events
Item 7. Financial Statements and Exhibits
Financial Statements:
None.
Exhibits:
4.1 Promissory Note dated September 27, 1999 in the principal amount
of $50,550,000 made payable by Cornerstone Realty Income Trust,
Inc. to the order of The Prudential Insurance Company of America.
4.2 Promissory Note dated September 27, 1999 in the principal amount
of $22,950,000 made payable by CRIT-NC, LLC to the order of The
Prudential Insurance Company of America.
4.3 Mortgage and Security Agreement dated as of September 27, 1999
from Cornerstone Realty Income Trust, Inc., as borrower, to The
Prudential Insurance Company of America, as lender, pertaining to
the Hampton Pointe and Westchase properties.
4.4 Mortgage and Security Agreement dated as of September 27, 1999
from Cornerstone Realty Income Trust, Inc., as borrower, to The
Prudential Insurance Company of America, as lender, pertaining to
the Arbors at Windsor Lake property.
4.5 Deed of Trust and Security Agreement dated as of September 27,
1999 made by CRIT-NC, LLC, as borrower, for the benefit of The
Prudential Insurance Company of America, as lender, pertaining to
the Charleston Place and Stone Point properties.
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4.6 Deed of Trust and Security Agreement dated as of September 27,
1999 made by CRIT-NC, LLC, as borrower, for the benefit of The
Prudential Insurance Company of America, as lender, pertaining to
the St. Regis and Remington Place properties.
4.7 Deed To Secure Debt and Security Agreement by Cornerstone Realty
Income Trust, Inc., as borrower, to The Prudential Insurance
Company of America, as lender, pertaining to the Ashley Run, Stone
Brook and Spring Lake properties.
4.8 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Charleston County, South Carolina).
4.9 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Richland County, South Carolina).
4.10 Assignment of Leases and Rents dated as of September 27, 1999, by
CRIT-NC, LLC to The Prudential Insurance Company of America
(Mecklenburg County, North Carolina).
4.11 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Clayton County, Georgia).
4.12 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Gwinnett County, Georgia).
4.13 Assignment of Leases and Rents dated as of September 27, 1999, by
CRIT-NC, LLC to The Prudential Insurance Company of America (Wake
County, North Carolina).
10.1 Environmental Indemnity Agreement dated as of September 27, 1999
by Cornerstone Realty Income Trust, Inc. in favor of The
Prudential Insurance Company of America referring to the
$50,550,000 Promissory Note.
10.2 Environmental Indemnity Agreement dated as of September 27, 1999
by CRIT-NC, LLC and Cornerstone Realty IncomeTrust, Inc. in favor
of The Prudential Insurance Company of America referring to the
$22,950,000 Note.
<PAGE>
10.3 Unconditional and Irrevocable Guaranty of Payment and Performance
(Recourse Carveouts) dated as of September 27, 1999 made by
Cornerstone Realty Income Trust, Inc. in favor of The Prudential
Insurance Company of America pertaining to the $22,950,000
Promissory Note.
10.4 Unconditional and Irrevocable Guaranty of Payment and Performance
(Cross-Collateralization) dated as of September 27, 1999 made by
Cornerstone Realty Income Trust, Inc. in favor of The Prudential
Insurance Company of America pertaining to the $22,950,000
Promissory Note.
10.5 Unconditional and Irrevocable Guaranty of Payment and Performance
(Cross-Collateralization) dated as of September 27, 1999 made by
CRIT-NC, LLC in favor of The Prudential Insurance Company of
America pertaining to the $50,550,000 Promissory Note.
<PAGE>
Item 5. Other Events
As stated in a press release dated October 4, 1999, Cornerstone Realty
Income Trust, Inc. ("Cornerstone") borrowed $50,550,000 from The Prudential
Insurance Company of America ("Lender") on September 29, 1999 ("Cornerstone
Loan") and evidenced the Cornerstone Loan by executing a promissory note in that
amount ("Cornerstone Note"). Our subsidiary, CRIT-NC, LLC (our "Subsidiary")
also borrowed $22,950,000 from the Lender at the same time ("Subsidiary Loan")
and evidenced the Subsidiary Loan by executing a promissory note in that amount
("Subsidiary Note" and, together with the Cornerstone Note, the "Notes").
The Notes are each payable interest only at the rate of 7.29% per annum
("Note Rate") maturing on October 15, 2006 ("Maturity"). However, in the event
that either the debt service coverage ratio for the entire Portfolio (as
hereinafter defined) is less than 1.30 to 1.0, or we and our Subsidiary have not
spent at least $2,400,000, in the aggregate, in the manner required by the
Lender for the entire Portfolio for repairs, capital improvements and
replacements before January 1, 2001 ("Repair Amount"), then effective on the
first monthly payment which is due following either of such events, we will be
obligated to make monthly payments on the Notes equal to their then outstanding
principal balances multiplied by 8.705% based on a 25 year amortization (which
shall continue until such time as the debt service coverage ratio for the entire
Portfolio is equal to or greater than 1.80 to 1.0 or the Lender determines that
we and our Subsidiary have spent the Repair Amount).
The Notes each incur a 10% per annum daily charge ("Daily Charge") for
late payments and, if not fully paid by the 14th day following its due date, a
4% late charge assessment ("Late Charge"). The Late Charge shall be payable in
lieu of any Daily Charge that may have accrued. Upon an Event of Default (as
hereinafter defined) or at Maturity, the Notes shall bear interest at the lesser
of (i) the maximum rate allowed by law or (ii) the greater of (a) the Note Rate
plus five percent (5%) or (b) five percent (5%) plus the prime rate for
corporate loans at large United States Money Center Commercial Banks.
The Notes may be prepaid after thirty (30) days written notice and
payment of a prepayment premium ("Prepayment Premium") equal to the greater of
(a) one percent (1%) of the principal amount being prepaid multiplied by the
quotient of the number of full months remaining until Maturity divided by the
number of full months comprising the term of the Notes, or (b) based on the
present value of the Notes which are determined by discounting at a stated
treasury rate all scheduled payments remaining to Maturity attributable to the
amount being prepaid. No Prepayment Premium shall be due if the Notes are
prepaid during the last fourteen (14) days prior to Maturity. However, any
prepayment on either of the Notes will require a proportionate prepayment of the
other Note; that is, if 5% of either the Cornerstone Note or the Subsidiary Note
is prepaid, 5% of the other note must also be prepaid.
Although the Notes have limited recourse liability for certain matters,
we and our Subsidiary do have liability for other matters (such as, for example,
accrued or payable taxes and assessments, security deposits due tenants,
insurance proceeds or condemnation awards not turned over to the Lender, and
waste of the property comprising the Portfolio), and we and our Subsidiary also
have full liability for indemnifications or in the event there is any breach or
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violation of the sale or encumbrance prohibitions (the so-called due-on-sale or
encumbrance provisions) of the Security Instruments (as hereinafter defined),
fraud, material misrepresentation, or bankruptcy.
Each of the apartment communities financed from the Cornerstone Loan,
comprising three in Georgia (Ashley Run, Spring Lake and Stone Brook) and three
in South Carolina (The Arbors at Windsor Lake, Hampton Pointe and Westchase),
and the four apartment communities in North Carolina (Charleston Place,
Remington Place, Stone Point and St. Regis) financed from the Subsidiary Loan
(collectively, the "Portfolio"), are encumbered by either a Deed to Secure Debt,
Mortgage or Deed of Trust (collectively, the "Security Instruments") and the
Security Instruments secure the Notes. We and our Subsidiary are subject to
various requirements under each Security Instrument. For instance, we must
maintain adequate insurance on the Portfolio, there must be maintenance of
certain records and reports, and there must be maintenance of the Portfolio in
good order, repair and operating condition.
In addition, each Security Instrument defines certain events of default
("Events of Default"). For each Security Instrument, Events of Default include
any default under either of the Notes, any default under any Security
Instrument, any default under any other loan documents (including the
Environmental Indemnity Agreements, as hereinafter defined), any breach or
default of certain representations, warranties and covenants, and any sale or
encumbrance of the Portfolio or further assignment of leases and rents therein,
without the prior consent of the Lender. In addition, we have guaranteed
("Guaranty") the Subsidiary's recourse obligations under the Subsidiary Note. A
default under such Guaranty is likewise a default under the Cornerstone Note.
The Notes and the Security Instruments are cross-collateralized and cross-
defaulted.
Upon any Event of Default, various remedies are available to the
Lender. Those remedies include, for example (1) declaring the entire principal
balance under the Notes, and all accrued and unpaid interest, to be due and
payable immediately along with the Prepayment Premium; (2) taking possession of
the Portfolio; and (3) collecting rental payments from tenants and/or
foreclosing the lien of the Security Instruments and selling the Portfolio to
satisfy unpaid amounts due under either of the Notes, the Security Instruments,
the Environmental Indemnity Agreements or other loan documents. Each Security
Instrument requires payment of any costs that may be incurred by the Lender and
the trustee, if applicable, in exercising such remedies. There are also certain
indemnifications (including the Environmental Indemnity Agreements) which
survive the payoff of the Cornerstone Loan and the Subsidiary Loan.
Both the Cornerstone Portfolio and the Subsidiary Portfolio are subject
to separate Environmental Indemnity Agreements (collectively, the "Environmental
Indemnity Agreements"). The indemnities protect the Lender for losses (broadly
defined) in the event that any Hazardous Materials (also broadly defined), which
includes, for example, asbestos, lead based paint and other toxic materials, are
found in, on, or under any of the properties within the Portfolio.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: November 2, 1999 By: /s/ Stanley J. Olander, Jr.
------------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer
Cornerstone Realty Income
Trust, Inc.
<PAGE>
Index to Exhibits
Exhibit No. Exhibit
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4.1 Promissory Note dated September 27, 1999 in the principal amount
of $50,550,000 made payable by Cornerstone Realty Income Trust,
Inc. to the order of The Prudential Insurance Company of America.
4.2 Promissory Note dated September 27, 1999 in the principal amount
of $22,950,000 made payable by CRIT-NC, LLC to the order of The
Prudential Insurance Company of America.
4.3 Mortgage and Security Agreement dated as of September 27, 1999
from Cornerstone Realty Income Trust, Inc., as borrower, to The
Prudential Insurance Company of America, as lender, pertaining to
the Hampton Pointe and Westchase properties.
4.4 Mortgage and Security Agreement dated as of September 27, 1999
from Cornerstone Realty Income Trust, Inc., as borrower, to The
Prudential Insurance Company of America, as lender, pertaining to
the Arbors at Windsor Lake property.
4.5 Deed of Trust and Security Agreement dated as of September 27,
1999 made by CRIT-NC, LLC, as borrower, for the benefit of The
Prudential Insurance Company of America, as lender, pertaining to
the Charleston Place and Stone Point properties.
4.6 Deed of Trust and Security Agreement dated as of September 27,
1999 made by CRIT-NC, LLC, as borrower, for the benefit of The
Prudential Insurance Company of America, as lender, pertaining to
the St. Regis and Remington Place properties.
4.7 Deed To Secure Debt and Security Agreement by Cornerstone Realty
Income Trust, Inc., as borrower, to The Prudential Insurance
Company of America, as lender, pertaining to the Ashley Run,
Stone Brook and Spring Lake properties.
4.8 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Charleston County, South Carolina).
4.9 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Richland County, South Carolina).
<PAGE>
4.10 Assignment of Leases and Rents dated as of September 27, 1999, by
CRIT-NC, LLC to The Prudential Insurance Company of America
(Mecklenburg County, North Carolina).
4.11 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Clayton County, Georgia).
4.12 Assignment of Leases and Rents dated as of September 27, 1999, by
Cornerstone Realty Income Trust, Inc. to The Prudential Insurance
Company of America (Gwinnett County, Georgia).
4.13 Assignment of Leases and Rents dated as of September 27, 1999, by
CRIT-NC, LLC to The Prudential Insurance Company of America (Wake
County, North Carolina).
10.1 Environmental Indemnity Agreement dated as of September 27, 1999
by Cornerstone Realty Income Trust, Inc. in favor of The
Prudential Insurance Company of America referring to the
$50,550,000 Promissory Note.
10.2 Environmental Indemnity Agreement dated as of September 27, 1999
by CRIT-NC, LLC and Cornerstone Realty Income Trust, Inc. in
favor of The Prudential Insurance Company of America referring to
the $22,950,000 Note.
10.3 Unconditional and Irrevocable Guaranty of Payment and Performance
(Recourse Carveouts) dated as of September 27, 1999 made by
Cornerstone Realty Income Trust, Inc. in favor of The Prudential
Insurance Company of America pertaining to the $22,950,000
Promissory Note.
10.4 Unconditional and Irrevocable Guaranty of Payment and Performance
(Cross-Collateralization) dated as of September 27, 1999 made by
Cornerstone Realty Income Trust, Inc. in favor of The Prudential
Insurance Company of America pertaining to the $22,950,000
Promissory Note.
10.5 Unconditional and Irrevocable Guaranty of Payment and Performance
(Cross-Collateralization) dated as of September 27, 1999 made by
CRIT-NC, LLC in favor of The Prudential Insurance Company of
America pertaining to the $50,550,000 Promissory Note.
EXHIBIT 4.1
PROMISSORY NOTE
$50,550,000.00 SEPTEMBER 27, 1999
Loan No. 6 103 650
FOR VALUE RECEIVED, CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation ("BORROWER") promises to pay to the order of THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("LENDER"), which shall
also mean successors and assigns who become holders of this Note), at Two
Ravinia Drive, Suite 1400, Atlanta, Georgia 30346, the principal sum of FIFTY
MILLION FIVE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($50,550,000.00), with
interest on the unpaid balance ("BALANCE") at the rate of seven and twenty-nine
hundredths percent (7.29%) per annum ("NOTE RATE") from the date of the first
disbursement of Loan proceeds under this Note ("FUNDING DATE") until Maturity
(defined below). Capitalized terms used without definition shall have the
meanings ascribed to them in the Instrument (defined below).
1. Regular Payments. Principal and interest shall be payable as follows:
(a) Interest from the Funding Date through October 15, 1999 shall be
due and payable on November 15, 1999, together with the first regularly
scheduled payment due under 1(b) below.
(b) Interest only shall be paid in arrears in eighty-four (84) monthly
installments based on the Balance outstanding from time to time, which, on the
Funding Date, shall be in the amount of Three Hundred Seven Thousand Ninety One
and 25/100 Dollars ($307,091.25) each, commencing on November 15, 1999 and
continuing on the fifteenth (15th) day of each succeeding month to and including
October 15, 2006. Each payment due date is referred to as a "DUE DATE".
(c) The entire Obligations (as defined in the Instrument) shall be due
and payable on October 15, 2006 ("MATURITY DATE"). "MATURITY" shall mean the
Maturity Date or earlier date that the Obligations may be due and payable by
acceleration by Lender as provided in the Documents.
(d) Interest on the Balance for any full month shall be calculated on
the basis of a three hundred sixty (360) day year consisting of twelve (12)
months of thirty (30) days each. For any partial month, interest shall be due in
an amount equal to (i) the Note Rate divided by 360 multiplied by (ii) the
number of days any Balance is outstanding through and including the day of
payment.
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2. Late Payment and Default Interest
(a) Late Charge. If any payment due under the Documents is not fully
paid by its due date, a late charge based on the monthly payment multiplied by
ten percent (10%) and divided by 365 days (Monthly Payment x 10%/365) per day
(the "DAILY CHARGE") shall be assessed for each day that elapses until payment
in full is made (including the date payment is made); provided, however, that if
any such payments, together with all accrued Daily Charges, are not fully paid
by the fourteenth (14th) day following their due date, a late charge equal to
four percent (4%) of such payments (the "LATE CHARGE") shall be assessed and be
immediately due and payable. The Late Charge shall be payable in lieu of Daily
Charges that shall have accrued. The Late Charge may be assessed only once on
each overdue payment. These charges shall be paid to defray the expenses
incurred by Lender in handling and processing such delinquent payment(s) and to
compensate Lender for the loss of the use of such funds. The Daily Charge and
Late Charge shall be secured by the Documents. The imposition of the Daily
Charge, Late Charge, and/or requirement that interest be paid at the Default
Rate (defined below) shall not be construed in any way to (i) excuse Borrower
from its obligation to make each payment under this Note promptly when due or
(ii) preclude Lender from exercising any rights or remedies available under the
Documents upon an Event of Default.
(b) Acceleration. Upon an Event of Default, including a breach of
Section 5.01 of the Instrument, Lender may declare the Balance, unpaid accrued
interest, the Prepayment Premium (defined below) and all other Obligations
immediately due and payable in full.
(c) Default Rate. Upon an Event of Default or at Maturity, whether by
acceleration (due to a voluntary or involuntary default) or otherwise, the
entire Obligations (excluding accrued but unpaid interest if prohibited by law)
shall bear interest at the Default Rate. The "DEFAULT RATE" shall be the lesser
of (i) the maximum rate allowed by the law or (ii) the greater of (A) the Note
Rate plus five percent (5%) or (B) five percent (5%) plus the prime rate (for
corporate loans at large United States money center commercial banks) published
in the Wall Street Journal on the first Business Day (defined below) of the
month in which the Event of Default or Maturity occurs or continues. The term
"BUSINESS DAY" shall mean a day which commercial banks are not authorized or
required by law to close in the Property State or in the State where payments
made by Borrower are received.
3. Application of Payments. Before an Event of Default, all payments received
under this Note shall be applied in the following order: (a) to unpaid Daily
Charges, Late Charges and costs of collection; (b) to any prepayment premium
due; (c) to interest on the Balance; and (d) then to the Balance. After an Event
of Default, all payments shall be applied in any order determined by Lender in
its sole discretion.
4. Prepayment. This Note may be prepaid, in whole or in part, upon at least
thirty (30) days' prior written notice to Lender and upon payment of all accrued
interest (and other Obligations due under the Documents) and a prepayment
premium ("PREPAYMENT PREMIUM") equal to the greater of (a) one percent (1%) of
the principal amount being prepaid multiplied by the quotient of the number of
full months remaining until the Maturity Date divided by the number of full
months comprising the term of this Note, or (b) the Present Value of the Loan
(defined below)
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<PAGE>
less the amount of principal and accrued interest (if any) being prepaid,
calculated as of the prepayment date. The Prepayment Premium shall be due and
payable, except as provided in the Instrument or as limited by law, upon any
prepayment of this Note, whether voluntary or involuntary, and Lender shall not
be obligated to accept any prepayment of the Note unless it is accompanied by
the Prepayment Premium, all accrued interest and all other Obligations due under
the Documents. Unless prepayment occurs on a Due Date, the actual number of days
until the next Due Date will be used to discount during that partial month.
Lender shall notify Borrower of the amount and calculation of the Prepayment
Premium. Borrower agrees that (a) Lender shall not be obligated to actually
reinvest the amount prepaid in any Treasury obligation and (b) the Prepayment
Premium is directly related to the damages that Lender will suffer as a result
of the prepayment. The "PRESENT VALUE OF THE LOAN" shall be determined by
discounting all scheduled payments remaining to the Maturity Date attributable
to the amount being prepaid at the Discount Rate (defined below). The "DISCOUNT
RATE" is the rate which, when compounded monthly, is equivalent to the Treasury
Rate (defined below), when compounded semi-annually. The "TREASURY RATE" is the
semi-annual yield on the Treasury Constant Maturity Series with maturity equal
to the remaining weighted average life of the Loan, for the week prior to the
prepayment date, as reported in Federal Reserve Statistical Release H.15 -
Selected Interest Rates, conclusively determined by Lender (absent a clear
mathematical calculation error) on the prepayment date. The rate will be
determined by linear interpolation between the yields reported in Release H.15,
if necessary. If Release H.15 is no longer published, Lender shall select a
comparable publication to determine the Treasury Rate. Notwithstanding the
foregoing, no Prepayment Premium shall be due if the Note is prepaid during the
last fourteen (14) days prior to the Maturity Date. In the event that either
Borrower prepays any amount under this Note or CRIT-NC, LLC prepays any amount
under that certain promissory note made to the order of Lender of even date
herewith (the "CRIT-NC, LLC Note"), an equal amount based on the current
allocated Balance must be paid on the other Note (For example, if CRIT-NC, LLC
prepays 5% on the CRIT-NC, LLC Note, Borrower shall simultaneously prepay 5% on
this Note). The applicable Prepayment Premium must also be paid on both Notes in
such event.
5. No Usury. Under no circumstances shall the aggregate amount paid or to be
paid as interest under this Note exceed the highest lawful rate permitted under
applicable usury law ("MAXIMUM RATE"). If under any circumstances the aggregate
amounts paid on this Note shall include interest payments which would exceed the
Maximum Rate, Borrower stipulates that payment and collection of interest in
excess of the Maximum Rate ("EXCESS AMOUNT") shall be deemed the result of a
mistake by both Borrower and Lender and Lender shall promptly credit the Excess
Amount against the Balance or refund to Borrower any portion of the Excess
Amount which cannot be so credited.
6. Security and Documents Incorporated. This Note is the Note of Borrower
referred to and secured or benefited by (i) the two (2) Mortgages and Security
Agreements of even date herewith between Borrower and Lender to be recorded in
the real estate records of Richland County, South Carolina and Charleston
County, South Carolina, (ii) the Deed to Secure Debt and Security Agreement
between Borrower and Lender of even date herewith to be recorded in the real
estate records of Gwinnett County, Georgia and Clayton County, Georgia, (iii)
the Unconditional and Irrevocable Guaranty of Payment and Performance
(Cross-Collateralization)
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<PAGE>
of even date herewith executed by CRIT-NC, LLC in favor of Lender, and (iv) the
two (2) Deeds of Trust and Security Agreements from CRIT-NC, LLC for the benefit
of the Lender of even date herewith to be recorded in the real estate records of
Mecklenburg County, North Carolina and Wake County, North Carolina
(collectively, the "INSTRUMENT") and is secured by all of the Property described
in the Instrument. Borrower shall observe and perform all of the provisions in
the Documents. The Documents are incorporated into this Note as if fully set
forth in this Note.
7. Treatment of Payments. All payments under this Note shall be made, without
offset or deduction, (a) in lawful money of the United States of America at the
office of Lender or at the place (and in the manner) Lender may specify by
written notice to Borrower, (b) in immediately available federal funds, and (c)
if received by Lender prior to 2:00 p.m. local time at such place, shall be
credited on that day or else, at Lender's option, shall be credited on the next
Business Day. Initially (unless waived by Lender), and until Lender shall direct
Borrower otherwise, Borrower shall make all payments due under this Note in the
manner set forth in Section 3.13 of the Instrument. If any Due Date falls on a
day which is not a Business Day, then the payment shall be deemed to have fallen
on the next succeeding Business Day.
8. Limited Recourse Liability. Except to the extent set forth in this Paragraph
8 and Paragraph 9 of this Note, the Borrower (singularly or collectively, the
"Exculpated Parties") shall not have any personal liability for the Obligations.
Notwithstanding the preceding sentence, Lender may bring a foreclosure action or
other appropriate action to enforce the Documents or realize upon and protect
the Property (including, without limitation, naming the Exculpated Parties in
the actions) and in addition THE EXCULPATED PARTIES SHALL HAVE PERSONAL
LIABILITY FOR:
(a) any indemnity, guaranty, master lease or similar instrument
furnished in connection with the Loan (including, without limitation, the
provisions of Section 8.03, 8.04, 8.05, 8.06 and 8.07 of the Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect to
the Property (except for any sums escrowed with Lender for such purposes
notwithstanding how applied by Lender);
(c) any security deposits of tenants (i) not turned over to Lender or
Lender's successor, if any, upon foreclosure, sale (pursuant to power of sale),
or conveyance in lieu thereof (if Lender, or any affiliate of Lender is the
party taking title to the Property), or (ii) not turned over to a receiver or
trustee for the Property after appointment;
(d) any insurance proceeds or condemnation awards neither turned over
to Lender nor used in compliance with Section 3.07 and 3.08 of the Instrument;
(e) if any of the Exculpated Parties executes an amendment or
termination of any lease (other than a lease with a Major Tenant which is
addressed in Paragraph 9(d) below) without Lender's prior written consent (and
Lender's consent was required under the Documents), the Exculpated Parties shall
have personal liability for the greater of:
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<PAGE>
(i) the present value (calculated at the Discount Rate) of the
aggregate total dollar amount (if any) by which (A) rental income and/or other
tenant obligations prior to the amendment of such lease exceeds (B) rental
income and/or other tenant obligations after the amendment of such lease; or
(ii) any termination fee or other consideration paid;
(f) waste of the Property;
(g) any rents or other income from the Property received by any of the
Exculpated Parties after receipt of written notice of a default under the
Documents (but only if the default is non-monetary in nature and Borrower is
entitled to notice under the Documents) and not otherwise applied to the
Obligations evidenced by this Note or to the current (not deferred) operating
expenses of the Property; PROVIDED, HOWEVER, THAT THE EXCULPATED PARTIES SHALL
HAVE PERSONAL LIABILITY for amounts paid as expenses to a person or entity
related to or affiliated with any of the Exculpated Parties unless the payments
are expressly permitted in the Documents;
(h) Borrower's failure to maintain any letter of credit required under
the Documents; and
(i) all legal fees, including the allocated costs of Lender's staff
attorneys, and other expenses incurred by Lender in enforcing the Documents if
Borrower contests, delays, or otherwise hinders or opposes (including, without
limitation, the filing of a bankruptcy) any of Lender's enforcement actions.
9. Full Recourse Liability. Notwithstanding the provisions of Paragraph 8 of
this Note, the EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for the
Obligations if:
(a) there shall be any breach or violation of Article V of the
Instrument; or
(b) there shall be any fraud or material misrepresentation by any of
the Exculpated Parties in connection with the Property, the Documents, the Loan
application, or any other aspect of the Loan which (i) materially and adversely
affects the Loan, or (ii) would have prevented Borrower from satisfying the
conditions for closing of the Loan; or
(c) the Property shall become an asset in (i) a voluntary bankruptcy or
insolvency proceeding or (ii) an involuntary bankruptcy or insolvency proceeding
which is not dismissed within ninety (90) days of filing; provided, however,
that this Paragraph 9(c) shall not apply if an involuntary bankruptcy is filed
by Lender; or
(d) any of the Exculpated Parties executes an amendment or termination
of any lease with a Major Tenant without Lender's prior written consent (and
Lender's consent was required under the Documents).
-5-
<PAGE>
10. Joint and Several Liability. This Note shall be the joint and several
obligation of all makers, endorsers, guarantors and sureties, and shall be
binding upon them and their respective successors and assigns and shall inure to
the benefit of Lender and its successors and assigns.
11. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER OR BORROWER IN CONNECTION THEREWITH.
12. Governing Law. This Note shall be governed by the laws of the State of
Georgia.
-6-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed by Borrower as of
the day and year first above written.
BORROWER:
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
----------------------------
Name: Stanley J. Olander, Jr.
------------------------
Title: Chief Financial Officer
------------------------
(CORPORATE SEAL)
-7-
<PAGE>
STATE OF VIRGINIA
CITY OF RICHMOND
On this 27th day of September, 1999, before me, Jacquelyn B. Owens, a
Notary Public of the City of Richmond, Virginia, personally appeared Stanley J.
Olander, Jr., known or identified to me to be the Chief Financial Officer of
CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation, and the officer
who subscribed the corporate name to the foregoing instrument, and acknowledged
to me that he executed the same in the name of such corporation.
IN WITNESS WHEREOF, I have set my hand and affixed my official notarial
stamp or seal, the day and year in this certificate first above written.
My Commission Expires:
6/30/03 Jacquelyn B. Owens
- ---------------------- ------------------------
Notary Public
[NOTARIAL SEAL]
-8-
EXHIBIT 4.2
PROMISSORY NOTE
$22,950,000.00 SEPTEMBER 27, 1999
Loan No. 6 103 651
FOR VALUE RECEIVED, CRIT-NC, LLC, a Virginia limited liability company
("BORROWER") promises to pay to the order of THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation ("LENDER"), which shall also mean successors
and assigns who become holders of this Note), at Two Ravinia Drive, Suite 1400,
Atlanta, Georgia 30346, the principal sum of TWENTY-TWO MILLION NINE HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($22,950,000.00), with interest on the unpaid
balance ("BALANCE") at the rate of seven and twenty-nine hundredths percent
(7.29%) per annum ("NOTE RATE") from the date of the first disbursement of Loan
proceeds under this Note ("FUNDING DATE") until Maturity (defined below).
Capitalized terms used without definition shall have the meanings ascribed to
them in the Instrument (defined below).
1. Regular Payments. Principal and interest shall be payable as follows:
(a) Interest from the Funding Date through October 15, 1999 shall be
due and payable on November 15, 1999, together with the first regularly
scheduled payment due under 1(b) below.
(b) Interest only shall be paid in arrears in eighty-four (84) monthly
installments based on the Balance outstanding from time to time, which, on the
Funding Date, shall be in the amount of One Hundred Thirty Nine Thousand Four
Hundred Twenty One and 25/100 Dollars ($139,421.25) each, commencing on November
15, 1999 and continuing on the fifteenth (15th) day of each succeeding month to
and including October 15, 2006. Each payment due date is referred to as a "DUE
DATE".
(c) The entire Obligations (as defined in the Instrument) shall be due
and payable on October 15, 2006 ("MATURITY DATE"). "MATURITY" shall mean the
Maturity Date or earlier date that the Obligations may be due and payable by
acceleration by Lender as provided in the Documents.
(d) Interest on the Balance for any full month shall be calculated on
the basis of a three hundred sixty (360) day year consisting of twelve (12)
months of thirty (30) days each. For any partial month, interest shall be due in
an amount equal to (i) the Note Rate divided by 360 multiplied by (ii) the
number of days any Balance is outstanding through and including the day of
payment.
2. Late Payment and Default Interest
(a) Late Charge. If any payment due under the Documents is not fully
paid by its due date, a late charge based on the monthly payment multiplied by
ten percent (10%) and divided by 365 days (Monthly Payment x 10%/365) per day
(the "DAILY CHARGE") shall be assessed for each
<PAGE>
day that elapses until payment in full is made (including the date payment is
made); provided, however, that if any such payments, together with all accrued
Daily Charges, are not fully paid by the fifteenth (15th) day following their
due date, a late charge equal to four percent (4%) of such payments (the "LATE
CHARGE") shall be assessed and be immediately due and payable. The Late Charge
shall be payable in lieu of Daily Charges that shall have accrued. The Late
Charge may be assessed only once on each overdue payment. These charges shall be
paid to defray the expenses incurred by Lender in handling and processing such
delinquent payment(s) and to compensate Lender for the loss of the use of such
funds. The Daily Charge and Late Charge shall be secured by the Documents. The
imposition of the Daily Charge, Late Charge, and/or requirement that interest be
paid at the Default Rate (defined below) shall not be construed in any way to
(i) excuse Borrower from its obligation to make each payment under this Note
promptly when due or (ii) preclude Lender from exercising any rights or remedies
available under the Documents upon an Event of Default.
(b) Acceleration. Upon an Event of Default, including a breach of
Section 5.01 of the Instrument, Lender may declare the Balance, unpaid accrued
interest, the Prepayment Premium (defined below) and all other Obligations
immediately due and payable in full.
(c) Default Rate. Upon an Event of Default or at Maturity, whether by
acceleration (due to a voluntary or involuntary default) or otherwise, the
entire Obligations (excluding accrued but unpaid interest if prohibited by law)
shall bear interest at the Default Rate. The "DEFAULT RATE" shall be the lesser
of (i) the maximum rate allowed by the law or (ii) the greater of (A) the Note
Rate plus five percent (5%) or (B) five percent (5%) plus the prime rate (for
corporate loans at large United States money center commercial banks) published
in the Wall Street Journal on the first Business Day (defined below) of the
month in which the Event of Default or Maturity occurs or continues. The term
"BUSINESS DAY" shall mean a day which commercial banks are not authorized or
required by law to close in the Property State or in the State where payments
made by Borrower are received.
3. Application of Payments. Before an Event of Default, all payments received
under this Note shall be applied in the following order: (a) to unpaid Daily
Charges, Late Charges and costs of collection; (b) to any prepayment premium
due; (c) to interest on the Balance; and (d) then to the Balance. After an Event
of Default, all payments shall be applied in any order determined by Lender in
its sole discretion.
4. Prepayment. This Note may be prepaid, in whole or in part, upon at least
thirty (30) days' prior written notice to Lender and upon payment of all accrued
interest (and other Obligations due under the Documents) and a prepayment
premium ("PREPAYMENT PREMIUM") equal to the greater of (a) one percent (1%) of
the principal amount being prepaid multiplied by the quotient of the number of
full months remaining until the Maturity Date divided by the number of full
months comprising the term of this Note, or (b) the Present Value of the Loan
(defined below) less the amount of principal and accrued interest (if any) being
prepaid, calculated as of the prepayment date. The Prepayment Premium shall be
due and payable, except as provided in the Instrument or as limited by law, upon
any prepayment of this Note, whether voluntary or involuntary, and Lender shall
not be obligated to accept any prepayment of the Note unless it is accompanied
by the Prepayment Premium, all accrued interest and all other Obligations due
-2-
<PAGE>
under the Documents. Unless prepayment occurs on a Due Date, the actual number
of days until the next Due Date will be used to discount during that partial
month. Lender shall notify Borrower of the amount and calculation of the
Prepayment Premium. Borrower agrees that (a) Lender shall not be obligated to
actually reinvest the amount prepaid in any Treasury obligation and (b) the
Prepayment Premium is directly related to the damages that Lender will suffer as
a result of the prepayment. The "PRESENT VALUE OF THE LOAN" shall be determined
by discounting all scheduled payments remaining to the Maturity Date
attributable to the amount being prepaid at the Discount Rate (defined below).
The "DISCOUNT RATE" is the rate which, when compounded monthly, is equivalent to
the Treasury Rate (defined below), when compounded semi-annually. The "TREASURY
RATE" is the semi-annual yield on the Treasury Constant Maturity Series with
maturity equal to the remaining weighted average life of the Loan, for the week
prior to the prepayment date, as reported in Federal Reserve Statistical Release
H.15 - Selected Interest Rates, conclusively determined by Lender (absent a
clear mathematical calculation error) on the prepayment date. The rate will be
determined by linear interpolation between the yields reported in Release H.15,
if necessary. If Release H.15 is no longer published, Lender shall select a
comparable publication to determine the Treasury Rate. Notwithstanding the
foregoing, no Prepayment Premium shall be due if the Note is prepaid during the
last fourteen (14) days prior to the Maturity Date. In the event that either
Borrower prepays any amount under this Note or Cornerstone Realty Income Trust
Inc. ("Cornerstone") prepays any amount under that certain promissory note made
to the order of Lender of even date herewith (the "Cornerstone Note"), an equal
amount based on the current allocated Balance must be paid on the other Note
(For example, if Cornerstone prepays 5% on the Cornerstone Note, Borrower shall
simultaneously prepay 5% on this Note). The applicable Prepayment Premium must
also be paid on both Notes in such event.
5. No Usury. Under no circumstances shall the aggregate amount paid or to be
paid as interest under this Note exceed the highest lawful rate permitted under
applicable usury law ("MAXIMUM RATE"). If under any circumstances the aggregate
amounts paid on this Note shall include interest payments which would exceed the
Maximum Rate, Borrower stipulates that payment and collection of interest in
excess of the Maximum Rate ("EXCESS AMOUNT") shall be deemed the result of a
mistake by both Borrower and Lender and Lender shall promptly credit the Excess
Amount against the Balance or refund to Borrower any portion of the Excess
Amount which cannot be so credited.
6. Security and Documents Incorporated. This Note is the Note of Borrower
referred to and secured or benefited by (i) the two (2) Deeds of Trust and
Security Agreements from Borrower for the benefit of the Lender of even date
herewith to be recorded in the real estate records of Mecklenburg County, North
Carolina and Wake County, North Carolina, (ii) the Unconditional and Irrevocable
Guaranty of Payment and Performance (Cross-Collateralization) of even date
herewith executed by Cornerstone Realty Income Trust, Inc. ("Guarantor") in
favor of Lender, (iii) the two (2) Mortgages and Security Agreements of even
date herewith between Guarantor and Lender to be recorded in the real estate
records of Richland County, South Carolina and Charleston County, South
Carolina, (iv) the Deed to Secure Debt and Security Agreements between Guarantor
and Lender of even date herewith to be recorded in the real estate records of
Gwinnett County, Georgia and Clayton County, Georgia (collectively, the
"INSTRUMENT") and is secured by all of the Property described in the Instrument.
Borrower shall observe and perform
-3-
<PAGE>
all of the provisions in the Documents. The Documents are incorporated into this
Note as if fully set forth in this Note.
7. Treatment of Payments. All payments under this Note shall be made, without
offset or deduction, (a) in lawful money of the United States of America at the
office of Lender or at the place (and in the manner) Lender may specify by
written notice to Borrower, (b) in immediately available federal funds, and (c)
if received by Lender prior to 2:00 p.m. local time at such place, shall be
credited on that day or else, at Lender's option, shall be credited on the next
Business Day. Initially (unless waived by Lender), and until Lender shall direct
Borrower otherwise, Borrower shall make all payments due under this Note in the
manner set forth in Section 3.13 of the Instrument. If any Due Date falls on a
day which is not a Business Day, then the payment shall be deemed to have fallen
on the next succeeding Business Day.
8. Limited Recourse Liability. Except to the extent set forth in this Paragraph
8 and Paragraph 9 of this Note, the Borrower (singularly or collectively, the
"Exculpated Parties") shall not have any personal liability for the Obligations.
Notwithstanding the preceding sentence, Lender may bring a foreclosure action or
other appropriate action to enforce the Documents or realize upon and protect
the Property (including, without limitation, naming the Exculpated Parties in
the actions) and in addition THE EXCULPATED PARTIES SHALL HAVE PERSONAL
LIABILITY FOR:
(a) any indemnity, guaranty, master lease or similar instrument
furnished in connection with the Loan (including, without limitation, the
provisions of Section 8.03, 8.04, 8.05, 8.06 and 8.07 of the Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect to
the Property (except for any sums escrowed with Lender for such purposes
notwithstanding how applied by Lender);
(c) any security deposits of tenants (i) not turned over to Lender or
Lender's successor, if any, upon foreclosure, sale (pursuant to power of sale),
or conveyance in lieu thereof (if Lender, or any affiliate of Lender is the
party taking title to the Property), or (ii) not turned over to a receiver or
trustee for the Property after appointment;
(d) any insurance proceeds or condemnation awards neither turned over
to Lender nor used in compliance with Section 3.07 and 3.08 of the Instrument;
(e) if any of the Exculpated Parties executes an amendment or
termination of any lease (other than a lease with a Major Tenant which is
addressed in Paragraph 9(d) below) without Lender's prior written consent (and
Lender's consent was required under the Documents), the Exculpated Parties shall
have personal liability for the greater of:
(i) the present value (calculated at the Discount Rate) of the
aggregate total dollar amount (if any) by which (A) rental income and/or other
tenant obligations prior to the amendment of such lease exceeds (B) rental
income and/or other tenant obligations after the amendment of such lease; or
-4-
<PAGE>
(ii) any termination fee or other consideration paid;
(f) waste of the Property;
(g) any rents or other income from the Property received by any of the
Exculpated Parties after receipt of written notice of a default under the
Documents (but only if the default is non-monetary in nature and Borrower is
entitled to notice under the Documents) and not otherwise applied to the
Obligations evidenced by this Note or to the current (not deferred) operating
expenses of the Property; PROVIDED, HOWEVER, THAT THE EXCULPATED PARTIES SHALL
HAVE PERSONAL LIABILITY for amounts paid as expenses to a person or entity
related to or affiliated with any of the Exculpated Parties unless the payments
are expressly permitted in the Documents;
(h) Borrower's failure to maintain any letter of credit required
under the Documents; and
(i) all legal fees, including the allocated costs of Lender's staff
attorneys, and other expenses incurred by Lender in enforcing the Documents if
Borrower contests, delays, or otherwise hinders or opposes (including, without
limitation, the filing of a bankruptcy) any of Lender's enforcement actions.
9. Full Recourse Liability. Notwithstanding the provisions of Paragraph 8 of
this Note, the EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for the
Obligations if:
(a) there shall be any breach or violation of Article V of the
Instrument; or
(b) there shall be any fraud or material misrepresentation by any of
the Exculpated Parties in connection with the Property, the Documents, the Loan
application, or any other aspect of the Loan which (i) materially and adversely
affects the Loan, or (ii) would have prevented Borrower from satisfying the
conditions for closing of the Loan; or
(c) the Property shall become an asset in (i) a voluntary bankruptcy or
insolvency proceeding or (ii) an involuntary bankruptcy or insolvency proceeding
which is not dismissed within ninety (90) days of filing; provided, however,
that this Paragraph 9(c) shall not apply if an involuntary bankruptcy is filed
by Lender; or
(d) any of the Exculpated Parties executes an amendment or termination
of any lease with a Major Tenant without Lender's prior written consent (and
Lender's consent was required under the Documents).
10. Joint and Several Liability. This Note shall be the joint and several
obligation of all makers, endorsers, guarantors and sureties, and shall be
binding upon them and their respective successors and assigns and shall inure to
the benefit of Lender and its successors and assigns.
-5-
<PAGE>
11. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER OR BORROWER IN CONNECTION THEREWITH.
12. Governing Law. This Note shall be governed by the laws of the State of North
Carolina.
-6-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed by Borrower as of
the day and year first above written.
BORROWER:
CRIT-NC, LLC, a Virginia limited
liability company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a
Virginia corporation, Managing
Member
Attest: /s/ David S. McKenney By: Stanley J. Olander, Jr.
---------------------- ------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
Title: Senior Vice President Title: Chief Financial Officer
[CORPORATE SEAL]
-7-
<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA
CITY OF RICHMOND
I, a Notary Public of the County and State aforesaid, certify that
David S. McKenney personally came before me this day and acknowledged that he is
the Assistant Secretary of Cornerstone Realty Income Trust, Inc. a Virginia
corporation, which is the Managing Member of CRIT-NC, LLC, a Virginia limited
liability company, and that by authority duly given and as the act of the
company, the foregoing instrument was signed in its name by Stanley J. Olander,
Jr., its duly authorized Chief Financial Officer, as the act and deed of the
corporation on behalf of the limited liability company.
Witness my hand and official stamp or seal this 27th day of September,
1999.
/s/ Tijuana L. McWilliams
-------------------------
Notary Public
My Commission Expires: April 30, 2003
-----------------
[NOTARY SEAL]
-8-
================================================================================
EXHIBIT 4.3
CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation, as
mortgagor
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as mortgagee
(Lender)
---------------------------------
MORTGAGE AND SECURITY AGREEMENT
---------------------------------
Dated: As of September 27, 1999
Locations:
Hampton Pointe
Westchase
Charleston, Charleston County, South Carolina
PREPARED BY AND UPON
RECORDATION RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
Loan No. 6 103 650
================================================================================
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND IS
ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS UNDER THE NAMES OF
BORROWER, AS "DEBTOR", AND LENDER, AS "SECURED PARTY".
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I OBLIGATIONS..........................................................................3
SECTION 1.01 OBLIGATIONS..........................................................................3
SECTION 1.02 LOAN DOCUMENTS.......................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.......................................................4
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY....................................................4
SECTION 2.02 VALIDITY OF LOAN DOCUMENTS...........................................................4
SECTION 2.03 LITIGATION...........................................................................4
SECTION 2.04 STATUS OF PROPERTY...................................................................5
SECTION 2.05 TAX STATUS OF BORROWER...............................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE......................................................5
SECTION 2.07 DISCLOSURE...........................................................................6
SECTION 2.08 ILLEGAL ACTIVITY.....................................................................6
ARTICLE III COVENANTS AND AGREEMENTS.............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS...............................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE............................................................6
SECTION 3.03 TAXES AND OTHER CHARGES..............................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS........................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY................................................8
SECTION 3.06 INSURANCE............................................................................9
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY..................................................10
SECTION 3.08 CONDEMNATION........................................................................12
SECTION 3.09 LIENS AND LIABILITIES...............................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS..........................................................13
SECTION 3.11 ERISA...............................................................................14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS............................15
SECTION 3.13 ELECTRONIC PAYMENTS.................................................................17
SECTION 3.14 INSPECTION..........................................................................17
SECTION 3.15 RECORDS, REPORTS, AND AUDITS........................................................17
SECTION 3.16 BORROWER'S CERTIFICATES.............................................................18
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES..................................19
SECTION 3.18 ADDITIONAL SECURITY.................................................................19
SECTION 3.19 FURTHER ACTS........................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................19
SECTION 4.01 EXPENSES AND ADVANCES...............................................................19
SECTION 4.02 SUBROGATION.........................................................................20
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................20
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE..........................................................20
SECTION 5.02 PERMITTED TRANSFER..................................................................21
SECTION 5.03 PERMITTED (ONE TIME) TRANSFER.......................................................21
ARTICLE VI DEFAULTS AND REMEDIES...............................................................23
SECTION 6.01 EVENTS OF DEFAULT...................................................................23
SECTION 6.02 REMEDIES............................................................................24
SECTION 6.03 EXPENSES............................................................................26
SECTION 6.04 RIGHTS PERTAINING TO SALES..........................................................26
SECTION 6.05 APPLICATION OF PROCEEDS.............................................................27
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES................................................27
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES.......................................................27
ARTICLE VII SECURITY AGREEMENT..................................................................28
SECTION 7.01 SECURITY AGREEMENT..................................................................28
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES....................................28
SECTION 8.01 LIMITED RECOURSE LIABILITY..........................................................28
SECTION 8.02 GENERAL INDEMNITY...................................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY.........................................................29
SECTION 8.04 ERISA INDEMNITY.....................................................................29
SECTION 8.05 ENVIRONMENTAL INDEMNITY.............................................................29
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES..................................................29
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL....................................................30
ARTICLE IX ADDITIONAL PROVISIONS...............................................................30
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.01 USURY SAVINGS CLAUSE................................................................30
SECTION 9.02 NOTICES.............................................................................30
SECTION 9.03 SOLE DISCRETION OF LENDER...........................................................31
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION.......................................31
SECTION 9.05 CONSTRUCTION OF PROVISIONS..........................................................31
SECTION 9.06 TRANSFER OF LOAN....................................................................32
SECTION 9.07 MISCELLANEOUS.......................................................................32
SECTION 9.08 ENTIRE AGREEMENT....................................................................33
SECTION 9.9 WAIVER OF TRIAL BY JURY.............................................................33
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL..........................................33
SECTION 10.01 PARTIAL RELEASE.....................................................................34
SECTION 10.02 SUBSTITUTION OF COLLATERAL..........................................................35
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS...................................................38
SECTION 11.01 AMORTIZATION REQUIRED...............................................................38
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS.............................38
</TABLE>
ATTACHMENTS:
EXHIBIT A - Legal Description of Land
EXHIBIT B - Description of Personal Property
EXHIBIT C - Permitted Encumbrances
EXHIBIT D - List of Major Tenants
EXHIBIT E - Allocated Loan Amounts and Individual Property List
EXHIBIT F - Required Repairs, Capital Improvements and Replacements
-iv-
<PAGE>
DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
-v-
<PAGE>
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (i)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
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MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "INSTRUMENT") is made as of September
27, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation,
having its principal office and place of business at 306 East Main Street,
Richmond, Virginia 23219, as mortgagor ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346, as mortgagee ("LENDER").
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Has granted, bargained, sold, released, assigned, transferred, pledged,
mortgaged, warranted and conveyed, and by these presents does grant, bargain,
sell, release, assign, transfer, pledge, mortgage, warrant and convey unto the
said Lender, and grants Lender a security interest in the following property,
rights, interests and estates owned by Borrower (collectively, the "Property"):
(i) The real property in Charleston County, South Carolina and described
in Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures) now
or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all land
lying within the rights-of-way, roads, or streets, open or proposed, adjoining
the Land to the center line thereof, and all sidewalks, alleys, and strips and
gores of land adjacent to or used in connection with the Property;
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(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses,
agreements, contracts, instruments, books of account, insurance policies, and
any other documents relating to the use, construction, occupancy, leasing,
activity, or operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or
by any proceeding or purchase in lieu thereof ) of the Property, including
awards resulting from a change of any streets (whether as to grade, access,
or otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower`s right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or
use of the Property (including any payments received with respect to any
Tenant or the Property pursuant to the Bankruptcy Code) and all cash,
security deposits, advance rentals, or similar payments relating thereto
(collectively, the "RENTS") and all proceeds from the cancellation,
termination, surrender, sale or other disposition of the Leases, and the
right to receive and apply the Rents to the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
TO HAVE AND TO HOLD the Property unto the Lender and its successors and assigns
forever, subject to the matters listed in Exhibit C ("PERMITTED ENCUMBRANCES")
and the provisions of this Instrument.
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PROVIDED, HOWEVER, if Borrower shall pay and perform the Obligations as provided
for in the Documents (defined below) and shall comply with all the provisions in
the Documents, these presents and the estates hereby granted (except for the
obligations of Borrower set forth in Sections 3.11 and 3.12 and Article VIII
hereof) shall cease, terminate and be void.
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents;
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Mortgage and Security Agreement between
Borrower and Lender of even date herewith securing the Note and to be recorded
in the real estate records of Richland County, South Carolina, (vi) that certain
Deed to Secure Debt and Security Agreement between Borrower and Lender of even
date herewith securing the Note and to be recorded in the real estate records of
Gwinnett County, Georgia and Clayton County, Georgia, (vii) that certain
Unconditional Guaranty of Payment and Performance (Cross-Collateralization) (the
"Guaranty") of even date herewith from CRIT-NC, LLC ("Guarantor") to Lender,
(viii) that certain Deed of Trust and Security Agreement between Guarantor and
Lender of even date herewith securing the Guaranty and to be recorded in the
real estate records of Wake County, North Carolina, (ix) that certain Deed of
Trust and Security Agreement between Guarantor and Lender of even date herewith
securing the Guaranty and to be recorded in the real estate records of
Mecklenburg County, North Carolina, (x) any additional mortgages, deeds of trust
and deeds to secure debt and other instruments given to secure the Note pursuant
to the substitution of collateral provisions of Section 10.02 below, and (xi)
any other written agreement executed in connection with the closing of the Loan
(but excluding the Loan application and Loan commitment) and by the party
against whom enforcement is sought, including those given to evidence or further
secure the payment and performance of any of the Obligations, and any written
renewals, extensions, and amendments of the foregoing, executed
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by the party against whom enforcement is sought. All of the provisions of the
Documents are incorporated into this Instrument as if fully set forth in this
Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seized of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, charges, encumbrances, and security
interests, except the Permitted Encumbrances; (ii) will forever warrant and
defend its title to the Property and the validity, enforceability, and priority
of the lien and security interest created by this Instrument against the claims
of all persons; (iii) is a Virginia corporation duly organized, validly
existing, and in good standing and qualified to transact business under the laws
of its state of organization or incorporation ("ORGANIZATION STATE") and the
state where the Property is located ("PROPERTY STATE"); and (iv) has all
necessary approvals, governmental and otherwise, and full power and authority to
own its properties (including the Property) and carry on its business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument and Uniform Commercial Code ("U.C.C.") filings).
The Documents constitute valid and binding obligations of Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform its
obligations.
SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "Flood Acts") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
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(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, or
encumbrances except the Permitted Encumbrances and those created by this
Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower is
a limited liability company). Borrower has received reasonably equivalent value
for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
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SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("Assessments") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment; (ii) Borrower demonstrates to
Lender's reasonable satisfaction that (1) the Property will not be sold to
satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a sale of the
Property; (iii) at Lender's option, Borrower has deposited the full amount
necessary to pay any unpaid portion of the Assessments with Lender; and (iv)
such proceeding shall be permitted under any other instrument to which Borrower
or the Property is subject (whether superior or inferior to this Instrument);
provided, however, that the foregoing shall not apply to the contesting of any
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges.
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(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes mortgages or debts secured by mortgages for federal, state
or local purposes or changes the manner of the collection of any such existing
taxes, and/or (iii) imposes a tax, either directly or indirectly, on any of the
Documents or the Obligations, Borrower shall, if permitted by law, pay such tax
within the statutory period or within twenty (20) days after demand by Lender,
whichever is less; provided, however, that if, in the opinion of Lender,
Borrower is not permitted by law to pay such taxes, Lender shall have the option
to declare the Obligations immediately due and payable (without any Prepayment
Premium) upon six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender under the
documents against the claims of all persons, and shall promptly notify Lender of
any such claims. Lender (whether or not named as a party to such proceedings) is
authorized and empowered (but shall not be obligated) to take such additional
steps as it may deem necessary or proper for the defense of any such proceeding
or the protection of the lien, security interest, validity, enforceability, or
priority of this Instrument, title to the Property, or any rights of Lender
under the Documents, including the employment of counsel, the prosecution and/or
defense of litigation, the compromise, release, or discharge of such adverse
claims, the purchase of any tax title, the removal of such any liens and
security interests, and any other actions Lender deems necessary to protect its
interests. Borrower authorizes Lender to take any actions required to be taken
by Borrower, or permitted to be taken by Lender, in the Documents in the name
and on behalf of Borrower. Borrower shall reimburse Lender on demand for all
expenses (including attorneys' fees) incurred by it in connection with the
foregoing and Lender's exercise of its rights under the Documents. All such
expenses of Lender, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.
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SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property, nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien or security interest (other than the Permitted Encumbrances
and those created by this Instrument) or (ii) leased by Borrower (A) with
Lender's prior written consent or (B) if the replaced Property was leased at the
time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "LAWS"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property except for subordinate utility
easements and rights-of-way that solely benefit the Property; (iv) execute or
file any subdivision plat affecting the Property; (v) consent to the annexation
of the Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the Property
to become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the material terms of the Permitted Encumbrances.
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SECTION 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary coverage plus umbrella coverage), which insurance shall
include operations and blanket contractual liability coverage which insures
contractual liability under the indemnifications set forth in Section 8.02 below
(but such coverage or the amount thereof shall in no way limit such
indemnifications). Upon request, Borrower shall maintain insurance or carry
additional amounts of insurance covering Borrower or the Property as Lender
shall reasonably require including against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company,
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Inc. is no longer available, a similar rating from a similar or successor
service). In addition, all policies shall (x) include a standard mortgagee
clause, without contribution, in the name of Lender and (y) provide that they
shall not be canceled, amended, or materially altered (including reduction in
the scope or limits of coverage) without at least thirty (30) days' prior notice
to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made available for Restoration (defined
below) (but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans and specifications approved by Lender
("RESTORATION"). Borrower shall comply with other reasonable requirements
established by Lender to preserve the security under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs
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(defined below) related to collection of the proceeds and (2) subject to Section
3.07(c) and at Lender's option, to (A) payment (without any Prepayment Premium)
of all or part of the Obligations, whether or not then due and payable, in the
order determined by Lender (provided that if any Obligations remains outstanding
after this payment, the unpaid Obligations shall continue in full force and
effect and Borrower shall not be excused in the payment thereof); (B) the cure
of any default under the Documents; or (C) the Restoration. Any insurance
proceeds held by Lender shall be held by Lender, and interest shall be earned
thereon at the rate paid by Lender at that time on other impound or escrow
accounts in connection with its mortgage portfolio business. If Borrower
receives any insurance proceeds for the Damage, Borrower shall promptly deliver
the proceeds to Lender. Notwithstanding anything in this Instrument or at law or
in equity to the contrary, none of the insurance proceeds paid to Lender shall
be deemed trust funds and Lender may dispose of these proceeds as provided in
this Section. Borrower expressly assumes all risk of loss from any Damage,
whether or not insurable or insured against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which does not exceed the aggregate of the remaining Net Proceeds
(defined below) and any funds deposited with Lender by Borrower ("ADDITIONAL
FUNDS") and (z) the aggregate of any loss of rental income insurance proceeds
which the carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any
funds deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves required
under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments, as such amounts become due under the construction
contract for Restoration, the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the
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amounts currently due under the construction contract for Restoration and
Lender's receipt of (i) appropriate lien waivers, (ii) a certification of the
percentage of Restoration completed by an architect or engineer acceptable to
Lender, and (iii) title insurance protection against materialmen's and
mechanic's liens. Lender shall disburse the funds within seven (7) days after
satisfaction of the conditions set forth in the preceding sentence. At Lender's
election, the disbursement of funds may be handled by a disbursing agent
selected by Lender, and such agent's reasonable fees and expenses shall be paid
by Borrower. The Net Proceeds, Rent Loss Proceeds, and any Additional Funds
shall constitute additional security for the Loan and Borrower shall execute,
deliver, file and/or record, at its expense, such instruments as Lender requires
to grant to Lender a perfected, first-priority security interest in these funds.
If the Net Proceeds are made available for Restoration and (x) Borrower refuses
or fails to complete the Restoration, (y) an Event of Default occurs, or (z) the
Net Proceeds or Additional Funds are not applied by Borrower to Restoration,
then any undisbursed portion may, at Lender's option, be applied to the
Obligations in any order of priority and any such application to principal shall
be deemed a voluntary prepayment subject to the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty
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(20%) of the gross area of the Improvements or (B) ten percent (10%) of the
parking spaces is affected by the Taking, (ii) the amount of the loss does not
exceed twenty percent (20%) of the original amount of the Note; (iii) the Taking
does not affect access to the Property from any public right-of-way; (iv) there
is no Event of Default at the time of application; (v) after Restoration, the
Property and its use will be in compliance with all Laws; (vi) in Lender's
reasonable judgment, Restoration is practical and can be completed within one
(1) year after the Taking and at least one (1) year prior to the maturity of the
Note; and (vii) the Tenants listed in Exhibit D ("MAJOR TENANTS") agree in
writing to continue their Leases without abatement of rent. Any portion of the
Award that is (i) for loss of value or property or (ii) in excess of the cost of
any Restoration permitted above, may, in Lender's sole discretion, be applied
against the Obligations or paid to Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender, express or implied,
to any contractor, subcontractor, laborer, mechanic or materialman for the
performance of any labor or the furnishing of any material for any improvement,
construction, alteration, or repair of the Property. Borrower further agrees
that Lender does not stand in any fiduciary relationship to Borrower. Any
contributions made, directly or indirectly, to Borrower by or on behalf of any
of its partners, members, principals or any party related to such parties shall
be treated as equity and shall be subordinate and inferior to the rights of
Lender under the Documents.
SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance premiums, then, at Lender's option, Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12)
of the annual Assessments (except for income taxes, franchise taxes, ground
rents, maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the amounts,
schedules and instructions for payment of the Impositions. Borrower authorizes
Lender or its agent to obtain the bills for Assessments directly from the
appropriate tax or governmental authority. All Deposits are pledged to Lender
and shall constitute additional
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security for the Obligations. The Deposits shall be held by Lender without
interest (except to the extent required under Laws) and may be commingled with
other funds. If (i) there is no Event of Default at the time of payment, (ii)
Borrower has delivered bills or invoices to Lender for the Impositions in
sufficient time to pay them when due, (iii) the Deposits are sufficient to pay
the Impositions or Borrower has deposited the necessary additional amount, then
Lender shall pay the Impositions prior to their due date. Any Deposits remaining
after payment of the Impositions shall, at Lender's option, be credited against
the Deposits required for the following year or paid to Borrower. If an Event of
Default occurs, the Deposits may, at Lender's option, be applied to the
Obligations in any order of priority. Any application to principal shall be
deemed a voluntary prepayment subject to the Prepayment Premium. Borrower shall
not claim any credit against the principal and interest due under the Note for
the Deposits. Upon an assignment or other transfer of this Instrument, Lender
may pay over the Deposits in its possession to the assignee or transferee and
then it shall be completely released from all liability with respect to the
Deposits. Borrower shall look solely to the assignee or transferee with respect
thereto. This provision shall apply to every transfer of the Deposits to a new
assignee or transferee. Subject to Article V, a transfer of title to the Land
shall automatically transfer to the new owner the beneficial interest in the
Deposits. Upon full payment and satisfaction of this Instrument or, at Lender's
option, at any prior time, the balance of the Deposits in Lender's possession
shall be paid over to the record owner of the Land and no other party shall have
any right or claim to the Deposits. Lender may transfer all its duties under
this Section to such service or financial institution as Lender may periodically
designate and Borrower agrees to make the Deposits to such service or
institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an
"operating company" or a "real estate operating company" within the meaning of
29 C.F.R. Section 2510.3-101(c) or (e). Borrower shall deliver to Lender such
certifications and/or other evidence periodically requested by Lender, in its
sole discretion, to verify these representations and warranties. Failure to
deliver these certifications or evidence, breach of these representations and
warranties, or consummation of any transaction which would cause this Instrument
or any exercise of Lender's rights under this Instrument to (i) constitute a
non-exempt prohibited transaction under ERISA or (ii) violate ERISA or any state
statute regulating governmental plans (collectively, a "VIOLATION"), shall be an
Event of Default. Notwithstanding anything in the Documents to the contrary, no
sale, assignment, or transfer of any direct or indirect right, title, or
interest in Borrower or the Property (including creation of a junior lien,
encumbrance or leasehold interest) shall be permitted which would, in Lender's
opinion, negate Borrower's representations in this Section or cause a Violation.
At least fifteen (15) days before consummation of any of the foregoing, Borrower
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shall obtain from the proposed transferee or lienholder (i) a certification to
Lender that the representations and warranties of this Section will be true
after consummation and (ii) an agreement to comply with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants.
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material",
"hazardous waste", "toxic substance", "toxic pollutant", "contaminant", or
"pollutant" within the meaning of any Environmental Law. "RELEASE" of any
Hazardous Materials includes any release, deposit, discharge, emission, leaking,
spilling, seeping, migrating, pumping, pouring, escaping, dumping, disposing or
other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits,
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and (D) (1) in only the amounts necessary to operate the Property or (2) fully
disclosed to and approved by Lender in writing; (iv) Borrower shall keep the
Property free and clear of all liens and encumbrances imposed by any
Environmental Laws due to any act or omission by Borrower or any person (the
"ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense, fully and
expeditiously cooperate in all activities in Section 3.12(c) including providing
all relevant information and making knowledgeable persons available for
interviews; (vi) Borrower shall, at its sole expense, (A) perform any reasonable
environmental site assessment or other investigation of environmental conditions
at the Property upon Lender's request based on Lender's reasonable belief that
the Property is not in compliance with all Environmental Laws, (B) share with
Lender the results and reports and Lender and the Indemnified Parties (defined
below) shall be entitled to rely on such results and reports, and (C) complete
any remediation of Hazardous Materials affecting the Property or other actions
required by any Environmental Laws; (vii) Borrower shall not allow any Tenant or
other user of the Property to violate any Environmental Law; and (viii) Borrower
shall immediately notify Lender in writing after it becomes aware of (A) the
presence, Release, or threatened Release of Hazardous Materials affecting the
Property, (B) any non-compliance of the Property with any Environmental Laws,
(C) any actual or potential Environmental Lien, (D) any required or proposed
remediation of environmental conditions relating to the Property, and (E) any
written or oral communication or notice from any person relating to Hazardous
Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
SECTION 3.13 Electronic Payments . All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change in Borrower's bank
or financial institution is necessary to appropriately effectuate the payments
by electronic funds transfer, Lender shall have the right to require Borrower to
select a different depository after thirty (30) days' prior notice. As of the
date of this Instrument, First Union National Bank has been deemed acceptable to
Lender. All costs of (i) establishing and maintaining such account and (ii) the
electronic funds transfers shall be paid by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be
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required after a default under the Documents. Borrower shall assist Lender and
such person in effecting said inspection, subject, however, to the rights of
tenants in possession.
SECTION 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual reports and (B) forty-five (45)
days after the end of each calendar quarter for quarterly reports. If any one
report, statement, or item is not received by Lender within fifteen (15) days
after Lender has given Borrower written notice that such report, statement or
item was not received on its due date, then a late fee of Five Hundred and
No/100 Dollars ($500.00) per month shall be due and payable by Borrower. In
addition, if any one report, statement, or item is not received within thirty
(30) days after such notice, Lender may immediately declare an Event of Default
under the Documents. Borrower shall (i) provide Lender with such additional
financial, management, or other information regarding Borrower, any general
partner of Borrower, or the Property, as Lender may reasonably request and (ii)
upon Lender's request, deliver all items required by Section 3.15 in an
electronic format (i.e. on computer disks) or by electronic transmission
acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business
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Day (as defined in the Note) after two (2) days prior written notice; provided
that no notice shall be required after any default under the Documents. Borrower
shall assist Lender in effecting such examination. All such inspections shall be
performed in a commercially reasonable manner. Upon five (5) days' prior notice,
Lender may inspect and make copies of Borrower's or any general partner of
Borrower's income tax returns with respect to the Property for the purpose of
verifying any items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any defaults (or
events which with the passage of time and/or notice would constitute a default)
under the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender's right to realize upon or enforce any other security
now or later held by Lender. Lender may enforce the Documents or any other
security in such order and manner as it may determine in its discretion.
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SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the lien and rights of Lender under the Documents and (ii)
protect the lawful owner of the Documents. Promptly upon request by Lender and
at Borrower's expense, Borrower shall execute additional instruments and take
such actions as Lender reasonably believes are necessary or desirable to (a)
maintain or grant Lender a first-priority, perfected lien on the Property, (b)
correct any error or omission in the Documents; and (c) effect the intent of the
Documents, including filing/recording the Documents, additional mortgages or
deeds of trust, financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower or Lender in connection with the granting, closing, servicing, and
enforcement of (a) the Loan and Documents or (b) attributable to Borrower as
owner of the Property. The term "COSTS" shall mean any of the foregoing incurred
in connection with (a) any default by Borrower under the Documents, (b) the
servicing of the Loan, or (c) the exercise, enforcement, compromise, defense,
litigation, or settlement of any of Lender's rights or remedies under the
Documents or relating to the Loan or the Obligations. If Borrower fails to pay
any amounts or perform any actions required under the Documents, Lender may (but
shall not be obligated to) advance sums to pay such amounts or perform such
actions. Borrower grants Lender the right to enter upon and take possession of
the Property to prevent or remedy any such failure and the right to take such
actions in Borrower's name. No advance or performance shall be deemed to have
cured a default by Borrower. All (a) sums advanced by or payable to Lender per
this Section or under applicable Laws, (b) except as expressly provided in the
Documents, payments due under the Documents which are not paid in full when due,
and (c) all Costs, shall: (i) be deemed demand obligations, (ii) bear interest
at the applicable interest rate specified in the Note, which shall be the
Default Rate unless prohibited by Laws, until paid if not paid on demand, (iii)
be part of, together with such interest, the Obligations , and (iv) be secured
by the Documents. Lender, upon making any such advance, shall also be subrogated
to rights of the person receiving such advance.
SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender shall be subrogated to all rights, claims, liens,
titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and (ii) are merged with the lien and security interest created by the Documents
as cumulative security for the payment and performance of the Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including
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any Prepayment Premium) shall become immediately due and payable, if Borrower,
without Lender's prior written consent (which may be withheld for any or no
reason including the possibility of an ERISA violation or the proposed
transferee's failure to agree in writing to Lender increasing the interest
payable on the Obligations to any rate, changing any other terms (including
maturity) of the Obligations or Documents, or requiring the payment of a
transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender agrees
that, upon fifteen (15) days prior written request of Borrower, Borrower, and
any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of time or the
giving of notice or both would be an Event of Default) has occurred and is
continuing;
(ii) the proposed transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the guidelines with
respect thereto then applicable to Lender's mortgage loans (the "Guidelines")
(or, if the statements required by the certification are not true with respect
to the proposed transferee, Lender shall have received such evidence as it may
require in its sole discretion to determine that the proposed transfer is not
and would not render the Loan a prohibited transaction under ERISA);
(iii) payment by Borrower or the proposed transferee of (1) all
reasonable costs and expenses incurred by Lender for the processing of said
transfer including a processing fee and (2) all other costs and expenses
(including attorneys' fees and expenses for Lender's staff attorneys and outside
counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower and Guarantor with another entity so long
as the surviving entity (i) has a net worth (as reasonably determined by Lender
in accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower as of the closing date of the Loan, (ii) has a ratio of total
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debt (both secured and unsecured) to total assets of less than fifty percent
(50%); and (iii) in the judgment of Lender, has financial capability and
creditworthiness, reputation and experience in the ownership, operation,
management, and leasing of similar properties, equal to or greater than
Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively,
"Borrower Property"), together with all of the properties (the "CRIT-NC LLC
Properties") owned by Guarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $22,950,000 (the "CRIT-NC, LLC Loan")
evidenced by the CRIT-NC, LLC Note (as defined in the Note) and the documents
and obligations securing the CRIT-NC, LLC Note (the Borrower Property and the
CRIT-NC, LLC Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a Person
(defined below) which, in the judgment of Lender, has financial capability and
creditworthiness, reputation and experience in the ownership, operation,
management, and leasing of similar properties, equal to or greater than
Borrower, including without limitation, a net worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio (defined below)
does not exceed 62% of the entire Portfolio;
(iii) Borrower pays Lender a non-refundable servicing fee (as specified
by Lender) at the time of the request and an additional fee equal to 1.0% of the
outstanding principal balance of the Loan and the CRIT-NC, LLC Loan at the time
of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to verify
the first priority of the Documents (and the documents securing the CRIT-NC, LLC
Loan) at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) for the entire
Portfolio is at least 1.90 to 1.00 for the preceding twelve month period and
Lender receives satisfactory evidence that this Debt Service Coverage Ratio for
the entire Portfolio will be maintained for the next succeeding twelve (12)
months;
(vi) the transferee expressly assumes all obligations under the
Documents (and the documents securing the CRIT-NC, LLC Loan) and executes any
documents reasonably required by Lender, and all of these documents are
satisfactory in form and substance to Lender;
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(vii) Lender reasonably approves the form and content of all transfer
documents, and Lender is furnished with a certified copy of the recorded
transfer documents;
(viii) the transferee complies with and delivers the ERISA Certificate
and Indemnification Agreement described in the Guidelines with respect thereto
then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees, costs, and
expenses incurred by Lender in connection with the proposed transfer, including,
without limitation, all legal (for both outside counsel and Lender's staff
attorneys), accounting, title insurance, documentary stamps taxes, intangibles
taxes, mortgage taxes, recording fees, and appraisal fees, whether or not the
transfer is actually consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not be
anticipated for any greater time period than that approved by generally accepted
accounting principles and ordinary operating expenses shall not be prepaid.
Documentation of NOI and expenses shall be certified by an officer of Borrower
with detail satisfactory to Lender and shall be subject to the approval of
Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
ARTICLE VI - DEFAULTS AND REMEDIES
Section 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
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(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien
or security interest created by the Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any remedies
provided hereunder or by law is not necessary for the protection or preservation
of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in lien to this Instrument;
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(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction (and not immediately paid by
Borrower) or shall be consented to by Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender or any person
(which shall be a person permitted by applicable Laws) designated by Lender may
(but shall not be obligated to) take any action (separately, concurrently,
cumulatively, and at any time and in any order) permitted under any Laws,
without notice, demand, presentment, or protest (all of which are hereby waived,
to the extent permitted by Laws), to protect and enforce Lender's rights under
the Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this Instrument
or (ii) partially foreclose this Instrument for any portion of the Obligations
due and the lien and security interest created by this Instrument as to the
Property not foreclosed shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right, title and
interest of Borrower therein and rights of redemption thereof, pursuant to power
of sale;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
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(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, sue for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender in
connection with the foregoing operations and all amounts needed to pay the
Impositions and other expenses of the Property, as well as just and reasonable
compensation for the services of Lender and its attorneys, agents, and
employees; and/or (vi) in every case in connection with the foregoing, exercise
all rights and powers of Borrower or Lender with respect to the Property, either
in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender deems advisable for the care,
protection and preservation of the Personal Property and (ii) request Borrower
at its expense to assemble the Personal Property and make it available to Lender
at a convenient place acceptable to Lender. Any notice of sale, disposition or
other intended action by Lender with respect to the Personal Property sent to
Borrower at least five (5) days prior to such action shall constitute
commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender exercises any of its rights under Section 6.02(g), Lender shall not
(a) be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose; (b) be deemed a beneficiary or mortgagee in possession by
reason of such entry or taking possession; nor (c) be liable (i) to account for
any action taken pursuant to such exercise other than for Rents actually
received by
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Lender, (ii) for any loss sustained by Borrower resulting from any failure to
lease the Property, or (iii) any other act or omission of Lender except for
losses caused by Lender's willful misconduct or gross negligence. Borrower
hereby consents to, ratifies, and confirms the exercise by Lender of its rights
under this Instrument and appoints Lender as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender in the exercise of its rights under the Documents, together with interest
thereon at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's rights under the Documents.
SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower waives any right
to require otherwise; (b) any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice; and (c) Lender may acquire the
Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided by Laws to the contrary, be applied
in the order determined by Lender to: (a) payment of all Costs and expenses of
any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items, if permitted by Laws; (c) payment
of the Obligations in such order as Lender may elect; (d) payment of any other
sums secured or required to be paid by Borrower; and (e) payment of the surplus,
if any, to any person lawfully entitled to receive it. Borrower and Lender
intend and agree that during any period of time between any foreclosure judgment
that may be obtained and the actual foreclosure sale that the foreclosure
judgment will not extinguish the Documents or any rights contained therein
including the obligation of Borrower to pay all Costs and to pay interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender to exercise any rights under the Documents upon any default
or Event of Default shall impair Lender's rights or be construed as a waiver of,
or acquiescence to, such or any subsequent default or Event of Default. No
recovery of any judgment by Lender and no levy of an execution upon the Property
or any other property of Borrower shall affect the lien and security interest
created by this Instrument and such liens, rights, powers, and remedies shall
continue unimpaired as before. Lender may resort to any security given by this
Instrument or any other security now
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given or hereafter existing to secure the Obligations, in whole or in part, in
such portions and in such order as Lender may deem advisable, and no such action
shall be construed as a waiver of any of the liens, rights, or benefits granted
hereunder. Acceptance of any payment after any Event of Default shall not be
deemed a waiver or a cure of such Event of Default and such acceptance shall be
deemed an acceptance on account only. If Lender has started enforcement of any
right by foreclosure, sale, entry, or otherwise and such proceeding shall be
discontinued, abandoned, or determined adversely for any reason, then Borrower
and Lender shall be restored to their former positions and rights under the
Documents with respect to the Property, subject to the lien and security
interest hereof.
SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns, and for any
person ever claiming an interest in the Property (other than Lender), waives and
releases all rights of redemption, reinstatement, valuation, appraisement,
notice of intention to mature or declare due the whole of the Obligations, all
rights to a marshaling of the assets of Borrower, including the Property, or to
a sale in inverse order of alienation, in the event of foreclosure of the liens
and security interests created under the Documents; (c) shall not be relieved of
its obligation to pay the Obligations as required in the Documents nor shall the
lien or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder of any subordinate lien, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security interest, or the priority of the modified Documents as
security for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender, as
security for the Obligations, a security interest in the Personal Property to
the fullest extent that the same may be subject to the U.C.C. Borrower
authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
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SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys' fees (both in-house staff
and retained attorneys) and all other costs of defense. The term "INDEMNIFIED
PARTIES" shall mean (a) Lender, (b) any prior owner or holder of the Note, (c)
any existing or prior servicer of the Loan, (d) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing, and (e)
the heirs, legal representatives, successors and assigns of each of the
foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may after a
determination by the Indemnified Parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interests, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the
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resolution of any claims or proceedings pertaining to ERISA. Upon demand,
Borrower shall pay or, in the sole discretion of the Indemnified Parties,
reimburse and/or indemnify the Indemnified Parties for all Costs imposed on,
incurred by, or asserted against the Indemnified Parties by reason of any items
set forth in this Article VIII and/or the enforcement or preservation of the
Indemnified Parties' rights under the Documents (except as noted in this
paragraph). Any amount payable to the Indemnified Parties under this Section
shall (a) be deemed a demand obligation, (b) be part of the Obligations, (c)
bear interest at the applicable interest rate specified in the Note, which shall
be the Default Rate unless prohibited by Laws, until paid if not paid on demand,
and (d) be secured by this Instrument.
SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, assignment or
foreclosure of this Instrument, (c) the acceptance by Lender (or any nominee) of
a deed in lieu of foreclosure, (d) a plan of reorganization filed under the
Bankruptcy Code, or (e) the exercise by the Lender of any rights in the
Documents. Borrower's obligations under Article VIII shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation under any
applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "NOTICE") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
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<TABLE>
<CAPTION>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
Cornerstone Realty Income Trust, Inc. McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attention: Martin B. Richards
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 103 650 Reference Loan No. 6 103 650
</TABLE>
Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's right to bring any action or proceeding against Borrower or the
Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
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correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO"; (g)
the terms "PROPERTY", "LAND", "IMPROVEMENTS", and "PERSONAL PROPERTY" shall be
construed as if followed by the phrase "OR ANY PART THEREOF"; (h) the term
"OBLIGATIONS" shall be construed as if followed by the phrase "OR ANY OTHER SUMS
SECURED HEREBY, OR ANY PART THEREOF"; (i) the term "PERSON" shall include
natural persons, firms, partnerships, corporations, governmental authorities or
agencies, and any other public or private legal entities; (j) the term
"PROVISIONS," when used with respect hereto or to any other document or
instrument, shall be construed as if preceded by the phrase "TERMS, COVENANTS,
AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the term "LEASE" shall mean
"TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR"
shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term
"TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l)
the term "OWNED" shall mean "NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY"
and "ALL" shall mean "ANY OR ALL"; and (n) the term "ON DEMAND" or "UPON DEMAND"
shall mean "WITHIN FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender may, without notice to
Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender shall continue to have and enjoy all its
rights and privileges
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as to each separate estate. Upon foreclosure of this Instrument, to the extent
permitted by Laws, none of the Leases shall be destroyed or terminated as a
result of such foreclosure, by application of the doctrine of merger or as a
matter of law, unless Lender takes all actions required by law to terminate the
Leases as a result of foreclosure. All of Borrower's covenants and agreements
under the Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents listed in Sections 3.04, 3.19, 4.01 and 6.02. The Documents
cannot be amended, terminated, or discharged except in a writing signed by the
party against whom enforcement is sought. No waiver, release, or other
forbearance by Lender will be effective unless it is in a writing signed by
Lender and then only to the extent expressly stated. The provisions of the
Documents shall be binding upon Borrower and its heirs, devisees,
representatives, successors, and assigns including successors in interest to the
Property and inure to the benefit of Lender and its heirs, successors,
substitutes, and assigns. Where two or more persons have executed the Documents,
the obligations of such persons shall be joint and several, except to the extent
the context clearly indicates otherwise. The Documents may be executed in any
number of counterparts with the same effect as if all parties had executed the
same document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart. Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of any Document which is
not of public record, and, in the case of any mutilation, upon surrender and
cancellation of the Document, Borrower will issue, in lieu thereof, a
replacement Document and indemnity reasonably satisfactory to Borrower, dated
the date of the lost, stolen, destroyed or mutilated Document containing the
same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
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(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Portfolio shall meet the
leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
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(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
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(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have determined in its sole
discretion, that following the proposed substitution, the entire Portfolio shall
meet the leasing percentage requirements in the Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
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Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal to or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
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SECTION 11.02 Required Repairs, Capital Improvements and Replacements. Borrower
shall be required to spend, between January 1, 1999 and December 31, 2000, at
least $2,400,000 (the "Repair Amount"), in the aggregate, on the repairs,
capital improvements and replacements for the entire Portfolio as outlined on
Exhibit F attached hereto and by this reference made a part hereof. Borrower
shall document the payment of the Repair Amount and the completion of the
applicable repairs, capital improvements and replacements made by Borrower by
furnishing to Lender, on or before March 1, 2001, annual financial statements
(for the years 1999 and 2000) and certifications of the Borrower reflecting such
expenditure and any other such written documentation as Lender shall reasonably
require. If Lender determines that Borrower has not spent the Repair Amount (by
December 31, 2000), then beginning with the April, 2001, monthly payments due
under the Loan, Borrower shall make monthly payments equal to the Amortizing
Payments, and the Amortizing Payments shall continue until Lender determines
that Borrower has spent the Repair Amount.
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IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
Signed, sealed, and delivered in BORROWER:
the presence of the following witnesses:
CORNERSTONE REALTY INCOME
/s/ David S. McKenney TRUST, INC., a Virginia corporation
- --------------------------------------
Witness
Printed Name: David S. McKenney By: /s/ Stanley J. Olander, Jr.
------------------------- --------------------------------
Name: Stanley J. Olander, Jr.
---------------------------
/s/ Mark A. Babb Title: Chief Financial Officer
- -------------------------------------- --------------------------
Witness
Printed Name: Mark A. Babb (CORPORATE SEAL)
-------------------------
Address:
306 East Main Street
Richmond, Virginia 23219
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ACKNOWLEDGMENT
ACKNOWLEDGMENT
STATE OF VIRGINIA )
) PROBATE
CITY OF RICHMOND )
PERSONALLY APPEARED BEFORE ME, the undersigned witness, who being duly
sworn, deposes and states that (s)he saw the within named Cornerstone Realty
Income Trust, Inc., by Stanley J. Olander, Jr., the Chief Financial Officer,
sign, seal and deliver the foregoing Mortgage and Security Agreement and that
(s)he with the other witness whose name is subscribed above witnessed the
execution thereof.
Sworn to before me this 27th day of /s/ Mark A. Babb Mark A. Babb
September, 1999 ---------------------------------
Witness
/s/ Jacquelyn B. Owens (L.S.)
- -----------------------------------
Notary Public for State of Virginia at-large
My Commission Expires: 6/30/03
----------
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Exhibit A
(Hampton Pointe)
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land, with improvements thereon,
situate, lying and being in the State of South Carolina, County of Charleston,
City of Charleston, containing 20.160 acres or 878,185 square feet, as shown on
a plat of Hampton Pointe Apartments dated August 23, 1999*, prepared by A. H.
Schwacke & Associates, Inc., and according to plat, being more particularly
described as follows, to-wit: Beginning at an iron on the northern edge of the
120-foot right-of-way of S.C. Highway No. 7, Sam Rittenberg Blvd., which iron is
approximately 2,204 feet from the intersection of S.C. Highway No. 7, Sam
Rittenberg Blvd., and Highway No. 61 (Ashley River Rd.), and running from said
point of beginning S62 47'14"W for a distance of 179.47 feet to a mark on a
headwall; thence turning and running N68 59'32"W for a distance of 210.00 feet
to a 5/8" rod; thence turning and running N37 59'32" for a distance of 125.00
feet to a 5/8" rod; thence turning and running N83 59'32"W for a distance of
132.00 feet to a 5/8" rod; thence turning and running N77 59'32"W for a distance
of 65.00 feet to a 5/8" rod; thence turning and running N63 54'02"W for a
distance of 294.89 feet to a 5/8" rod; thence turning and running N02 06"46"E
for a distance of 941.25 feet to an iron; thence turning and running N39 30'50"E
for a distance of 448.89 feet to a 1" iron; thence turning and running S62
53'58"E for a distance of 328.93 feet to a 2" iron; thence turning and running
S01 38'00"E for a distance of 350.50 feet to a 1" iron; thence turning and
running S06 08'11"E for a distance of 622.18 feet to a 1" iron; thence turning
and running S20 23'12"E for a distance of 425.12 to a CMO; thence turning an
running S71 20'54"" for a distance of 57.57 feet to the iron at the point of
beginning, be all measurements a little more or less.
*and revised September 20, 1999,
-40-
<PAGE>
(West Chase)
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land, situate, lying and being in the
City of Charleston, Charleston County, South Carolina, containing 30.34 acres
(erroneously shown as 29.96 acres on the herein referenced plat) and being shown
on a plat of "CHARLESTON WESTCHASE ASSOCIATES, A LIMITED PARTNERSHIP,
CHARLESTON, SOUTH CAROLINA," made January 21, 1986, revised July 23, 1986, by
Hucks and Associates, Inc. Land Surveyors and Land Planning recorded in the RMC
Office for Charleston County in Plat Book BK, page 35. Said 30.34 acre tract of
land has such size, shapes, metes, bounds, location and dimensions as are shown
on said plat and is more fully described, according to said plat, as follows:
BEGINNING at a point on the southwest right-of-way of SC Hwy. No. 61 at a point
representing the common boundary of property now or formerly of Santo J.
Convertino and continuing thence along the southwest boundary of SC Hwy. No. 61,
S 24 42'05" E, 324.88 feet to an iron; thence, along Tract 2, property now or
formerly of Whitefield Const., S 49 40'43" W, 500.00 feet to an iron; thence
continuing along Tract 2, property now or formerly of Whitefield Const. S 40
15'00" E, 374.70 feet to an iron; thence along Tract 3, property now or formerly
of Whitefield Const., S 40 11'40" E, 304.17 feet to an iron the northern
boundary of the right-of-way of Richmond Street; thence, continuing along the
northern boundary of Richmond Street, the following courses and distances S 49
46'14" W, 556.86 feet to an iron; S 50 03'49" W, 131.87 feet to an iron; thence,
S 48 19' 50" W, 4.95 feet to a concrete monument thence, S 51 01'33" W, 841.71
feet to an iron; thence along the eastern boundary of the right-of-way of Mark
Clark Expressway, N 62 24'30" W, 79.39 feet to a concrete monument; thence,
continuing along the right-of-way of Mark Clark Expressway, the following
courses and distances: N 17 32'39" W, 70.70 feet to a concrete monument; N 27
27'14" E, 28.21 feet to a concrete monument; thence, with a curve to the left
having a radius of 290.39 feet, an arc distance of 188.97 feet (chord bearing
and distance of N 08 51'51" E, 185.66 feet) to a concrete monument;; thence, N
09 49'55" W, 45.77 feet to an iron; thence N 09 53'54" W, 118.37 feet to a
concrete monument;; thence, N 07 12'20" W, 87.39 feet to a concrete monument;
thence, with a curve to the right having a radius of 817.26 feet, an arc
distance of 569.26 feet (chord bearing and distance of N 13 38'51" E, 557.83
feet) to a concrete monument; located with the 15 foot C.P.W. Easement; thence,
N 32 42'14" E, 4.68 feet to a concrete monument; thence N 32 42'14" E, 56.37
feet to a concrete monument; thence N 31 33'06" E, 489.72 feet to an iron;
thence, along property now or formerly of Santo J. Convertino, N 50 35'04" E
853.90 feet to an iron located on the boundary of the southwest right-of-way of
SC Hwy. No. 61, the point of BEGINNING.
Said property containing 30.34 acres according to plat of As Built Survey of
Westchase Apartments for Cornerstone Realty Income Trust, Inc. prepared by Hucks
and Associates, PC, dated August 26, 1999 and last revised September 22, 1999,
which plat is incorporated by this reference for purposes of this description.
-41-
<PAGE>
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, owned by Borrower, wherever situate, and now or hereafter located on,
attached to, now or hereafter contained in, or used or usable in connection with
the real property described in Exhibit A attached hereto and incorporated herein
(the "LAND"), and all improvements located thereon (the "IMPROVEMENTS") or
placed on any part thereof, though not attached thereto, including all screens,
awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture and
furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto,
-42-
<PAGE>
which Borrower now has or may hereafter acquire in the Land, the Improvements,
or any of the personal property described in this Exhibit B, or any portion
thereof or interest therein, and any and all awards made for the taking by
eminent domain, or by any proceeding or purchase in lieu thereof, of the whole
or any part of such property, including without limitation, any award resulting
from a change of any streets (whether as to grade, access, or otherwise) and any
award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
-43-
<PAGE>
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as Hampton Pointe, those items recorded
in the records of Charleston County, South Carolina, as set forth in Schedule B,
Section 2, of that certain Commitments for Title Insurance issued by Lawyers
Title Insurance Corporation, Commitment No. 1444.022, as endorsed and marked in
connection with the making of the Loan evidenced by the Note and the recording
of this Instrument.
As to the real property commonly known as Westchase Apartments, those items
recorded in the records of Charleston County, South Carolina, as set forth in
Schedule B, Section 2, of that certain Commitments for Title Insurance issued by
Lawyers Title Insurance Corporation, Commitment No. 1444.024, as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
-44-
<PAGE>
Exhibit D
LIST OF MAJOR TENANTS
NONE
-45-
<PAGE>
Exhibit E
Allocated Loan Amounts and Individual Property List
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
LOAN
YEAR # OF ALLOCATION
PROPERTY NAME CITY ST ACQ'D UNITS BALANCE
(in $000s)
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORNERSTONE REALTY INCOME TRUST INC.
LOAN NO.: 6 103 650
TAX ID NO.: 54-1589139
--------------------------------------------------------------------------------------------------------------
Ashley Run Norcross GA 1997 348 $13,700
--------------------------------------------------------------------------------------------------------------
Spring Lake Morrow GA 1998 188 $6,000
--------------------------------------------------------------------------------------------------------------
Stone Brook Norcross GA 1997 188 $6,350
--------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
--------------------------------------------------------------------------------------------------------------
Hampton Pointe Charleston SC 1998 304 $9,150
--------------------------------------------------------------------------------------------------------------
Westchase Charleston SC 1997 352 $8,900
--------------------------------------------------------------------------------------------------------------
1,608 $50,550
--------------------------------------------------------------------------------------------------------------
CRIT-NC, LLC
LOAN NO.: 6 103 651
TAX ID NO.: 54-1882705
--------------------------------------------------------------------------------------------------------------
Charleston Place Charlotte NC 1997 214 $6,150
--------------------------------------------------------------------------------------------------------------
Remington Place Raleigh NC 1997 136 $4,750
--------------------------------------------------------------------------------------------------------------
St. Regis Raleigh NC 1997 180 $6,200
--------------------------------------------------------------------------------------------------------------
Stone Point Charlotte NC 1998 192 $5,850
--------------------------------------------------------------------------------------------------------------
722 $22,950
--------------------------------------------------------------------------------------------------------------
Total Loan 2,330 $73,500
--------------------------------------------------------------------------------------------------------------
</TABLE>
-46-
<PAGE>
EXHIBIT F
Sheet 1
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING IMPROVE- ADJUSTED IMPROVE-
COMMUNITY UNITS DATE MENTS PER UNIT MENT
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE ARBORS AT WINDSOR LAKE 228 1/1/99 161,000 $ 706 161,000
- ----------------------------------------------------------------------------------------------------------------------
CHARLESTON PLACE 214 5/14/99 270,000 $1,262 270,000
- ----------------------------------------------------------------------------------------------------------------------
WESTCHASE APARTMENTS 352 1/15/99 367,000 $1,043 367,000
- ----------------------------------------------------------------------------------------------------------------------
ASHLEY RUN 348 4/30/99 400,000 $1,149 400,000
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE
- ----------------------------------------------------------------------------------------------------------------------
1,142 1,198,000 $1,049
- ----------------------------------------------------------------------------------------------------------------------
COMMUNITIES STILL IN RENOV. PERIOD
- ----------------------------------------------------------------------------------------------------------------------
STONE BROOK 188 10/31/99 215,000 $1,144
- ----------------------------------------------------------------------------------------------------------------------
ST. REGIS 180 " 204,000 $1,133
- ----------------------------------------------------------------------------------------------------------------------
REMINGTON PLACE 136 " 135,000 $ 993
- ----------------------------------------------------------------------------------------------------------------------
SPRING LAKE 188 8/12/00 506,000 $2,691
- ----------------------------------------------------------------------------------------------------------------------
STONE POINT 192 1/15/00 186,500 $ 971
- ----------------------------------------------------------------------------------------------------------------------
HAMPTON POINTE 304 3/31/00 400,000 $1,316
-------
- ----------------------------------------------------------------------------------------------------------------------
SUB TOTAL 1,188 1,646,500 $8,248 1,646,500 $1,386
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 2,330 2,844,500 $1,221
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CORNERSTONE REQUIRED TO SPEND ON CAPITAL IMPROVEMENTS APPROXIMATELY 80% OF THE
ABOVE ALLOCATED INDIVIDUAL PROPERTY IMPROVEMENT BUDGETED AMOUNTS ON A PRORATA
BASIS FOR A TOTAL OF NOT LESS THAN $2,400,000 BY YEAR END 2000.
IN ADDITION TO THE ABOVE GENERAL IMPROVEMENTS, CORNERSTONE UNDER THE CAPITAL
IMPROVEMENT PROVISIONS OF THE LOAN DOCUMENTS WILL ALSO PERFORM THE FOLLOWING
SPECIFIC REPAIRS:
BEFORE YEAR END 2000
1. REPLACE THE EXTERIOR DEFECTIVE MASONITE SIDING AT ST. REGIS AND REPAIR ANY
EXTERIOR WOOD DAMAGE.
2. PAINT EXTERIOR OF WEST CHASE APARTMENTS.
AGREED AND ACCEPTED: CORNERSTONE REALTY INCOME TRUST, INC.
BY /S/ STANLEY J. OLANDER, JR.
---------------------------------------
ITS CHIEF FINANCIAL OFFICER
---------------------------------------
DATE: 9/27/99
------------
EXHIBIT 4.4
================================================================================
CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation, as
mortgagor
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as mortgagee
(Lender)
---------------------------------
MORTGAGE AND SECURITY AGREEMENT
---------------------------------
Dated: As of September 27, 1999
Location:
Arbors at Windsor Lake, Richland County, South Carolina
PREPARED BY AND UPON
RECORDATION RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
Loan No. 6 103 650
================================================================================
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND IS
ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS UNDER THE NAMES OF
BORROWER, AS "DEBTOR", AND LENDER, AS "SECURED PARTY".
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I OBLIGATIONS..........................................................................3
SECTION 1.01 OBLIGATIONS..........................................................................3
SECTION 1.02 LOAN DOCUMENTS.......................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.......................................................4
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY....................................................4
SECTION 2.02 VALIDITY OF LOAN DOCUMENTS...........................................................4
SECTION 2.03 LITIGATION...........................................................................4
SECTION 2.04 STATUS OF PROPERTY...................................................................4
SECTION 2.05 TAX STATUS OF BORROWER...............................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE......................................................5
SECTION 2.07 DISCLOSURE...........................................................................5
SECTION 2.08 ILLEGAL ACTIVITY.....................................................................6
ARTICLE III COVENANTS AND AGREEMENTS.............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS...............................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE............................................................6
SECTION 3.03 TAXES AND OTHER CHARGES..............................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS........................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY................................................7
SECTION 3.06 INSURANCE............................................................................8
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY..................................................10
SECTION 3.08 CONDEMNATION........................................................................12
SECTION 3.09 LIENS AND LIABILITIES...............................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS..........................................................13
SECTION 3.11 ERISA 14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS............................15
SECTION 3.13 ELECTRONIC PAYMENTS.................................................................16
SECTION 3.14 INSPECTION..........................................................................16
SECTION 3.15 RECORDS, REPORTS, AND AUDITS........................................................17
SECTION 3.16 BORROWER'S CERTIFICATES.............................................................18
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES..................................18
</TABLE>
-II-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.18 ADDITIONAL SECURITY.................................................................18
SECTION 3.19 FURTHER ACTS........................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................19
SECTION 4.01 EXPENSES AND ADVANCES...............................................................19
SECTION 4.02 SUBROGATION.........................................................................19
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................19
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE..........................................................19
SECTION 5.02 PERMITTED TRANSFER..................................................................20
SECTION 5.03 PERMITTED (ONE TIME) TRANSFER.......................................................21
ARTICLE VI DEFAULTS AND REMEDIES...............................................................22
SECTION 6.01 EVENTS OF DEFAULT...................................................................22
SECTION 6.02 REMEDIES 24
SECTION 6.03 EXPENSES 26
SECTION 6.04 RIGHTS PERTAINING TO SALES..........................................................26
SECTION 6.05 APPLICATION OF PROCEEDS.............................................................26
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES................................................26
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES.......................................................27
ARTICLE VII SECURITY AGREEMENT..................................................................27
SECTION 7.01 SECURITY AGREEMENT..................................................................27
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES....................................27
SECTION 8.01 LIMITED RECOURSE LIABILITY..........................................................27
SECTION 8.02 GENERAL INDEMNITY...................................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY.........................................................28
SECTION 8.04 ERISA INDEMNITY.....................................................................28
SECTION 8.05 ENVIRONMENTAL INDEMNITY.............................................................28
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES..................................................28
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL....................................................29
ARTICLE IX ADDITIONAL PROVISIONS...............................................................29
SECTION 9.01 USURY SAVINGS CLAUSE................................................................29
</TABLE>
-III-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.02 NOTICES.............................................................................29
SECTION 9.03 SOLE DISCRETION OF LENDER...........................................................30
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION.......................................30
SECTION 9.05 CONSTRUCTION OF PROVISIONS..........................................................30
SECTION 9.06 TRANSFER OF LOAN....................................................................31
SECTION 9.07 MISCELLANEOUS.......................................................................31
SECTION 9.08 ENTIRE AGREEMENT....................................................................32
SECTION 9.9 WAIVER OF TRIAL BY JURY.............................................................32
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL..........................................32
SECTION 10.01 PARTIAL RELEASE.....................................................................32
SECTION 10.02 SUBSTITUTION OF COLLATERAL..........................................................34
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS...................................................36
SECTION 11.01 AMORTIZATION REQUIRED...............................................................36
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS.............................37
</TABLE>
ATTACHMENTS:
EXHIBIT A - Legal Description of Land
EXHIBIT B - Description of Personal Property
EXHIBIT C - Permitted Encumbrances
EXHIBIT D - List of Major Tenants
EXHIBIT E - Allocated Loan Amounts and Individual Property List
EXHIBIT F - Required Repairs, Capital Improvements and Replacements
-iv-
<PAGE>
DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
-v-
<PAGE>
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (I)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
-vi-
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "INSTRUMENT") is made as of September
27, 1999, by Cornerstone Realty Income Trust, Inc., a Virginia corporation,
having its principal office and place of business at 306 East Main Street,
Richmond, Virginia 23219, as mortgagor ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346, as mortgagee ("LENDER").
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Has granted, bargained, sold, released, assigned, transferred, pledged,
mortgaged, warranted and conveyed, and by these presents does grant, bargain,
sell, release, assign, transfer, pledge, mortgage, warrant and convey unto the
said Lender, and grants Lender a security interest in the following property,
rights, interests and estates owned by Borrower (collectively, the "Property"):
(i) The real property in Richland County, South Carolina and described
in Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures)
now or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all
land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof, and all sidewalks, alleys, and
strips and gores of land adjacent to or used in connection with the Property;
<PAGE>
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof ) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower`s right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
TO HAVE AND TO HOLD the Property unto the Lender and its successors and assigns
forever, subject to the matters listed in Exhibit C ("PERMITTED ENCUMBRANCES")
and the provisions of this Instrument.
-2-
<PAGE>
PROVIDED, HOWEVER, if Borrower shall pay and perform the Obligations as provided
for in the Documents (defined below) and shall comply with all the provisions in
the Documents, these presents and the estates hereby granted (except for the
obligations of Borrower set forth in Sections 3.11 and 3.12 and Article VIII
hereof) shall cease, terminate and be void.
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents;
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Mortgage and Security Agreement between
Borrower and Lender of even date herewith securing the Note and to be recorded
in the real estate records of Richland County, South Carolina, (vi) that certain
Deed to Secure Debt and Security Agreement between Borrower and Lender of even
date herewith securing the Note and to be recorded in the real estate records of
Gwinnett County, Georgia and Clayton County, Georgia, (vii) that certain
Unconditional Guaranty of Payment and Performance (Cross-Collateralization) (the
"Guaranty") of even date herewith from CRIT-NC, LLC ("Guarantor") to Lender,
(viii) that certain Deed of Trust and Security Agreement between Guarantor and
Lender of even date herewith securing the Guaranty and to be recorded in the
real estate records of Wake County, North Carolina, (ix) that certain Deed of
Trust and Security Agreement between Guarantor and Lender of even date herewith
securing the Guaranty and to be recorded in the real estate records of
Mecklenburg County, North Carolina, (x) any additional mortgages, deeds of trust
and deeds to secure debt and other instruments given to secure the Note pursuant
to the substitution of collateral provisions of Section 10.02 below, and (xi)
any other written agreement executed in connection with the closing of the Loan
(but excluding the Loan application and Loan commitment) and by the party
against whom enforcement is sought, including those given to evidence or further
secure the payment and performance of any of the Obligations, and any written
renewals, extensions, and amendments of the foregoing, executed
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by the party against whom enforcement is sought. All of the provisions of the
Documents are incorporated into this Instrument as if fully set forth in this
Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seized of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, charges, encumbrances, and security
interests, except the Permitted Encumbrances; (ii) will forever warrant and
defend its title to the Property and the validity, enforceability, and priority
of the lien and security interest created by this Instrument against the claims
of all persons; (iii) is a Virginia corporation duly organized, validly
existing, and in good standing and qualified to transact business under the laws
of its state of organization or incorporation ("ORGANIZATION STATE") and the
state where the Property is located ("PROPERTY STATE"); and (iv) has all
necessary approvals, governmental and otherwise, and full power and authority to
own its properties (including the Property) and carry on its business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument and Uniform Commercial Code ("U.C.C.") filings).
The Documents constitute valid and binding obligations of Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform its
obligations.
SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
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(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, or
encumbrances except the Permitted Encumbrances and those created by this
Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower is
a limited liability company). Borrower has received reasonably equivalent value
for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
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SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment; (ii) Borrower demonstrates to
Lender's reasonable satisfaction that (1) the Property will not be sold to
satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a sale of the
Property; (iii) at Lender's option, Borrower has deposited the full amount
necessary to pay any unpaid portion of the Assessments with Lender; and (iv)
such proceeding shall be permitted under any other instrument to which Borrower
or the Property is subject (whether superior or inferior to this Instrument);
provided, however, that the foregoing shall not apply to the contesting of any
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges.
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(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes mortgages or debts secured by mortgages for federal, state
or local purposes or changes the manner of the collection of any such existing
taxes, and/or (iii) imposes a tax, either directly or indirectly, on any of the
Documents or the Obligations, Borrower shall, if permitted by law, pay such tax
within the statutory period or within twenty (20) days after demand by Lender,
whichever is less; provided, however, that if, in the opinion of Lender,
Borrower is not permitted by law to pay such taxes, Lender shall have the option
to declare the Obligations immediately due and payable (without any Prepayment
Premium) upon six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender under the
documents against the claims of all persons, and shall promptly notify Lender of
any such claims. Lender (whether or not named as a party to such proceedings) is
authorized and empowered (but shall not be obligated) to take such additional
steps as it may deem necessary or proper for the defense of any such proceeding
or the protection of the lien, security interest, validity, enforceability, or
priority of this Instrument, title to the Property, or any rights of Lender
under the Documents, including the employment of counsel, the prosecution and/or
defense of litigation, the compromise, release, or discharge of such adverse
claims, the purchase of any tax title, the removal of such any liens and
security interests, and any other actions Lender deems necessary to protect its
interests. Borrower authorizes Lender to take any actions required to be taken
by Borrower, or permitted to be taken by Lender, in the Documents in the name
and on behalf of Borrower. Borrower shall reimburse Lender on demand for all
expenses (including attorneys' fees) incurred by it in connection with the
foregoing and Lender's exercise of its rights under the Documents. All such
expenses of Lender, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.
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SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property, nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien or security interest (other than the Permitted Encumbrances
and those created by this Instrument) or (ii) leased by Borrower (A) with
Lender's prior written consent or (B) if the replaced Property was leased at the
time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "Laws"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property except for subordinate utility
easements and rights-of-way that solely benefit the Property; (iv) execute or
file any subdivision plat affecting the Property; (v) consent to the annexation
of the Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the Property
to become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the material terms of the Permitted Encumbrances.
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SECTION 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary coverage plus umbrella coverage), which insurance shall
include operations and blanket contractual liability coverage which insures
contractual liability under the indemnifications set forth in Section 8.02 below
(but such coverage or the amount thereof shall in no way limit such
indemnifications). Upon request, Borrower shall maintain insurance or carry
additional amounts of insurance covering Borrower or the Property as Lender
shall reasonably require including against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company,
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Inc. is no longer available, a similar rating from a similar or successor
service). In addition, all policies shall (x) include a standard mortgagee
clause, without contribution, in the name of Lender and (y) provide that they
shall not be canceled, amended, or materially altered (including reduction in
the scope or limits of coverage) without at least thirty (30) days' prior notice
to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made available for Restoration (defined
below) (but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans and specifications approved by Lender
("RESTORATION"). Borrower shall comply with other reasonable requirements
established by Lender to preserve the security under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs
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(defined below) related to collection of the proceeds and (2) subject to Section
3.07(c) and at Lender's option, to (A) payment (without any Prepayment Premium)
of all or part of the Obligations, whether or not then due and payable, in the
order determined by Lender (provided that if any Obligations remains outstanding
after this payment, the unpaid Obligations shall continue in full force and
effect and Borrower shall not be excused in the payment thereof); (B) the cure
of any default under the Documents; or (C) the Restoration. Any insurance
proceeds held by Lender shall be held by Lender, and interest shall be earned
thereon at the rate paid by Lender at that time on other impound or escrow
accounts in connection with its mortgage portfolio business. If Borrower
receives any insurance proceeds for the Damage, Borrower shall promptly deliver
the proceeds to Lender. Notwithstanding anything in this Instrument or at law or
in equity to the contrary, none of the insurance proceeds paid to Lender shall
be deemed trust funds and Lender may dispose of these proceeds as provided in
this Section. Borrower expressly assumes all risk of loss from any Damage,
whether or not insurable or insured against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which does not exceed the aggregate of the remaining Net Proceeds
(defined below) and any funds deposited with Lender by Borrower ("ADDITIONAL
FUNDS") and (z) the aggregate of any loss of rental income insurance proceeds
which the carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any
funds deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves required
under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments, as such amounts become due under the construction
contract for Restoration, the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the
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amounts currently due under the construction contract for Restoration and
Lender's receipt of (i) appropriate lien waivers, (ii) a certification of the
percentage of Restoration completed by an architect or engineer acceptable to
Lender, and (iii) title insurance protection against materialmen's and
mechanic's liens. Lender shall disburse the funds within seven (7) days after
satisfaction of the conditions set forth in the preceding sentence. At Lender's
election, the disbursement of funds may be handled by a disbursing agent
selected by Lender, and such agent's reasonable fees and expenses shall be paid
by Borrower. The Net Proceeds, Rent Loss Proceeds, and any Additional Funds
shall constitute additional security for the Loan and Borrower shall execute,
deliver, file and/or record, at its expense, such instruments as Lender requires
to grant to Lender a perfected, first-priority security interest in these funds.
If the Net Proceeds are made available for Restoration and (x) Borrower refuses
or fails to complete the Restoration, (y) an Event of Default occurs, or (z) the
Net Proceeds or Additional Funds are not applied by Borrower to Restoration,
then any undisbursed portion may, at Lender's option, be applied to the
Obligations in any order of priority and any such application to principal shall
be deemed a voluntary prepayment subject to the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty
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(20%) of the gross area of the Improvements or (B) ten percent (10%) of the
parking spaces is affected by the Taking, (ii) the amount of the loss does not
exceed twenty percent (20%) of the original amount of the Note; (iii) the Taking
does not affect access to the Property from any public right-of-way; (iv) there
is no Event of Default at the time of application; (v) after Restoration, the
Property and its use will be in compliance with all Laws; (vi) in Lender's
reasonable judgment, Restoration is practical and can be completed within one
(1) year after the Taking and at least one (1) year prior to the maturity of the
Note; and (vii) the Tenants listed in Exhibit D ("MAJOR TENANTS") agree in
writing to continue their Leases without abatement of rent. Any portion of the
Award that is (i) for loss of value or property or (ii) in excess of the cost of
any Restoration permitted above, may, in Lender's sole discretion, be applied
against the Obligations or paid to Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender, express or implied,
to any contractor, subcontractor, laborer, mechanic or materialman for the
performance of any labor or the furnishing of any material for any improvement,
construction, alteration, or repair of the Property. Borrower further agrees
that Lender does not stand in any fiduciary relationship to Borrower. Any
contributions made, directly or indirectly, to Borrower by or on behalf of any
of its partners, members, principals or any party related to such parties shall
be treated as equity and shall be subordinate and inferior to the rights of
Lender under the Documents.
SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance premiums, then, at Lender's option, Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12)
of the annual Assessments (except for income taxes, franchise taxes, ground
rents, maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the amounts,
schedules and instructions for payment of the Impositions. Borrower authorizes
Lender or its agent to obtain the bills for Assessments directly from the
appropriate tax or governmental authority. All Deposits are pledged to Lender
and shall constitute additional
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security for the Obligations. The Deposits shall be held by Lender without
interest (except to the extent required under Laws) and may be commingled with
other funds. If (i) there is no Event of Default at the time of payment, (ii)
Borrower has delivered bills or invoices to Lender for the Impositions in
sufficient time to pay them when due, (iii) the Deposits are sufficient to pay
the Impositions or Borrower has deposited the necessary additional amount, then
Lender shall pay the Impositions prior to their due date. Any Deposits remaining
after payment of the Impositions shall, at Lender's option, be credited against
the Deposits required for the following year or paid to Borrower. If an Event of
Default occurs, the Deposits may, at Lender's option, be applied to the
Obligations in any order of priority. Any application to principal shall be
deemed a voluntary prepayment subject to the Prepayment Premium. Borrower shall
not claim any credit against the principal and interest due under the Note for
the Deposits. Upon an assignment or other transfer of this Instrument, Lender
may pay over the Deposits in its possession to the assignee or transferee and
then it shall be completely released from all liability with respect to the
Deposits. Borrower shall look solely to the assignee or transferee with respect
thereto. This provision shall apply to every transfer of the Deposits to a new
assignee or transferee. Subject to Article V, a transfer of title to the Land
shall automatically transfer to the new owner the beneficial interest in the
Deposits. Upon full payment and satisfaction of this Instrument or, at Lender's
option, at any prior time, the balance of the Deposits in Lender's possession
shall be paid over to the record owner of the Land and no other party shall have
any right or claim to the Deposits. Lender may transfer all its duties under
this Section to such service or financial institution as Lender may periodically
designate and Borrower agrees to make the Deposits to such service or
institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an
"operating company" or a "real estate operating company" within the meaning of
29 C.F.R. Section 2510.3-101(c) or (e). Borrower shall deliver to Lender such
certifications and/or other evidence periodically requested by Lender, in its
sole discretion, to verify these representations and warranties. Failure to
deliver these certifications or evidence, breach of these representations and
warranties, or consummation of any transaction which would cause this Instrument
or any exercise of Lender's rights under this Instrument to (i) constitute a
non-exempt prohibited transaction under ERISA or (ii) violate ERISA or any state
statute regulating governmental plans (collectively, a "VIOLATION"), shall be an
Event of Default. Notwithstanding anything in the Documents to the contrary, no
sale, assignment, or transfer of any direct or indirect right, title, or
interest in Borrower or the Property (including creation of a junior lien,
encumbrance or leasehold interest) shall be permitted which would, in Lender's
opinion, negate Borrower's representations in this Section or cause a Violation.
At least fifteen (15) days before consummation of any of the foregoing, Borrower
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shall obtain from the proposed transferee or lienholder (i) a certification to
Lender that the representations and warranties of this Section will be true
after consummation and (ii) an agreement to comply with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants.
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material",
"hazardous waste", "toxic substance", "toxic pollutant", "contaminant", or
"pollutant" within the meaning of any Environmental Law. "RELEASE" of any
Hazardous Materials includes any release, deposit, discharge, emission, leaking,
spilling, seeping, migrating, pumping, pouring, escaping, dumping, disposing or
other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits,
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and (D) (1) in only the amounts necessary to operate the Property or (2) fully
disclosed to and approved by Lender in writing; (iv) Borrower shall keep the
Property free and clear of all liens and encumbrances imposed by any
Environmental Laws due to any act or omission by Borrower or any person (the
"ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense, fully and
expeditiously cooperate in all activities in Section 3.12(c) including providing
all relevant information and making knowledgeable persons available for
interviews; (vi) Borrower shall, at its sole expense, (A) perform any reasonable
environmental site assessment or other investigation of environmental conditions
at the Property upon Lender's request based on Lender's reasonable belief that
the Property is not in compliance with all Environmental Laws, (B) share with
Lender the results and reports and Lender and the Indemnified Parties (defined
below) shall be entitled to rely on such results and reports, and (C) complete
any remediation of Hazardous Materials affecting the Property or other actions
required by any Environmental Laws; (vii) Borrower shall not allow any Tenant or
other user of the Property to violate any Environmental Law; and (viii) Borrower
shall immediately notify Lender in writing after it becomes aware of (A) the
presence, Release, or threatened Release of Hazardous Materials affecting the
Property, (B) any non-compliance of the Property with any Environmental Laws,
(C) any actual or potential Environmental Lien, (D) any required or proposed
remediation of environmental conditions relating to the Property, and (E) any
written or oral communication or notice from any person relating to Hazardous
Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
SECTION 3.13 Electronic Payments. All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change in Borrower's bank
or financial institution is necessary to appropriately effectuate the payments
by electronic funds transfer, Lender shall have the right to require Borrower to
select a different depository after thirty (30) days' prior notice. As of the
date of this Instrument, First Union National Bank has been deemed acceptable to
Lender. All costs of (i) establishing and maintaining such account and (ii) the
electronic funds transfers shall be paid by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be
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required after a default under the Documents. Borrower shall assist Lender and
such person in effecting said inspection, subject, however, to the rights of
tenants in possession.
SECTION 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual reports and (B) forty-five (45)
days after the end of each calendar quarter for quarterly reports. If any one
report, statement, or item is not received by Lender within fifteen (15) days
after Lender has given Borrower written notice that such report, statement or
item was not received on its due date, then a late fee of Five Hundred and
No/100 Dollars ($500.00) per month shall be due and payable by Borrower. In
addition, if any one report, statement, or item is not received within thirty
(30) days after such notice, Lender may immediately declare an Event of Default
under the Documents. Borrower shall (i) provide Lender with such additional
financial, management, or other information regarding Borrower, any general
partner of Borrower, or the Property, as Lender may reasonably request and (ii)
upon Lender's request, deliver all items required by Section 3.15 in an
electronic format (i.e. on computer disks) or by electronic transmission
acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business
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Day (as defined in the Note) after two (2) days prior written notice; provided
that no notice shall be required after any default under the Documents. Borrower
shall assist Lender in effecting such examination. All such inspections shall be
performed in a commercially reasonable manner. Upon five (5) days' prior notice,
Lender may inspect and make copies of Borrower's or any general partner of
Borrower's income tax returns with respect to the Property for the purpose of
verifying any items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any defaults (or
events which with the passage of time and/or notice would constitute a default)
under the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender's right to realize upon or enforce any other security
now or later held by Lender. Lender may enforce the Documents or any other
security in such order and manner as it may determine in its discretion.
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SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the lien and rights of Lender under the Documents and (ii)
protect the lawful owner of the Documents. Promptly upon request by Lender and
at Borrower's expense, Borrower shall execute additional instruments and take
such actions as Lender reasonably believes are necessary or desirable to (a)
maintain or grant Lender a first-priority, perfected lien on the Property, (b)
correct any error or omission in the Documents; and (c) effect the intent of the
Documents, including filing/recording the Documents, additional mortgages or
deeds of trust, financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower or Lender in connection with the granting, closing, servicing, and
enforcement of (a) the Loan and Documents or (b) attributable to Borrower as
owner of the Property. The term "COSTS" shall mean any of the foregoing incurred
in connection with (a) any default by Borrower under the Documents, (b) the
servicing of the Loan, or (c) the exercise, enforcement, compromise, defense,
litigation, or settlement of any of Lender's rights or remedies under the
Documents or relating to the Loan or the Obligations. If Borrower fails to pay
any amounts or perform any actions required under the Documents, Lender may (but
shall not be obligated to) advance sums to pay such amounts or perform such
actions. Borrower grants Lender the right to enter upon and take possession of
the Property to prevent or remedy any such failure and the right to take such
actions in Borrower's name. No advance or performance shall be deemed to have
cured a default by Borrower. All (a) sums advanced by or payable to Lender per
this Section or under applicable Laws, (b) except as expressly provided in the
Documents, payments due under the Documents which are not paid in full when due,
and (c) all Costs, shall: (i) be deemed demand obligations, (ii) bear interest
at the applicable interest rate specified in the Note, which shall be the
Default Rate unless prohibited by Laws, until paid if not paid on demand, (iii)
be part of, together with such interest, the Obligations , and (iv) be secured
by the Documents. Lender, upon making any such advance, shall also be subrogated
to rights of the person receiving such advance.
SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender shall be subrogated to all rights, claims, liens,
titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and (ii) are merged with the lien and security interest created by the Documents
as cumulative security for the payment and performance of the Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including
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any Prepayment Premium) shall become immediately due and payable, if Borrower,
without Lender's prior written consent (which may be withheld for any or no
reason including the possibility of an ERISA violation or the proposed
transferee's failure to agree in writing to Lender increasing the interest
payable on the Obligations to any rate, changing any other terms (including
maturity) of the Obligations or Documents, or requiring the payment of a
transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender
agrees that, upon fifteen (15) days prior written request of Borrower, Borrower,
and any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of
time or the giving of notice or both would be an Event of Default) has
occurred and is continuing;
(ii) the proposed transferee complies with and delivers the
ERISA Certificate and Indemnification Agreement described in the
guidelines with respect thereto then applicable to Lender's mortgage
loans (the "Guidelines") (or, if the statements required by the
certification are not true with respect to the proposed transferee,
Lender shall have received such evidence as it may require in its sole
discretion to determine that the proposed transfer is not and would not
render the Loan a prohibited transaction under ERISA);
(iii) payment by Borrower or the proposed transferee of (1)
all reasonable costs and expenses incurred by Lender for the processing
of said transfer including a processing fee and (2) all other costs and
expenses (including attorneys' fees and expenses for Lender's staff
attorneys and outside counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower with another entity so long as the
surviving entity (i) has a net worth (as reasonably determined by Lender in
accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower as of the closing date of the Loan, (ii) has a ratio of total
debt (both secured
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and unsecured) to total assets of less than fifty percent (50%); and (iii) in
the judgment of Lender, has financial capability and creditworthiness,
reputation and experience in the ownership, operation, management, and leasing
of similar properties, equal to or greater than Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively,
"Borrower Property"), together with all of the properties (the "CRIT-NC LLC
Properties") owned by Guarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $22,950,000 (the "CRIT-NC, LLC Loan")
evidenced by the CRIT-NC, LLC Note (as defined in the Note) and the documents
and obligations securing the CRIT-NC, LLC Note (the Borrower Property and the
CRIT-NC, LLC Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a
Person (defined below) which, in the judgment of Lender, has financial
capability and creditworthiness, reputation and experience in the
ownership, operation, management, and leasing of similar properties,
equal to or greater than Borrower, including without limitation, a net
worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio (defined
below) does not exceed 62% of the entire Portfolio;
(iii) Borrower pays Lender a non-refundable servicing fee (as
specified by Lender) at the time of the request and an additional fee
equal to 1.0% of the outstanding principal balance of the Loan and the
CRIT-NC, LLC Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to
verify the first priority of the Documents (and the documents securing
the CRIT-NC, LLC Loan) at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) for the
entire Portfolio is at least 1.90 to 1.00 for the preceding twelve
month period and Lender receives satisfactory evidence that this Debt
Service Coverage Ratio for the entire Portfolio will be maintained for
the next succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under
the Documents (and the documents securing the CRIT-NC, LLC Loan) and
executes any documents reasonably required by Lender, and all of these
documents are satisfactory in form and substance to Lender;
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(vii) Lender reasonably approves the form and content of all
transfer documents, and Lender is furnished with a certified copy of
the recorded transfer documents;
(viii) the transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the Guidelines
with respect thereto then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees,
costs, and expenses incurred by Lender in connection with the proposed
transfer, including, without limitation, all legal (for both outside
counsel and Lender's staff attorneys), accounting, title insurance,
documentary stamps taxes, intangibles taxes, mortgage taxes, recording
fees, and appraisal fees, whether or not the transfer is actually
consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not be
anticipated for any greater time period than that approved by generally accepted
accounting principles and ordinary operating expenses shall not be prepaid.
Documentation of NOI and expenses shall be certified by an officer of Borrower
with detail satisfactory to Lender and shall be subject to the approval of
Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
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(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien
or security interest created by the Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any remedies
provided hereunder or by law is not necessary for the protection or preservation
of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in lien to this Instrument;
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(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction (and not immediately paid by
Borrower) or shall be consented to by Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender or any person
(which shall be a person permitted by applicable Laws) designated by Lender may
(but shall not be obligated to) take any action (separately, concurrently,
cumulatively, and at any time and in any order) permitted under any Laws,
without notice, demand, presentment, or protest (all of which are hereby waived,
to the extent permitted by Laws), to protect and enforce Lender's rights under
the Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this Instrument
or (ii) partially foreclose this Instrument for any portion of the Obligations
due and the lien and security interest created by this Instrument as to the
Property not foreclosed shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right, title and
interest of Borrower therein and rights of redemption thereof, pursuant to power
of sale;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
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(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, sue for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender in
connection with the foregoing operations and all amounts needed to pay the
Impositions and other expenses of the Property, as well as just and reasonable
compensation for the services of Lender and its attorneys, agents, and
employees; and/or (vi) in every case in connection with the foregoing, exercise
all rights and powers of Borrower or Lender with respect to the Property, either
in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender deems advisable for the care,
protection and preservation of the Personal Property and (ii) request Borrower
at its expense to assemble the Personal Property and make it available to Lender
at a convenient place acceptable to Lender. Any notice of sale, disposition or
other intended action by Lender with respect to the Personal Property sent to
Borrower at least five (5) days prior to such action shall constitute
commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender exercises any of its rights under Section 6.02(g), Lender shall not
(a) be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose; (b) be deemed a beneficiary or mortgagee in possession by
reason of such entry or taking possession; nor (c) be liable (i) to account for
any action taken pursuant to such exercise other than for Rents actually
received by
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Lender, (ii) for any loss sustained by Borrower resulting from any failure to
lease the Property, or (iii) any other act or omission of Lender except for
losses caused by Lender's willful misconduct or gross negligence. Borrower
hereby consents to, ratifies, and confirms the exercise by Lender of its rights
under this Instrument and appoints Lender as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender in the exercise of its rights under the Documents, together with interest
thereon at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's rights under the Documents.
SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower waives any right
to require otherwise; (b) any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice; and (c) Lender may acquire the
Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided by Laws to the contrary, be applied
in the order determined by Lender to: (a) payment of all Costs and expenses of
any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items, if permitted by Laws; (c) payment
of the Obligations in such order as Lender may elect; (d) payment of any other
sums secured or required to be paid by Borrower; and (e) payment of the surplus,
if any, to any person lawfully entitled to receive it. Borrower and Lender
intend and agree that during any period of time between any foreclosure judgment
that may be obtained and the actual foreclosure sale that the foreclosure
judgment will not extinguish the Documents or any rights contained therein
including the obligation of Borrower to pay all Costs and to pay interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender to exercise any rights under the Documents upon any default
or Event of Default shall impair Lender's rights or be construed as a waiver of,
or acquiescence to, such or any subsequent default or Event of Default. No
recovery of any judgment by Lender and no levy of an execution upon the Property
or any other property of Borrower shall affect the lien and security interest
created by this Instrument and such liens, rights, powers, and remedies shall
continue unimpaired as before. Lender may resort to any security given by this
Instrument or any other security now
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given or hereafter existing to secure the Obligations, in whole or in part, in
such portions and in such order as Lender may deem advisable, and no such action
shall be construed as a waiver of any of the liens, rights, or benefits granted
hereunder. Acceptance of any payment after any Event of Default shall not be
deemed a waiver or a cure of such Event of Default and such acceptance shall be
deemed an acceptance on account only. If Lender has started enforcement of any
right by foreclosure, sale, entry, or otherwise and such proceeding shall be
discontinued, abandoned, or determined adversely for any reason, then Borrower
and Lender shall be restored to their former positions and rights under the
Documents with respect to the Property, subject to the lien and security
interest hereof.
SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns, and for any
person ever claiming an interest in the Property (other than Lender), waives and
releases all rights of redemption, reinstatement, valuation, appraisement,
notice of intention to mature or declare due the whole of the Obligations, all
rights to a marshaling of the assets of Borrower, including the Property, or to
a sale in inverse order of alienation, in the event of foreclosure of the liens
and security interests created under the Documents; (c) shall not be relieved of
its obligation to pay the Obligations as required in the Documents nor shall the
lien or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder of any subordinate lien, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security interest, or the priority of the modified Documents as
security for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender, as
security for the Obligations, a security interest in the Personal Property to
the fullest extent that the same may be subject to the U.C.C. Borrower
authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
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SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys' fees (both in-house staff
and retained attorneys) and all other costs of defense. The term "INDEMNIFIED
PARTIES" shall mean (a) Lender, (b) any prior owner or holder of the Note, (c)
any existing or prior servicer of the Loan, (d) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing, and (e)
the heirs, legal representatives, successors and assigns of each of the
foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may, after a
determination by the Indemnified Parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interests, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the
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resolution of any claims or proceedings pertaining to ERISA. Upon demand,
Borrower shall pay or, in the sole discretion of the Indemnified Parties,
reimburse and/or indemnify the Indemnified Parties for all Costs imposed on,
incurred by, or asserted against the Indemnified Parties by reason of any items
set forth in this Article VIII and/or the enforcement or preservation of the
Indemnified Parties' rights under the Documents (except as noted in this
paragraph). Any amount payable to the Indemnified Parties under this Section
shall (a) be deemed a demand obligation, (b) be part of the Obligations, (c)
bear interest at the applicable interest rate specified in the Note, which shall
be the Default Rate unless prohibited by Laws, until paid if not paid on demand,
and (d) be secured by this Instrument.
SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, assignment or
foreclosure of this Instrument, (c) the acceptance by Lender (or any nominee) of
a deed in lieu of foreclosure, (d) a plan of reorganization filed under the
Bankruptcy Code, or (e) the exercise by the Lender of any rights in the
Documents. Borrower's obligations under Article VIII shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation under any
applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "NOTICE") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
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<TABLE>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
Cornerstone Realty Income Trust, Inc. McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attention: Martin B. Richards
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 103 650 Reference Loan No. 6 103 650
</TABLE>
Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's right to bring any action or proceeding against Borrower or the
Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
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correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO"; (g)
the terms "PROPERTY", "LAND", "IMPROVEMENTS", and "PERSONAL PROPERTY" shall be
construed as if followed by the phrase "OR ANY PART THEREOF"; (h) the term
"OBLIGATIONS" shall be construed as if followed by the phrase "OR ANY OTHER SUMS
SECURED HEREBY, OR ANY PART THEREOF"; (i) the term "PERSON" shall include
natural persons, firms, partnerships, corporations, governmental authorities or
agencies, and any other public or private legal entities; (j) the term
"PROVISIONS," when used with respect hereto or to any other document or
instrument, shall be construed as if preceded by the phrase "TERMS, COVENANTS,
AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the term "LEASE" shall mean
"TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR"
shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term
"TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l)
the term "OWNED" shall mean "NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY"
and "ALL" shall mean "ANY OR ALL"; and (n) the term "ON DEMAND" or "UPON DEMAND"
shall mean "WITHIN FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender may, without notice to
Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender shall continue to have and enjoy all its
rights and privileges
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as to each separate estate. Upon foreclosure of this Instrument, to the extent
permitted by Laws, none of the Leases shall be destroyed or terminated as a
result of such foreclosure, by application of the doctrine of merger or as a
matter of law, unless Lender takes all actions required by law to terminate the
Leases as a result of foreclosure. All of Borrower's covenants and agreements
under the Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents listed in Sections 3.04, 3.19, 4.01 and 6.02. The Documents
cannot be amended, terminated, or discharged except in a writing signed by the
party against whom enforcement is sought. No waiver, release, or other
forbearance by Lender will be effective unless it is in a writing signed by
Lender and then only to the extent expressly stated. The provisions of the
Documents shall be binding upon Borrower and its heirs, devisees,
representatives, successors, and assigns including successors in interest to the
Property and inure to the benefit of Lender and its heirs, successors,
substitutes, and assigns. Where two or more persons have executed the Documents,
the obligations of such persons shall be joint and several, except to the extent
the context clearly indicates otherwise. The Documents may be executed in any
number of counterparts with the same effect as if all parties had executed the
same document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart. Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of any Document which is
not of public record, and, in the case of any mutilation, upon surrender and
cancellation of the Document, Borrower will issue, in lieu thereof, a
replacement Document and indemnity reasonably satisfactory to Borrower, dated
the date of the lost, stolen, destroyed or mutilated Document containing the
same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
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(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Portfolio shall meet the
leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
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(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
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(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have determined in its sole
discretion, that following the proposed substitution, the entire Portfolio shall
meet the leasing percentage requirements in the Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
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Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal to or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
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SECTION 11.02 Required Repairs, Capital Improvements and Replacements. Borrower
shall be required to spend, between January 1, 1999 and December 31, 2000, at
least $2,400,000 (the "Repair Amount"), in the aggregate, on the repairs,
capital improvements and replacements for the entire Portfolio as outlined on
Exhibit F attached hereto and by this reference made a part hereof. Borrower
shall document the payment of the Repair Amount and the completion of the
applicable repairs, capital improvements and replacements made by Borrower by
furnishing to Lender, on or before March 1, 2001, annual financial statements
(for the years 1999 and 2000) and certifications of the Borrower reflecting such
expenditure and any other such written documentation as Lender shall reasonably
require. If Lender determines that Borrower has not spent the Repair Amount (by
December 31, 2000), then beginning with the April, 2001, monthly payments due
under the Loan, Borrower shall make monthly payments equal to the Amortizing
Payments, and the Amortizing Payments shall continue until Lender determines
that Borrower has spent the Repair Amount.
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IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
Signed, sealed, and delivered in the BORROWER:
presence of the following witnesses:
CORNERSTONE REALTY INCOME
/s/ David S. McKenney TRUST, INC., a Virginia
- -----------------------------------
Witness
Printed Name: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
--------------------- ------------------------------
Name: Stanley J. Olander, Jr.
/s/ Mark A. Babb Title: Chief Financial Officer
- -----------------------------------
Witness
Printed Name: /s/ Mark A. Babb (CORPORATE SEAL)
-------------------
Address:
306 East Main Street
Richmond, Virginia 23219
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ACKNOWLEDGMENT
ACKNOWLEDGMENT
STATE OF VIRGINIA )
) PROBATE
CITY OF RICHMOND )
PERSONALLY APPEARED BEFORE ME, the undersigned witness, who being duly
sworn, deposes and states that (s)he saw the within named Cornerstone Realty
Income Trust, Inc., by Stanley J. Olander, Jr., the Chief Financial Officer and
Secretary, sign, seal and deliver the foregoing Mortgage and Security Agreement
and that (s)he with the other witness whose name is subscribed above witnessed
the execution thereof.
Sworn to before me this 27th day of /s/ Mark A. Babb Mark A. Babb
September, 1999 ------------------------------------
Witness
/s/ Jacquelyn B. Owens (L.S.)
- --------------------------------------
Notary Public for State of Virginia at-large
My Commission Expires: 6/30/03
----------
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Exhibit A
(Arbors at Windsor Lake)
All that certain piece, parcel, or lot of land, with improvements, situate,
lying and being near the City of Columbia, in the County of Richland, State of
South Carolina, and having the following boundaries and measurements, to wit:
BEGINNING AT AN EXISTING 1-1/2" PIPE IN THE SOUTHWESTERN MOST CORNER OF SAID
TRACT WHERE SAID TRACT INTERSECTS WITH HUNT CLUB ROAD (SR 40-1975) 60' R/W AND
WINDSOR LAKE BOULEVARD (SR 40-1196) R/W WIDTH VARIES, THENCE RUNNING IN A
NORTHEASTERLY DIRECTION ALONG SAID WINDSOR LAKE BOULEVARD AS FOLLOWS:
N 02 08'16" W FOR A DISTANCE OF 100.02 FEET TO AN EXISTING 1-1/2" PIPE;
N 10 53'55" E FOR A DISTANCE OF 99.21 FEET TO A NEW #5 REBAR WITH CAP;
N 20 54'39" E FOR A DISTANCE OF 309.48 FEET TO A NEW #5 REBAR WITH CAP;
N 22 09'01" E FOR A DISTANCE OF 131.64 FEET TO AN EXISTING DISTURBED 1"
PIPE;
N 16 42'06" E FOR A DISTANCE OF 87.07 FEET TO AN EXISTING 1" PIPE;
N 05 31'41" E FOR A DISTANCE OF 98.61 FEET TO A NEW #5 REBAR WITH CAP'
N 05 36'39" E FOR A DISTANCE OF 70.74 FEET TO A NEW #5 REBAR WITH CAP;
N 27 48'41" E FOR A DISTANCE OF 68.64 FEET TO AN EXISTING RIGHT-OF-WAY
MONUMENT;
N 66 36'21" E FOR A DISTANCE OF 79.41 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF LOREN I.
CINTRON (D.B. D1346-0446) S 34 59'37" E FOR A DISTANCE OF 53.35 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF LELIA M.
HANSARD (D.B. D1276, 0869) S 35 01'34" E FOR A DISTANCE OF 53.03 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF PENELOPE
J. GEORGE (D.B. D902, 0857) S 31 29'39" E FOR A DISTANCE OF 7.78 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING WITH PROPERTIES NOW OR FORMERLY OF PENELOPE J.
GEORGE (D.B. 0902, 0857) AND JEFFERY S. SHEALY (D.B. D1201-0453) S 32 18'18" E
FOR A DISTANCE OF 97.13 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF JEFFERY S. SHEALY (D.B.
D1201-0453) N 55 04'34" E FOR A DISTANCE OF 115.00 FEET TO AN EXISTING #4 REBAR
AT THE RIGHT-OF-WAY BAY SPRINGS ROAD 50' R/W; THENCE TURNING AND RUNNING ACROSS
BAY SPRINGS ROAD 50' R/W S 83 48'04" E FOR A DISTANCE OF 66.42 FEET TO A NEW #5
REBAR AND CAP AT THE RIGHT-OF-WAY OF BAY SPRINGS ROAD 50' R/W; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF DONALD & CHRISTINA HOTZ (D.B.
D1267-0833) N 54 56'02" E FOR A DISTANCE OF 60.13 FEET TO AN EXISTING #4 REBAR;
THENCE RUNNING WITH THE PROPERTY NOW OR FORMERLY OF DOROTHY M. & OSCAR J.
McMILLAN (D.B. D1012-0663) N 54 56'02" E FOR A DISTANCE OF 39.92 FEET TO A #4
REBAR; THENCE RUNNING ALONG THE PROPERTY OF DOROTHY M. AND OSCAR J. McMILLAN
(D.B. D1012-0663) N 74 06'22" E FOR A DISTANCE OF 8.00 FEET TO AN EXISTING #4
REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF HORACE DENNARD &
JANE M. MILLER (D.B. D1173-0003) N 74 06'22" E FOR A DISTANCE OF 46.98 FEET TO
AN EXISTING #4 REBAR; THENCE TURNING AND RUNNING ALONG THE PROPERTIES NOW OR
FORMERLY OF TAMMY WATTS (D.B. D1089-0296), JOSEPH C. & VANGALENE FRINKS (D.B.
D1215-0568) AND K & T CORPORATION (D.B. D1418-0332) S 34 59'29" E FOR A DISTANCE
OF 110.15 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING ALONG THE
PROPERTY NOW OR FORMERLY OF JIMMY & DOROTHY GREEN (D.B. D1054-0727) S 35 02'21"
E FOR A DISTANCE OF 59.86 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING
ALONG PROPERTIES NOW OR FORMERLY OF WILLIE E. GRANT (D.B. D1181-0965), JAMES V.
DEBLOSSIO (D.B. D1182-0546), EVELYN GRAHAM & GLENN BUTLER (D.B. D1387-0304),
ODESSA Y. WASHINGTON (D.B. D1208-0612) AND RICHARD B. MORA (D.B. D1363-0403) S
35 00'29" E FOR A DISTANCE OF 344.86 FEET TO AN EXISTING #4 REBAR; THENCE
TURNING ALONG THE PROPERTY NOW OR FORMERLY OF FOX CHASE TOWNHOMES HOME OWNERS
ASSOCIATION (COMMON AREAS) (D.B. D976-0862) AS FOLLOWS:
S 07 05'31" E FOR A DISTANCE OF 46.03 FEET TO AN EXISTING 1-1/2" PIPE;
S 07 04'18" E FOR A DISTANCE OF 53.29 FEET TO AN EXISTING #4 REBAR;
S 39 03'33" W FOR A DISTANCE OF 64.93 FEET TO AN EXISTING #5 REBAR WITH
CAP;
S 12 30'46" E FOR A DISTANCE OF 111.22 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG SAID HUNT CLUB ROAD (SR 40-1975) 60' R/W S 77
24'38" W FOR A DISTANCE OF 649.56 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE
CONTINUING ALONG SAID HUNT CLUB ROAD (SR 40-1975) 60' R/W S 77 25'43" W FOR A
DISTANCE OF 400.02' TO THE PLACE AND POINT OF BEGINNING.
Said property containing 14.487 acres according to plat of ALTA/ACSM Land Title
Survey for Cornerstone Realty Income Trust, Inc., prepared by Power Engineering
Company, Inc., dated August 30, 1999 and last revised September 21, 1999, which
plat is incorporated by this reference for purposes of this description.
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Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, owned by Borrower, wherever situate, and now or hereafter located on,
attached to, now or hereafter contained in, or used or usable in connection with
the real property described in Exhibit A attached hereto and incorporated herein
(the "LAND"), and all improvements located thereon (the "IMPROVEMENTS") or
placed on any part thereof, though not attached thereto, including all screens,
awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture and
furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto, which Borrower now has or may hereafter
acquire in the Land, the Improvements, or any of the personal property described
in this Exhibit B, or any portion thereof or interest therein, and any and all
awards made for the taking by eminent domain, or by any proceeding or purchase
in lieu
-41-
<PAGE>
thereof, of the whole or any part of such property, including without
limitation, any award resulting from a change of any streets (whether as to
grade, access, or otherwise) and any award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
-42-
<PAGE>
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as The Arbors at Windsor Lake, those
items recorded in the records of Charleston County, South Carolina, as set forth
in Schedule B, Section 2, of that certain Commitments for Title Insurance issued
by Lawyers Title Insurance Corporation, Commitment No. 1444.023, as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
-43-
<PAGE>
Exhibit D
LIST OF MAJOR TENANTS
NONE
-44-
<PAGE>
Exhibit E
Allocated Loan Amounts and Individual Property List
<TABLE>
<CAPTION>
LOAN
YEAR # OF ALLOCATION
PROPERTY NAME CITY ST ACQ'D UNITS BALANCE
(in $000s)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORNERSTONE REALTY INCOME TRUST INC.
LOAN NO.: 6 103 650
TAX ID NO.: 54-1589139
-------------------------------------------------------------------------------------------------------------------
Ashley Run Norcross GA 1997 348 $13,700
-------------------------------------------------------------------------------------------------------------------
Spring Lake Morrow GA 1998 188 $6,000
-------------------------------------------------------------------------------------------------------------------
Stone Brook Norcross GA 1997 188 $6,350
-------------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
-------------------------------------------------------------------------------------------------------------------
Hampton Pointe Charleston SC 1998 304 $9,150
-------------------------------------------------------------------------------------------------------------------
Westchase Charleston SC 1997 352 $8,900
-------------------------------------------------------------------------------------------------------------------
1,608 $50,550
-------------------------------------------------------------------------------------------------------------------
CRIT-NC, LLC
LOAN NO.: 6 103 651
TAX ID NO.: 54-1882705
-------------------------------------------------------------------------------------------------------------------
Charleston Place Charlotte NC 1997 214 $6,150
-------------------------------------------------------------------------------------------------------------------
Remington Place Raleigh NC 1997 136 $4,750
-------------------------------------------------------------------------------------------------------------------
St. Regis Raleigh NC 1997 180 $6,200
-------------------------------------------------------------------------------------------------------------------
Stone Point Charlotte NC 1998 192 $5,850
-------------------------------------------------------------------------------------------------------------------
722 $22,950
-------------------------------------------------------------------------------------------------------------------
Total Loan 2,330 $73,500
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
EXHIBIT F
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING DATE IMPROVE-MENTS ADJUSTED IMPROVE-MENT
COMMUNITY UNITS PER UNIT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE ARBORS AT WINDSOR LAKE 228 1/1/99 161,000 $ 706 161,000
- ---------------------------------------------------------------------------------------------------------------------
CHARLESTON PLACE 214 5/14/99 270,000 $1,262 270,000
- ---------------------------------------------------------------------------------------------------------------------
WESTCHASE APARTMENTS 352 1/15/99 367,000 $1,043 367,000
- ---------------------------------------------------------------------------------------------------------------------
ASHLEY RUN 348 4/30/99 400,000 $1,149 400,000
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE
- ---------------------------------------------------------------------------------------------------------------------
1,142 1,198,000 $1,049
- ---------------------------------------------------------------------------------------------------------------------
COMMUNITIES STILL IN RENOV. PERIOD
- ---------------------------------------------------------------------------------------------------------------------
STONE BROOK 188 10/31/99 215,000 $1,144
- ---------------------------------------------------------------------------------------------------------------------
ST. REGIS 180 " 204,000 $1,133
- ---------------------------------------------------------------------------------------------------------------------
REMINGTON PLACE 136 " 135,000 $ 993
- ---------------------------------------------------------------------------------------------------------------------
SPRING LAKE 188 8/12/00 506,000 $2,691
- ---------------------------------------------------------------------------------------------------------------------
STONE POINT 192 1/15/00 186,500 $ 971
- ---------------------------------------------------------------------------------------------------------------------
HAMPTON POINTE 304 3/31/00 400,000 $1,316
- ---------------------------------------------------------------------------------------------------------------------
SUB TOTAL 1,188 1,646,500 $8,248 1,646,500 $1,386
- ---------------------------------------------------------------------------------------------------------------------
TOTAL 2,330 2,844,500 $1,221
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
CORNERSTONE REQUIRED TO SPEND ON CAPITAL IMPROVEMENTS APPROXIMATELY 80% OF THE
ABOVE ALLOCATED INDIVIDUAL PROPERTY IMPROVEMENT BUDGETED AMOUNTS ON A PRORATA
BASIS FOR A TOTAL OF NOT LESS THAN $2,400,000 BY YEAR END 2000.
IN ADDITION TO THE ABOVE GENERAL IMPROVEMENTS, CORNERSTONE UNDER THE CAPITAL
IMPROVEMENT PROVISIONS OF THE LOAN DOCUMENTS WILL ALSO PERFORM THE FOLLOWING
SPECIFIC REPAIRS:
BEFORE YEAR END 2000
1. REPLACE THE EXTERIOR DEFECTIVE MASONITE SIDING AT ST. REGIS AND REPAIR ANY
EXTERIOR WOOD DAMAGE. 2. PAINT EXTERIOR OF WEST CHASE APARTMENTS.
AGREED AND ACCEPTED: CORNERSTONE REALTY INCOME TRUST, INC.
BY /S/ STANLEY J. OLANDER, JR.
-----------------------------
ITS CHIEF FINANCIAL OFFICER
-----------------------------
DATE: 9/27/99
-46-
EXHIBIT 4.5
PREPARED OUT OF STATE BY AND The debt secured by the within Deed of Trust,
UPON RECORDATION RETURN TO: Trust, together with the note(s) secured
thereby, have been satisfied in full this
Alston & Bird LLP _____ day of __________________
One Atlantic Center
1201 West Peachtree Street Signed by:___________________
Atlanta, Georgia 30309-3424 Title:_______________________
Attn: Christina K. Braisted
Loan No. 6 103 651
================================================================================
CRIT-NC, LLC, a Virginia limited liability company, as grantor
(Borrower)
to
LAWYERS TITLE INSURANCE CORPORATION, as trustee
(Trustee)
for the benefit of
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as beneficiary
(Lender)
---------------------------------
DEED OF TRUST AND
SECURITY AGREEMENT
---------------------------------
Dated: As of September 27, 1999
Locations:
Charleston Place, Mecklenburg County, North Carolina
Stone Point, Mecklenburg County, North Carolina
================================================================================
<PAGE>
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES
OBLIGATIONS CONTAINING PROVISIONS FOR EXTENSIONS OF TIME FOR PAYMENT AND OTHER
MODIFICATIONS IN THE TERMS OF THE OBLIGATIONS. A POWER OF SALE HAS BEEN GRANTED
IN THIS INSTRUMENT, PURSUANT TO WHICH THE TRUSTEE MAY TAKE THE PROPERTY AND SELL
IT WITHOUT GOING TO COURT IN A JUDICIAL FORECLOSURE ACTION UPON DEFAULT BY
BORROWER UNDER THIS INSTRUMENT.
PORTIONS OF THE PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR
FIXTURES ON THE LAND DESCRIBED IN EXHIBIT A HERETO. THE PROPERTY SECURES
INDEBTEDNESS EVIDENCED BY THE NOTE SECURED HEREUNDER IN THE ORIGINAL PRINCIPAL
AMOUNT OF TWENTY-TWO MILLION NINE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($22,950,000.00).
-ii-
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I OBLIGATIONS..........................................................................3
SECTION 1.01 OBLIGATIONS..........................................................................3
SECTION 1.02 LOAN DOCUMENTS.......................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.......................................................4
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY....................................................4
SECTION 2.02 VALIDITY OF LOAN DOCUMENTS...........................................................4
SECTION 2.03 LITIGATION...........................................................................4
SECTION 2.04 STATUS OF PROPERTY...................................................................5
SECTION 2.05 TAX STATUS OF BORROWER...............................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE......................................................6
SECTION 2.07 DISCLOSURE...........................................................................6
SECTION 2.08 ILLEGAL ACTIVITY.....................................................................6
ARTICLE III COVENANTS AND AGREEMENTS.............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS...............................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE............................................................6
SECTION 3.03 TAXES AND OTHER CHARGES..............................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS........................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY................................................8
SECTION 3.06 INSURANCE............................................................................9
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY..................................................10
SECTION 3.08 CONDEMNATION........................................................................12
SECTION 3.09 LIENS AND LIABILITIES...............................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS..........................................................14
SECTION 3.11 ERISA...............................................................................14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS............................15
SECTION 3.13 ELECTRONIC PAYMENTS.................................................................17
SECTION 3.14 INSPECTION..........................................................................17
SECTION 3.15 RECORDS, REPORTS, AND AUDITS........................................................17
SECTION 3.16 BORROWER'S CERTIFICATES.............................................................18
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES..................................19
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 3.18 ADDITIONAL SECURITY.................................................................19
SECTION 3.19 FURTHER ACTS........................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................19
SECTION 4.01 EXPENSES AND ADVANCES...............................................................19
SECTION 4.02 SUBROGATION.........................................................................20
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................20
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE..........................................................20
SECTION 5.02 PERMITTED TRANSFER..................................................................20
SECTION 5.03 PERMITTED (ONE TIME) TRANSFER.......................................................21
ARTICLE VI DEFAULTS AND REMEDIES...............................................................23
SECTION 6.01 EVENTS OF DEFAULT...................................................................23
SECTION 6.02 REMEDIES............................................................................24
SECTION 6.03 EXPENSES............................................................................26
SECTION 6.04 RIGHTS PERTAINING TO SALES..........................................................27
SECTION 6.05 APPLICATION OF PROCEEDS.............................................................27
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES................................................27
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES.......................................................28
ARTICLE VII SECURITY AGREEMENT..................................................................28
SECTION 7.01 SECURITY AGREEMENT..................................................................28
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES....................................28
SECTION 8.01 LIMITED RECOURSE LIABILITY..........................................................28
SECTION 8.02 GENERAL INDEMNITY...................................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY.........................................................29
SECTION 8.04 ERISA INDEMNITY.....................................................................29
SECTION 8.05 ENVIRONMENTAL INDEMNITY.............................................................29
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES..................................................29
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL....................................................30
ARTICLE IX ADDITIONAL PROVISIONS...............................................................30
SECTION 9.01 USURY SAVINGS CLAUSE................................................................30
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.02 NOTICES.............................................................................30
SECTION 9.03 SOLE DISCRETION OF LENDER...........................................................31
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION.......................................31
SECTION 9.05 CONSTRUCTION OF PROVISIONS..........................................................31
SECTION 9.06 TRANSFER OF LOAN....................................................................32
SECTION 9.07 MISCELLANEOUS.......................................................................32
SECTION 9.08 ENTIRE AGREEMENT....................................................................33
SECTION 9.09 CONCERNING THE TRUSTEE..............................................................33
SECTION 9.10 WAIVER OF TRIAL BY JURY.............................................................34
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL..........................................34
SECTION 10.01 PARTIAL RELEASE.....................................................................34
SECTION 10.02 SUBSTITUTION OF COLLATERAL..........................................................36
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS...................................................38
SECTION 11.01 AMORTIZATION REQUIRED...............................................................38
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS.............................38
</TABLE>
ATTACHMENTS:
EXHIBIT A - Legal Description of Land
EXHIBIT B - Description of Personal Property
EXHIBIT C - Permitted Encumbrances
EXHIBIT D - List of Major Tenants
EXHIBIT E - Allocated Loan Amounts and Individual Property List
EXHIBIT F - Required Repairs, Capital Improvements and Replacements
-v-
<PAGE>
DEFINITIONS
The terms set forth below are defined in the following sections of this
Deed of Trust and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
-vi-
<PAGE>
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (i)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
Trustee Preamble, Section 9.05(o)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
-vii-
<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT (this "INSTRUMENT") is made as of
September 27, 1999, by CRIT-NC, LLC, a Virginia limited liability company,
having its principal office and place of business at 306 East Main Street,
Richmond, Virginia 23219, as grantor (to be indexed as the Grantor and to be
referred to hereinafter as "BORROWER"), to LAWYERS TITLE INSURANCE CORPORATION,
a Virginia corporation having an address at 201 South College Street, Suite
1590, Charlotte, North Carolina 28244 as trustee (to be indexed as the Grantee
and to be referred to hereinafter as "TRUSTEE"), for the benefit of THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an
office at Two Ravinia Drive, Suite 1400, Atlanta, Georgia 30346, as beneficiary
(to be indexed as a Grantee and to be referred to hereinafter as "LENDER").
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Twenty-Two Million Nine
Hundred Fifty Thousand and No/100 Dollars ($22,950,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Grants, bargains, sells, assigns, transfers, pledges, mortgages, warrants,
and conveys to Trustee, WITH POWER OF SALE, for the benefit of Lender, and
grants Trustee and Lender a security interest in, the following property,
rights, interests and estates owned by Borrower (collectively, the "PROPERTY"):
(i) The real property in Mecklenburg County, North Carolina and described
in Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures) now
or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all land
lying within the rights-of-way, roads, or streets, open or proposed, adjoining
the Land to the center line thereof,
<PAGE>
and all sidewalks, alleys, and strips and gores of land adjacent to or used in
connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof ) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower`s right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
-2-
<PAGE>
TO HAVE AND TO HOLD the Property unto Lender and Trustee, and their successors
and assigns forever, subject to the matters listed in Exhibit C ("PERMITTED
ENCUMBRANCES") and the provisions of this Instrument.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if Borrower shall pay the
Obligations as they become due, and shall comply with all of the covenants,
terms, and conditions of this Instrument, then this conveyance shall be null and
void and may be canceled of record at the request and cost of Borrower, but, if
at any time an Event of Default shall occur, Lender may direct Trustee to sell
the Property at public sale as provided in Section 6.02 or exercise the other
remedies set forth herein or provided by law.
PROVIDED, HOWEVER, if Borrower shall pay and perform the Obligations as provided
for in the Documents and shall comply with all the provisions in the Documents
(defined below), these presents and the estates hereby granted (except for the
obligations of Borrower set forth in Sections 3.11 and 3.12 and Article VIII
hereof) shall cease, terminate and be void.
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents;
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Deed of Trust and Security Agreement
between Borrower and Lender of even date herewith securing the Note and to be
recorded in the real estate records of Wake County, North Carolina, (vi) that
certain Unconditional Guaranty of Payment and Performance
(Cross-Collateralization) (the "Guaranty") of even date herewith from
Cornerstone Realty Income Trust, Inc. ("Guarantor") to Lender, (vii) that
certain Deed to Secure Debt and Security Agreement between Guarantor and Lender
of even date herewith securing the Guaranty and to be recorded in the real
estate records of Gwinnett County, Georgia and Clayton County, Georgia, (viii)
that certain
-3-
<PAGE>
Mortgage and Security Agreement between Guarantor and Lender of even date
herewith securing the Guaranty and to be recorded in the real estate records of
Charleston County, South Carolina, (ix) that certain Mortgage and Security
Agreement between Guarantor and Lender of even date herewith securing the
Guaranty and to be recorded in the real estate records of Richland County, South
Carolina, (x) any additional mortgages, deeds of trust and deeds to secure debt
and other instruments given to secure the Note pursuant to the substitution of
collateral provisions of Section 10.02 below, and (xi) any other written
agreement executed in connection with the closing of the Loan (but excluding the
Loan application and Loan commitment) and by the party against whom enforcement
is sought, including those given to evidence or further secure the payment and
performance of any of the Obligations, and any written renewals, extensions, and
amendments of the foregoing, executed by the party against whom enforcement is
sought. All of the provisions of the Documents are incorporated into this
Instrument as if fully set forth in this Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seised of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, charges, encumbrances, and security
interests, except the Permitted Encumbrances; (ii) will forever warrant and
defend its title to the Property and the validity, enforceability, and priority
of the lien and security interest created by this Instrument against the claims
of all persons; (iii) is a Virginia limited liability company duly organized,
validly existing, and in good standing and qualified to transact business under
the laws of its state of organization or incorporation ("ORGANIZATION STATE")
and the state (or district) where the Property is located ("PROPERTY STATE");
and (iv) has all necessary approvals, governmental and otherwise, and full power
and authority to own its properties (including the Property) and carry on its
business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument and Uniform Commercial Code ("U.C.C.") filings).
The Documents constitute valid and binding obligations of Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform its
obligations.
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SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, or
encumbrances except the Permitted Encumbrances and those created by this
Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
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SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower is
a limited liability company). Borrower has received reasonably equivalent value
for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment;
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(ii) Borrower demonstrates to Lender's reasonable satisfaction that (1) the
Property will not be sold to satisfy the Assessment prior to the final
determination of the legal proceedings, (2) it has taken such actions as are
required or permitted to accomplish a stay of any such sale, or (3) it has
furnished a bond or surety (satisfactory to Lender in form and amount)
sufficient to prevent a sale of the Property; (iii) at Lender's option, Borrower
has deposited the full amount necessary to pay any unpaid portion of the
Assessments with Lender; and (iv) such proceeding shall be permitted under any
other instrument to which Borrower or the Property is subject (whether superior
or inferior to this Instrument); provided, however, that the foregoing shall not
apply to the contesting of any income taxes, franchise taxes, ground rents,
maintenance charges, and utility charges.
(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes deeds of trust or debts secured by deeds of trust for
federal, state or local purposes or changes the manner of the collection of any
such existing taxes, and/or (iii) imposes a tax, either directly or indirectly,
on any of the Documents or the Obligations, Borrower shall, if permitted by law,
pay such tax within the statutory period or within twenty (20) days after demand
by Lender, whichever is less; provided, however, that if, in the opinion of
Lender, Borrower is not permitted by law to pay such taxes, Lender shall have
the option to declare the Obligations immediately due and payable (without any
Prepayment Premium) upon six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender and/or
Trustee under the documents against the claims of all persons, and shall
promptly notify Lender and Trustee of any such claims. Lender and/or Trustee
(whether or not named as a party to such proceedings) is authorized and
empowered (but shall not be obligated) to take such additional steps as it may
deem necessary or proper for the defense of any such proceeding or the
protection of the lien, security interest, validity, enforceability, or priority
of this Instrument, title
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to the Property, or any rights of Lender and/or Trustee under the Documents,
including the employment of counsel, the prosecution and/or defense of
litigation, the compromise, release, or discharge of such adverse claims, the
purchase of any tax title, the removal of such any liens and security interests,
and any other actions Lender and/or Trustee deems necessary to protect their
interests. Borrower authorizes Lender and/or Trustee to take any actions
required to be taken by Borrower, or permitted to be taken by Lender and/or
Trustee, in the Documents in the name and on behalf of Borrower. Borrower shall
reimburse Lender and Trustee on demand for all expenses (including attorneys'
fees) incurred by them in connection with the foregoing and their exercise of
the rights under the Documents. All such expenses of Lender and/or Trustee,
until reimbursed by Borrower, shall be part of the Obligations, bear interest at
the applicable interest rate specified in the Note, which shall be the Default
Rate unless prohibited by Laws, and shall be secured by this Instrument.
SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property, nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien or security interest (other than the Permitted Encumbrances
and those created by this Instrument) or (ii) leased by Borrower (A) with
Lender's prior written consent or (B) if the replaced Property was leased at the
time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "LAWS"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
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(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property except for subordinate utility
easements and rights-of-way that solely benefit the Property; (iv) execute or
file any subdivision plat affecting the Property; (v) consent to the annexation
of the Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the Property
to become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the material terms of the Permitted Encumbrances.
SECTION 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary
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coverage plus umbrella coverage), which insurance shall include operations and
blanket contractual liability coverage which insures contractual liability under
the indemnifications set forth in Section 8.02 below (but such coverage or the
amount thereof shall in no way limit such indemnifications). Upon request,
Borrower shall maintain insurance or carry additional amounts of insurance
covering Borrower or the Property as Lender shall reasonably require including
against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company, Inc. is no longer available, a similar rating from a similar
or successor service). In addition, all policies shall (x) include a standard
mortgagee clause, without contribution, in the name of Lender and (y) provide
that they shall not be canceled, amended, or materially altered (including
reduction in the scope or limits of coverage) without at least thirty (30) days'
prior notice to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made
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available for Restoration (defined below) (but regardless of whether any
proceeds are sufficient for Restoration), Borrower shall promptly commence and
diligently pursue to completion the restoration, replacement, and rebuilding of
the Property as nearly as possible to its value and condition immediately prior
to the Damage or a Taking (defined below) in accordance with plans and
specifications approved by Lender ("RESTORATION"). Borrower shall comply with
other reasonable requirements established by Lender to preserve the security
under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs (defined below) related to collection of the
proceeds and (2) subject to Section 3.07(c) and at Lender's option, to (A)
payment (without any Prepayment Premium) of all or part of the Obligations,
whether or not then due and payable, in the order determined by Lender (provided
that if any Obligations remains outstanding after this payment, the unpaid
Obligations shall continue in full force and effect and Borrower shall not be
excused in the payment thereof); (B) the cure of any default under the
Documents; or (C) the Restoration. Any insurance proceeds held by Lender shall
be held by Lender, and interest shall be earned thereon at the rate paid by
Lender at that time on other impound or escrow accounts in connection with its
mortgage portfolio business. If Borrower receives any insurance proceeds for the
Damage, Borrower shall promptly deliver the proceeds to Lender. Notwithstanding
anything in this Instrument or at law or in equity to the contrary, none of the
insurance proceeds paid to Lender shall be deemed trust funds and Lender may
dispose of these proceeds as provided in this Section. Borrower expressly
assumes all risk of loss from any Damage, whether or not insurable or insured
against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which
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does not exceed the aggregate of the remaining Net Proceeds (defined below) and
any funds deposited with Lender by Borrower ("ADDITIONAL FUNDS") and (z) the
aggregate of any loss of rental income insurance proceeds which the carrier has
acknowledged to be payable ("RENT LOSS PROCEEDS") and any funds deposited with
Lender by Borrower are sufficient to cover all costs and operating expenses of
the Property, including payments due and reserves required under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the amounts currently due under the construction
contract for Restoration and Lender's receipt of (i) appropriate lien waivers,
(ii) a certification of the percentage of Restoration completed by an architect
or engineer acceptable to Lender, and (iii) title insurance protection against
materialmen's and mechanic's liens. Lender shall disburse the funds within seven
(7) days after satisfaction of the conditions set forth in the preceding
sentence. At Lender's election, the disbursement of funds may be handled by a
disbursing agent selected by Lender, and such agent's reasonable fees and
expenses shall be paid by Borrower. The Net Proceeds, Rent Loss Proceeds, and
any Additional Funds shall constitute additional security for the Loan and
Borrower shall execute, deliver, file and/or record, at its expense, such
instruments as Lender requires to grant to Lender a perfected, first-priority
security interest in these funds. If the Net Proceeds are made available for
Restoration and (x) Borrower refuses or fails to complete the Restoration, (y)
an Event of Default occurs, or (z) the Net Proceeds or Additional Funds are not
applied by Borrower to Restoration, then any undisbursed portion may, at
Lender's option, be applied to the Obligations in any order of priority and any
such application to principal shall be deemed a voluntary prepayment subject to
the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
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(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty (20%) of the gross area of the
Improvements or (B) ten percent (10%) of the parking spaces is affected by the
Taking, (ii) the amount of the loss does not exceed twenty percent (20%) of the
original amount of the Note; (iii) the Taking does not affect access to the
Property from any public right-of-way; (iv) there is no Event of Default at the
time of application; (v) after Restoration, the Property and its use will be in
compliance with all Laws; (vi) in Lender's reasonable judgment, Restoration is
practical and can be completed within one (1) year after the Taking and at least
one (1) year prior to the maturity of the Note; and (vii) the Tenants listed in
Exhibit D ("MAJOR TENANTS") agree in writing to continue their Leases without
abatement of rent. Any portion of the Award that is (i) for loss of value or
property or (ii) in excess of the cost of any Restoration permitted above, may,
in Lender's sole discretion, be applied against the Obligations or paid to
Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender or Trustee, express
or implied, to any contractor, subcontractor, laborer, mechanic or materialman
for the performance of any labor or the furnishing of any material for any
improvement, construction, alteration, or repair of the Property. Borrower
further agrees that neither Lender nor Trustee stand in any fiduciary
relationship to Borrower, except as provided by Laws. Any contributions made,
directly or indirectly, to Borrower by or on behalf of any of its partners,
members, principals or any party related to such parties shall be treated as
equity and shall be subordinate and inferior to the rights of Lender under the
Documents.
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SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance premiums, then, at Lender's option, Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12)
of the annual Assessments (except for income taxes, franchise taxes, ground
rents, maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the amounts,
schedules and instructions for payment of the Impositions. Borrower authorizes
Lender or its agent to obtain the bills for Assessments directly from the
appropriate tax or governmental authority. All Deposits are pledged to Lender
and shall constitute additional security for the Obligations. The Deposits shall
be held by Lender without interest (except to the extent required under Laws)
and may be commingled with other funds. If (i) there is no Event of Default at
the time of payment, (ii) Borrower has delivered bills or invoices to Lender for
the Impositions in sufficient time to pay them when due, (iii) the Deposits are
sufficient to pay the Impositions or Borrower has deposited the necessary
additional amount, then Lender shall pay the Impositions prior to their due
date. Any Deposits remaining after payment of the Impositions shall, at Lender's
option, be credited against the Deposits required for the following year or paid
to Borrower. If an Event of Default occurs, the Deposits may, at Lender's
option, be applied to the Obligations in any order of priority. Any application
to principal shall be deemed a voluntary prepayment subject to the Prepayment
Premium. Borrower shall not claim any credit against the principal and interest
due under the Note for the Deposits. Upon an assignment or other transfer of
this Instrument, Lender may pay over the Deposits in its possession to the
assignee or transferee and then it shall be completely released from all
liability with respect to the Deposits. Borrower shall look solely to the
assignee or transferee with respect thereto. This provision shall apply to every
transfer of the Deposits to a new assignee or transferee. Subject to Article V,
a transfer of title to the Land shall automatically transfer to the new owner
the beneficial interest in the Deposits. Upon full payment and satisfaction of
this Instrument or, at Lender's option, at any prior time, the balance of the
Deposits in Lender's possession shall be paid over to the record owner of the
Land and no other party shall have any right or claim to the Deposits. Lender
may transfer all its duties under this Section to such service or financial
institution as Lender may periodically designate and Borrower agrees to make the
Deposits to such service or institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in
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Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or
a "real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e). Borrower shall deliver to Lender such certifications
and/or other evidence periodically requested by Lender, in its sole discretion,
to verify these representations and warranties. Failure to deliver these
certifications or evidence, breach of these representations and warranties, or
consummation of any transaction which would cause this Instrument or any
exercise of Lender's rights under this Instrument to (i) constitute a non-exempt
prohibited transaction under ERISA or (ii) violate ERISA or any state statute
regulating governmental plans (collectively, a "VIOLATION"), shall be an Event
of Default. Notwithstanding anything in the Documents to the contrary, no sale,
assignment, or transfer of any direct or indirect right, title, or interest in
Borrower or the Property (including creation of a junior lien, encumbrance or
leasehold interest) shall be permitted which would, in Lender's opinion, negate
Borrower's representations in this Section or cause a Violation. At least
fifteen (15) days before consummation of any of the foregoing, Borrower shall
obtain from the proposed transferee or lienholder (i) a certification to Lender
that the representations and warranties of this Section will be true after
consummation and (ii) an agreement to comply with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants .
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or
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above-ground storage tanks, whether empty or containing any substance; any
substance the presence of which on the Property is prohibited by any federal,
state or local authority; any substance that requires special handling; and any
other material or substance now or in the future defined as a "hazardous
substance," "hazardous material", "hazardous waste", "toxic substance", "toxic
pollutant", "contaminant", or "pollutant" within the meaning of any
Environmental Law. "RELEASE" of any Hazardous Materials includes any release,
deposit, discharge, emission, leaking, spilling, seeping, migrating, pumping,
pouring, escaping, dumping, disposing or other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits, and (D) (1) in only the amounts necessary to operate the
Property or (2) fully disclosed to and approved by Lender in writing; (iv)
Borrower shall keep the Property free and clear of all liens and encumbrances
imposed by any Environmental Laws due to any act or omission by Borrower or any
person (the "ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense,
fully and expeditiously cooperate in all activities in Section 3.12(c) including
providing all relevant information and making knowledgeable persons available
for interviews; (vi) Borrower shall, at its sole expense, (A) perform any
reasonable environmental site assessment or other investigation of environmental
conditions at the Property upon Lender's request based on Lender's reasonable
belief that the Property is not in compliance with all Environmental Laws, (B)
share with Lender the results and reports and Lender and the Indemnified Parties
(defined below) shall be entitled to rely on such results and reports, and (C)
complete any remediation of Hazardous Materials affecting the Property or other
actions required by any Environmental Laws; (vii) Borrower shall not allow any
Tenant or other user of the Property to violate any Environmental Law; and
(viii) Borrower shall immediately notify Lender in writing after it becomes
aware of (A) the presence, Release, or threatened Release of Hazardous Materials
affecting the Property, (B) any non-compliance of the Property with any
Environmental Laws, (C) any actual or potential Environmental Lien, (D) any
required or proposed remediation of environmental conditions relating to the
Property, and (E) any written or oral communication or notice from any person
relating to Hazardous Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
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SECTION 3.13 Electronic Payments . All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change in Borrower's bank
or financial institution is necessary to appropriately effectuate the payments
by electronic funds transfer, Lender shall have the right to require Borrower to
select a different depository after thirty (30) days' prior notice. As of the
date of this Instrument, First Union National Bank has been deemed acceptable to
Lender. All costs of (i) establishing and maintaining such account and (ii) the
electronic funds transfers shall be paid by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be required after a
default under the Documents. Borrower shall assist Lender and such person in
effecting said inspection, subject, however, to the rights of tenants in
possession.
Section 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual
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reports and (B) forty-five (45) days after the end of each calendar quarter for
quarterly reports. If any one report, statement, or item is not received by
Lender within fifteen (15) days after Lender has given Borrower written notice
that such report, statement or item was not received on its due date, then a
late fee of Five Hundred and No/100 Dollars ($500.00) per month shall be due and
payable by Borrower. In addition, if any one report, statement, or item is not
received within thirty (30) days after such notice, Lender may immediately
declare an Event of Default under the Documents. Borrower shall (i) provide
Lender with such additional financial, management, or other information
regarding Borrower, any general partner of Borrower, or the Property, as Lender
may reasonably request and (ii) upon Lender's request, deliver all items
required by Section 3.15 in an electronic format (i.e. on computer disks) or by
electronic transmission acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business Day (as defined in the Note)
after two (2) days prior written notice; provided that no notice shall be
required after any default under the Documents. Borrower shall assist Lender in
effecting such examination. All such inspections shall be performed in a
commercially reasonable manner. Upon five (5) days' prior notice, Lender may
inspect and make copies of Borrower's or any general partner of Borrower's
income tax returns with respect to the Property for the purpose of verifying any
items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any defaults (or
events which with the passage of time and/or notice would constitute a default)
under the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
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SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender's or Trustee's right to realize upon or enforce any
other security now or later held by Lender or Trustee. Lender and/or Trustee may
enforce the Documents or any other security in such order and manner as either
of them may determine in their discretion, to the extent permitted by Laws.
SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the lien and rights of Lender and Trustee under the
Documents and (ii) protect the lawful owner of the Documents. Promptly upon
request by Lender or Trustee, and at Borrower's sole expense, Borrower shall
execute additional instruments and take such actions as Lender and/or Trustee
reasonably believe are necessary or desirable to (a) maintain or grant Lender
and Trustee a first-priority, perfected lien on the Property, (b) grant to
Lender and Trustee, to the fullest extent permitted by Laws, the right to
foreclose on, or transfer title to, the Property non-judicially, (c) correct any
error or omission in the Documents, and (d) effect the intent of the Documents,
including filing/recording the Documents, additional deeds of trust, financing
statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower, Lender, or Trustee in connection with the granting, closing,
servicing, and enforcement of (a) the Loan and Documents or (b) attributable to
Borrower as owner of the Property. The term "COSTS" shall mean any of the
foregoing incurred in connection with (a) any default by Borrower under the
Documents, (b) the servicing of the Loan, or (c) the exercise, enforcement,
compromise, defense, litigation, or settlement of any of Lender's and/or
Trustee's rights or remedies under the Documents or relating to the Loan or the
Obligations. If Borrower fails to pay any amounts or perform any actions
required under the Documents, Lender or Trustee may (but shall not be obligated
to) advance sums to pay such amounts or perform such actions. Borrower grants
Lender or Trustee the right to enter upon and take possession of the Property to
prevent or remedy any such failure and the right to take such actions in
Borrower's name. No advance or performance shall be deemed to have cured a
default by Borrower. All (a) sums advanced by or payable to Lender or Trustee
per this Section or under applicable Laws, (b) except as expressly provided in
the Documents, payments due under the Documents which are not paid in full when
due, and (c) all Costs, shall: (i) be deemed demand
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obligations, (ii) bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, until paid if
not paid on demand, (iii) be part of, together with such interest, the
Obligations , and (iv) be secured by the Documents. Lender or Trustee, upon
making any such advance, shall also be subrogated to rights of the person
receiving such advance.
SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender and Trustee shall be subrogated to all rights, claims,
liens, titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and Trustee and (ii) are merged with the lien and security interest created by
the Documents as cumulative security for the payment and performance of the
Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including any Prepayment Premium) shall become immediately due and
payable, if Borrower, without Lender's prior written consent (which may be
withheld for any or no reason including the possibility of an ERISA violation or
the proposed transferee's failure to agree in writing to Lender increasing the
interest payable on the Obligations to any rate, changing any other terms
(including maturity) of the Obligations or Documents, or requiring the payment
of a transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender agrees
that, upon fifteen (15) days prior written request of Borrower, Borrower, and
any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of time or the
giving of notice or both would be an Event of Default) has occurred and is
continuing;
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(ii) the proposed transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the guidelines with
respect thereto then applicable to Lender's mortgage loans (the "Guidelines")
(or, if the statements required by the certification are not true with respect
to the proposed transferee, Lender shall have received such evidence as it may
require in its sole discretion to determine that the proposed transfer is not
and would not render the Loan a prohibited transaction under ERISA);
(iii) payment by Borrower or the proposed transferee of (1) all
reasonable costs and expenses incurred by Lender for the processing of said
transfer including a processing fee and (2) all other costs and expenses
(including attorneys' fees and expenses for Lender's staff attorneys and outside
counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower and Guarantor with another entity so long
as the surviving entity (i) has a net worth (as reasonably determined by Lender
in accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower as of the closing date of the Loan, (ii) has a ratio of total
debt (both secured and unsecured) to total assets of less than fifty percent
(50%); and (iii) in the judgment of Lender, has financial capability and
creditworthiness, reputation and experience in the ownership, operation,
management, and leasing of similar properties, equal to or greater than
Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively, the
"Borrower Property"), together with all of the properties (the "Cornerstone
Properties") owned byGuarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $50,550,000.00 (the "Cornerstone Loan")
evidenced by the Cornerstone Note (as defined in the Note) and the documents and
obligations securing the Cornerstone Note (the Borrower Property and the
Cornerstone Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a Person
(defined below) which, in the judgment of Lender, has financial capability and
creditworthiness, reputation and experience in the ownership, operation,
management, and leasing of similar properties, equal to or greater than
Borrower, including without limitation, a net worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio (defined below)
does not exceed 62% of the entire Portfolio;
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(iii) Borrower pays Lender a non-refundable servicing fee (as specified
by Lender) at the time of the request and an additional fee equal to 1.0% of the
outstanding principal balance of the Loan and the Cornerstone Loan at the time
of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to verify
the first priority of the Documents (and the documents securing the Cornerstone
Loan) at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) for the entire
Portfolio is at least 1.90 to 1.00 for the preceding twelve month period and
Lender receives satisfactory evidence that this Debt Service Coverage Ratio for
the entire Portfolio will be maintained for the next succeeding twelve (12)
months;
(vi) the transferee expressly assumes all obligations under the
Documents (and the documents securing the Cornerstone Loan) and executes any
documents reasonably required by Lender, and all of these documents are
satisfactory in form and substance to Lender;
(vii) Lender reasonably approves the form and content of all transfer
documents, and Lender is furnished with a certified copy of the recorded
transfer documents;
(viii) the transferee complies with and delivers the ERISA Certificate
and Indemnification Agreement described in the Guidelines with respect thereto
then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees, costs, and
expenses incurred by Lender in connection with the proposed transfer, including,
without limitation, all legal (for both outside counsel and Lender's staff
attorneys), accounting, title insurance, documentary stamps taxes, intangibles
taxes, mortgage taxes, recording fees, and appraisal fees, whether or not the
transfer is actually consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not
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be anticipated for any greater time period than that approved by generally
accepted accounting principles and ordinary operating expenses shall not be
prepaid. Documentation of NOI and expenses shall be certified by an officer of
Borrower with detail satisfactory to Lender and shall be subject to the approval
of Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien
or security interest created by the Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any remedies
provided hereunder or by law is not necessary for the protection or preservation
of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
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(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in lien to this Instrument;
(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction or shall be consented to by
Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender, or any person
designated by Lender or Trustee, or Trustee, may (but shall not be obligated to)
take any action (separately, concurrently, cumulatively, and at any time and in
any order) permitted under any Laws, without notice, demand, presentment, or
protest (all of which are hereby waived, to the extent permitted by Laws), to
protect and enforce Lender's or Trustee's rights under the Documents or Laws
including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this Instrument
or (ii) partially foreclose this Instrument for any portion of the Obligations
due and the lien and security interest created by this Instrument as to the
Property not foreclosed shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
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(c) Without limiting any rights of Lender or Trustee under this Section
6.02, cause any or all of the Property to be sold under the power of sale
granted by this Instrument in any manner permitted by applicable law. The
Trustee is hereby granted a power of sale, and Trustee, after having recorded
and given all notices and conducted such hearings as required by law, upon the
expiration of such time as is required by law, may sell the Property, and all
estate, right, title, interest, claim, and demand of Borrower therein, at one or
more sales, as an entirety or in parcels or lots (regardless of the manner in
which the Property may be classified), with such elements of real and/or
personal property (and, to the extent permitted by applicable law, may elect to
deem all of the Property to be real property for purposes thereof), and at such
time or place and upon such terms as Trustee may deem expedient or as may be
required by applicable law. Upon any sale, Trustee shall execute and deliver to
the purchaser or purchasers a deed or deeds conveying the property sold, but
without any covenant or warranty, express or implied, and the recitals in the
deed or deeds of any facts affecting the regularity or validity of the sale will
be conclusive against all persons. In the event of a sale, by foreclosure or
otherwise, of less than all of the Property, this Instrument shall continue as a
lien and security interest on the remaining portion of the Property;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, sue for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender or
Trustee in connection with the foregoing operations and all amounts needed to
pay the Impositions and other expenses of the Property, as well as just and
reasonable compensation for the services of Lender, Trustee, and their
attorneys, agents, and employees; and/or (vi) in every case in connection with
the foregoing, exercise all rights and powers of Borrower, Lender or Trustee
with respect to the Property, either in Borrower's name or otherwise;
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(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender or Trustee under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender or Trustee deems advisable for the
care, protection and preservation of the Personal Property and (ii) request
Borrower at its expense to assemble the Personal Property and make it available
to Lender or Trustee at a convenient place acceptable to Lender or Trustee. Any
notice of sale, disposition or other intended action by Lender or Trustee with
respect to the Personal Property sent to Borrower at least five (5) days prior
to such action shall constitute commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender or Trustee exercises any of its rights under Section 6.02(g), Lender
and Trustee shall not (a) be deemed to have entered upon or taken possession of
the Property except upon the exercise of its option to do so, evidenced by its
demand and overt act for such purpose; (b) be deemed a beneficiary or mortgagee
in possession by reason of such entry or taking possession; nor (c) be liable
(i) to account for any action taken pursuant to such exercise other than for
Rents actually received by Lender or Trustee, (ii) for any loss sustained by
Borrower resulting from any failure to lease the Property, or (iii) any other
act or omission of Lender or Trustee except for losses caused by Lender's or
Trustee's willful misconduct or gross negligence. Borrower hereby consents to,
ratifies, and confirms the exercise by Lender and Trustee of their rights under
this Instrument and appoints Lender and Trustee as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender or Trustee in the exercise of their rights under the Documents, together
with interest thereon at the applicable interest rate specified in the Note,
which shall be the Default Rate unless prohibited by Laws, shall be (a) part of
the Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's and/or Trustee's rights under the
Documents.
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SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender or Trustee
may determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender or Trustee may conduct multiple sales of
any part of the Property in separate tracts or in its entirety and Borrower
waives any right to require otherwise; (b) any sale may be postponed or
adjourned by public announcement at the time and place appointed for such sale
or for such postponed or adjourned sale without further notice; and (c) Lender
may acquire the Property and, in lieu of paying cash, may pay by crediting
against the Obligations the amount of its bid, after deducting therefrom any
sums which Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender or Trustee, shall, except as expressly provided by Laws to the contrary,
be applied in the order determined by Lender to: (a) payment of all Costs and
expenses of any enforcement action, foreclosure sale, transfer of title by power
of sale, or otherwise, including interest thereon at the applicable interest
rate specified in the Note, which shall be the Default Rate unless prohibited by
Laws, (b) all taxes, Assessments, and other charges unless the Property was sold
subject to these items, if permitted by Laws; (c) payment of the Obligations in
such order as Lender may elect; (d) payment of any other sums secured or
required to be paid by Borrower; and (e) payment of the surplus, if any, to any
person lawfully entitled to receive it. Borrower and Lender intend and agree
that during any period of time between any foreclosure judgment that may be
obtained and the actual foreclosure sale that the foreclosure judgment will not
extinguish the Documents or any rights contained therein including the
obligation of Borrower to pay all Costs and to pay interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender or Trustee to exercise any rights under the Documents upon
any default or Event of Default shall impair Lender's or Trustee's rights or be
construed as a waiver of, or acquiescence to, such or any subsequent default or
Event of Default. No recovery of any judgment by Lender or Trustee and no levy
of an execution upon the Property or any other property of Borrower shall affect
the lien and security interest created by this Instrument and such liens,
rights, powers, and remedies shall continue unimpaired as before. Lender or
Trustee may resort to any security given by this Instrument or any other
security now given or hereafter existing to secure the Obligations, in whole or
in part, in such portions and in such order as Lender or Trustee may deem
advisable, and no such action shall be construed as a waiver of any of the
liens, rights, or benefits granted hereunder. Acceptance of any payment after
any Event of Default shall not be deemed a waiver or a cure of such Event of
Default and such acceptance shall be deemed an acceptance on account only. If
Lender or Trustee has started enforcement of any right by foreclosure, sale,
entry, or otherwise and such proceeding shall be discontinued, abandoned, or
determined adversely for any reason, then Borrower, Lender and Trustee shall be
restored to their former positions and rights under the Documents regarding the
Property, subject to the lien and security interest hereof.
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SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns, and for any
person ever claiming an interest in the Property (other than Lender), waives and
releases all rights of redemption, reinstatement, valuation, appraisement,
notice of intention to mature or declare due the whole of the Obligations, all
rights to a marshaling of the assets of Borrower, including the Property, or to
a sale in inverse order of alienation, in the event of foreclosure (or
extinguishment by transfer of title by power of sale) of the liens and security
interests created under the Documents; (c) shall not be relieved of its
obligation to pay the Obligations as required in the Documents nor shall the
lien or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder of any subordinate lien, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security interest, or the priority of the modified Documents as
security for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property deed of trust and a "SECURITY AGREEMENT" within the meaning of the
U.C.C. The Property includes real and personal property and all tangible and
intangible rights and interest of Borrower in the Property. Borrower grants to
Lender and Trustee, as security for the Obligations, a security interest in the
Personal Property to the fullest extent that it may be subject to the U.C.C.
Borrower authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall
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mean any claims, suits, liabilities (including strict liabilities), actions,
proceedings, obligations, debts, damages, losses, Costs, expenses, fines,
penalties, charges, fees, judgments, awards, and amounts paid in settlement of
whatever kind including attorneys' fees (both in-house staff and retained
attorneys) and all other costs of defense. The term "INDEMNIFIED PARTIES" shall
mean (a) Lender, (b) any prior owner or holder of the Note, (c) any existing or
prior servicer of the Loan, (d) Trustee, (e) the officers, directors,
shareholders, partners, employees and trustees of the foregoing, and (f) the
heirs, legal representatives, successors and assigns of the foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may, after a
determination by the Indemnified parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interests, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the resolution of any claims or proceedings pertaining to ERISA. Upon
demand, Borrower shall pay or, in the sole discretion of the Indemnified
Parties, reimburse and/or indemnify the Indemnified Parties for all Costs
imposed on, incurred by, or asserted against the Indemnified Parties by reason
of any items set forth in this Article VIII and/or the enforcement or
preservation of the Indemnified Parties' rights under the Documents (except as
noted in this paragraph). Any amount payable to the Indemnified Parties under
this Section shall (a) be deemed a demand obligation, (b) be part of the
Obligations, (c) bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, until paid if
not paid on demand, and (d) be secured by this Instrument.
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SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, transfer of
title by power of sale, assignment or foreclosure of this Instrument, (c) the
acceptance by Lender (or any nominee) of a deed in lieu of foreclosure, (d) a
plan of reorganization filed under the Bankruptcy Code, or (e) the exercise by
the Lender of any rights in the Documents. Borrower's obligations under Article
VIII shall not be affected by the absence or unavailability of insurance
covering the same or by the failure or refusal by any insurance carrier to
perform any obligation under any applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "NOTICE") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
<TABLE>
<CAPTION>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
CRIT-NC, LLC McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attention: Martin B. Richards
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Vice President-Mortgage Loan Servicing Attention: Regional Counsel
Reference Loan No. 6 103 651 Reference Loan No. 6 103 651
If to Trustee:
LAWYERS TITLE INSURANCE CORPORATION
201 South College Street, Suite 1590
Charlotte, NC 28244
</TABLE>
Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's or Trustee's right to bring any action or proceeding against Borrower
or the Property relating to the Obligations (an "Action") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are
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used for convenience and reference only and in no way define, limit, or in any
way affect this Instrument; (c) words of masculine, feminine, or neuter gender
shall mean and include the correlative words of the other genders, and words
importing the singular number shall mean and include the plural number, and vice
versa; (d) no inference in favor of or against any party shall be drawn from the
fact that such party has drafted any portion of. this Instrument; (e) all
obligations of Borrower hereunder shall be performed and satisfied by or on
behalf of Borrower at Borrower's sole expense; (f) the terms "INCLUDE,"
"INCLUDING," and similar terms shall be construed as if followed by the phrase
"WITHOUT BEING LIMITED TO"; (g) the terms "PROPERTY", "LAND", "IMPROVEMENTS",
and "PERSONAL PROPERTY" shall be construed as if followed by the phrase "OR ANY
PART THEREOF"; (h) the term "OBLIGATIONS" shall be construed as if followed by
the phrase "OR ANY OTHER SUMS SECURED HEREBY, OR ANY PART THEREOF"; (i) the term
"PERSON" shall include natural persons, firms, partnerships, corporations,
governmental authorities or agencies, and any other public or private legal
entities; (j) the term "PROVISIONS," when used with respect hereto or to any
other document or instrument, shall be construed as if preceded by the phrase
"TERMS, COVENANTS, AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the term
"LEASE" shall mean "TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL AGREEMENT,"
the term "LESSOR" shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND SUBLESSOR," and
the term "TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT, LESSEE, AND
SUBLESSEE"; (l) the term "OWNED" shall mean "NOW OWNED OR LATER ACQUIRED"; (m)
the terms "ANY" and "ALL" shall mean "ANY OR ALL"; (n) the term "ON DEMAND" or
"UPON DEMAND" shall mean "WITHIN FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE";
and (o) the term "TRUSTEE" shall mean "TRUSTEE, ITS SUCCESSORS AND ASSIGNS, AND
ANY SUBSTITUTE OR SUCCESSOR TRUSTEE OF THE ESTATES, PROPERTIES, POWERS, TRUSTS
AND RIGHTS CONFERRED UPON TRUSTEE PURSUANT TO THE DOCUMENTS".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender and Trustee may, without notice
to Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
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Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender and Trustee shall continue to have and
enjoy all its rights and privileges as to each separate estate. Upon foreclosure
(or transfer of title by power of sale) of this Instrument, to the extent
permitted by Laws, none of the Leases shall be destroyed or terminated as a
result of such foreclosure (or sale), by application of the doctrine of merger
or as a matter of law, unless Lender or Trustee takes all actions required by
law to terminate the Leases as a result of foreclosure or sale. All of
Borrower's covenants and agreements under the Documents shall run with the land
and time is of the essence. Borrower appoints Lender as its attorney-in-fact,
which appointment is irrevocable and shall be deemed to be coupled with an
interest, with respect to the execution, acknowledgment, delivery, filing or
recording for and in the name of Borrower of any of the documents listed in
Sections 3.04, 3.19, 4.01 and 6.02. The Documents cannot be amended, terminated,
or discharged except in a writing signed by the party against whom enforcement
is sought. No waiver, release, or other forbearance by Lender will be effective
unless it is in a writing signed by Lender and then only to the extent expressly
stated. The provisions of the Documents shall be binding upon Borrower and its
heirs, devisees, representatives, successors, and assigns including successors
in interest to the Property and inure to the benefit of Lender and Trustee and
their heirs, successors, substitutes, and assigns. Where two or more persons
have executed the Documents, the obligations of such persons shall be joint and
several, except to the extent the context clearly indicates otherwise. The
Documents may be executed in any number of counterparts with the same effect as
if all parties had executed the same document. All such counterparts shall be
construed together and shall constitute one instrument, but in making proof
hereof it shall only be necessary to produce one such counterpart. Upon receipt
of an affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of any Document which is not of public record, and, in the case of
any mutilation, upon surrender and cancellation of the Document, Borrower will
issue, in lieu thereof, a replacement Document and indemnity reasonably
satisfactory to Borrower, dated the date of the lost, stolen, destroyed or
mutilated Document containing the same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower,
Lender and Trustee with respect to the Loan and supersede all prior written or
oral understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 Concerning the Trustee. By recording a written substitution in the
county where the Property is located or by any other means permitted by Laws,
Lender may (a) remove Trustee or any successor Trustee at any time (or times)
without notice or cause and (b) replace any Trustee who dies or resigns. To the
extent permitted by Laws, Trustee waives any statutory fee for its services and
agrees to accept reasonable compensation in lieu thereof. Trustee may resign
upon thirty (30) days notice to Lender and Borrower. If more than one person is
appointed Trustee, all rights granted to Trustee under this Instrument may be
exercised by any of them, without the others, with the same effect as if
exercised by all of them jointly. In addition to exercising all rights set forth
in this Instrument, Trustee may exercise all rights under Laws.
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SECTION 9.10 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
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(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Portfolio shall meet the
leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
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This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have determined in its sole
discretion, that following the proposed substitution, the entire Portfolio shall
meet the leasing percentage requirements in the Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
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(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal to or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
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This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
SECTION 11.02 Required Repairs, Capital Improvements and Replacements. Borrower
shall be required to spend, between January 1, 1999 and December 31, 2000, at
least $2,400,000 (the "Repair Amount"), in the aggregate, on the repairs,
capital improvements and replacements for the entire Portfolio as outlined on
Exhibit F attached hereto and by this reference made a part hereof. Borrower
shall document the payment of the Repair Amount and the completion of the
applicable repairs, capital improvements and replacements made by Borrower by
furnishing to Lender, on or before March 1, 2001, annual financial statements
(for the years 1999 and 2000) and certifications of the Borrower reflecting such
expenditure and any other such written documentation as Lender shall reasonably
require. If Lender determines that Borrower has not spent the Repair Amount (by
December 31, 2000), then beginning with the April, 2001, monthly payments due
under the Loan, Borrower shall make monthly payments equal to the Amortizing
Payments, and the Amortizing Payments shall continue until Lender determines
that Borrower has spent the Repair Amount.
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IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
<TABLE>
<CAPTION>
<S> <C>
BORROWER:
CRIT-NC, LLC, a Virginia limited
liability company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a
Virginia corporation, Managing
Member
Attest: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
------------------------------ ------------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
------------------------- Title: Chief Financial Officer
Title: Sr. Vice President and
------------------------
Assistant Secretary
------------------------
[CORPORATE SEAL]
</TABLE>
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<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA
CITY OF RICHMOND
I, a Notary Public of the County and State aforesaid, certify that
David S. McKenney personally came before me this day and acknowledged that (s)he
is the Assistant Secretary of Cornerstone Realty Income Trust, Inc. a Virginia
corporation, which is the Managing Member of CRIT-NC, LLC, a Virginia limited
liability company, and that by authority duly given and as the act of the
company, the foregoing instrument was signed in its name by Stanley J. Olander,
Jr., its duly authorized Chief Financial Officer, as the act and deed of the
corporation on behalf of the limited liability company.
Witness my hand and official stamp or seal this 27th day of September,
1999.
/s/ Jacquelyn B. Owens
------------------------
Notary Public
My Commission Expires: 6/30/03
[NOTARY SEAL]
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Exhibit A
(Charleston Place)
Lying and being in the City of Charlotte, Mecklenburg County, State of North
Carolina and more particularly described as follows:
To find the true point of BEGINNING, commence at the intersection of the
centerlines of Monroe Road (which has a 90' right-of-way) and Timber Springs
Drive (which has a variable width right-of-way) and run thence with the
centerline of Monroe Road S. 26-02-08 E., 750.37 feet to a point; thence leaving
said centerline S. 80-09-57 E., 56.26 feet to an existing rebar in the center of
a broken concrete monument in the northeasterly margin of the right-of-way of
Monroe Road, the true point of BEGINNING; thence from said point of BEGINNING
with the northeasterly margin of the right-of-way of Monroe Road N. 26-02-08 W.,
720.81 feet to an existing bent #4 rebar; thence with the arc of a circular
curve to the right having a radius of 20.00 feet (chord bearing N. 18-57-53 E.,
a chord distance of 28.28 feet) an arc distance of 31.42 feet to an existing
bent #4 rebar located on the southerly margin of Timber Springs Drive; thence
with the southerly margin of Timber Springs Drive the following nine (9) courses
and distances; (1) N. 63-57-52 E., 67.30 feet to a set #5 rebar; (2) with the
arc of a circular curve to the left having a radius of 313.01 feet (chord
bearing N. 56-58-53 E., a chord distance of 76.21 feet) an arc distance of 76.40
feet to an existing #4 rebar; (3) with the arc of a circular curve to the right
having a radius of 160.00 feet (chord bearing N. 56-58-53 E., a chord distance
of 38.90 feet) an arc distance of 39.00 feet to an existing #4 rebar; (4) with
the arc of a circular curve to the right having a radius of 286.00 feet (chord
bearing S. 82-08-34 E., a chord distance of 318.97 feet) an arc distance of
338.36 feet to an existing #4 rebar; (5) S. 48-15-00 E., 258.50 feet to an
existing #5 rebar; (6) with the arc of a circular curve to the left having a
radius of 200.00 feet (chord bearing S. 68-10-00 E., a chord distance of 136.26
feet), an arc distance of 139.04 feet to an existing #4 rebar; (7) S. 88-05-00
E., 100.00 feet to an existing bent 1/2" pipe; (8) with the arc of a circular
curve to the right having a radius of 195.00 feet (chord bearing S. 77-40-00 E.,
a chord distance of 70.51 feet), an arc distance of 70.90 feet to an existing
bent 1/2" pipe; and (9) S. 67-15-00 E., 89.25 feet to an existing 1" rod located
in the westerly boundary of the property conveyed to Timber Crest Apartments,
LLC by instrument recorded in Book 9213, Page 495, Mecklenburg County Public
Registry; thence with the westerly boundary of Timber Crest Apartments, LLC (now
or formerly) S. 10-33-53 E., 604.43 feet to an existing concrete monument
located in the northerly boundary of the property conveyed to American Store &
Lock #4 by instrument recorded in Book 5622, Page 646, Mecklenburg County Public
Registry (said concrete monument lying N. 80-09-57 W., 387.77 feet from another
concrete monument); thence with the northerly boundary of the American Store &
Lock #4 (now or formerly) and the northerly boundary of the property conveyed to
Hide-A-Way Inn, Inc. by instrument recorded in Book 4228, Page 191, Mecklenburg
County Public Registry N. 80-09-57 W., 859.70 feet to the BEGINNING, containing
14.949 acres.
TOGETHER WITH so much of the right-of-way of Monroe Road as lies between the
following boundaries: the centerline thereof; the northeasterly margin of the
right-of-way thereof; and between the centerline of Timber Springs Drive and the
southerly boundary line of the above-described real property (hereinabove called
N. 80-09-57 W. 859.70 feet), extended until said southerly boundary line
intersects the centerline of the right-of-way of Monroe Road.
Said property containing 14.949 acres according to Final As Built Plat of
Charleston Place prepared by James E. Davis of Concord Engineering & Surveying,
Inc., dated August 23, 1999 and last revised September 22, 1999, which plat is
incorporated by this reference for purposes of this description.
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(Stone Point)
BEGINNING at a set iron rod on the Northerly right-of-way line of York Road
(N.C. Highway 49) as described in Deed Book 10610, Page 448 of the Mecklenburg
County Public Registry, said point being located N 60(degrees) 18' 1" W - 130.69
feet from a found NCDOT right-of-way disc nominal to station 15+09.315, also
being a point on the Easterly line of Orion Development Corporation (now or
formerly) as described in Deed Book 5338, Page 484 of the Mecklenburg County
Public registry; thence from said Point of Beginning, along the Easterly and
Northerly lines of said Orion Development Corporation, N 44(degrees) 25'14" W -
357.13 feet to a found 1" pipe and S 45(degrees) 34'46" W - 209.57 feet to an
existing iron located in the Northeasterly margin of the property of Gretta L.
Neely (now or formerly) as described in Deed Book 7428, Page 776 of the
Mecklenburg County Public Registry; thence, along the Northeasterly line of the
Neely property N 44(degrees) 23'25" W - 382.48 feet to an existing iron located
in the Easterly line of the property of Steele Creek Partnership (nor or
formerly) as described in Deed Book 5732, Page 247 of the Mecklenburg County
Public Registry; thence along the Easterly line of the Steele Creek Partnership
property and the Easterly line of the property of York Ridge Apartments
Associates (now or formerly) as described in Deed Bok 7843, Page 106 of the
Mecklenburg County Public Registry N 05(degrees) 18'13" W -649.66 feet to a
found concrete monument having grid coordinates N=504,343.752 and
E=1,413,664.771 and being located N 08(degrees) 55'17" E - 1647.959 feet
(Ground) 1647.713 feet (Grid) from NCGS Monument "Moss" having grid coordinates
N=502,710.6542 and E=1,413,445.7971, combined grid factor = 0.99985065; thence
along the Southerly line of Lots 4, 3, 2 and 1 as shown on a map recorded in Map
Book 24, Page 820 of the Mecklenburg County Public Registry the following (2)
courses and distances:
(1) N 85(degrees)58' 16" E - 341.53 feet to a found 1" inch pipe;
(2) N 59(degrees) 50' 40" E - 490.88 feet to a set "PK" nail located in
the centerline of the right-of-way of John Price Road; Thence along
the centerline of John Price Road the following (3) courses:
(1) along the arc of a curve to the left having a central angle of
23(degrees) 09' 07", a radius of 855.00' feet, an arc length of
345.49' feet and whose chord bears S 09(degrees) 01' 08" E -
343.14' feet to a point'
(2) S 20(degrees)35' 42" E - 346.00 feet to a point;
(3) along the arc of a curve to the right having a central angle of
9(degrees) 43' 47", a radius of 623.36 feet, an arc length of
105.86 feet and whose chord bears S 15(degrees) 45' 14" E - 105.73
feet to the most Northeasterly corner of said "NCDOT" right-of-way
as described in Deed Book 10610, Page 448 of the Mecklenburg County
Public Registry. Thence along the Northerly and Westerly line of
said "NCDOT" right-of-way the following (5) courses:
(1) S 79(degrees) 07' 52" W - 30.00 feet to a found "NCDOT" right-of-
way disc;
(2) S 03(degrees) 46' 19" W - 140.16 feet to a found "NCDOT"
right-of-way disc;
(3) S 02(degrees) 47' 22" W - 251.56 feet to a set iron rod passing a
"NCDOT" right-of-way disc at 245.00 feet;
(4) S 39(degrees) 12'49" W - 71.52 feet to a set iron rod
(5) S 60(degrees) 32' 17" W - 167.61 feet to the Point of Beginning,
passing an "NCDOT" Right-Of-Way disc at 9.81 feet, containing
18.903 acres more or less (including right-of-way).
Said property is described according to plat of survey entitled "Stone Point
Apartments" prepared for Cornerstone Realty Income Trust, Inc. by Delta Land
Services, Inc., dated September 1, 1999 and last revised September 15, 1999,
which plat is incorporated by this reference for purposes of this description.
-42-
<PAGE>
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, now or hereafter owned by Borrower, wherever situate, and now or
hereafter located on, attached to, contained in, or used or usable in connection
with the real property described in Exhibit A attached hereto and incorporated
herein (the "LAND"), and all improvements located thereon (the "IMPROVEMENTS")
or placed on any part thereof, though not attached thereto, including all
screens, awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture
and furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto,
-43-
<PAGE>
which Borrower now has or may hereafter acquire in the Land, the Improvements,
or any of the personal property described in this Exhibit B, or any portion
thereof or interest therein, and any and all awards made for the taking by
eminent domain, or by any proceeding or purchase in lieu thereof, of the whole
or any part of such property, including without limitation, any award resulting
from a change of any streets (whether as to grade, access, or otherwise) and any
award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
-44-
<PAGE>
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as Charleston Place, those items set
forth in Schedule B, Section 2, of that certain Commitment for Title Insurance
issued by Lawyers Title Insurance Corporation, Commitment No. 1000050, as
endorsed and marked in connection with the making of the Loan evidenced by the
Note and the recording of this Instrument.
As to the real property commonly known as Stone Point Apartments, those items
set forth in Schedule B, Section 2, of that certain Commitment for Title
Insurance issued by Lawyers Title Insurance Corporation, Commitment No. 1000051,
as endorsed and marked in connection with the making of the Loan evidenced by
the Note and the recording of this Instrument.
-45-
<PAGE>
Exhibit D
LIST OF MAJOR TENANTS
NONE
-46-
<PAGE>
Exhibit E
Allocated Loan Amounts and Individual Property List
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
LOAN
YEAR # OF ALLOCATION
PROPERTY NAME CITY ST ACQ'D UNITS BALANCE
(in $000s)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CORNERSTONE REALTY INCOME TRUST INC.
LOAN NO.: 6 103 650
TAX ID NO.: 54-1589139
-------------------------------------------------------------------------------------------------------------------
Ashley Run Norcross GA 1997 348 $13,700
-------------------------------------------------------------------------------------------------------------------
Spring Lake Morrow GA 1998 188 $6,000
-------------------------------------------------------------------------------------------------------------------
Stone Brook Norcross GA 1997 188 $6,350
-------------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
-------------------------------------------------------------------------------------------------------------------
Hampton Pointe Charleston SC 1998 304 $ 9,150
-------------------------------------------------------------------------------------------------------------------
Westchase Charleston SC 1997 352 $8,900
-------------------------------------------------------------------------------------------------------------------
1,608 $50,550
-------------------------------------------------------------------------------------------------------------------
CRIT-NC, LLC
LOAN NO.: 6 103 651
TAX ID NO.: 54-1882705
-------------------------------------------------------------------------------------------------------------------
Charleston Place Charlotte NC 1997 214 $6,150
-------------------------------------------------------------------------------------------------------------------
Remington Place Raleigh NC 1997 136 $4,750
-------------------------------------------------------------------------------------------------------------------
St. Regis Raleigh NC 1997 180 $6,200
-------------------------------------------------------------------------------------------------------------------
Stone Point Charlotte NC 1998 192 $5,850
-------------------------------------------------------------------------------------------------------------------
722 $22,950
-------------------------------------------------------------------------------------------------------------------
Total Loan 2,330 $73,500
-------------------------------------------------------------------------------------------------------------------
</TABLE>
-47-
<PAGE>
EXHIBIT F
Sheet 1
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING IMPROVE- ADJUSTED IMPROVE-
COMMUNITY UNITS DATE MENTS PER UNIT MENT
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE ARBORS AT WINDSOR LAKE 228 1/1/99 161,000 $ 706 161,000
- ----------------------------------------------------------------------------------------------------------------------
CHARLESTON PLACE 214 5/14/99 270,000 $1,262 270,000
- ----------------------------------------------------------------------------------------------------------------------
WESTCHASE APARTMENTS 352 1/15/99 367,000 $1,043 367,000
- ----------------------------------------------------------------------------------------------------------------------
ASHLEY RUN 348 4/30/99 400,000 $1,149 400,000
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE
- ----------------------------------------------------------------------------------------------------------------------
1,142 1,198,000 $1,049
- ----------------------------------------------------------------------------------------------------------------------
COMMUNITIES STILL IN RENOV. PERIOD
- ----------------------------------------------------------------------------------------------------------------------
STONE BROOK 188 10/31/99 215,000 $1,144
- ----------------------------------------------------------------------------------------------------------------------
ST. REGIS 180 " 204,000 $1,133
- ----------------------------------------------------------------------------------------------------------------------
REMINGTON PLACE 136 " 135,000 $ 993
- ----------------------------------------------------------------------------------------------------------------------
SPRING LAKE 188 8/12/00 506,000 $2,691
- ----------------------------------------------------------------------------------------------------------------------
STONE POINT 192 1/15/00 186,500 $ 971
- ----------------------------------------------------------------------------------------------------------------------
HAMPTON POINTE 304 3/31/00 400,000 $1,316
-------
- ----------------------------------------------------------------------------------------------------------------------
SUB TOTAL 1,188 1,646,500 $8,248 1,646,500 $1,386
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 2,330 2,844,500 $1,221
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CORNERSTONE REQUIRED TO SPEND ON CAPITAL IMPROVEMENTS APPROXIMATELY 80% OF THE
ABOVE ALLOCATED INDIVIDUAL PROPERTY IMPROVEMENT BUDGETED AMOUNTS ON A PRORATA
BASIS FOR A TOTAL OF NOT LESS THAN $2,400,000 BY YEAR END 2000.
IN ADDITION TO THE ABOVE GENERAL IMPROVEMENTS, CORNERSTONE UNDER THE CAPITAL
IMPROVEMENT PROVISIONS OF THE LOAN DOCUMENTS WILL ALSO PERFORM THE FOLLOWING
SPECIFIC REPAIRS:
BEFORE YEAR END 2000
1. REPLACE THE EXTERIOR DEFECTIVE MASONITE SIDING AT ST. REGIS AND REPAIR ANY
EXTERIOR WOOD DAMAGE.
2. PAINT EXTERIOR OF WEST CHASE APARTMENTS.
AGREED AND ACCEPTED: CORNERSTONE REALTY INCOME TRUST, INC.
BY /S/ STANLEY J. OLANDER, JR.
---------------------------------
ITS CHIEF FINANCIAL OFFICER
---------------------------------
DATE: 9/27/99
------------
-48-
EXHIBIT 4.6
PREPARED OUT OF STATE BY AND The debt secured by the within Deed of Trust,
UPON RECORDATION RETURN TO: together with the note(s) secured thereby, have
been satisfied in full this _____ day of
Alston & Bird LLP __________________
One Atlantic Center
1201 West Peachtree Street Signed by:___________________
Atlanta, Georgia 30309-3424 Title:_______________________
Attn: Christina K. Braisted
Loan No. 6 103 651
================================================================================
CRIT-NC, LLC, a Virginia limited liability company, as grantor
(Borrower)
to
LAWYERS TITLE INSURANCE CORPORATION, as trustee
(Trustee)
for the benefit of
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as beneficiary
(Lender)
---------------------------------
DEED OF TRUST AND
SECURITY AGREEMENT
---------------------------------
Dated: As of September 27, 1999
Locations:
St. Regis, Wake County, North Carolina
Remington Place, Wake County, North Carolina
================================================================================
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES
OBLIGATIONS CONTAINING PROVISIONS FOR EXTENSIONS OF TIME FOR
<PAGE>
PAYMENT AND OTHER MODIFICATIONS IN THE TERMS OF THE OBLIGATIONS. A POWER OF SALE
HAS BEEN GRANTED IN THIS INSTRUMENT, PURSUANT TO WHICH THE TRUSTEE MAY TAKE THE
PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A JUDICIAL FORECLOSURE ACTION
UPON DEFAULT BY BORROWER UNDER THIS INSTRUMENT.
PORTIONS OF THE PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR
FIXTURES ON THE LAND DESCRIBED IN EXHIBIT A HERETO. THE PROPERTY SECURES
INDEBTEDNESS EVIDENCED BY THE NOTE SECURED HEREUNDER IN THE ORIGINAL PRINCIPAL
AMOUNT OF TWENTY-TWO MILLION NINE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($22,950,000.00).
- ii -
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OBLIGATIONS..........................................................................3
SECTION 1.01 OBLIGATIONS..........................................................................3
SECTION 1.02 LOAN DOCUMENTS.......................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.......................................................4
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY....................................................4
SECTION 2.02 VALIDITY OF LOAN DOCUMENTS...........................................................4
SECTION 2.03 LITIGATION...........................................................................4
SECTION 2.04 STATUS OF PROPERTY...................................................................5
SECTION 2.05 TAX STATUS OF BORROWER...............................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE......................................................6
SECTION 2.07 DISCLOSURE...........................................................................6
SECTION 2.08 ILLEGAL ACTIVITY.....................................................................6
ARTICLE III COVENANTS AND AGREEMENTS.............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS...............................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE............................................................6
SECTION 3.03 TAXES AND OTHER CHARGES..............................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS........................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY................................................8
SECTION 3.06 INSURANCE............................................................................9
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY..................................................10
SECTION 3.08 CONDEMNATION........................................................................12
SECTION 3.09 LIENS AND LIABILITIES...............................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS..........................................................14
SECTION 3.11 ERISA...............................................................................14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS............................15
SECTION 3.13 ELECTRONIC PAYMENTS.................................................................17
SECTION 3.14 INSPECTION..........................................................................17
SECTION 3.15 RECORDS, REPORTS, AND AUDITS........................................................17
SECTION 3.16 BORROWER'S CERTIFICATES.............................................................18
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES..................................19
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.18 ADDITIONAL SECURITY.................................................................19
SECTION 3.19 FURTHER ACTS........................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................19
SECTION 4.01 EXPENSES AND ADVANCES...............................................................19
SECTION 4.02 SUBROGATION.........................................................................20
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................20
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE..........................................................20
SECTION 5.02 PERMITTED TRANSFER..................................................................20
SECTION 5.03 PERMITTED (ONE TIME) TRANSFER.......................................................21
ARTICLE VI DEFAULTS AND REMEDIES...............................................................23
SECTION 6.01 EVENTS OF DEFAULT...................................................................23
SECTION 6.02 REMEDIES............................................................................24
SECTION 6.03 EXPENSES............................................................................26
SECTION 6.04 RIGHTS PERTAINING TO SALES..........................................................27
SECTION 6.05 APPLICATION OF PROCEEDS.............................................................27
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES................................................27
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES.......................................................28
ARTICLE VII SECURITY AGREEMENT..................................................................28
SECTION 7.01 SECURITY AGREEMENT..................................................................28
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES....................................28
SECTION 8.01 LIMITED RECOURSE LIABILITY..........................................................28
SECTION 8.02 GENERAL INDEMNITY...................................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY.........................................................29
SECTION 8.04 ERISA INDEMNITY.....................................................................29
SECTION 8.05 ENVIRONMENTAL INDEMNITY.............................................................29
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES..................................................29
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL....................................................30
ARTICLE IX ADDITIONAL PROVISIONS...............................................................30
SECTION 9.01 USURY SAVINGS CLAUSE................................................................30
</TABLE>
- iv -
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.02 NOTICES.............................................................................30
SECTION 9.03 SOLE DISCRETION OF LENDER...........................................................31
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION.......................................31
SECTION 9.05 CONSTRUCTION OF PROVISIONS..........................................................32
SECTION 9.06 TRANSFER OF LOAN....................................................................32
SECTION 9.07 MISCELLANEOUS.......................................................................33
SECTION 9.08 ENTIRE AGREEMENT....................................................................33
SECTION 9.09 CONCERNING THE TRUSTEE..............................................................34
SECTION 9.10 WAIVER OF TRIAL BY JURY.............................................................34
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL..........................................34
SECTION 10.01 PARTIAL RELEASE.....................................................................34
SECTION 10.02 SUBSTITUTION OF COLLATERAL..........................................................36
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS...................................................38
SECTION 11.01 AMORTIZATION REQUIRED...............................................................38
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS.............................38
</TABLE>
ATTACHMENTS:
EXHIBIT A - Legal Description of Land
EXHIBIT B - Description of Personal Property
EXHIBIT C - Permitted Encumbrances
EXHIBIT D - List of Major Tenants
EXHIBIT E - Allocated Loan Amounts and Individual Property List
EXHIBIT F - Required Repairs, Capital Improvements and Replacements
- v -
<PAGE>
DEFINITIONS
The terms set forth below are defined in the following sections of this
Deed of Trust and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
- vi -
<PAGE>
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (i)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
Trustee Preamble, Section 9.05(o)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
- vii -
<PAGE>
DEED OF TRUST AND SECURITY AGREEMENT
THIS DEED OF TRUST AND SECURITY AGREEMENT (this "INSTRUMENT") is made as of
September 27, 1999, by CRIT-NC, LLC, a Virginia limited liability company,
having its principal office and place of business at 306 East Main Street,
Richmond, Virginia 23219, as grantor (to be indexed as the Grantor and to be
referred to hereinafter as "BORROWER"), to LAWYERS TITLE INSURANCE CORPORATION,
a Virginia corporation having an address at 434 Fayetteville Mall, Suite 2000,
Raleigh, North Carolina 27601 as trustee (to be indexed as the Grantee and to be
referred to hereinafter as "TRUSTEE"), for the benefit of THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an office at Two
Ravinia Drive, Suite 1400, Atlanta, Georgia 30346, as beneficiary (to be indexed
as a Grantee and to be referred to hereinafter as "LENDER").
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Twenty-Two Million Nine
Hundred Fifty Thousand and No/100 Dollars ($22,950,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Grants, bargains, sells, assigns, transfers, pledges, mortgages, warrants,
and conveys to Trustee, WITH POWER OF SALE, for the benefit of Lender, and
grants Trustee and Lender a security interest in, the following property,
rights, interests and estates owned by Borrower (collectively, the "PROPERTY"):
(i) The real property in Wake County, North Carolina and described in
Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures)
now or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all
land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof,
<PAGE>
and all sidewalks, alleys, and strips and gores of land adjacent to or used in
connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof ) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower`s right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
- 2 -
<PAGE>
TO HAVE AND TO HOLD the Property unto Lender and Trustee, and their successors
and assigns forever, subject to the matters listed in Exhibit C ("PERMITTED
ENCUMBRANCES") and the provisions of this Instrument.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if Borrower shall pay the
Obligations as they become due, and shall comply with all of the covenants,
terms, and conditions of this Instrument, then this conveyance shall be null and
void and may be canceled of record at the request and cost of Borrower, but, if
at any time an Event of Default shall occur, Lender may direct Trustee to sell
the Property at public sale as provided in Section 6.02 or exercise the other
remedies set forth herein or provided by law.
PROVIDED, HOWEVER, if Borrower shall pay and perform the Obligations as provided
for in the Documents and shall comply with all the provisions in the Documents
(defined below), these presents and the estates hereby granted (except for the
obligations of Borrower set forth in Sections 3.11 and 3.12 and Article VIII
hereof) shall cease, terminate and be void.
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents;
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Deed of Trust and Security Agreement
between Borrower and Lender of even date herewith securing the Note and to be
recorded in the real estate records of Wake County, North Carolina, (vi) that
certain Unconditional Guaranty of Payment and Performance
(Cross-Collateralization) (the "Guaranty") of even date herewith from
Cornerstone Realty Income Trust, Inc. ("Guarantor") to Lender, (vii) that
certain Deed to Secure Debt and Security Agreement between Guarantor and Lender
of even date herewith securing the Guaranty and to be recorded in the real
estate records of Gwinnett County, Georgia and Clayton County, Georgia, (viii)
that certain
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Mortgage and Security Agreement between Guarantor and Lender of even date
herewith securing the Guaranty and to be recorded in the real estate records of
Charleston County, South Carolina, (ix) that certain Mortgage and Security
Agreement between Guarantor and Lender of even date herewith securing the
Guaranty and to be recorded in the real estate records of Richland County, South
Carolina, (x) any additional mortgages, deeds of trust and deeds to secure debt
and other instruments given to secure the Note pursuant to the substitution of
collateral provisions of Section 10.02 below, and (xi) any other written
agreement executed in connection with the closing of the Loan (but excluding the
Loan application and Loan commitment) and by the party against whom enforcement
is sought, including those given to evidence or further secure the payment and
performance of any of the Obligations, and any written renewals, extensions, and
amendments of the foregoing, executed by the party against whom enforcement is
sought. All of the provisions of the Documents are incorporated into this
Instrument as if fully set forth in this Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seised of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, charges, encumbrances, and security
interests, except the Permitted Encumbrances; (ii) will forever warrant and
defend its title to the Property and the validity, enforceability, and priority
of the lien and security interest created by this Instrument against the claims
of all persons; (iii) is a Virginia limited liability company duly organized,
validly existing, and in good standing and qualified to transact business under
the laws of its state of organization or incorporation ("ORGANIZATION STATE")
and the state (or district) where the Property is located ("PROPERTY STATE");
and (iv) has all necessary approvals, governmental and otherwise, and full power
and authority to own its properties (including the Property) and carry on its
business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument and Uniform Commercial Code ("U.C.C.") filings).
The Documents constitute valid and binding obligations of Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the
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Property which would have a material adverse affect on either the Property or
Borrower's ability to perform its obligations.
SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, or
encumbrances except the Permitted Encumbrances and those created by this
Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
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SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower is
a limited liability company). Borrower has received reasonably equivalent value
for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment;
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(ii) Borrower demonstrates to Lender's reasonable satisfaction that (1) the
Property will not be sold to satisfy the Assessment prior to the final
determination of the legal proceedings, (2) it has taken such actions as are
required or permitted to accomplish a stay of any such sale, or (3) it has
furnished a bond or surety (satisfactory to Lender in form and amount)
sufficient to prevent a sale of the Property; (iii) at Lender's option, Borrower
has deposited the full amount necessary to pay any unpaid portion of the
Assessments with Lender; and (iv) such proceeding shall be permitted under any
other instrument to which Borrower or the Property is subject (whether superior
or inferior to this Instrument); provided, however, that the foregoing shall not
apply to the contesting of any income taxes, franchise taxes, ground rents,
maintenance charges, and utility charges.
(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes deeds of trust or debts secured by deeds of trust for
federal, state or local purposes or changes the manner of the collection of any
such existing taxes, and/or (iii) imposes a tax, either directly or indirectly,
on any of the Documents or the Obligations, Borrower shall, if permitted by law,
pay such tax within the statutory period or within twenty (20) days after demand
by Lender, whichever is less; provided, however, that if, in the opinion of
Lender, Borrower is not permitted by law to pay such taxes, Lender shall have
the option to declare the Obligations immediately due and payable (without any
Prepayment Premium) upon six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender and/or
Trustee under the documents against the claims of all persons, and shall
promptly notify Lender and Trustee of any such claims. Lender and/or Trustee
(whether or not named as a party to such proceedings) is authorized and
empowered (but shall not be obligated) to take such additional steps as it may
deem necessary or proper for the defense of any such proceeding or the
protection of the lien, security interest, validity, enforceability, or priority
of this Instrument, title
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to the Property, or any rights of Lender and/or Trustee under the Documents,
including the employment of counsel, the prosecution and/or defense of
litigation, the compromise, release, or discharge of such adverse claims, the
purchase of any tax title, the removal of such any liens and security interests,
and any other actions Lender and/or Trustee deems necessary to protect their
interests. Borrower authorizes Lender and/or Trustee to take any actions
required to be taken by Borrower, or permitted to be taken by Lender and/or
Trustee, in the Documents in the name and on behalf of Borrower. Borrower shall
reimburse Lender and Trustee on demand for all expenses (including attorneys'
fees) incurred by them in connection with the foregoing and their exercise of
the rights under the Documents. All such expenses of Lender and/or Trustee,
until reimbursed by Borrower, shall be part of the Obligations, bear interest at
the applicable interest rate specified in the Note, which shall be the Default
Rate unless prohibited by Laws, and shall be secured by this Instrument.
SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property, nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien or security interest (other than the Permitted Encumbrances
and those created by this Instrument) or (ii) leased by Borrower (A) with
Lender's prior written consent or (B) if the replaced Property was leased at the
time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "LAWS"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
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(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property except for subordinate utility
easements and rights-of-way that solely benefit the Property; (iv) execute or
file any subdivision plat affecting the Property; (v) consent to the annexation
of the Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the Property
to become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the material terms of the Permitted Encumbrances.
Section 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary
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coverage plus umbrella coverage), which insurance shall include operations and
blanket contractual liability coverage which insures contractual liability under
the indemnifications set forth in Section 8.02 below (but such coverage or the
amount thereof shall in no way limit such indemnifications). Upon request,
Borrower shall maintain insurance or carry additional amounts of insurance
covering Borrower or the Property as Lender shall reasonably require including
against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company, Inc. is no longer available, a similar rating from a similar
or successor service). In addition, all policies shall (x) include a standard
mortgagee clause, without contribution, in the name of Lender and (y) provide
that they shall not be canceled, amended, or materially altered (including
reduction in the scope or limits of coverage) without at least thirty (30) days'
prior notice to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made
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available for Restoration (defined below) (but regardless of whether any
proceeds are sufficient for Restoration), Borrower shall promptly commence and
diligently pursue to completion the restoration, replacement, and rebuilding of
the Property as nearly as possible to its value and condition immediately prior
to the Damage or a Taking (defined below) in accordance with plans and
specifications approved by Lender ("RESTORATION"). Borrower shall comply with
other reasonable requirements established by Lender to preserve the security
under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs (defined below) related to collection of the
proceeds and (2) subject to Section 3.07(c) and at Lender's option, to (A)
payment (without any Prepayment Premium) of all or part of the Obligations,
whether or not then due and payable, in the order determined by Lender (provided
that if any Obligations remains outstanding after this payment, the unpaid
Obligations shall continue in full force and effect and Borrower shall not be
excused in the payment thereof); (B) the cure of any default under the
Documents; or (C) the Restoration. Any insurance proceeds held by Lender shall
be held by Lender, and interest shall be earned thereon at the rate paid by
Lender at that time on other impound or escrow accounts in connection with its
mortgage portfolio business. If Borrower receives any insurance proceeds for the
Damage, Borrower shall promptly deliver the proceeds to Lender. Notwithstanding
anything in this Instrument or at law or in equity to the contrary, none of the
insurance proceeds paid to Lender shall be deemed trust funds and Lender may
dispose of these proceeds as provided in this Section. Borrower expressly
assumes all risk of loss from any Damage, whether or not insurable or insured
against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which
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does not exceed the aggregate of the remaining Net Proceeds (defined below) and
any funds deposited with Lender by Borrower ("ADDITIONAL FUNDS") and (z) the
aggregate of any loss of rental income insurance proceeds which the carrier has
acknowledged to be payable ("RENT LOSS PROCEEDS") and any funds deposited with
Lender by Borrower are sufficient to cover all costs and operating expenses of
the Property, including payments due and reserves required under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the amounts currently due under the construction
contract for Restoration and Lender's receipt of (i) appropriate lien waivers,
(ii) a certification of the percentage of Restoration completed by an architect
or engineer acceptable to Lender, and (iii) title insurance protection against
materialmen's and mechanic's liens. Lender shall disburse the funds within seven
(7) days after satisfaction of the conditions set forth in the preceding
sentence. At Lender's election, the disbursement of funds may be handled by a
disbursing agent selected by Lender, and such agent's reasonable fees and
expenses shall be paid by Borrower. The Net Proceeds, Rent Loss Proceeds, and
any Additional Funds shall constitute additional security for the Loan and
Borrower shall execute, deliver, file and/or record, at its expense, such
instruments as Lender requires to grant to Lender a perfected, first-priority
security interest in these funds. If the Net Proceeds are made available for
Restoration and (x) Borrower refuses or fails to complete the Restoration, (y)
an Event of Default occurs, or (z) the Net Proceeds or Additional Funds are not
applied by Borrower to Restoration, then any undisbursed portion may, at
Lender's option, be applied to the Obligations in any order of priority and any
such application to principal shall be deemed a voluntary prepayment subject to
the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or
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award. Borrower will sign and deliver all instruments requested by Lender to
permit these actions.
(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty (20%) of the gross area of the
Improvements or (B) ten percent (10%) of the parking spaces is affected by the
Taking, (ii) the amount of the loss does not exceed twenty percent (20%) of the
original amount of the Note; (iii) the Taking does not affect access to the
Property from any public right-of-way; (iv) there is no Event of Default at the
time of application; (v) after Restoration, the Property and its use will be in
compliance with all Laws; (vi) in Lender's reasonable judgment, Restoration is
practical and can be completed within one (1) year after the Taking and at least
one (1) year prior to the maturity of the Note; and (vii) the Tenants listed in
Exhibit D ("MAJOR TENANTS") agree in writing to continue their Leases without
abatement of rent. Any portion of the Award that is (i) for loss of value or
property or (ii) in excess of the cost of any Restoration permitted above, may,
in Lender's sole discretion, be applied against the Obligations or paid to
Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender or Trustee, express
or implied, to any contractor, subcontractor, laborer, mechanic or materialman
for the performance of any labor or the furnishing of any material for any
improvement, construction, alteration, or repair of the Property. Borrower
further agrees that neither Lender nor Trustee stand in any fiduciary
relationship to Borrower, except as provided by Laws. Any contributions made,
directly or indirectly, to Borrower by or on behalf of any of its partners,
members, principals or any party related to such parties shall be treated as
equity and shall be subordinate and inferior to the rights of Lender under the
Documents.
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SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance premiums, then, at Lender's option, Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12)
of the annual Assessments (except for income taxes, franchise taxes, ground
rents, maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the amounts,
schedules and instructions for payment of the Impositions. Borrower authorizes
Lender or its agent to obtain the bills for Assessments directly from the
appropriate tax or governmental authority. All Deposits are pledged to Lender
and shall constitute additional security for the Obligations. The Deposits shall
be held by Lender without interest (except to the extent required under Laws)
and may be commingled with other funds. If (i) there is no Event of Default at
the time of payment, (ii) Borrower has delivered bills or invoices to Lender for
the Impositions in sufficient time to pay them when due, (iii) the Deposits are
sufficient to pay the Impositions or Borrower has deposited the necessary
additional amount, then Lender shall pay the Impositions prior to their due
date. Any Deposits remaining after payment of the Impositions shall, at Lender's
option, be credited against the Deposits required for the following year or paid
to Borrower. If an Event of Default occurs, the Deposits may, at Lender's
option, be applied to the Obligations in any order of priority. Any application
to principal shall be deemed a voluntary prepayment subject to the Prepayment
Premium. Borrower shall not claim any credit against the principal and interest
due under the Note for the Deposits. Upon an assignment or other transfer of
this Instrument, Lender may pay over the Deposits in its possession to the
assignee or transferee and then it shall be completely released from all
liability with respect to the Deposits. Borrower shall look solely to the
assignee or transferee with respect thereto. This provision shall apply to every
transfer of the Deposits to a new assignee or transferee. Subject to Article V,
a transfer of title to the Land shall automatically transfer to the new owner
the beneficial interest in the Deposits. Upon full payment and satisfaction of
this Instrument or, at Lender's option, at any prior time, the balance of the
Deposits in Lender's possession shall be paid over to the record owner of the
Land and no other party shall have any right or claim to the Deposits. Lender
may transfer all its duties under this Section to such service or financial
institution as Lender may periodically designate and Borrower agrees to make the
Deposits to such service or institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in
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Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2); or (3) Borrower qualifies as an "operating company" or
a "real estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e). Borrower shall deliver to Lender such certifications
and/or other evidence periodically requested by Lender, in its sole discretion,
to verify these representations and warranties. Failure to deliver these
certifications or evidence, breach of these representations and warranties, or
consummation of any transaction which would cause this Instrument or any
exercise of Lender's rights under this Instrument to (i) constitute a non-exempt
prohibited transaction under ERISA or (ii) violate ERISA or any state statute
regulating governmental plans (collectively, a "VIOLATION"), shall be an Event
of Default. Notwithstanding anything in the Documents to the contrary, no sale,
assignment, or transfer of any direct or indirect right, title, or interest in
Borrower or the Property (including creation of a junior lien, encumbrance or
leasehold interest) shall be permitted which would, in Lender's opinion, negate
Borrower's representations in this Section or cause a Violation. At least
fifteen (15) days before consummation of any of the foregoing, Borrower shall
obtain from the proposed transferee or lienholder (i) a certification to Lender
that the representations and warranties of this Section will be true after
consummation and (ii) an agreement to comply with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants.
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or
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above-ground storage tanks, whether empty or containing any substance; any
substance the presence of which on the Property is prohibited by any federal,
state or local authority; any substance that requires special handling; and any
other material or substance now or in the future defined as a "hazardous
substance," "hazardous material", "hazardous waste", "toxic substance", "toxic
pollutant", "contaminant", or "pollutant" within the meaning of any
Environmental Law. "RELEASE" of any Hazardous Materials includes any release,
deposit, discharge, emission, leaking, spilling, seeping, migrating, pumping,
pouring, escaping, dumping, disposing or other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits, and (D) (1) in only the amounts necessary to operate the
Property or (2) fully disclosed to and approved by Lender in writing; (iv)
Borrower shall keep the Property free and clear of all liens and encumbrances
imposed by any Environmental Laws due to any act or omission by Borrower or any
person (the "ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense,
fully and expeditiously cooperate in all activities in Section 3.12(c) including
providing all relevant information and making knowledgeable persons available
for interviews; (vi) Borrower shall, at its sole expense, (A) perform any
reasonable environmental site assessment or other investigation of environmental
conditions at the Property upon Lender's request based on Lender's reasonable
belief that the Property is not in compliance with all Environmental Laws, (B)
share with Lender the results and reports and Lender and the Indemnified Parties
(defined below) shall be entitled to rely on such results and reports, and (C)
complete any remediation of Hazardous Materials affecting the Property or other
actions required by any Environmental Laws; (vii) Borrower shall not allow any
Tenant or other user of the Property to violate any Environmental Law; and
(viii) Borrower shall immediately notify Lender in writing after it becomes
aware of (A) the presence, Release, or threatened Release of Hazardous Materials
affecting the Property, (B) any non-compliance of the Property with any
Environmental Laws, (C) any actual or potential Environmental Lien, (D) any
required or proposed remediation of environmental conditions relating to the
Property, and (E) any written or oral communication or notice from any person
relating to Hazardous Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
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SECTION 3.13 Electronic Payments . All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change in Borrower's bank
or financial institution is necessary to appropriately effectuate the payments
by electronic funds transfer, Lender shall have the right to require Borrower to
select a different depository after thirty (30) days' prior notice. As of the
date of this Instrument, First Union National Bank has been deemed acceptable to
Lender. All costs of (i) establishing and maintaining such account and (ii) the
electronic funds transfers shall be paid by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be required after a
default under the Documents. Borrower shall assist Lender and such person in
effecting said inspection, subject, however, to the rights of tenants in
possession.
SECTION 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual
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reports and (B) forty-five (45) days after the end of each calendar quarter for
quarterly reports. If any one report, statement, or item is not received by
Lender within fifteen (15) days after Lender has given Borrower written notice
that such report, statement or item was not received on its due date, then a
late fee of Five Hundred and No/100 Dollars ($500.00) per month shall be due and
payable by Borrower. In addition, if any one report, statement, or item is not
received within thirty (30) days after such notice, Lender may immediately
declare an Event of Default under the Documents. Borrower shall (i) provide
Lender with such additional financial, management, or other information
regarding Borrower, any general partner of Borrower, or the Property, as Lender
may reasonably request and (ii) upon Lender's request, deliver all items
required by Section 3.15 in an electronic format (i.e. on computer disks) or by
electronic transmission acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business Day (as defined in the Note)
after two (2) days prior written notice; provided that no notice shall be
required after any default under the Documents. Borrower shall assist Lender in
effecting such examination. All such inspections shall be performed in a
commercially reasonable manner. Upon five (5) days' prior notice, Lender may
inspect and make copies of Borrower's or any general partner of Borrower's
income tax returns with respect to the Property for the purpose of verifying any
items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any defaults (or
events which with the passage of time and/or notice would constitute a default)
under the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
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SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender's or Trustee's right to realize upon or enforce any
other security now or later held by Lender or Trustee. Lender and/or Trustee may
enforce the Documents or any other security in such order and manner as either
of them may determine in their discretion, to the extent permitted by Laws.
SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the lien and rights of Lender and Trustee under the
Documents and (ii) protect the lawful owner of the Documents. Promptly upon
request by Lender or Trustee, and at Borrower's sole expense, Borrower shall
execute additional instruments and take such actions as Lender and/or Trustee
reasonably believe are necessary or desirable to (a) maintain or grant Lender
and Trustee a first-priority, perfected lien on the Property, (b) grant to
Lender and Trustee, to the fullest extent permitted by Laws, the right to
foreclose on, or transfer title to, the Property non-judicially, (c) correct any
error or omission in the Documents, and (d) effect the intent of the Documents,
including filing/recording the Documents, additional deeds of trust, financing
statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower, Lender, or Trustee in connection with the granting, closing,
servicing, and enforcement of (a) the Loan and Documents or (b) attributable to
Borrower as owner of the Property. The term "COSTS" shall mean any of the
foregoing incurred in connection with (a) any default by Borrower under the
Documents, (b) the servicing of the Loan, or (c) the exercise, enforcement,
compromise, defense, litigation, or settlement of any of Lender's and/or
Trustee's rights or remedies under the Documents or relating to the Loan or the
Obligations. If Borrower fails to pay any amounts or perform any actions
required under the Documents, Lender or Trustee may (but shall not be obligated
to) advance sums to pay such amounts or perform such actions. Borrower grants
Lender or Trustee the right to enter upon and take possession of the Property to
prevent or remedy any such failure and the right to take such actions in
Borrower's name. No advance or performance shall be deemed to have cured a
default by Borrower. All (a) sums advanced by or payable to Lender or Trustee
per this Section or under applicable Laws, (b) except as expressly provided in
the Documents, payments due under the Documents which are not paid in full when
due, and (c) all Costs, shall: (i) be deemed demand
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obligations, (ii) bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, until paid if
not paid on demand, (iii) be part of, together with such interest, the
Obligations , and (iv) be secured by the Documents. Lender or Trustee, upon
making any such advance, shall also be subrogated to rights of the person
receiving such advance.
SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender and Trustee shall be subrogated to all rights, claims,
liens, titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and Trustee and (ii) are merged with the lien and security interest created by
the Documents as cumulative security for the payment and performance of the
Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including any Prepayment Premium) shall become immediately due and
payable, if Borrower, without Lender's prior written consent (which may be
withheld for any or no reason including the possibility of an ERISA violation or
the proposed transferee's failure to agree in writing to Lender increasing the
interest payable on the Obligations to any rate, changing any other terms
(including maturity) of the Obligations or Documents, or requiring the payment
of a transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender agrees
that, upon fifteen (15) days prior written request of Borrower, Borrower, and
any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of
time or the giving of notice or both would be an Event of Default) has
occurred and is continuing;
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(ii) the proposed transferee complies with and delivers the
ERISA Certificate and Indemnification Agreement described in the
guidelines with respect thereto then applicable to Lender's mortgage
loans (the "Guidelines") (or, if the statements required by the
certification are not true with respect to the proposed transferee,
Lender shall have received such evidence as it may require in its sole
discretion to determine that the proposed transfer is not and would not
render the Loan a prohibited transaction under ERISA);
(iii) payment by Borrower or the proposed transferee of (1)
all reasonable costs and expenses incurred by Lender for the processing
of said transfer including a processing fee and (2) all other costs and
expenses (including attorneys' fees and expenses for Lender's staff
attorneys and outside counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower and Guarantor with another entity so long
as the surviving entity (i) has a net worth (as reasonably determined by Lender
in accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower as of the closing date of the Loan, (ii) has a ratio of total
debt (both secured and unsecured) to total assets of less than fifty percent
(50%); and (iii) in the judgment of Lender, has financial capability and
creditworthiness, reputation and experience in the ownership, operation,
management, and leasing of similar properties, equal to or greater than
Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively, the
"Borrower Property"), together with all of the properties (the "Cornerstone
Properties") owned by Guarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $50,550,000.00 (the "Cornerstone Loan")
evidenced by the Cornerstone Note (as defined in the Note) and the documents and
obligations securing the Cornerstone Note (the Borrower Property and the
Cornerstone Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a
Person (defined below) which, in the judgment of Lender, has financial
capability and creditworthiness, reputation and experience in the
ownership, operation, management, and leasing of similar properties,
equal to or greater than Borrower, including without limitation, a net
worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio (defined
below) does not exceed 62% of the entire Portfolio;
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(iii) Borrower pays Lender a non-refundable servicing fee (as
specified by Lender) at the time of the request and an additional fee
equal to 1.0% of the outstanding principal balance of the Loan and the
Cornerstone Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to
verify the first priority of the Documents (and the documents securing
the Cornerstone Loan) at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) for the
entire Portfolio is at least 1.90 to 1.00 for the preceding twelve
month period and Lender receives satisfactory evidence that this Debt
Service Coverage Ratio for the entire Portfolio will be maintained for
the next succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under
the Documents (and the documents securing the Cornerstone Loan) and
executes any documents reasonably required by Lender, and all of these
documents are satisfactory in form and substance to Lender;
(vii) Lender reasonably approves the form and content of all
transfer documents, and Lender is furnished with a certified copy of
the recorded transfer documents;
(viii) the transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the Guidelines
with respect thereto then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees,
costs, and expenses incurred by Lender in connection with the proposed
transfer, including, without limitation, all legal (for both outside
counsel and Lender's staff attorneys), accounting, title insurance,
documentary stamps taxes, intangibles taxes, mortgage taxes, recording
fees, and appraisal fees, whether or not the transfer is actually
consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not
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be anticipated for any greater time period than that approved by generally
accepted accounting principles and ordinary operating expenses shall not be
prepaid. Documentation of NOI and expenses shall be certified by an officer of
Borrower with detail satisfactory to Lender and shall be subject to the approval
of Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien
or security interest created by the Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any remedies
provided hereunder or by law is not necessary for the protection or preservation
of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
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(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in lien to this Instrument;
(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction or shall be consented to by
Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender, or any person
designated by Lender or the Trustee, or Trustee, may (but shall not be obligated
to) take any action (separately, concurrently, cumulatively, and at any time and
in any order) permitted under any Laws, without notice, demand, presentment, or
protest (all of which are hereby waived, to the extent permitted by Laws), to
protect and enforce Lender's or Trustee's rights under the Documents or Laws
including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this Instrument
or (ii) partially foreclose this Instrument for any portion of the Obligations
due and the lien and security interest created by this Instrument as to the
Property not foreclosed shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
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(c) Without limiting any rights of Lender or Trustee under this Section
6.02, cause any or all of the Property to be sold under the power of sale
granted by this Instrument in any manner permitted by applicable law. The
Trustee is hereby granted a power of sale, and Trustee, after having recorded
and given all notices and conducted such hearings as required by law, upon the
expiration of such time as is required by law, may sell the Property, and all
estate, right, title, interest, claim, and demand of Borrower therein, at one or
more sales, as an entirety or in parcels or lots (regardless of the manner in
which the Property may be classified), with such elements of real and/or
personal property (and, to the extent permitted by applicable law, may elect to
deem all of the Property to be real property for purposes thereof), and at such
time or place and upon such terms as Trustee may deem expedient or as may be
required by applicable law. Upon any sale, Trustee shall execute and deliver to
the purchaser or purchasers a deed or deeds conveying the property sold, but
without any covenant or warranty, express or implied, and the recitals in the
deed or deeds of any facts affecting the regularity or validity of the sale will
be conclusive against all persons. In the event of a sale, by foreclosure or
otherwise, of less than all of the Property, this Instrument shall continue as a
lien and security interest on the remaining portion of the Property;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, sue for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender or
Trustee in connection with the foregoing operations and all amounts needed to
pay the Impositions and other expenses of the Property, as well as just and
reasonable compensation for the services of Lender, Trustee, and their
attorneys, agents, and employees; and/or (vi) in every case in connection with
the
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foregoing, exercise all rights and powers of Borrower, Lender or Trustee with
respect to the Property, either in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender or Trustee under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender or Trustee deems advisable for the
care, protection and preservation of the Personal Property and (ii) request
Borrower at its expense to assemble the Personal Property and make it available
to Lender or Trustee at a convenient place acceptable to Lender or Trustee. Any
notice of sale, disposition or other intended action by Lender or Trustee with
respect to the Personal Property sent to Borrower at least five (5) days prior
to such action shall constitute commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender or Trustee exercises any of its rights under Section 6.02(g), Lender
and Trustee shall not (a) be deemed to have entered upon or taken possession of
the Property except upon the exercise of its option to do so, evidenced by its
demand and overt act for such purpose; (b) be deemed a beneficiary or mortgagee
in possession by reason of such entry or taking possession; nor (c) be liable
(i) to account for any action taken pursuant to such exercise other than for
Rents actually received by Lender or Trustee, (ii) for any loss sustained by
Borrower resulting from any failure to lease the Property, or (iii) any other
act or omission of Lender or Trustee except for losses caused by Lender's or
Trustee's willful misconduct or gross negligence. Borrower hereby consents to,
ratifies, and confirms the exercise by Lender and Trustee of their rights under
this Instrument and appoints Lender and Trustee as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender or Trustee in the exercise of their rights under the Documents, together
with interest thereon at the applicable interest rate specified in the Note,
which shall be the Default Rate unless prohibited by Laws, shall be (a) part of
the Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's and/or Trustee's rights under the
Documents.
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SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender or Trustee
may determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender or Trustee may conduct multiple sales of
any part of the Property in separate tracts or in its entirety and Borrower
waives any right to require otherwise; (b) any sale may be postponed or
adjourned by public announcement at the time and place appointed for such sale
or for such postponed or adjourned sale without further notice; and (c) Lender
may acquire the Property and, in lieu of paying cash, may pay by crediting
against the Obligations the amount of its bid, after deducting therefrom any
sums which Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender or Trustee, shall, except as expressly provided by Laws to the contrary,
be applied in the order determined by Lender to: (a) payment of all Costs and
expenses of any enforcement action, foreclosure sale, transfer of title by power
of sale, or otherwise, including interest thereon at the applicable interest
rate specified in the Note, which shall be the Default Rate unless prohibited by
Laws, (b) all taxes, Assessments, and other charges unless the Property was sold
subject to these items, if permitted by Laws; (c) payment of the Obligations in
such order as Lender may elect; (d) payment of any other sums secured or
required to be paid by Borrower; and (e) payment of the surplus, if any, to any
person lawfully entitled to receive it. Borrower and Lender intend and agree
that during any period of time between any foreclosure judgment that may be
obtained and the actual foreclosure sale that the foreclosure judgment will not
extinguish the Documents or any rights contained therein including the
obligation of Borrower to pay all Costs and to pay interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender or Trustee to exercise any rights under the Documents upon
any default or Event of Default shall impair Lender's or Trustee's rights or be
construed as a waiver of, or acquiescence to, such or any subsequent default or
Event of Default. No recovery of any judgment by Lender or Trustee and no levy
of an execution upon the Property or any other property of Borrower shall affect
the lien and security interest created by this Instrument and such liens,
rights, powers, and remedies shall continue unimpaired as before. Lender or
Trustee may resort to any security given by this Instrument or any other
security now given or hereafter existing to secure the Obligations, in whole or
in part, in such portions and in such order as Lender or Trustee may deem
advisable, and no such action shall be construed as a waiver of any of the
liens, rights, or benefits granted hereunder. Acceptance of any payment after
any Event of Default shall not be deemed a waiver or a cure of such Event of
Default and such acceptance shall be deemed an acceptance on account only. If
Lender or Trustee has started enforcement of any right by foreclosure, sale,
entry, or otherwise and such proceeding shall be discontinued, abandoned, or
determined adversely for any reason, then Borrower, Lender and Trustee shall be
restored to their former positions and rights under the Documents regarding the
Property, subject to the lien and security interest hereof.
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SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns, and for any
person ever claiming an interest in the Property (other than Lender), waives and
releases all rights of redemption, reinstatement, valuation, appraisement,
notice of intention to mature or declare due the whole of the Obligations, all
rights to a marshaling of the assets of Borrower, including the Property, or to
a sale in inverse order of alienation, in the event of foreclosure (or
extinguishment by transfer of title by power of sale) of the liens and security
interests created under the Documents; (c) shall not be relieved of its
obligation to pay the Obligations as required in the Documents nor shall the
lien or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder of any subordinate lien, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security interest, or the priority of the modified Documents as
security for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property deed of trust and a "SECURITY AGREEMENT" within the meaning of the
U.C.C. The Property includes real and personal property and all tangible and
intangible rights and interest of Borrower in the Property. Borrower grants to
Lender and Trustee, as security for the Obligations, a security interest in the
Personal Property to the fullest extent that it may be subject to the U.C.C.
Borrower authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall
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mean any claims, suits, liabilities (including strict liabilities), actions,
proceedings, obligations, debts, damages, losses, Costs, expenses, fines,
penalties, charges, fees, judgments, awards, and amounts paid in settlement of
whatever kind including attorneys' fees (both in-house staff and retained
attorneys) and all other costs of defense. The term "INDEMNIFIED PARTIES" shall
mean (a) Lender, (b) any prior owner or holder of the Note, (c) any existing or
prior servicer of the Loan, (d) Trustee, (e) the officers, directors,
shareholders, partners, employees and trustees of the foregoing, and (f) the
heirs, legal representatives, successors and assigns of the foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may after a
determination by the Indemnified Parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interest, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the resolution of any claims or proceedings pertaining to ERISA. Upon
demand, Borrower shall pay or, in the sole discretion of the Indemnified
Parties, reimburse and/or indemnify the Indemnified Parties for all Costs
imposed on, incurred by, or asserted against the Indemnified Parties by reason
of any items set forth in this Article VIII and/or the enforcement or
preservation of the Indemnified Parties' rights under the Documents (except as
noted in this paragraph). Any amount payable to the Indemnified Parties under
this Section shall (a) be deemed a demand obligation, (b) be part of the
Obligations, (c) bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, until paid if
not paid on demand, and (d) be secured by this Instrument.
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SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, transfer of
title by power of sale, assignment or foreclosure of this Instrument, (c) the
acceptance by Lender (or any nominee) of a deed in lieu of foreclosure, (d) a
plan of reorganization filed under the Bankruptcy Code, or (e) the exercise by
the Lender of any rights in the Documents. Borrower's obligations under Article
VIII shall not be affected by the absence or unavailability of insurance
covering the same or by the failure or refusal by any insurance carrier to
perform any obligation under any applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "notice") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
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<TABLE>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
CRIT-NC, LLC McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attention: Martin B. Richards
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Vice President-Mortgage Loan Servicing Attention: Regional Counsel
Reference Loan No. 6 103 651 Reference Loan No. 6 103 651
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If to Trustee:
LAWYERS TITLE INSURANCE CORPORATION
434 Fayetteville Mall, Suite 2000
Raleigh, North Carolina 27601
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Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's or Trustee's right to bring any action or proceeding against Borrower
or the Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and
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determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of. this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO"; (g)
the terms "PROPERTY", "LAND", "IMPROVEMENTS", and "PERSONAL PROPERTY" shall be
construed as if followed by the phrase "OR ANY PART THEREOF"; (h) the term
"OBLIGATIONS" shall be construed as if followed by the phrase "OR ANY OTHER SUMS
SECURED HEREBY, OR ANY PART THEREOF"; (i) the term "PERSON" shall include
natural persons, firms, partnerships, corporations, governmental authorities or
agencies, and any other public or private legal entities; (j) the term
"PROVISIONS," when used with respect hereto or to any other document or
instrument, shall be construed as if preceded by the phrase "TERMS, COVENANTS,
AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the term "LEASE" shall mean
"TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR"
shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term
"TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l)
the term "OWNED" shall mean "NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY"
and "ALL" shall mean "ANY OR ALL"; (n) the term "ON DEMAND" or "UPON DEMAND"
shall mean "WITHIN FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE"; and (o) the
term "TRUSTEE" shall mean "TRUSTEE, ITS SUCCESSORS AND ASSIGNS, AND ANY
SUBSTITUTE OR SUCCESSOR TRUSTEE OF THE ESTATES, PROPERTIES, POWERS, TRUSTS AND
RIGHTS CONFERRED UPON TRUSTEE PURSUANT TO THE DOCUMENTS".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
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estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender and Trustee may, without notice
to Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender and Trustee shall continue to have and
enjoy all its rights and privileges as to each separate estate. Upon foreclosure
(or transfer of title by power of sale) of this Instrument, to the extent
permitted by Laws, none of the Leases shall be destroyed or terminated as a
result of such foreclosure (or sale), by application of the doctrine of merger
or as a matter of law, unless Lender or Trustee takes all actions required by
law to terminate the Leases as a result of foreclosure or sale. All of
Borrower's covenants and agreements under the Documents shall run with the land
and time is of the essence. Borrower appoints Lender as its attorney-in-fact,
which appointment is irrevocable and shall be deemed to be coupled with an
interest, with respect to the execution, acknowledgment, delivery, filing or
recording for and in the name of Borrower of any of the documents listed in
Sections 3.04, 3.19, 4.01 and 6.02. The Documents cannot be amended, terminated,
or discharged except in a writing signed by the party against whom enforcement
is sought. No waiver, release, or other forbearance by Lender will be effective
unless it is in a writing signed by Lender and then only to the extent expressly
stated. The provisions of the Documents shall be binding upon Borrower and its
heirs, devisees, representatives, successors, and assigns including successors
in interest to the Property and inure to the benefit of Lender and Trustee and
their heirs, successors, substitutes, and assigns. Where two or more persons
have executed the Documents, the obligations of such persons shall be joint and
several, except to the extent the context clearly indicates otherwise. The
Documents may be executed in any number of counterparts with the same effect as
if all parties had executed the same document. All such counterparts shall be
construed together and shall constitute one instrument, but in making proof
hereof it shall only be necessary to produce one such counterpart. Upon receipt
of an affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of any Document which is not of public record, and, in the case of
any mutilation, upon surrender and cancellation of the Document, Borrower will
issue, in lieu thereof, a replacement Document and indemnity reasonably
satisfactory to Borrower, dated the date of the lost, stolen, destroyed or
mutilated Document containing the same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower,
Lender and Trustee with respect to the Loan and supersede all prior written or
oral understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
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SECTION 9.09 Concerning the Trustee. By recording a written substitution in the
county where the Property is located or by any other means permitted by Laws,
Lender may (a) remove Trustee or any successor Trustee at any time (or times)
without notice or cause and (b) replace any Trustee who dies or resigns. To the
extent permitted by Laws, Trustee waives any statutory fee for its services and
agrees to accept reasonable compensation in lieu thereof. Trustee may resign
upon thirty (30) days notice to Lender and Borrower. If more than one person is
appointed Trustee, all rights granted to Trustee under this Instrument may be
exercised by any of them, without the others, with the same effect as if
exercised by all of them jointly. In addition to exercising all rights set forth
in this Instrument, Trustee may exercise all rights under Laws.
SECTION 9.10 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
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(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Portfolio shall meet the
leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
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Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have
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determined in its sole discretion, that following the proposed substitution, the
entire Portfolio shall meet the leasing percentage requirements in the
Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
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Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
SECTION 11.02 Required Repairs, Capital Improvements and Replacements. Borrower
shall be required to spend, between January 1, 1999 and December 31, 2000, at
least $2,400,000 (the "Repair Amount"), in the aggregate, on the repairs,
capital improvements and replacements for the entire Portfolio as outlined on
Exhibit F attached hereto and by this reference made a part hereof. Borrower
shall document the payment of the Repair Amount and the completion of the
applicable repairs, capital improvements and replacements made by Borrower by
furnishing to Lender, on or before March 1, 2001, annual financial statements
(for the years 1999 and 2000) and certifications of the Borrower reflecting such
expenditure and any other such written documentation as Lender shall reasonably
require. If Lender determines that Borrower has not spent the Repair Amount (by
December 31, 2000), then beginning with the April, 2001, monthly payments due
under the Loan, Borrower shall make monthly payments equal to the Amortizing
Payments, and the Amortizing Payments shall continue until Lender determines
that Borrower has spent the Repair Amount.
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IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
BORROWER:
CRIT-NC, LLC, a Virginia limited liability company
(SEAL)
By: CORNERSTONE REALTY INCOME TRUST, INC., a
Virginia corporation, Managing Member
Attest: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
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Name: David S. McKenney Name: Stanley J. Olander, Jr.
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Title: Sr. Vice President Title: Chief Financial Officer
---------------------------- --------------------------------
[CORPORATE SEAL]
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ACKNOWLEDGMENT
STATE OF VIRGINIA
CITY OF RICHMOND
I, a Notary Public of the County and State aforesaid, certify that
David S. McKenney personally came before me this day and acknowledged that he is
the Assistant Secretary of Cornerstone Realty Income Trust, Inc. a Virginia
corporation, which is the Managing Member of CRIT-NC, LLC, a Virginia limited
liability company, and that by authority duly given and as the act of the
company, the foregoing instrument was signed in its name by Stanley J. Olander,
Jr. , its duly authorized Secretary, as the act and deed of the corporation on
behalf of the limited liability company.
Witness my hand and official stamp or seal this 27th day of September,
1999.
/s/ Jacquelyn B. Owens
----------------------------
Notary Public
My Commission Expires: 6/30/03
-----------
[NOTARY SEAL]
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Exhibit A
(St. Regis)
LEGAL DESCRIPTION
BEGINNING AT AN EXISTING IRON PIPE LOCATED IN THE EASTERN RIGHT OF WAY OF
INTERSTATE 40, SAID IRON BEING S 41(DEGREES) 50' 23" E 1,731.98' FROM NCGS
MONUMENT "CARY MALL", SAID MONUMENT HAVING NC GRID COORDINATES N-739,227.5142
E-2,074,232.4091; THENCE FROM THE POINT OF BEGINNING ALONG THE SOUTHERN PROPERTY
LINE OF WESTERN BLVD. L.L.C. AS DESCRIBED IN D.B. 6927 PG. 115, N 61(DEGREES)
36' 07" E 707.54' TO AN EXISTING IRON PIPE IN THE WESTERN RIGHT OF WAY OF
FARMGATE ROAD (60' PUBLIC RIGHT OF WAY)): THENCE ALONG THE RIGHT OF WAY OF
FARMGATE ROAD ON A CURVE TO THE LEFT HAVING A RADIUS OF 420.95', AN ARC LENGTH
OF 425.68', AND A CHORD BEARING AND DISTANCE OF S 44(DEGREES) 17' 42" E 407.78'
TO AN EXISTING IRON PIPE; THENCE LEAVING SAID RIGHT OF WAY AND ALONG THE
NORTHWESTERN PROPERTY LINE OF SUNPOINTE CONDOMINIUMS AS DESCRIBED IN D.B. 3567
PG. 521, S42(DEGREES) 32' 32" W 112.09' TO AN EXISTING IRON PIPE; THENCE ALONG
SAID LINE S 27(DEGREES) 27' 46" W 173.53' TO AN EXISTING IRON PIPE; THENCE ALONG
THE NORTHWESTERN PROPERTY LINE OF SUNPOINTE CONDOMINIUMS AS DESCRIBED IN D.B.
3652 PG. 430, S 33(DEGREES) 12' 51" W 128.02' TO AN EXISTING IRON PIPE; THENCE
ALONG SAID LINE S 33(DEGREES) 24' 01" W 148.67' TO AN EXISTING IRON PIPE, THENCE
S 20(DEGREES) 54' 44" W 295.85' TO AN EXISTING IRON PIPE IN THE EASTERN RIGHT OF
WAY OF INTERSTATE 40, THENCE ALONG SAID RIGHT OF WAY ON A CURVE TO THE RIGHT
HAVING A RADIUS OF 7,439.44', AN ARC LENGTH OF 560.61', AND A CHORD BEARING AND
DISTANCE OF N 38(DEGREES) 31' 09" W 560.48' TO A RIGHT OF WAY MONUMENT; THENCE N
35(DEGREES) 40' 06" W 187.40' TO A RIGHT OF WAY MONUMENT; THENCE N 18(DEGREES)
02' 21" W 114.36' TO THE POINT OF BEGINNING CONTAINING 10.358 ACRES.
Said property is described according to plat of ALTA/ACSM Land Title Survey by
M.M. Weeks Land Surveying, dated October 27, 1997 and last revised August 30,
1999, which plat is incorporated by this reference for purposes of this
description.
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(Remington Place)
BEGINNING AT AN EXISTING IRON PIPE LOCATED IN THE WESTERN RIGHT OF WAY LINE OF
LAKE DAM ROAD, SAID IRON PIPE ALSO BEING LOCATED N 22(DEGREES) 29' 44" E, 417.21
FEET FROM NCGS "LAKE DAM" (Y=728550.112 AND X=2086847.21); RUNS THENCE FROM SAID
POINT OF BEGINNING ALONG AND WITH THE NORTHERN RIGHT OF WAY LINE OF THE I-440
BELTLINE RAMP A COURSE OF S81(DEGREES) 31' 29" W FOR A DISTANCE OF 70.40 FEET TO
A NCDOT RIGHT OF WAY MONUMENT; THENCE CONTINUING WITH THE LINE OF SAID RAMP A
COURSE OF N 77(DEGREES) 24' 07" W FOR A DISTANCE OF 481.83 FEET TO AN EXISTING
IRON PIPE; THENCE DEPARTING SAID RAMP AND WITH THE LINE OF THE CITY OF RALEIGH
(LAKE JOHNSON CITY PARK) THE FOLLOWING EIGHT (8) COURSES
1) A COURSE OF N 17(DEGREES) 22' 32" W FOR A DISTANCE OF 141.99 FEET TO AN
EXISTING IRON PIPE;
2) A COURSE OF N 8(DEGREES) 37' 31" E FOR A DISTANCE OF 140.05 FEET TO AN
EXISTING IRON PIPE;
3) A COURSE OF N 35(DEGREES) 37' 04" E FOR A DISTANCE OF 124.95 FEET TO AN
EXISTING IRON PIPE;
4) A COURSE OF N 87(DEGREES) 33' 56" E FOR A DISTANCE OF 333.93 FEET TO AN
EXISTING IRON PIPE;
5) A COURSE OF N 88(DEGREES) 17' 57" E FOR A DISTANCE OF 19.86 FEET TO AN
EXISTING IRON PIPE;
6) A COURSE OF N 24(DEGREES) 27' 08" E FOR A DISTANCE OF 256.35 FEET TO AN
EXISTING IRON PIPE;
7) A COURSE OF N 33(DEGREES) 00' 07" E FOR A DISTANCE OF 503.99 FEET TO AN
EXISTING IRON PIPE;
8) A COURSE OF N 24(DEGREES) 08' 03" E FOR A DISTANCE OF 445.63 FEET TO AN
EXISTING IRON PIPE IN THE WESTERN RIGHT OF WAY LINE OF LAKE DAM ROAD (PUBLIC,
60' R/W); THENCE A COURSE OF N 24(DEGREES) 25' 18" E FOR A DISTANCE OF 14.05
FEET TO AN EXISTING IRON PIPE; THENCE A COURSE OF N 85(DEGREES) 56' 56" E FOR A
DISTANCE OF 24.08 FEET TO A PK NAIL IN THE CENTERLINE OF SAID LAKE DAM ROAD;
THENCE WITH THE CENTERLINE OF SAID LAKE DAM ROAD THE FOLLOWING ELEVEN (11)
COURSES:
1) A COURSE OF S 1(DEGREES) 03' 28" E FOR A DISTANCE OF 298.38 FEET TO A PK
NAIL;
2) A COURSE OF S 0(DEGREES) 51' 19" E FOR A DISTANCE OF 138.69 FEET TO A PK
NAIL;
3) A COURSE OF S 0(DEGREES) 35' 42" E FOR A DISTANCE OF 95.82 FEET TO A PK NAIL;
4) A COURSE OF S 0(DEGREES) 39' 03" W FOR A DISTANCE OF 104.60 FEET TO A PK
NAIL;
5) A COURSE OF S 6(DEGREES) 33' 35" W FOR A DISTANCE OF 102.72 FEET TO A PK
NAIL;
6) A COURSE OF S 12(DEGREES) 41' 16" W FOR A DISTANCE OF 98.19 FEET TO A PK
NAIL;
7) A COURSE OF S 17(DEGREES) 46' 18" W FOR A DISTANCE OF 96.73 FEET TO A PK
NAIL;
8) A COURSE OF S 23(DEGREES) 00' 25" W FOR A DISTANCE OF 92.71 FEET TO A PK
NAIL;
9) A COURSE OF S 27(DEGREES) 40' 21" W FOR A DISTANCE OF 92.48 FEET TO A PK
NAIL;
10) A COURSE OF S 28(DEGREES) 35' 34" W FOR A DISTANCE OF 126.83 FEET TO A PK
NAIL;
11) A COURSE OF S 28(DEGREES) 42' 47" W FOR A DISTANCE OF 213.50 FEET TO A PK
NAIL; THENCE A COURSE OF N 61(DEGREES) 25' 55" W FOR A DISTANCE OF 29.35 FEET TO
A NCDOT RIGHT OF WAY MONUMENT; THENCE A COURSE OF N 61(DEGREES) 27' 41" W FOR A
DISTANCE OF 30.08 FEET TO A NCDOT RIGHT OF WAY MONUMENT; THENCE WITH THE WESTERN
RIGHT OF WAY LINE OF LAKE DAM ROAD (AT THIS POINT 59 FEET FROM CENTERLINE) A
COURSE OF S 28(DEGREES) 34' 34" W FOR A DISTANCE OF 224.84 FEET TO AN EXISTING
IRON PIPE, THE POINT AND PLACE OF BEGINNING AND CONTAINING 14.637 ACRES, MORE OR
LESS.
Said property is described according to plat of As Built Survey for Cornerstone
Realty Income Trust, Inc. prepared by Murphy Hobson Sacks, Professional Land
Surveyors, dated August 1999, which plat is incorporated by this reference for
purposes of this description.
- 42 -
<PAGE>
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, now or hereafter owned by Borrower, wherever situate, and now or
hereafter located on, attached to, contained in, or used or usable in connection
with the real property described in Exhibit A attached hereto and incorporated
herein (the "LAND"), and all improvements located thereon (the "IMPROVEMENTS")
or placed on any part thereof, though not attached thereto, including all
screens, awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture
and furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto,
- 43 -
<PAGE>
which Borrower now has or may hereafter acquire in the Land, the Improvements,
or any of the personal property described in this Exhibit B, or any portion
thereof or interest therein, and any and all awards made for the taking by
eminent domain, or by any proceeding or purchase in lieu thereof, of the whole
or any part of such property, including without limitation, any award resulting
from a change of any streets (whether as to grade, access, or otherwise) and any
award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
- 44 -
<PAGE>
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as St. Regis, those items set forth in
Schedule B, Section 2, of that certain Commitment for Title Insurance issued by
Lawyers Title Insurance Corporation, Commitment No. 2000080, as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
As to the real property commonly known as Remington Place, those items set forth
in Schedule B, Section 2, of that certain Commitment for Title Insurance issued
by Lawyers Title Insurance Corporation, Commitment No. 2000090, as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
- 45 -
<PAGE>
Exhibit D
LIST OF MAJOR TENANTS
NONE
- 46 -
<PAGE>
Exhibit E
Allocated Loan Amounts and Individual Property List
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
LOAN
YEAR # OF ALLOCATION
PROPERTY NAME CITY ST ACQ'D UNITS BALANCE
(IN $000S)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
CORNERSTONE REALTY INCOME TRUST INC.
LOAN NO.: 6 103 650
TAX ID NO.: 54-1589139
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ashley Run Norcross GA 1997 348 $13,700
-------------------------------------------------------------------------------------------------------------------
Spring Lake Morrow GA 1998 188 $6,000
-------------------------------------------------------------------------------------------------------------------
Stone Brook Norcross GA 1997 188 $6,350
-------------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
-------------------------------------------------------------------------------------------------------------------
Hampton Pointe Charleston SC 1998 304 $9,150
-------------------------------------------------------------------------------------------------------------------
Westchase Charleston SC 1997 352 $8,900
-------------------------------------------------------------------------------------------------------------------
1,608 $50,550
-------------------------------------------------------------------------------------------------------------------
CRIT-NC, LLC
LOAN NO.: 6 103 651
TAX ID NO.: 54-1882705
-------------------------------------------------------------------------------------------------------------------
Charleston Place Charlotte NC 1997 214 $6,150
-------------------------------------------------------------------------------------------------------------------
Remington Place Raleigh NC 1997 136 $4,750
-------------------------------------------------------------------------------------------------------------------
St. Regis Raleigh NC 1997 180 $6,200
-------------------------------------------------------------------------------------------------------------------
Stone Point Charlotte NC 1998 192 $5,850
-------------------------------------------------------------------------------------------------------------------
722 $22,950
-------------------------------------------------------------------------------------------------------------------
Total Loan 2,330 $73,500
-------------------------------------------------------------------------------------------------------------------
</TABLE>
- 47 -
<PAGE>
EXHIBIT F
Sheet 1
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING DATE IMPROVE- ADJUSTED IMPROVE-
COMMUNITY UNITS MENTS PER UNIT MENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
THE ARBORS AT WINDSOR LAKE 228 1/1/99 161,000 $ 706 161,000
- ----------------------------------------------------------------------------------------------------------------------
CHARLESTON PLACE 214 5/14/99 270,000 $1,262 270,000
- ----------------------------------------------------------------------------------------------------------------------
WESTCHASE APARTMENTS 352 1/15/99 367,000 $1,043 367,000
- ----------------------------------------------------------------------------------------------------------------------
ASHLEY RUN 348 4/30/99 400,000 $1,149 400,000
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE
- ----------------------------------------------------------------------------------------------------------------------
1,142 1,198,000 $1,049
- ----------------------------------------------------------------------------------------------------------------------
COMMUNITIES STILL IN RENOV. PERIOD
- ----------------------------------------------------------------------------------------------------------------------
STONE BROOK 188 10/31/99 215,000 $1,144
- ----------------------------------------------------------------------------------------------------------------------
ST. REGIS 180 " 204,000 $1,133
- ----------------------------------------------------------------------------------------------------------------------
REMINGTON PLACE 136 " 135,000 $ 993
- ----------------------------------------------------------------------------------------------------------------------
SPRING LAKE 188 8/12/00 506,000 $2,691
- ----------------------------------------------------------------------------------------------------------------------
STONE POINT 192 1/15/00 186,500 $ 971
- ----------------------------------------------------------------------------------------------------------------------
HAMPTON POINTE 304 3/31/00 400,000 $1,316
- ----------------------------------------------------------------------------------------------------------------------
SUB TOTAL 1,188 1,646,500 $8,248 1,646,500 $1,386
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 2,330 2,844,500 $1,221
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CORNERSTONE REQUIRED TO SPEND ON CAPITAL IMPROVEMENTS APPROXIMATELY 80% OF THE
ABOVE ALLOCATED INDIVIDUAL PROPERTY IMPROVEMENT BUDGETED AMOUNTS ON A PRORATA
BASIS FOR A TOTAL OF NOT LESS THAN $2,400,000 BY YEAR END 2000.
IN ADDITION TO THE ABOVE GENERAL IMPROVEMENTS, CORNERSTONE UNDER THE CAPITAL
IMPROVEMENT PROVISIONS OF THE LOAN DOCUMENTS WILL ALSO PERFORM THE FOLLOWING
SPECIFIC REPAIRS:
BEFORE YEAR END 2000
1. REPLACE THE EXTERIOR DEFECTIVE MASONITE SIDING AT ST. REGIS AND REPAIR ANY
EXTERIOR WOOD DAMAGE. 2. PAINT EXTERIOR OF WEST CHASE APARTMENTS.
AGREED AND ACCEPTED: CORNERSTONE REALTY INCOME TRUST, INC.
BY /S/ STANLEY J. OLANDER, JR.
-----------------------------------
ITS CHIEF FINANCIAL OFFICER
-----------------------------------
DATE: 9/27/99
-----------
- 48 -
EXHIBIT 4.7
================================================================================
PREPARED BY AND UPON RECORDATION RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
Loan No. 6 103 650
CORNERSTONE REALTY INCOME TRUST, INC.,
a Virginia corporation, as grantor
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as grantee
(Lender)
---------------------------------
DEED TO SECURE DEBT AND SECURITY AGREEMENT
---------------------------------
Dated: As of September ___, 1999
Locations:
Ashley Run, Gwinnett County, Georgia
Stone Brook, Gwinnett County, Georgia
Spring Lake, Clayton County, Georgia
================================================================================
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I OBLIGATIONS............................................................................3
SECTION 1.01 OBLIGATIONS...................................................................3
SECTION 1.02 LOAN DOCUMENTS................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES.........................................................4
SECTION 2.01 TITLE, LEGAL STATUS AND AUTHORITY.............................................4
SECTION 2.02 VALIDITY OF LOAN DOCUMENTS....................................................4
SECTION 2.03 LITIGATION....................................................................4
SECTION 2.04 STATUS OF PROPERTY............................................................5
SECTION 2.05 TAX STATUS OF BORROWER........................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE...............................................5
SECTION 2.07 DISCLOSURE....................................................................6
SECTION 2.08 ILLEGAL ACTIVITY..............................................................6
ARTICLE III COVENANTS AND AGREEMENTS...............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS........................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE.....................................................6
SECTION 3.03 TAXES AND OTHER CHARGES.......................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS.................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY.........................................8
SECTION 3.06 INSURANCE.....................................................................9
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY...........................................10
SECTION 3.08 CONDEMNATION.................................................................12
SECTION 3.09 LIENS AND LIABILITIES........................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS...................................................13
SECTION 3.11 ERISA........................................................................14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS.....................15
SECTION 3.13 ELECTRONIC PAYMENTS..........................................................16
SECTION 3.14 INSPECTION...................................................................17
SECTION 3.15 RECORDS, REPORTS, AND AUDITS.................................................17
SECTION 3.16 BORROWER'S CERTIFICATES......................................................18
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES...........................18
SECTION 3.18 ADDITIONAL SECURITY..........................................................19
SECTION 3.19 FURTHER ACTS.................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION............................................19
SECTION 4.01 EXPENSES AND ADVANCES........................................................19
SECTION 4.02 SUBROGATION..................................................................20
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY........................................20
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE...................................................20
ARTICLE VI DEFAULTS AND REMEDIES.................................................................23
SECTION 6.01 EVENTS OF DEFAULT............................................................23
SECTION 6.02 REMEDIES.....................................................................24
SECTION 6.03 EXPENSES.....................................................................26
SECTION 6.04 RIGHTS PERTAINING TO SALES...................................................26
SECTION 6.05 APPLICATION OF PROCEEDS......................................................27
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES.........................................27
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES................................................27
ARTICLE VII SECURITY AGREEMENT....................................................................28
SECTION 7.01 SECURITY AGREEMENT...........................................................28
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES......................................28
SECTION 8.01 LIMITED RECOURSE LIABILITY...................................................28
SECTION 8.02 GENERAL INDEMNITY............................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY..................................................29
SECTION 8.04 ERISA INDEMNITY..............................................................29
SECTION 8.05 ENVIRONMENTAL INDEMNITY......................................................29
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES...........................................29
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL.............................................29
ARTICLE IX ADDITIONAL PROVISIONS.................................................................30
SECTION 9.01 USURY SAVINGS CLAUSE.........................................................30
SECTION 9.02 NOTICES......................................................................30
SECTION 9.03 SOLE DISCRETION OF LENDER....................................................31
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION................................31
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.05 CONSTRUCTION OF PROVISIONS...................................................31
SECTION 9.06 TRANSFER OF LOAN.............................................................32
SECTION 9.07 MISCELLANEOUS................................................................32
SECTION 9.08 ENTIRE AGREEMENT.............................................................33
SECTION 9.9 WAIVER OF TRIAL BY JURY......................................................33
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL............................................33
SECTION 10.01 PARTIAL RELEASE..............................................................33
SECTION 10.02 SUBSTITUTION OF COLLATERAL...................................................35
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS.....................................................37
SECTION 11.01 AMORTIZATION REQUIRED........................................................37
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS......................37
ARTICLE XII LOCAL LAW PROVISIONS..................................................................38
12.01 WAIVER................................................................................38
12.02 NATURE OF INSTRUMENT (AS DEED TO SECURE DEBT).........................................38
12.03 NO NOVATION...........................................................................38
</TABLE>
- iii -
<PAGE>
ATTACHMENTS:
EXHIBIT A - Legal Description of Land
EXHIBIT B - Description of Personal Property
EXHIBIT C - Permitted Encumbrances
EXHIBIT D - List of Major Tenants
EXHIBIT E - Allocated Loan Amounts and Individual Property List
EXHIBIT F - Required Repairs, Capital Improvements and Replacements
- iv -
<PAGE>
DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
- v -
<PAGE>
Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (i)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
- vi -
<PAGE>
DEED TO SECURE DEBT AND SECURITY AGREEMENT
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (this "INSTRUMENT") is made as
of September ___, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation, having its principal office and place of business at 306 East Main
Street, Richmond, Virginia 23219, as grantor ("BORROWER"), to THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an office at One
Ravinia Drive, Suite 1400, Atlanta, Georgia 30346, as grantee ("LENDER").
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT, PURSUANT TO WHICH LENDER
MAY TAKE THE PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A JUDICIAL
FORECLOSURE ACTION UPON DEFAULT BY BORROWER UNDER THIS INSTRUMENT.
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Grants, bargains, sells, assigns, transfers, pledges, warrants, and conveys
to Lender, and conveys to Lender in FEE SIMPLE, subject only to the Permitted
Encumbrances (as hereinafter defined), WITH POWER OF SALE, and grants Lender
security title to, and a security interest in, the following property, rights,
interests and estates owned by Borrower (collectively, the "PROPERTY"):
(i) The real property in Gwinnett County, Georgia and Clayton County,
Georgia and described in Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures)
now or later located in or on the Land ("Improvements");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
- 1 -
<PAGE>
(iv) All right, title, and interest owned by Borrower in and to all
land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof, and all sidewalks, alleys, and
strips and gores of land adjacent to or used in connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof ) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases,
licenses, or other agreements affecting the use, enjoyment or occupancy of the
Property now or later existing (including any use or occupancy arrangements
created pursuant to Title 7 or 11 of the United States Code, as amended from
time to time, or any similar federal or state laws now or later enacted for the
relief of debtors (the "BANKRUPTCY CODE") and all extensions and amendments
thereto (collectively, the "LEASES") and all Borrower`s right, title and
interest under the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
- 2 -
<PAGE>
TO HAVE AND TO HOLD the Property unto the Lender and its successors and assigns
forever, subject to the matters listed in Exhibit C ("PERMITTED ENCUMBRANCES")
and the provisions of this Instrument.
SHOULD THE OBLIGATIONS BE PAID according to the tenor and effect thereof when
the same shall become due and payable, then this Instrument shall be canceled
and surrendered (except for the obligations of Borrower set forth in Sections
3.11 and 3.12 and Article VIII hereof, which shall survive such cancellation and
surrender).
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is intended (i) to operate and to be
construed as a deed passing title to the Property to Lender, and is made under
those provisions of the existing laws of the State of Georgia relating to deeds
to secure debt, and not as a mortgage; (ii) to constitute a security agreement
pursuant to the Uniform Commercial Code as enacted in the State of Georgia; and
(iii) executed, acknowledged, and delivered by Borrower to secure and enforce
the following obligations (collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents; and
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Mortgage and Security Agreement between
Borrower and Lender of even date herewith securing the Note and to be recorded
in the real estate records of Richland County, South Carolina, (vi) that certain
Mortgage and Security Agreement between Borrower and Lender of even date
herewith securing the Note and to be recorded in the real estate records of
Charleston County, South Carolina, (vii) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) (the "GUARANTY") of even date
herewith from CRIT-NC, LLC ("GUARANTOR") to Lender, (viii) that certain Deed of
Trust and Security Agreement between Guarantor and Lender of even date herewith
securing the Guaranty and to be recorded in the real estate records of Wake
County, North Carolina, (ix) that certain Deed of Trust and Security Agreement
between Guarantor and Lender of even date herewith securing the Guaranty and to
be recorded
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in the real estate records of Mecklenburg County, North Carolina, (x) any
additional mortgages, deeds of trust and deeds to secure debt and other
instruments given to secure the Note pursuant to the substitution of collateral
provisions of Section 10.02 below, and (xi) any other written agreement executed
in connection with the closing of the Loan (but excluding the Loan application
and Loan commitment) and by the party against whom enforcement is sought,
including those given to evidence or further secure the payment and performance
of any of the Obligations, and any written renewals, extensions, and amendments
of the foregoing, executed by the party against whom enforcement is sought. All
of the provisions of the Documents are incorporated into this Instrument as if
fully set forth in this Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seised of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, deeds to secure debt, charges,
encumbrances, and security interests, except the Permitted Encumbrances; (ii)
will forever warrant and defend its title to the Property and the validity,
enforceability, and priority of the security title, lien and security interest
created by this Instrument against the claims of all persons; (iii) is a
Virginia corporation duly organized, validly existing, and in good standing and
qualified to transact business under the laws of its state of organization or
incorporation ("ORGANIZATION STATE") and the state where the Property is located
("PROPERTY STATE"); and (iv) has all necessary approvals, governmental and
otherwise, and full power and authority to own its properties (including the
Property) and carry on its business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, security title or encumbrance upon any of its properties or assets
except for those in this Instrument; and (vi) will not require any authorization
or license from, or any filing with, any governmental or other body (except for
the recordation of this Instrument and Uniform Commercial Code ("U.C.C.")
filings). The Documents constitute legal, valid, and binding obligations of
Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform its
obligations.
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SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, security
titles or encumbrances except the Permitted Encumbrances and those created by
this Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or
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managing member of Borrower (if Borrower is a limited liability company).
Borrower has received reasonably equivalent value for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment; (ii) Borrower demonstrates to
Lender's reasonable satisfaction that (1) the Property will not be sold to
satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has
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furnished a bond or surety (satisfactory to Lender in form and amount)
sufficient to prevent a sale of the Property; (iv) at Lender's option, Borrower
has deposited the full amount necessary to pay any unpaid portion of the
Assessments with Lender; and (v) such proceeding shall be permitted under any
other instrument to which Borrower or the Property is subject (whether superior
or inferior to this Instrument); provided, however, that the foregoing shall not
apply to the contesting of any income taxes, franchise taxes, ground rents,
maintenance charges, and utility charges.
(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes mortgages (or deeds to secure debt) or debts secured by
mortgages (or deeds to secure debt) for federal, state or local purposes or
changes the manner of the collection of any such existing taxes, and/or (iii)
imposes a tax, either directly or indirectly, on any of the Documents or the
Obligations, Borrower shall, if permitted by law, pay such tax within the
statutory period or within twenty (20) days after demand by Lender, whichever is
less; provided, however, that if, in the opinion of Lender, Borrower is not
permitted by law to pay such taxes, Lender shall have the option to declare the
Obligations immediately due and payable (without any Prepayment Premium) upon
six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien, security title or security interest created thereby, and any rights of
Lender under the documents against the claims of all persons, and shall promptly
notify Lender of any such claims. Lender (whether or not named as a party to
such proceedings) is authorized and empowered (but shall not be obligated) to
take such additional steps as it may deem necessary or proper for the defense of
any such proceeding or the protection of the lien, security title, security
interest, validity, enforceability, or priority of this Instrument, title to the
Property, or any rights of Lender under the Documents, including the employment
of counsel, the prosecution and/or defense of litigation, the compromise,
release, or discharge of such adverse claims, the purchase of any tax title, the
removal of such any liens, security titles and
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security interests, and any other actions Lender deems necessary to protect its
interests. Borrower authorizes Lender to take any actions required to be taken
by Borrower, or permitted to be taken by Lender, in the Documents in the name
and on behalf of Borrower. Borrower shall reimburse Lender on demand for all
expenses (including attorneys' fees) incurred by it in connection with the
foregoing and Lender's exercise of its rights under the Documents. All such
expenses of Lender, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.
SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien, security title or security interest (other than the Permitted
Encumbrances and those created by this Instrument) or (ii) leased by Borrower
(A) with Lender's prior written consent or (B) if the replaced Property was
leased at the time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "LAWS"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances;
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(iii) impose any restrictive covenants or encumbrances upon the Property, except
for subordinate utility easements and rights-of-way that solely benefit the
Property; (iv) execute or file any subdivision plat affecting the Property; (v)
consent to the annexation of the Property to any municipality; (vi) permit the
Property to be used by the public or any person in a way that might make a claim
of adverse possession or any implied dedication or easement possible; (vii)
cause or permit the Property to become a non-conforming use under zoning
ordinances or any present or future non-conforming use of the Property to be
discontinued; or (viii) fail to comply with the material terms of the Permitted
Encumbrances.
SECTION 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary coverage plus umbrella coverage), which insurance shall
include operations and blanket contractual liability coverage which insures
contractual liability under the indemnifications set forth in Section 8.02 below
(but such coverage or the amount thereof shall in no way limit such
indemnifications). Upon request, Borrower shall maintain insurance or carry
additional amounts of
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insurance covering Borrower or the Property as Lender shall reasonably require
including against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company, Inc. is no longer available, a similar rating from a similar
or successor service). In addition, all policies shall (x) include a standard
mortgagee clause, without contribution, in the name of Lender and (y) provide
that they shall not be canceled, amended, or materially altered (including
reduction in the scope or limits of coverage) without at least thirty (30) days'
prior notice to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made available for Restoration (defined
below) (but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans
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and specifications approved by Lender ("RESTORATION"). Borrower shall comply
with other reasonable requirements established by Lender to preserve the
security under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs (defined below) related to collection of the
proceeds and (2) subject to Section 3.07(c) and at Lender's option, to (A)
payment (without any Prepayment Premium) of all or part of the Obligations,
whether or not then due and payable, in the order determined by Lender (provided
that if any Obligations remains outstanding after this payment, the unpaid
Obligations shall continue in full force and effect and Borrower shall not be
excused in the payment thereof); (B) the cure of any default under the
Documents; or (C) the Restoration. Any insurance proceeds held by Lender shall
be held by Lender, and interest shall be earned thereon at the rate paid by
Lender at that time on other impound or escrow accounts in connection with its
mortgage portfolio business. If Borrower receives any insurance proceeds for the
Damage, Borrower shall promptly deliver the proceeds to Lender. Notwithstanding
anything in this Instrument or at law or in equity to the contrary, none of the
insurance proceeds paid to Lender shall be deemed trust funds and Lender may
dispose of these proceeds as provided in this Section. Borrower expressly
assumes all risk of loss from any Damage, whether or not insurable or insured
against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which does not exceed the aggregate of the remaining Net Proceeds
(defined below) and any funds deposited with Lender by Borrower ("ADDITIONAL
FUNDS") and (z) the aggregate of any loss of rental income insurance proceeds
which the carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any
funds deposited with Lender by Borrower are sufficient to cover all costs and
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operating expenses of the Property, including payments due and reserves required
under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments, as such amounts become due under the construction
contract for Restoration, the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the amounts currently due under the construction
contract for Restoration and Lender's receipt of (i) appropriate lien waivers,
(ii) a certification of the percentage of Restoration completed by an architect
or engineer acceptable to Lender, and (iii) title insurance protection against
materialmen's and mechanic's liens. Lender shall disburse the funds within seven
(7) days after satisfaction of the conditions set forth in the preceding
sentence. At Lender's election, the disbursement of funds may be handled by a
disbursing agent selected by Lender, and such agent's reasonable fees and
expenses shall be paid by Borrower. The Net Proceeds, Rent Loss Proceeds, and
any Additional Funds shall constitute additional security for the Loan and
Borrower shall execute, deliver, file and/or record, at its expense, such
instruments as Lender requires to grant to Lender a perfected, first-priority
security interest in these funds. If the Net Proceeds are made available for
Restoration and (x) Borrower refuses or fails to complete the Restoration, (y)
an Event of Default occurs, or (z) the Net Proceeds or Additional Funds are not
applied by Borrower to Restoration, then any undisbursed portion may, at
Lender's option, be applied to the Obligations in any order of priority and any
such application to principal shall be deemed a voluntary prepayment subject to
the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
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(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty (20%) of the gross area of the
Improvements or (B) ten percent (10%) of the parking spaces is affected by the
Taking, (ii) the amount of the loss does not exceed twenty percent (20%) of the
original amount of the Note; (iii) the Taking does not affect access to the
Property from any public right-of-way; (iv) there is no Event of Default at the
time of application; (v) after Restoration, the Property and its use will be in
compliance with all Laws; (vi) in Lender's reasonable judgment, Restoration is
practical and can be completed within one (1) year after the Taking and at least
one (1) year prior to the maturity of the Note; and (vii) the Tenants listed in
Exhibit D ("MAJOR TENANTS") agree in writing to continue their Leases without
abatement of rent. Any portion of the Award that is (i) for loss of value or
property or (ii) in excess of the cost of any Restoration permitted above, may,
in Lender's sole discretion, be applied against the Obligations or paid to
Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien, security title or encumbrance on the
Property or the Rents (collectively, "LIENS") and Borrower shall, at its sole
expense, do everything necessary to preserve the security title, lien and
security interest created by this Instrument and its priority. Nothing in the
Documents shall be deemed or construed as constituting the consent or request by
Lender, express or implied, to any contractor, subcontractor, laborer, mechanic
or materialman for the performance of any labor or the furnishing of any
material for any improvement, construction, alteration, or repair of the
Property. Borrower further agrees that Lender does not stand in any fiduciary
relationship to Borrower. Any contributions made, directly or indirectly, to
Borrower by or on behalf of any of its partners, members, principals or any
party related to such parties shall be treated as equity and shall be
subordinate and inferior to the rights of Lender under the Documents.
SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance
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premiums, then, at Lender's option, Borrower shall make monthly deposits
("DEPOSITS") with Lender equal to one-twelfth (1/12) of the annual Assessments
(except for income taxes, franchise taxes, ground rents, maintenance charges and
utility charges) and the premiums for insurance required under Section 3.06 (the
"INSURANCE PREMIUMS") together with amounts sufficient to pay these items thirty
(30) days before they are due (collectively, the "IMPOSITIONS"). Lender shall
estimate the amount of the Deposits until ascertainable. At that time, Borrower
shall promptly deposit any deficiency. Borrower shall promptly notify Lender of
any changes to the amounts, schedules and instructions for payment of the
Impositions. Borrower authorizes Lender or its agent to obtain the bills for
Assessments directly from the appropriate tax or governmental authority. All
Deposits are pledged to Lender and shall constitute additional security for the
Obligations. The Deposits shall be held by Lender without interest (except to
the extent required under Laws) and may be commingled with other funds. If (i)
there is no Event of Default at the time of payment, (ii) Borrower has delivered
bills or invoices to Lender for the Impositions in sufficient time to pay them
when due, (iii) the Deposits are sufficient to pay the Impositions or Borrower
has deposited the necessary additional amount, then Lender shall pay the
Impositions prior to their due date. Any Deposits remaining after payment of the
Impositions shall, at Lender's option, be credited against the Deposits required
for the following year or paid to Borrower. If an Event of Default occurs, the
Deposits may, at Lender's option, be applied to the Obligations in any order of
priority. Any application to principal shall be deemed a voluntary prepayment
subject to the Prepayment Premium. Borrower shall not claim any credit against
the principal and interest due under the Note for the Deposits. Upon an
assignment or other transfer of this Instrument, Lender may pay over the
Deposits in its possession to the assignee or transferee and then it shall be
completely released from all liability with respect to the Deposits. Borrower
shall look solely to the assignee or transferee with respect thereto. This
provision shall apply to every transfer of the Deposits to a new assignee or
transferee. Subject to Article V, a transfer of title to the Land shall
automatically transfer to the new owner the beneficial interest in the Deposits.
Upon full payment and satisfaction of this Instrument or, at Lender's option, at
any prior time, the balance of the Deposits in Lender's possession shall be paid
over to the record owner of the Land and no other party shall have any right or
claim to the Deposits. Lender may transfer all its duties under this Section to
such service or financial institution as Lender may periodically designate and
Borrower agrees to make the Deposits to such service or institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an
"operating company" or a "real estate operating company" within the meaning of
29 C.F.R. Section 2510.3-101(c) or (e). Borrower shall deliver to Lender such
certifications and/or other evidence periodically requested by
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Lender, in its sole discretion, to verify these representations and warranties.
Failure to deliver these certifications or evidence, breach of these
representations and warranties, or consummation of any transaction which would
cause this Instrument or any exercise of Lender's rights under this Instrument
to (i) constitute a non-exempt prohibited transaction under ERISA or (ii)
violate ERISA or any state statute regulating governmental plans (collectively,
a "VIOLATION"), shall be an Event of Default. Notwithstanding anything in the
Documents to the contrary, no sale, assignment, or transfer of any direct or
indirect right, title, or interest in Borrower or the Property (including
creation of a junior lien, encumbrance or leasehold interest) shall be permitted
which would, in Lender's opinion, negate Borrower's representations in this
Section or cause a Violation. At least fifteen (15) days before consummation of
any of the foregoing, Borrower shall obtain from the proposed transferee or
lienholder (i) a certification to Lender that the representations and warranties
of this Section will be true after consummation and (ii) an agreement to comply
with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants.
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material",
"hazardous waste", "toxic
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substance", "toxic pollutant", "contaminant", or "pollutant" within the meaning
of any Environmental Law. "RELEASE" of any Hazardous Materials includes any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
pumping, pouring, escaping, dumping, disposing or other movement of Hazardous
Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits, and (D) (1) in only the amounts necessary to operate the
Property or (2) fully disclosed to and approved by Lender in writing; (iv)
Borrower shall keep the Property free and clear of all liens and encumbrances
imposed by any Environmental Laws due to any act or omission by Borrower or any
person (the "ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense,
fully and expeditiously cooperate in all activities in Section 3.12(c) including
providing all relevant information and making knowledgeable persons available
for interviews; (vi) Borrower shall, at its sole expense, (A) perform any
reasonable environmental site assessment or other investigation of environmental
conditions at the Property upon Lender's request based on Lender's reasonable
belief that the Property is not in compliance with all Environmental Laws, (B)
share with Lender the results and reports and Lender and the Indemnified Parties
(defined below) shall be entitled to rely on such results and reports, and (C)
complete any remediation of Hazardous Materials affecting the Property or other
actions required by any Environmental Laws; (vii) Borrower shall not allow any
Tenant or other user of the Property to violate any Environmental Law; and
(viii) Borrower shall immediately notify Lender in writing after it becomes
aware of (A) the presence, Release, or threatened Release of Hazardous Materials
affecting the Property, (B) any non-compliance of the Property with any
Environmental Laws, (C) any actual or potential Environmental Lien, (D) any
required or proposed remediation of environmental conditions relating to the
Property, and (E) any written or oral communication or notice from any person
relating to Hazardous Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
SECTION 3.13 Electronic Payments. All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change
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in Borrower's bank or financial institution is necessary to appropriately
effectuate the payments by electronic funds transfer, Lender shall have the
right to require Borrower to select a different depository after thirty (30)
days' prior notice. As of the date of this Instrument, First Union National Bank
has been deemed acceptable to Lender. All costs of (i) establishing and
maintaining such account and (ii) the electronic funds transfers shall be paid
by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be required after a
default under the Documents. Borrower shall assist Lender and such person in
effecting said inspection, subject, however, to the rights of tenants in
possession.
SECTION 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual reports and (B) forty-five (45)
days after the end of each calendar quarter for quarterly reports. If any one
report, statement, or item is not received by Lender within fifteen (15) days
after Lender has given Borrower written notice that such report, statement or
item was not received on its due date, then a late fee of Five Hundred and
No/100 Dollars ($500.00) per month shall be due and payable by Borrower. In
addition, if any one report, statement, or item is not received within
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thirty (30) days after such notice, Lender may immediately declare an Event of
Default under the Documents. Borrower shall (i) provide Lender with such
additional financial, management, or other information regarding Borrower, any
general partner of Borrower, or the Property, as Lender may reasonably request
and (ii) upon Lender's request, deliver all items required by Section 3.15 in an
electronic format (i.e. on computer disks) or by electronic transmission
acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business Day (as defined in the Note)
after two (2) days prior written notice; provided that no notice shall be
required after any default under the Documents. Borrower shall assist Lender in
effecting such examination. All such inspections shall be performed in a
commercially reasonable manner. Upon five (5) days' prior notice, Lender may
inspect and make copies of Borrower's or any general partner of Borrower's
income tax returns with respect to the Property for the purpose of verifying any
items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors as to (a) the amount of the Obligations outstanding; (b) the interest
rate, terms of payment, and maturity date of the Note; (c) the date to which
payments have been paid under the Note; (d) whether any offsets or defenses
exist against the Obligations and a detailed description of any listed; (e)
whether all Leases are in full force and effect and have not been modified (or
if modified, setting forth all modifications); (f) the date to which the Rents
have been paid; (g) whether, to the best knowledge of Borrower, any defaults
exist under the Leases and a detailed description of any listed; (h) the
security deposit held by Borrower under each Lease and that such amount is the
amount required under such Lease; (i) whether there are any defaults (or events
which with the passage of time and/or notice would constitute a default) under
the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
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SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and security
title, lien and security interest of this Instrument and shall not affect the
liability or obligations of any maker or guarantor. Neither the acceptance of
the Documents nor their enforcement shall prejudice or affect Lender's right to
realize upon or enforce any other security now or later held by Lender. Lender
may enforce the Documents or any other security in such order and manner as it
may determine in its discretion.
SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the security title, lien, security interest and rights of
Lender under the Documents and (ii) protect the lawful owner of the Documents.
Promptly upon request by Lender and at Borrower's expense, Borrower shall
execute additional instruments and take such actions as Lender reasonably
believes are necessary or desirable to (a) maintain or grant Lender a
first-priority, perfected security title, lien and security interest on the
Property, (b) correct any error or omission in the Documents; and (c) effect the
intent of the Documents, including filing/recording the Documents, additional
deeds to secure debt, financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower or Lender in connection with the granting, closing, servicing, and
enforcement of (a) the Loan and Documents or (b) attributable to Borrower as
owner of the Property. The term "COSTS" shall mean any of the foregoing incurred
in connection with (a) any default by Borrower under the Documents, (b) the
servicing of the Loan, or (c) the exercise, enforcement, compromise, defense,
litigation, or settlement of any of Lender's rights or remedies under the
Documents or relating to the Loan or the Obligations. If Borrower fails to pay
any amounts or perform any actions required under the Documents, Lender may (but
shall not be obligated to) advance sums to pay such amounts or perform such
actions. Borrower grants Lender the right to enter upon and take possession of
the Property to prevent or remedy any such failure and the right to take such
actions in Borrower's name. No advance or performance shall be deemed to have
cured a default by Borrower. All (a) sums advanced by or payable to Lender per
this Section or under applicable Laws, (b) except as expressly provided in the
Documents, payments due under the Documents which are not paid in full when due,
and (c) all Costs, shall: (i) be deemed demand obligations, (ii) bear interest
at the applicable interest rate specified in the Note, which shall be the
Default Rate unless prohibited by Laws, until paid if not paid on demand, (iii)
be part of, together with such interest, the Obligations , and (iv) be secured
by the Documents. Lender, upon making any such advance, shall also be subrogated
to rights of the person receiving such advance.
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SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender shall be subrogated to all rights, claims, liens,
titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and (ii) are merged with the security title, lien and security interest created
by the Documents as cumulative security for the payment and performance of the
Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including any Prepayment Premium) shall become immediately due and
payable, if Borrower, without Lender's prior written consent (which may be
withheld for any or no reason including the possibility of an ERISA violation or
the proposed transferee's failure to agree in writing to Lender increasing the
interest payable on the Obligations to any rate, changing any other terms
(including maturity) of the Obligations or Documents, or requiring the payment
of a transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender agrees
that, upon fifteen (15) days prior written request of Borrower, Borrower, and
any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of
time or the giving of notice or both would be an Event of Default) has
occurred and is continuing;
(ii) the proposed transferee complies with and delivers the
ERISA Certificate and Indemnification Agreement described in the
guidelines with respect thereto then applicable to Lender's mortgage
loans (the "Guidelines") (or, if the statements required by the
certification are not true with respect to the proposed transferee,
Lender shall have received such evidence as it may require in its sole
discretion to determine that the proposed transfer is not and would not
render the Loan a prohibited transaction under ERISA);
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(iii) payment by Borrower or the proposed transferee of (1)
all reasonable costs and expenses incurred by Lender for the processing
of said transfer including a processing fee and (2) all other costs and
expenses (including attorneys' fees and expenses for Lender's staff
attorneys and outside counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower and Guarantor with another entity so long
as the surviving entity (i) has a net worth (as reasonably determined by Lender
in accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower and Guarantor as of the closing date of the Loan, (ii) has a
ratio of total debt (both secured and unsecured) to total assets of less than
fifty percent (50%); and (iii) in the judgment of Lender, has financial
capability and creditworthiness, reputation and experience in the ownership,
operation, management, and leasing of similar properties, equal to or greater
than Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively, the
"Borrower Property"), together with all of the properties (the "CRIT-NC LLC
Properties") owned by Guarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $22,950,000.00 (the "CRIT-NC, LLC Loan")
evidenced by the CRIT-NC, LLC Note (as defined in the Note) and the documents
and obligations securing the CRIT-NC, LLC Note (the Borrower Property and the
CRIT-NC, LLC Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a
Person (defined below) which, in the judgment of Lender, has financial
capability and creditworthiness, reputation and experience in the
ownership, operation, management, and leasing of similar properties,
equal to or greater than Borrower, including without limitation, a net
worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio
(defined below) does not exceed 62% of the entire Portfolio;
(iii) Borrower pays Lender a non-refundable servicing fee (as
specified by Lender) at the time of the request and an additional fee
equal to 1.0% of the outstanding principal balance of the Loan and the
CRIT-NC, LLC Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed
to verify the first priority of the Documents (and the documents
securing the CRIT-NC, LLC Loan) at Borrower's expense;
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(v) the Debt Service Coverage Ratio (defined below) for
the entire Portfolio is at least 1.90 to 1.00 for the preceding twelve
month period and Lender receives satisfactory evidence that this Debt
Service Coverage Ratio for the entire Portfolio will be maintained for
the next succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under
the Documents (and the documents securing the CRIT-NC, LLC Loan) and
executes any documents reasonably required by Lender, and all of these
documents are satisfactory in form and substance to Lender;
(vii) Lender reasonably approves the form and content of all
transfer documents, and Lender is furnished with a certified copy of
the recorded transfer documents;
(viii) the transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the Guidelines
with respect thereto then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees,
costs, and expenses incurred by Lender in connection with the proposed
transfer, including, without limitation, all legal (for both outside
counsel and Lender's staff attorneys), accounting, title insurance,
documentary stamps taxes, intangibles taxes, mortgage taxes, recording
fees, and appraisal fees, whether or not the transfer is actually
consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not be
anticipated for any greater time period than that approved by generally accepted
accounting principles and ordinary operating expenses shall not be prepaid.
Documentation of NOI and expenses shall be certified by an officer of Borrower
with detail satisfactory to Lender and shall be subject to the approval of
Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
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ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien,
security title or security interest created by the Documents will be impaired
prior to completion of such cure, and (3) Lender's immediate exercise of any
remedies provided hereunder or by law is not necessary for the protection or
preservation of the Property or Lender's security interest ;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
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(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in priority of lien, security
interest or security title to this Instrument;
(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction or shall be consented to by
Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender or any person
(which shall be a person permitted by applicable Laws) designated by Lender may
(but shall not be obligated to) take any action (separately, concurrently,
cumulatively, and at any time and in any order) permitted under any Laws,
without notice, demand, presentment, or protest (all of which are hereby waived,
to the extent permitted by Laws), to protect and enforce Lender's rights under
the Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) Lender, at its option, may sell the Property, or any part thereof,
at public sale or sales before the door of the courthouse of the county in which
the Property, or any part thereof, is situated, to the highest bidder for cash,
in order to pay the Obligations and insurance premiums, liens, assessments,
taxes and charges, including utility charges, if any, with accrued interest
thereon, and all Costs incurred by Lender in connection with such sale and all
other expenses of the sale and of all proceedings in connection therewith,
including reasonable attorneys' fees, after advertising the time, place and
terms of sale once a week for four (4) weeks immediately preceding such sale
(but without regard to the number of days) in a newspaper in which sheriff's
sales are advertised in said county. The foregoing notwithstanding, Lender may
sell, or cause to be sold, any tangible or intangible personal property, or any
part thereof, and which constitutes a part of the security hereunder, in the
foregoing manner, or as may otherwise be provided by law. Lender may bid and
purchase at any such sale and may satisfy Lender's obligation to purchase
pursuant to Lender's bid by canceling an equivalent portion of any Obligations
then outstanding and secured hereby.
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At any such sale, Lender may execute and deliver to the purchaser a
conveyance of the Property, or any part thereof, in fee simple (but without
covenants and warranties, express or implied), and, to this end, Borrower hereby
constitutes and appoints Lender the agent and attorney-in-fact of Borrower to
make such sale and conveyance, and thereby to divest Borrower of all right,
title, and equity that Borrower may have in and to the Property and to vest the
same in the purchaser or purchasers at such sale or sales, and all the acts and
doings of said agent and attorney-in-fact are hereby ratified and confirmed, and
any recitals in said conveyance or conveyances as to facts essential to a valid
sale shall be binding on Borrower. The aforesaid power of sale and agency hereby
granted are coupled with an interest and are irrevocable by death or otherwise,
are granted as cumulative of the other remedies provided by law for collection
of the Obligations secured hereby, and shall not be exhausted by one exercise
thereof but may be exercised until full payment of all Obligations secured
hereby.
(c) sell for cash or upon credit the Property and all right, title and
interest of Borrower therein and rights of redemption thereof, pursuant to power
of sale;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, sue for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender in
connection with the foregoing operations and all amounts needed to pay the
Impositions and other expenses of the Property, as well as just and reasonable
compensation for the services of Lender and its attorneys, agents, and
employees; and/or (vi) in every case in connection with the foregoing, exercise
all rights and
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powers of Borrower or Lender with respect to the Property, either in Borrower's
name or otherwise;
(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the security title, security interest, lien or priority of this
Instrument or improving the position of any subordinate lienholder or security
title holder with respect thereto, except to the extent that the Obligations
shall have been actually reduced, and Lender may accept by assignment, pledge,
or otherwise any other property in place thereof as Lender may require without
being accountable for so doing to any other lienholder or security title holder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender deems advisable for the care,
protection and preservation of the Personal Property and (ii) request Borrower
at its expense to assemble the Personal Property and make it available to Lender
at a convenient place acceptable to Lender. Any notice of sale, disposition or
other intended action by Lender with respect to the Personal Property sent to
Borrower at least five (5) days prior to such action shall constitute
commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender exercises any of its rights under Section 6.02(g), Lender shall not
(a) be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose; (b) be deemed a beneficiary or "mortgagee in possession" by
reason of such entry or taking possession; nor (c) be liable (i) to account for
any action taken pursuant to such exercise other than for Rents actually
received by Lender, (ii) for any loss sustained by Borrower resulting from any
failure to lease the Property, or (iii) any other act or omission of Lender
except for losses caused by Lender's willful misconduct or gross negligence.
Borrower hereby consents to, ratifies, and confirms the exercise by Lender of
its rights under this Instrument and appoints Lender as its attorney-in-fact,
which appointment shall be deemed to be coupled with an interest and
irrevocable, for such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender in the exercise of its rights under the Documents, together with interest
thereon at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's rights under the Documents.
SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion,
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apply to any sales of the Property under Article VI, whether by judicial
proceeding, judgment, decree, power of sale, foreclosure or otherwise: (a)
Lender may conduct multiple sales of any part of the Property in separate tracts
or in its entirety and Borrower waives any right to require otherwise; (b) any
sale may be postponed or adjourned by public announcement at the time and place
appointed for such sale or for such postponed or adjourned sale without further
notice; and (c) Lender may acquire the Property and, in lieu of paying cash, may
pay by crediting against the Obligations the amount of its bid, after deducting
therefrom any sums which Lender is authorized to deduct under the provisions of
the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided by Laws to the contrary, be applied
in the order determined by Lender to: (a) payment of all Costs and expenses of
any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items, if permitted by Laws; (c) payment
of the Obligations in such order as Lender may elect; (d) payment of any other
sums secured or required to be paid by Borrower; and (e) payment of the surplus,
if any, to any person lawfully entitled to receive it. Borrower and Lender
intend and agree that during any period of time between any foreclosure judgment
that may be obtained and the actual foreclosure sale that the foreclosure
judgment will not extinguish the Documents or any rights contained therein
including the obligation of Borrower to pay all Costs and to pay interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender to exercise any rights under the Documents upon any default
or Event of Default shall impair Lender's rights or be construed as a waiver of,
or acquiescence to, such or any subsequent default or Event of Default. No
recovery of any judgment by Lender and no levy of an execution upon the Property
or any other property of Borrower shall affect the security title, lien and
security interest created by this Instrument and such liens, security titles,
security interests, rights, powers, and remedies shall continue unimpaired as
before. Lender may resort to any security given by this Instrument or any other
security now given or hereafter existing to secure the Obligations, in whole or
in part, in such portions and in such order as Lender may deem advisable, and no
such action shall be construed as a waiver of any of the liens, security titles,
security interests, rights, or benefits granted hereunder. Acceptance of any
payment after any Event of Default shall not be deemed a waiver or a cure of
such Event of Default and such acceptance shall be deemed an acceptance on
account only. If Lender has started enforcement of any right by foreclosure,
sale, entry, or otherwise and such proceeding shall be discontinued, abandoned,
or determined adversely for any reason, then Borrower and Lender shall be
restored to their former positions and rights under the Documents with respect
to the Property, subject to the security title, lien and security interest
hereof.
SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns,
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and for any person ever claiming an interest in the Property (other than
Lender), waives and releases all rights of redemption, reinstatement, valuation,
appraisement, notice of intention to mature or declare due the whole of the
Obligations, all rights to a marshaling of the assets of Borrower, including the
Property, or to a sale in inverse order of alienation, in the event of
foreclosure of the liens, security titles and security interests created under
the Documents; (c) shall not be relieved of its obligation to pay the
Obligations as required in the Documents nor shall the lien, security title or
priority of the Documents be impaired by any agreement renewing, extending, or
modifying the time of payment or the provisions of the Documents (including a
modification of any interest rate), unless expressly released, discharged, or
modified by such agreement. Regardless of consideration and without any notice
to or consent by the holder of any subordinate lien, security title, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security title, security interest, or the priority of the modified
Documents as security for the Obligations over any such subordinate lien,
security title, security interest, encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender, as
security for the Obligations, a security interest in the Personal Property to
the fullest extent that the same may be subject to the U.C.C. Borrower
authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys' fees (both in-house staff
and retained attorneys) and all other costs of defense. The term "INDEMNIFIED
PARTIES" shall mean
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(a) Lender, (b) any prior owner or holder of the Note, (c) any existing or prior
servicer of the Loan, (d) the officers, directors, shareholders, partners,
employees and trustees of any of the foregoing, and (e) the heirs, legal
representatives, successors and assigns of each of the foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may, after a
determination by the Indemnified Parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interests, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the resolution of any claims or proceedings pertaining to ERISA. Upon
demand, Borrower shall pay or, in the sole discretion of the Indemnified
Parties, reimburse and/or indemnify the Indemnified Parties for all Costs
imposed on, incurred by, or asserted against the Indemnified Parties by reason
of any items set forth in this Article VIII and/or the enforcement or
preservation of the Indemnified Parties' rights under the Documents (except as
noted in this paragraph). Any amount payable to the Indemnified Parties under
this Section shall (a) be deemed a demand obligation, (b) be part of the
Obligations, (c) bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, until paid if
not paid on demand, and (d) be secured by this Instrument.
SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of
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Borrower, shall not be subject to any limitation on personal liability in the
Documents, and shall survive (a) repayment of the Obligations, (b) any
termination, satisfaction, assignment or foreclosure of this Instrument, (c) the
acceptance by Lender (or any nominee) of a deed in lieu of foreclosure, (d) a
plan of reorganization filed under the Bankruptcy Code, or (e) the exercise by
the Lender of any rights in the Documents. Borrower's obligations under Article
VIII shall not be affected by the absence or unavailability of insurance
covering the same or by the failure or refusal by any insurance carrier to
perform any obligation under any applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "NOTICE") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
<TABLE>
<S> <C>
If to Borrower: With a copy to notices sent to Borrower to:
Cornerstone Realty Income Trust, Inc. McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attention: Martin B. Richards
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<TABLE>
<S> <C>
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 103 650 Reference Loan No. 6 103 650
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Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's right to bring any action or proceeding against Borrower or the
Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of. this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO"; (g)
the terms "PROPERTY", "LAND", "IMPROVEMENTS", and "PERSONAL PROPERTY" shall be
construed as if followed by the
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phrase "OR ANY PART THEREOF"; (h) the term "OBLIGATIONS" shall be construed as
if followed by the phrase "OR ANY OTHER SUMS SECURED HEREBY, OR ANY PART
THEREOF"; (i) the term "PERSON" shall include natural persons, firms,
partnerships, corporations, governmental authorities or agencies, and any other
public or private legal entities; (j) the term "PROVISIONS," when used with
respect hereto or to any other document or instrument, shall be construed as if
preceded by the phrase "TERMS, COVENANTS, AGREEMENTS, REQUIREMENTS, AND/OR
CONDITIONS"; (k) the term "LEASE" shall mean "TENANCY, SUBTENANCY, LEASE,
SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR" shall mean "LANDLORD,
SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term "TENANTS" or "LESSEE" shall
mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l) the term "OWNED" shall mean
"NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY" and "ALL" shall mean "ANY OR
ALL"; and (n) the term "ON DEMAND" or "UPON DEMAND" shall mean "WITHIN FIVE (5)
BUSINESS DAYS AFTER WRITTEN NOTICE".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender may, without notice to
Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the security title, lien
and security interest created hereby shall not be destroyed or terminated by the
application of the doctrine of merger and Lender shall continue to have and
enjoy all its rights and privileges as to each separate estate. Upon foreclosure
of this Instrument, none of the Leases shall be destroyed or terminated as a
result of such foreclosure, by application of the doctrine of merger or as a
matter of law, unless Lender takes all actions required by law to terminate the
Leases as a result of foreclosure. All of Borrower's covenants and agreements
under the Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in
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the name of Borrower of any of the documents listed in Sections 3.04, 3.19, 4.01
and 6.02. The Documents cannot be amended, terminated, or discharged except in a
writing signed by the party against whom enforcement is sought. No waiver,
release, or other forbearance by Lender will be effective unless it is in a
writing signed by Lender and then only to the extent expressly stated. The
provisions of the Documents shall be binding upon Borrower and its heirs,
devisees, representatives, successors, and assigns including successors in
interest to the Property and inure to the benefit of Lender and its heirs,
successors, substitutes, and assigns. Where two or more persons have executed
the Documents, the obligations of such persons shall be joint and several,
except to the extent the context clearly indicates otherwise. The Documents may
be executed in any number of counterparts with the same effect as if all parties
had executed the same document. All such counterparts shall be construed
together and shall constitute one instrument, but in making proof hereof it
shall only be necessary to produce one such counterpart. Upon receipt of an
affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of any Document which is not of public record, and, in the case of
any mutilation, upon surrender and cancellation of the Document, Borrower will
issue, in lieu thereof, a replacement Document and indemnity reasonably
satisfactory to Borrower, dated the date of the lost, stolen, destroyed or
mutilated Document containing the same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
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(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Property portfolio shall meet
the leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
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(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
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(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have determined in its sole
discretion, that following the proposed substitution, the entire Portfolio shall
meet the leasing percentage requirements in the Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
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(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal to or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
SECTION 11.02 Required Repairs, Capital Improvements and Replacements. Borrower
shall be required to spend, between January 1, 1999 and December 31, 2000, at
least $2,400,000 (the "Repair Amount"), in the aggregate, on the repairs,
capital improvements and replacements for the entire Portfolio as outlined on
Exhibit F attached hereto and by this reference made a part hereof. Borrower
shall document the payment of the Repair Amount and the completion of the
applicable repairs, capital improvements and replacements made by Borrower by
furnishing to Lender, on or before March 1, 2001, annual financial statements
(for the years 1999 and 2000) and certifications of the Borrower reflecting such
expenditure and any other such written documentation as Lender shall reasonably
require. If Lender determines that Borrower has not spent the Repair Amount (by
December 31, 2000), then beginning with the April, 2001, monthly payments due
under the Loan,
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Borrower shall make monthly payments equal to the Amortizing Payments, and the
Amortizing Payments shall continue until Lender determines that Borrower has
spent the Repair Amount.
ARTICLE XII - LOCAL LAW PROVISIONS
SECTION 12.01 Waiver. BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE UNDER
THE CONSTITUTION OR THE LAWS OF THE STATE OF GEORGIA OR THE CONSTITUTION OR THE
LAWS OF THE UNITED STATES OF AMERICA TO NOTICE, OTHER THAN EXPRESSLY PROVIDED
FOR IN THIS INSTRUMENT, OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY
RIGHT OR REMEDY PROVIDED BY THIS INSTRUMENT TO LENDER, AND BORROWER WAIVES
BORROWER'S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED
IN ACCORDANCE WITH THE PROVISIONS OF THIS INSTRUMENT ON THE GROUND (IF SUCH BE
THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING. ALL
WAIVERS BY BORROWER IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY,
AND KNOWINGLY, AFTER BORROWER HAS BY BORROWER'S ATTORNEY BEEN FIRST APPRISED OF
AND COUNSELED WITH RESPECT TO BORROWER'S POSSIBLE ALTERNATIVE RIGHTS.
/s/ SJO
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(Initialed and Acknowledged by Borrower)
SECTION 12.02 Nature of Instrument (as Deed to Secure Debt). THIS INSTRUMENT is
a deed passing title to Lender and is made under the laws of the State of
Georgia relating to deeds to secure debt, and is not a mortgage, and is given to
secure the performance and repayment of the Obligations. All references in this
Instrument to Borrower as "mortgagor" shall be deemed to refer to Borrower as
"grantor," and all references in this Instrument to Lender as "mortgagee" shall
be deemed to refer to Lender as "grantee."
SECTION 12.03 No Novation. Lender's acceptance of an assumption of the
obligations of this Instrument and of the Note, and any release of Borrower (if
any) in connection with such assumption, shall not constitute a novation.
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IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
Signed, sealed, and delivered BORROWER:
in the presence of:
CORNERSTONE REALTY INCOME TRUST,
/s/ Mark A. Babb Mark A. Babb a Virginia corporation
- -----------------------------------
Unofficial Witness
/s/ Jacquelyn B. Owens By: /s/ Stanley J. Olander, Jr.
- ----------------------------------- ----------------------------------
Notary Public Name: Stanley J. Olander, Jr.
---------------------------
Title: Chief Financial Officer
--------------------------
My Commission Expires: (CORPORATE SEAL)
6/30/03
- -------------------------------
[NOTARIAL SEAL]
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Exhibit A
(Ashley Run)
All that tract of parcel of land lying and being in Land Lots 281 and 306 of the
6th District, Gwinnett County, Georgia, being more particularly described as
follows:
Beginning at a point marked by an iron pin found located at the common corner of
Land Lots 280, 281, 306 and 307 of the 6th District, Gwinnett County, Georgia
(being hereinafter called "Point A"); thence N 31(degrees) 25' 45" W along the
Land Lot line dividing Land Lots 306 and 307 of the aforesaid District and
County, a distance of 29.73 feet, more or less, to a point on the center line of
a creek (and being the southernmost point of Lot 6, Unit 1, Section II,
Lockridge Forest, Block "A"); thence in a generally northeasterly direction
along the center line of said creek and following the meanderings thereof a
distance of 951 feet, more or less, to a point, being hereinafter called "Point
B," said Point B also being located by commencing at Point A and proceeding the
following courses and distances; N 44(degrees) 44' 26" E a distance of 203.54
feet to a point; thence N 86(degrees) 24' 31" E a distance of 319.45 feet to a
point; thence N 53(degrees) 44' 58" E a distance of 152.63 feet to a point;
thence 66(degrees) 44' 16" E a distance of 154.17 feet to a point; thence N
74(degrees) 14' 39" E a distance of 81.04 feet to Point B; thence N 44(degrees)
30' 49" E a distance of 288.56 feet to a point; thence N 49(degrees) 53' 52" E a
distance of 235.99 feet to a point; thence N 52(degrees) 15' 37" E a distance of
139.32 feet to a point marked by an iron pin found; thence N 53(degrees) 05' 05"
E a distance of 224.96 feet to a point; thence N 56(degrees) 38' 28" E a
distance of 322.26 feet to a point; thence N 67(degrees) 13' 03" E a distance of
325.13 feet to a point marked by an iron pin found; thence S 31(degrees) 36' 58"
E a distance of 540 feet, more or less, to an iron pin placed in the center line
of a creek and marked "Point X"; thence northeasterly and northerly along the
center line of said creek and following the meanderings thereof a distance of
1,491 feet, more or less, to an iron pin placed at the intersection of the
center line of said creek and the Land Lot line dividing Land Lots 305 and 306
of the aforesaid District and County marked "Point Y" and being located N
30(degrees) 48' 58" W 458 feet, more or less, from the common corner of Land
Lots 281, 282, 305 and 306 of the aforesaid District and County; thence S
30(degrees) 48' 58" E along the Land Lot line dividing Land Lots 305 and 306 of
the aforesaid District and County, a distance of 422.45 feet, to a point marked
by an iron pin found located at the common corner of Land Lots 281, 282, 305 and
306 of the aforesaid District and County; thence S 30(degrees) 55' 56" E along
the Land Lot line dividing Land Lots 281 and 282 of the aforesaid District and
County, a distance of 81.08 feet to a point marked by an iron pin placed; thence
S 12(degrees) 03' 16" W a distance of 859.74 feet to a point; thence S
07(degrees) 31' 41" E a distance of 396.39 feet to a point; thence N 60(degrees)
33' 37" W a distance of 533.39 feet to a point; thence N 31(degrees) 36' 04" W a
distance 0f 300.05 feet to a point; thence N 89(degrees) 59' 42" W a distance of
293.76 feet to a point; thence S 35(degrees) 56' 25" W a distance of 502.75 feet
to a point; thence S 03(degrees) 05' 57" W a distance of 370.60 feet to a point;
thence S 87(degrees) 51' 51" E a distance of 215.18 feet to a point; thence S
28(degrees) 55' 51" E a distance of 140.57 feet to a point; thence S 09(degrees)
47' 25" W a distance of 645.86 feet to a point, said point being located on the
northern margin of the right-of-way of Jones Mill Road (having an 80-foot
right-of-way at this point); thence proceeding along the northern and
northeastern margin of the right-of-way of Jones Mill Road along an arc of a
curve to the right a distance of 587.75 feet to a point (said arc being
subtended by a chord having a bearing of N 79(degrees) 19' 42" W and a chord
distance of 577.94 feet); thence N 61(degrees) 09' 01" W along the northern
margin of the right-of-way of Jones Mill Road a distance of 140.25 feet to a
point; thence northerly, northeasterly, westerly and southwesterly along the arc
of a curve to the left and being the cul-de-sac of Jones Mill Road a distance of
207.42 feet (said arc being subtended by a chord having a bearing of N
76(degrees) 49' 28" W and a chord distance of 129.96 feet); thence along the
center line of Jones Mill Road the following courses and distances N 59(degrees)
43' 00" W a distance of 145.74 feet to a point; thence northwesterly and
westerly along an arc of a curve to the left a distance of 158.60 feet to a
point (said arc being subtended by a chord having a bearing of N 73(degrees) 36'
43" W and a chord distance of 157.05 feet); thence N 87(degrees) 30' 26" W a
distance of 126.58 feet to a point; thence westerly along an arc of a curve to
the left a distance of 338.79 feet to a point, said point being located on the
Land Lot line dividing Land Lots 280 and 281 of the aforesaid District and
County (said arc being subtended by a chord having a bearing of S 87(degrees)
47' 04" W and a chord distance of 338.41 feet); thence departing from the center
line of Jones Mill Road and proceeding N 31(degrees) 25' 45" W along the Land
Lot line dividing Land Lots 280 and 281 of the aforesaid District and County, a
distance of 333.32 feet to the Point of Beginning, containing 45.1055 acres,
more or less, as shown and delineated on the ALTA/ACSM Survey dated August 25,
1999, prepared by Samuel G. Evans, Jr., Georgia Registered Land Surveyor No.
1159, of EDI Engineers & Surveyors, Inc., which as-built survey is incorporated
herein by reference thereto.
- 40 -
<PAGE>
(Stone Brook)
ALL THAT TRACT OR PARCEL OF LAND LYING AND BEING IN LAND LOT 184 OF THE
6TH DISTRICT, GWINNETT COUNTY, GEORGIA AND BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS: BEGINNING AT A POINT FOUND AT THE INTERSECTION OF
THE NORTHERLY LINE OF LAND LOT 184 AND THE SOUTHERLY RIGHT-OF-WAY LINE
OF BEAVER RUIN ROAD (BEING A 130-FOOT RIGHT-OF-WAY); THENCE FOLLOWING
SAID SOUTHERLY RIGHT-OF-WAY LINE OF BEAVER RUIN ROAD 719.0 FEET
SOUTHEASTERLY TO THE TRUE POINT OF BEGINNING; THENCE FROM SAID POINT OF
BEGINNING CONTINUING ALONG THE SOUTHERLY RIGHT-OF-WAY LINE OF BEAVER
RUIN ROAD S 79(DEGREES) 13' 05" E A DISTANCE OF 307.39 FEET TO THE
POINT OF CURVATURE OF A CURVE TO THE RIGHT HAVING A RADIUS OF 1,024.49
FEET, A CHORD BEARING OF S 67(DEGREES) 32' 44" E AND A CHORD DISTANCE
OF 414.55 FEET; ALONG SAID CURVE AN ARC DISTANCE OF 417.43 FEET TO A
POINT; THENCE S 55(DEGREES) 52' 23" E A DISTANCE OF 685.77 FEET TO A
POINT; THENCE DEPARTING SAID RIGHT-OF-WAY LINE S 82(DEGREES) 36' 58" W
A DISTANCE OF 237.50 FEET TO A POINT; THENCE S 58(DEGREES) 37' 55" W A
DISTANCE OF 35.92 FEET TO A POINT; THENCE S 78(DEGREES) 10' 49" W A
DISTANCE OF 35.24 FEET TO A POINT; THENCE S 58(DEGREES) 37' 55" W A
DISTANCE OF 77.00 FEET TO A POINT; THENCE S 43(DEGREES) 13' 22" W A
DISTANCE OF 26.97 FEET TO A POINT; THENCE S 57(DEGREES) 26' 19" W A
DISTANCE OF 103.92 FEET TO A POINT; THENCE S 31(DEGREES) 22' 05" E A
DISTANCE OF 17.30 FEET TO A POINT; THENCE S 58(DEGREES) 35' 48" W A
DISTANCE OF 118.79 FEET TO A POINT; THENCE S 55(DEGREES) 53' 23" E A
DISTANCE OF 128.95 FEET TO A POINT; THENCE S 58(DEGREES) 36' 00" W A
DISTANCE OF 125.00 FEET TO A POINT; THENCE S 31(DEGREES) 24' 55" E A
DISTANCE OF 449.94 FEET TO A POINT; THENCE N 58(DEGREES) 35' 26" E A
DISTANCE OF 250.00 FEET TO A POINT; THENCE S 31(DEGREES) 24' 34" E A
DISTANCE OF 88.08 FEET TO A POINT; THENCE S 58(DEGREES) 6' 09" W A
DISTANCE OF 385.01 FEET TO A POINT; THENCE N 31(DEGREES) 24' 34" W A
DISTANCE OF 91.36 FEET TO A POINT; THENCE N 58(DEGREES) 35' 26" E A
DISTANCE OF 80.00 FEET TO A POINT; THENCE N 31(DEGREES) 24' 34" W A
DISTANCE OF 200.00 FEET TO A POINT; THENCE S 58(DEGREES) 35' 26" W A
DISTANCE OF 030.00 FEET TO A POINT; THENCE N 31(DEGREES) 24' 32" W A
DISTANCE OF 249.96 FEET TO A POINT; THENCE S 58(DEGREES) 36' 00" W A
DISTANCE OF 252.63 FEET TO A POINT; THENCE N 30(DEGREES) 27' 48" W A
DISTANCE OF 890.13 FEET TO A POINT; THENCE N 59(DEGREES) 29' 15" E A
DISTANCE OF 245.06 FEET TO A POINT; THENCE N 30(DEGREES) 30' 15" W A
DISTANCE OF 314.52 FEET TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE
OF BEAVER RUIN ROAD, SAID POINT BEING THE TRUE POINT OF BEGINNING, AND
CONTAINING 18.035 ACRES AS SHOWN ON A PLAT ENTITLED "SURVEY FOR HAL
BARNETT" PREPARED BY HAYES, JAMES & ASSOCIATES, INC., LAWRENCEVILLE,
GEORGIA, DATED OCTOBER 02, 1985, AND ON AS BUILT SURVEY OF BARRINGTON
PARC FOR CORNERSTONE REALTY INCOME TRUST, INC. AND CHICAGO TITLE
INSURANCE COMPANY, PREPARED BY HAYES, JAMES & ASSOCIATES, INC., DATED
JULY 21, 1989, LAST REVISED OCTOBER 23, 1997 AND ALTA/ACSM AS BUILT
SURVEY OF STONE BROOK FOR CRIT-NC; THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA AND LAWYERS TITLE INS. CORP., DATED SEPT. 20, 1999.
TOGETHER WITH those easement rights arising under the following:
1. Easement Agreement by and between Georgia Waste Systems, Inc.,
successor by merger with Whitaker & Sons, Inc., and Hal W. Barnett,
dated as of May ___, 1985, filed for record July 3, 1985, at 9:23 a.m.,
recorded in Deed Book 3086 at page 585, records of Gwinnett County,
Georgia.
2. Sewer Easement from James M. Conley and Barbara M. Conley to Hal W.
Barnett, dated as of May ___, 1985, filed for record July 3, 1985, at
9:23 a.m., recorded in Deed Book 3086, page 583, aforesaid records.
3. Sewer Easement from Marvin's, Inc., to Hal W. Barnett, dated as of May
29, 1985, filed for record July 3, 1985, at 9:23 a.m., recorded in Deed
Book 3086 at page 600, aforesaid records.
4. Sewer Easement from Red Plum Industrial Park, a Joint Venture,
comprised of George T. Baker, William H. Coffer, Jr., Donald F.
Palmieri and MB & Lane Enterprises, Inc., a Georgia corporation, to Hal
W. Barnett, dated as of June 18, 1985, filed for record July 3, 1984,
at 9:23 a.m., recorded in deed Book 3086 at page 606, aforesaid
records.
- 41 -
<PAGE>
(Spring Lake)
All that tract or parcel of land lying and being in Land Lot 82 of the
12th District of Clayton County, Georgia and being more particularly described
as follows:
Beginning at a point on the easterly r/w of Southlake Parkway (80' r/w)
a distance of 434.88 feet southerly from the intersection formed by the easterly
r/w of Southlake Parkway (80'r/w) and the southerly r/w of Nolan Court (said
point lying 33.0 feet southerly from the centerline of said Nolan Court) and
running thence South 87(degrees) 13' 52" East, and departing the easterly r/w of
Southlake Parkway, a distance of 1166.69 feet to a point; running thence South
00(degrees) 25' 11" West a distance of 986.99 feet to a point; running thence
North 89(degrees) 36' 58" West a distance of 1283.91 feet to a point on the
easterly r/w of Southlake Parkway (80'r/w); running thence northerly along the
easterly r/w of Southlake Parkway (80'r/w) the following courses and distances:
North 07(degrees) 33' 11" East, 831.83 feet; thence along the arc of a curve to
the left 210.86 feet to the point of beginning (said arc having a chord distance
of 210.76 feet on a bearing of North 04(degrees) 28' 29" East and a radius of
1962.354 feet); said property containing 28.35027 acres or 1,234,938 square
feet.
Said property is described according to plat of ALTA/ACSM Land Title
Survey for Cornerstone Realty Income Trust, Inc., The Prudential
Insurance Company of America and Lawyers Title Insurance Corporation by
Watts & Browning Engineers, Inc., dated August 18, 1999 and last
revised September 10, 1999, which plat is incorporated by this
reference for purposes of this description.
- 42 -
<PAGE>
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, now or hereafter owned by Borrower, wherever situate, and now or
hereafter located on, attached to, contained in, or used or usable in connection
with the real property described in Exhibit A attached hereto and incorporated
herein (the "LAND"), and all improvements located thereon (the "IMPROVEMENTS")
or placed on any part thereof, though not attached thereto, including all
screens, awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture
and furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto,
- 43 -
<PAGE>
which Borrower now has or may hereafter acquire in the Land, the Improvements,
or any of the personal property described in this Exhibit B, or any portion
thereof or interest therein, and any and all awards made for the taking by
eminent domain, or by any proceeding or purchase in lieu thereof, of the whole
or any part of such property, including without limitation, any award resulting
from a change of any streets (whether as to grade, access, or otherwise) and any
award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
- 44 -
<PAGE>
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as Ashley Run, those items set forth in
Schedule B, Section 2, of that certain Commitment for Title Insurance issued by
Lawyers Title Insurance Corporation, Commitment No. 2-11007(B), as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
As to the real property commonly known as Stone Brook, those items set forth in
Schedule B, Section 2, of that certain Commitment for Title Insurance issued by
Lawyers Title Insurance Corporation, Commitment No. 2-11007(A), as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
As to the real property commonly known as Spring Lake, those items set forth in
Schedule B, Section 2, of that certain Commitment for Title Insurance issued by
Lawyers Title Insurance Corporation, Commitment No. 2-11007(C), as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
- 45 -
<PAGE>
Exhibit D
LIST OF MAJOR TENANTS
NONE
- 46 -
<PAGE>
Exhibit E
Allocated Loan Amounts and Individual Property List
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
LOAN
YEAR # OF ALLOCATION
PROPERTY NAME CITY ST ACQ'D UNITS BALANCE
(IN $000S)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
CORNERSTONE REALTY INCOME TRUST INC.
LOAN NO.: 6 103 650
TAX ID NO.: 54-1589139
-------------------------------------------------------------------------------------------------------------------
Ashley Run Norcross GA 1997 348 $13,700
-------------------------------------------------------------------------------------------------------------------
Spring Lake Morrow GA 1998 188 $6,000
-------------------------------------------------------------------------------------------------------------------
Stone Brook Norcross GA 1997 188 $6,350
-------------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
-------------------------------------------------------------------------------------------------------------------
Hampton Pointe Charleston SC 1998 304 $9,150
-------------------------------------------------------------------------------------------------------------------
Westchase Charleston SC 1997 352 $8,900
-------------------------------------------------------------------------------------------------------------------
1,608 $50,550
-------------------------------------------------------------------------------------------------------------------
CRIT-NC, LLC
LOAN NO.: 6 103 651
TAX ID NO.: 54-1882705
-------------------------------------------------------------------------------------------------------------------
Charleston Place Charlotte NC 1997 214 $6,150
-------------------------------------------------------------------------------------------------------------------
Remington Place Raleigh NC 1997 136 $4,750
-------------------------------------------------------------------------------------------------------------------
St. Regis Raleigh NC 1997 180 $6,200
-------------------------------------------------------------------------------------------------------------------
Stone Point Charlotte NC 1998 192 $5,850
-------------------------------------------------------------------------------------------------------------------
722 $22,950
-------------------------------------------------------------------------------------------------------------------
Total Loan 2,330 $73,500
-------------------------------------------------------------------------------------------------------------------
</TABLE>
- 47 -
<PAGE>
EXHIBIT F
Sheet 1
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING IMPROVE- ADJUSTED IMPROVE-
COMMUNITY UNITS DATE MENTS PER UNIT MENT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
THE ARBORS AT WINDSOR LAKE 228 1/1/99 161,000 $ 706 161,000
- ----------------------------------------------------------------------------------------------------------------------
CHARLESTON PLACE 214 5/14/99 270,000 $1,262 270,000
- ----------------------------------------------------------------------------------------------------------------------
WESTCHASE APARTMENTS 352 1/15/99 367,000 $1,043 367,000
- ----------------------------------------------------------------------------------------------------------------------
ASHLEY RUN 348 4/30/99 400,000 $1,149 400,000
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE
- ----------------------------------------------------------------------------------------------------------------------
1,142 1,198,000 $1,049
- ----------------------------------------------------------------------------------------------------------------------
COMMUNITIES STILL IN RENOV. PERIOD
- ----------------------------------------------------------------------------------------------------------------------
STONE BROOK 188 10/31/99 215,000 $1,144
- ----------------------------------------------------------------------------------------------------------------------
ST. REGIS 180 " 204,000 $1,133
- ----------------------------------------------------------------------------------------------------------------------
REMINGTON PLACE 136 " 135,000 $ 993
- ----------------------------------------------------------------------------------------------------------------------
SPRING LAKE 188 8/12/00 506,000 $2,691
- ----------------------------------------------------------------------------------------------------------------------
STONE POINT 192 1/15/00 186,500 $ 971
- ----------------------------------------------------------------------------------------------------------------------
HAMPTON POINTE 304 3/31/00 400,000 $1,316
- ----------------------------------------------------------------------------------------------------------------------
SUB TOTAL 1,188 1,646,500 $8,248 1,646,500 $1,386
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 2,330 2,844,500 $1,221
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
CORNERSTONE REQUIRED TO SPEND ON CAPITAL IMPROVEMENTS APPROXIMATELY 80% OF THE
ABOVE ALLOCATED INDIVIDUAL PROPERTY IMPROVEMENT BUDGETED AMOUNTS ON A PRORATA
BASIS FOR A TOTAL OF NOT LESS THAN $2,400,000 BY YEAR END 2000.
IN ADDITION TO THE ABOVE GENERAL IMPROVEMENTS, CORNERSTONE UNDER THE CAPITAL
IMPROVEMENT PROVISIONS OF THE LOAN DOCUMENTS WILL ALSO PERFORM THE FOLLOWING
SPECIFIC REPAIRS:
BEFORE YEAR END 2000
1. REPLACE THE EXTERIOR DEFECTIVE MASONITE SIDING AT ST. REGIS AND REPAIR ANY
EXTERIOR WOOD DAMAGE. 2. PAINT EXTERIOR OF WEST CHASE APARTMENTS.
AGREED AND ACCEPTED: CORNERSTONE REALTY INCOME TRUST, INC.
BY /S/ STANLEY J. OLANDER, JR.
-------------------------------
ITS CHIEF FINANCIAL OFFICER
------------------------------
DATE: 9/27/99
-----------
- 48 -
<PAGE>
EXHIBIT 4.8
RECORDING REQUESTED BY AND LOAN NO. 6 103 650
WHEN RECORDED RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
(CHARLESTON COUNTY, SOUTH CAROLINA)
This Assignment of Leases and Rents (this "ASSIGNMENT") is made as of
September 27, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation having its principal office and place of business at 306 East Main
Street, Richmond, Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Charleston County,
South Carolina, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00) ("LOAN") evidenced by
that certain Promissory Note dated as of the date of this Assignment ("NOTE")
and secured by, among other things, that certain Mortgage and Security Agreement
executed by Borrower in favor of Lender dated as of the date of this Assignment
and to be recorded in the real estate records of Charleston County, South
Carolina ("INSTRUMENT") (capitalized terms used without definition shall have
the meanings ascribed to them in the Instrument) and the Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower assigned the
Leases and Rents to Lender in the manner provided below to secure payment of the
Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally assigns,
transfers, and sets over to Lender all of the right, title, interest, and
estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all guaranties thereof);
(b) the Rents; (c) all proceeds from the cancellation, surrender, sale or other
disposition of the Leases; (d) the right to collect and receive all the Rents;
and (e) the right to
<PAGE>
enforce and exercise, whether at law or in equity or by any other means, all
terms and conditions of the Leases ("LEASE PROVISIONS"). This assignment is
intended by Borrower and Lender to constitute a present, absolute assignment and
not a collateral assignment for additional security only. Upon full payment and
satisfaction of the Obligations and written request by Borrower, Lender shall
transfer, set over, and assign to Borrower all right, title, and interest of
Lender in, to, and under the Leases and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall have a
revocable license ("LICENSE") from Lender to exercise all rights extended to the
landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the License shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment, Lender, and
not Borrower, shall be the creditor of any Tenant in respect of assignments for
the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution
or receivership proceedings affecting any such Tenant; provided, however, that
Borrower shall be the party obligated to make timely filings of claims in such
proceedings or to otherwise pursue creditor's rights therein. Notwithstanding
the foregoing, Lender shall have the right, but not the obligation, to file such
claims instead of Borrower and if Lender does file a claim, Borrower agrees that
Lender (a) is entitled to all distributions on such claim to the exclusion of
Borrower and (b) has the exclusive right to vote such claim and otherwise to
participate in the administration of the estate in connection with such claim.
Lender shall have the option to apply any monies received by it as such creditor
to the Obligations in the order set forth in the Documents. If a petition is
filed under the Bankruptcy Code by or against Borrower, and Borrower, as
landlord under any Lease, decides to reject such Lease pursuant to Section
365(a) of the Bankruptcy Code, then Borrower shall give Lender at least ten (10)
days' prior written notice of the date when Borrower shall apply to the
bankruptcy court for authority to reject the Lease. Lender may, but shall not be
obligated to, send Borrower within such ten-day period a written notice stating
that (a) Lender demands that Borrower assume and assign the Lease to Lender
pursuant to Section 365 of the Bankruptcy Code and (b) Lender covenants to cure
or provide adequate assurance of future performance under the Lease. If Lender
sends such notice, Borrower shall not reject the Lease provided Lender complies
with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. Upon demand and notice of an Event
of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay all Rents to Lender and (b) rely upon any such
notice from Lender without any obligation to inquire as to the actual existence
of the default, notwithstanding any claim of Borrower to the
-2-
<PAGE>
contrary. Borrower shall have no claim against any Tenant for any Rents paid by
Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold
Lender harmless from any and all Losses that Lender may incur under the Leases
or by reason of this Assignment, except for Losses incurred as a direct result
of Lender's willful misconduct or gross negligence. Nothing in this Assignment
shall be construed to bind Lender to the performance of any Lease Provisions or
to otherwise impose any liability on Lender including, without limitation, any
liability under covenants of quiet enjoyment in the Leases in the event that any
Tenant shall have been joined as party defendant in any action to foreclose the
Instrument and shall have been barred thereby of all right, title, interest, and
equity of redemption in the premises. This Assignment imposes no liability upon
Lender for the operation and maintenance of the Property or for carrying out the
terms of any Lease before Lender has entered and taken actual possession and
complete control of all operations of the Property. Any Losses incurred by
Lender, by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Lender's request, be
reimbursed by Borrower. Such reimbursement shall include interest at the Default
Rate and Costs. Lender may, upon entry and taking of possession, collect the
Rents and apply them to reimbursement for any such items.
6. Representations and Warranties. Borrower represents and warrants that (a)
Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any Lease
that is in default, (b) enter into new, bona-fide, arm's length Leases (or renew
existing Leases) provided each Lease satisfies the minimum leasing requirements
in Exhibit C attached hereto and incorporated herein and is on Borrower's
standard form lease (approved by Lender) with no
-3-
<PAGE>
modifications that increase the obligations of the landlord, and (c) take such
actions as are customary and reasonable for apartment owners. Upon Lender's
request and at Borrower's expense, Borrower shall (i) promptly deliver to Lender
copies of all notices of default Borrower has sent to any Tenant, (ii) enforce
the Leases and all remedies available to Borrower upon any Tenant's default,
(iii) deliver to Lender copies of all papers served in connection with any such
enforcement proceedings, and (iv) consult with Lender, its agents and attorneys
with respect to the conduct thereof. Borrower shall not enter into any
settlement of any such proceeding without Lender's prior written consent except
in the ordinary course of business, and so long as such actions are reasonable
and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent of
Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect, notwithstanding
any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
Signed, sealed, and delivered in the BORROWER:
presence of the following witnesses:
CORNERSTONE REALTY INCOME TRUST,
/s/ David S. McKenney INC., a Virginia corporation
- -----------------------
Witness
Printed Name: David S. McKenney By: /s/ Stanley J. Olander, Jr.
----------------- ----------------------------
Name: Stanley J. Olander, Jr.
-----------------------
/s/ Mark A. Babb Title: Chief Financial Officer
------------------- -------------------------------
Witness
Printed Name: Mark A. Babb (CORPORATE SEAL)
-------------
-5-
<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA )
) PROBATE
CITY OF RICHMOND )
PERSONALLY APPEARED BEFORE ME, the undersigned witness, who being duly
sworn, deposes and states that (s)he saw the within named Cornerstone Realty
Income Trust, Inc., by Stanley J. Olander, Jr., the Chief Financial Officer,
sign, seal and deliver the foregoing Assignment of Leases and Rents and that
(s)he with the other witness whose name is subscribed above witnessed the
execution thereof.
Sworn to before me this 27th day of /s/ Mark A. Babb Mark A. Babb
September, 1999 -----------------------------------
Witness
/s/ Jacquelyn B. Owens (L.S.)
- ------------------------------------
Notary Public for___________________
My Commission Expires: 6/30/03
------------
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<PAGE>
EXHIBIT A
(West Chase)
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land, situate, lying and being in the
City of Charleston, Charleston County, South Carolina, containing 30.34 acres
(erroneously shown as 29.96 acres on the herein referenced plat) and being shown
on a plat of "CHARLESTON WESTCHASE ASSOCIATES, A LIMITED PARTNERSHIP,
CHARLESTON, SOUTH CAROLINA," made January 21, 1986, revised July 23, 1986, by
Hucks and Associates, Inc. Land Surveyors and Land Planning recorded in the RMC
Office for Charleston County in Plat Book BK, page 35. Said 30.34 acre tract of
land has such size, shapes, metes, bounds, location and dimensions as are shown
on said plat and is more fully described, according to said plat, as follows:
BEGINNING at a point on the southwest right-of-way of SC Hwy. No. 61 at a point
representing the common boundary of property now or formerly of Santo J.
Convertino and continuing thence along the southwest boundary of SC Hwy. No. 61,
S 24 42'05" E, 324.88 feet to an iron; thence, along Tract 2, property now or
formerly of Whitefield Const., S 49 40'43" W, 500.00 feet to an iron; thence
continuing along Tract 2, property now or formerly of Whitefield Const. S 40
15'00" E, 374.70 feet to an iron; thence along Tract 3, property now or formerly
of Whitefield Const., S 40 11'40" E, 304.17 feet to an iron the northern
boundary of the right-of-way of Richmond Street; thence, continuing along the
northern boundary of Richmond Street, the following courses and distances S 49
46'14" W, 556.86 feet to an iron; S 50 03'49" W, 131.87 feet to an iron; thence,
S 48 19' 50" W, 4.95 feet to a concrete monument thence, S 51 01'33" W, 841.71
feet to an iron; thence along the eastern boundary of the right-of-way of Mark
Clark Expressway, N 62 24'30" W, 79.39 feet to a concrete monument; thence,
continuing along the right-of-way of Mark Clark Expressway, the following
courses and distances: N 17 32'39" W, 70.70 feet to a concrete monument; N 27
27'14" E, 28.21 feet to a concrete monument; thence, with a curve to the left
having a radius of 290.39 feet, an arc distance of 188.97 feet (chord bearing
and distance of N 08 51'51" E, 185.66 feet) to a concrete monument;; thence, N
09 49'55" W, 45.77 feet to an iron; thence N 09 53'54" W, 118.37 feet to a
concrete monument;; thence, N 07 12'20" W, 87.39 feet to a concrete monument;
thence, with a curve to the right having a radius of 817.26 feet, an arc
distance of 569.26 feet (chord bearing and distance of N 13 38'51" E, 557.83
feet) to a concrete monument; located with the 15 foot C.P.W. Easement; thence,
N 32 42'14" E, 4.68 feet to a concrete monument; thence N 32 42'14" E, 56.37
feet to a concrete monument; thence N 31 33'06" E, 489.72 feet to an iron;
thence, along property now or formerly of Santo J. Convertino, N 50 35'04" E
853.90 feet to an iron located on the boundary of the southwest right-of-way of
SC Hwy. No. 61, the point of BEGINNING.
Said property containing 30.34 acres according to plat of As Built Survey of
Westchase Apartments for Cornerstone Realty Income Trust, Inc. prepared by Hucks
and Associates, PC, dated August 26, 1999 and last revised September 22, 1999,
which plat is incorporated by this reference for purposes of this description.
-7-
<PAGE>
(Hampton Pointe)
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land, with improvements thereon,
situate, lying and being in the State of South Carolina, County of Charleston,
City of Charleston, containing 20.160 acres or 878,185 square feet, as shown on
a plat of Hampton Pointe Apartments dated August 23, 1999*, prepared by A. H.
Schwacke & Associates, Inc., and according to plat, being more particularly
described as follows, to-wit: Beginning at an iron on the northern edge of the
120- foot right-of-way of S.C. Highway No. 7, Sam Rittenberg Blvd., which iron
is approximately 2,204 feet from the intersection of S.C. Highway No. 7, Sam
Rittenberg Blvd., and Highway No. 61 (Ashley River Rd.), and running from said
point of beginning S62 47'14"W for a distance of 179.47 feet to a mark on a
headwall; thence turning and running N68 59'32"W for a distance of 210.00 feet
to a 5/8" rod; thence turning and running N37 59'32" for a distance of 125.00
feet to a 5/8" rod; thence turning and running N83 59'32"W for a distance of
132.00 feet to a 5/8" rod; thence turning and running N77 59'32"W for a distance
of 65.00 feet to a 5/8" rod; thence turning and running N63 54'02"W for a
distance of 294.89 feet to a 5/8" rod; thence turning and running N02 06"46"E
for a distance of 941.25 feet to an iron; thence turning and running N39 30'50"E
for a distance of 448.89 feet to a 1" iron; thence turning and running S62
53'58"E for a distance of 328.93 feet to a 2" iron; thence turning and running
S01 38'00"E for a distance of 350.50 feet to a 1" iron; thence turning and
running S06 08'11"E for a distance of 622.18 feet to a 1" iron; thence turning
and running S20 23'12"E for a distance of 425.12 to a CMO; thence turning an
running S71 20'54"" for a distance of 57.57 feet to the iron at the point of
beginning, be all measurements a little more or less.
*and revised September 20, 1999,
-8-
<PAGE>
Exhibit B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the rent roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
-9-
<PAGE>
Exhibit C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12)
month minimum, but with respect to the entire Portfolio
securing the Loan (as defined in the Instrument) up to
thirty-five percent (35%) of the total units at any one time
may be leased to tenants for a term of less than twelve (12)
months, of which up to thirteen percent (13%) of the total
units at any one time may be leased for original or renewal
terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and,
if applicable, gas heating and cooking separately metered to
tenants.
-10-
EXHIBIT 4.9
RECORDING REQUESTED BY AND LOAN NO. 6 103 650
WHEN RECORDED RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
(RICHLAND COUNTY, SOUTH CAROLINA)
This Assignment of Leases and Rents (this "ASSIGNMENT") is made as of
September 27, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation having its principal office and place of business at 306 East Main
Street, Richmond, Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Charleston County,
South Carolina, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00) ("LOAN") evidenced by
that certain Promissory Note dated as of the date of this Assignment ("NOTE")
and secured by, among other things, that certain Mortgage and Security Agreement
executed by Borrower in favor of Lender dated as of the date of this Assignment
and to be recorded in the real estate records of Richland County, South Carolina
("INSTRUMENT") (capitalized terms used without definition shall have the
meanings ascribed to them in the Instrument) and the Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower assigned the
Leases and Rents to Lender in the manner provided below to secure payment of the
Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally assigns,
transfers, and sets over to Lender all of the right, title, interest, and
estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all guaranties thereof);
(b) the Rents; (c) all proceeds from the cancellation, surrender, sale or other
disposition of the Leases; (d) the right to collect and receive all the Rents;
and (e) the right to
<PAGE>
enforce and exercise, whether at law or in equity or by any other means, all
terms and conditions of the Leases ("LEASE PROVISIONS"). This assignment is
intended by Borrower and Lender to constitute a present, absolute assignment and
not a collateral assignment for additional security only. Upon full payment and
satisfaction of the Obligations and written request by Borrower, Lender shall
transfer, set over, and assign to Borrower all right, title, and interest of
Lender in, to, and under the Leases and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall have a
revocable license ("LICENSE") from Lender to exercise all rights extended to the
landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the License shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment, Lender, and
not Borrower, shall be the creditor of any Tenant in respect of assignments for
the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution
or receivership proceedings affecting any such Tenant; provided, however, that
Borrower shall be the party obligated to make timely filings of claims in such
proceedings or to otherwise pursue creditor's rights therein. Notwithstanding
the foregoing, Lender shall have the right, but not the obligation, to file such
claims instead of Borrower and if Lender does file a claim, Borrower agrees that
Lender (a) is entitled to all distributions on such claim to the exclusion of
Borrower and (b) has the exclusive right to vote such claim and otherwise to
participate in the administration of the estate in connection with such claim.
Lender shall have the option to apply any monies received by it as such creditor
to the Obligations in the order set forth in the Documents. If a petition is
filed under the Bankruptcy Code by or against Borrower, and Borrower, as
landlord under any Lease, decides to reject such Lease pursuant to Section
365(a) of the Bankruptcy Code, then Borrower shall give Lender at least ten (10)
days' prior written notice of the date when Borrower shall apply to the
bankruptcy court for authority to reject the Lease. Lender may, but shall not be
obligated to, send Borrower within such ten-day period a written notice stating
that (a) Lender demands that Borrower assume and assign the Lease to Lender
pursuant to Section 365 of the Bankruptcy Code and (b) Lender covenants to cure
or provide adequate assurance of future performance under the Lease. If Lender
sends such notice, Borrower shall not reject the Lease provided Lender complies
with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. Upon demand and notice of an Event
of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay all Rents to Lender and (b) rely upon any such
notice from Lender without any obligation to inquire as to the actual existence
of the default, notwithstanding any claim of Borrower to the
-2-
<PAGE>
contrary. Borrower shall have no claim against any Tenant for any Rents paid by
Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold
Lender harmless from any and all Losses that Lender may incur under the Leases
or by reason of this Assignment, except for Losses incurred as a direct result
of Lender's willful misconduct or gross negligence. Nothing in this Assignment
shall be construed to bind Lender to the performance of any Lease Provisions or
to otherwise impose any liability on Lender including, without limitation, any
liability under covenants of quiet enjoyment in the Leases in the event that any
Tenant shall have been joined as party defendant in any action to foreclose the
Instrument and shall have been barred thereby of all right, title, interest, and
equity of redemption in the premises. This Assignment imposes no liability upon
Lender for the operation and maintenance of the Property or for carrying out the
terms of any Lease before Lender has entered and taken actual possession and
complete control of all operations of the Property. Any Losses incurred by
Lender, by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Lender's request, be
reimbursed by Borrower. Such reimbursement shall include interest at the Default
Rate and Costs. Lender may, upon entry and taking of possession, collect the
Rents and apply them to reimbursement for any such items.
6. Representations and Warranties. Borrower represents and warrants that (a)
Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any Lease
that is in default, (b) enter into new, bona-fide, arm's length Leases (or renew
existing Leases) provided each Lease satisfies the minimum leasing requirements
in Exhibit C attached hereto and incorporated herein and is on Borrower's
standard form lease (approved by Lender) with no
-3-
<PAGE>
modifications that increase the obligations of the landlord, and (c) take such
actions as are customary and reasonable for apartment owners. Upon Lender's
request and at Borrower's expense, Borrower shall (i) promptly deliver to Lender
copies of all notices of default Borrower has sent to any Tenant, (ii) enforce
the Leases and all remedies available to Borrower upon any Tenant's default,
(iii) deliver to Lender copies of all papers served in connection with any such
enforcement proceedings, and (iv) consult with Lender, its agents and attorneys
with respect to the conduct thereof. Borrower shall not enter into any
settlement of any such proceeding without Lender's prior written consent except
in the ordinary course of business, and so long as such actions are reasonable
and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent of
Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect, notwithstanding
any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
Signed, sealed, and delivered in the BORROWER:
presence of the following witnesses: CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
/s/ David S. McKenney
- ----------------------
Witness
Printed Name: David S. McKenney By: /s/ Stanley J. Olander, Jr.
-----------------------------
Name: Stanley J. Olander, Jr.
-----------------------
/s/ Mark A. Babb Title: Chief Financial Officer
- ------------------ -----------------------
Witness
Printed Name: Mark A. Babb (CORPORATE SEAL)
------------
-5-
<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA )
) PROBATE
CITY OF RICHMOND )
PERSONALLY APPEARED BEFORE ME, the undersigned witness, who being duly
sworn, deposes and states that (s)he saw the within named Cornerstone Realty
Income Trust, Inc., by Stanley J. Olander, Jr., the Chief Financial Officer,
sign, seal and deliver the foregoing Assignment of Leases and Rents and that
(s)he with the other witness whose name is subscribed above witnessed the
execution thereof.
Sworn to before me this 27th day of /s/ Mark A. Babb Mark A. Babb
-----------------------------------
September, 1999 Witness
/s/ Jacquelyn B. Owens (L.S.)
- -----------------------------------------
Notary Public for________________________
My Commission Expires: 6/30/03
-------------
-6-
<PAGE>
EXHIBIT A
(Legal Description of Real Property)
(Arbors at Windsor Lake)
All that certain piece, parcel, or lot of land, with improvements, situate,
lying and being near the City of Columbia, in the County of Richland, State of
South Carolina, and having the following boundaries and measurements, to wit:
BEGINNING AT AN EXISTING 1-1/2" PIPE IN THE SOUTHWESTERN MOST CORNER OF SAID
TRACT WHERE SAID TRACT INTERSECTS WITH HUNT CLUB ROAD (SR 40-1975) 60' R/W AND
WINDSOR LAKE BOULEVARD (SR 40- 1196) R/W WIDTH VARIES, THENCE RUNNING IN A
NORTHEASTERLY DIRECTION ALONG SAID WINDSOR LAKE BOULEVARD AS FOLLOWS:
N 02 08'16" W FOR A DISTANCE OF 100.02 FEET TO AN EXISTING 1-1/2" PIPE; N
10 53'55" E FOR A DISTANCE OF 99.21 FEET TO A NEW #5 REBAR WITH CAP; N 20
54'39" E FOR A DISTANCE OF 309.48 FEET TO A NEW #5 REBAR WITH CAP; N 22
09'01" E FOR A DISTANCE OF 131.64 FEET TO AN EXISTING DISTURBED 1" PIPE; N
16 42'06" E FOR A DISTANCE OF 87.07 FEET TO AN EXISTING 1" PIPE; N 05
31'41" E FOR A DISTANCE OF 98.61 FEET TO A NEW #5 REBAR WITH CAP' N 05
36'39" E FOR A DISTANCE OF 70.74 FEET TO A NEW #5 REBAR WITH CAP; N 27
48'41" E FOR A DISTANCE OF 68.64 FEET TO AN EXISTING RIGHT-OF-WAY MONUMENT;
N 66 36'21" E FOR A DISTANCE OF 79.41 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF LOREN I.
CINTRON (D.B. D1346-0446) S 34 59'37" E FOR A DISTANCE OF 53.35 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF LELIA M.
HANSARD (D.B. D1276, 0869) S 35 01'34" E FOR A DISTANCE OF 53.03 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF PENELOPE
J. GEORGE (D.B. D902, 0857) S 31 29'39" E FOR A DISTANCE OF 7.78 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING WITH PROPERTIES NOW OR FORMERLY OF PENELOPE J.
GEORGE (D.B. 0902, 0857) AND JEFFERY S. SHEALY (D.B. D1201-0453) S 32 18'18" E
FOR A DISTANCE OF 97.13 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF JEFFERY S. SHEALY (D.B.
D1201-0453) N 55 04'34" E FOR A DISTANCE OF 115.00 FEET TO AN EXISTING #4 REBAR
AT THE RIGHT-OF-WAY BAY SPRINGS ROAD 50' R/W; THENCE TURNING AND RUNNING ACROSS
BAY SPRINGS ROAD 50' R/W S 83 48'04" E FOR A DISTANCE OF 66.42 FEET TO A NEW #5
REBAR AND CAP AT THE RIGHT-OF-WAY OF BAY SPRINGS ROAD 50' R/W; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF DONALD & CHRISTINA HOTZ (D.B.
D1267-0833) N 54 56'02" E FOR A DISTANCE OF 60.13 FEET TO AN EXISTING #4 REBAR;
THENCE RUNNING WITH THE PROPERTY NOW OR FORMERLY OF DOROTHY M. & OSCAR J.
McMILLAN (D.B. D1012-0663) N 54 56'02" E FOR A DISTANCE OF 39.92 FEET TO A #4
REBAR; THENCE RUNNING ALONG THE PROPERTY OF DOROTHY M. AND OSCAR J. McMILLAN
(D.B. D1012-0663) N 74 06'22" E FOR A DISTANCE OF 8.00 FEET TO AN EXISTING #4
REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF HORACE DENNARD &
JANE M. MILLER (D.B. D1173-0003) N 74 06'22" E FOR A DISTANCE OF 46.98 FEET TO
AN EXISTING #4 REBAR; THENCE TURNING AND RUNNING ALONG THE PROPERTIES NOW OR
FORMERLY OF TAMMY WATTS (D.B. D1089-0296), JOSEPH C. & VANGALENE FRINKS (D.B.
D1215-0568) AND K & T CORPORATION (D.B. D1418-0332) S 34 59'29" E FOR A DISTANCE
OF 110.15 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING ALONG THE
PROPERTY NOW OR FORMERLY OF JIMMY & DOROTHY GREEN (D.B. D1054-0727) S 35 02'21"
E FOR A DISTANCE OF 59.86 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING
ALONG PROPERTIES NOW OR FORMERLY OF WILLIE E. GRANT (D.B. D1181-0965), JAMES V.
DEBLOSSIO (D.B. D1182-0546), EVELYN GRAHAM & GLENN BUTLER (D.B. D1387- 0304),
ODESSA Y. WASHINGTON (D.B. D1208-0612) AND RICHARD B. MORA (D.B. D1363-0403) S
35 00'29" E FOR A DISTANCE OF 344.86 FEET TO AN EXISTING #4 REBAR; THENCE
TURNING ALONG THE PROPERTY NOW OR FORMERLY OF FOX CHASE TOWNHOMES HOME OWNERS
ASSOCIATION (COMMON AREAS) (D.B. D976-0862) AS FOLLOWS:
S 07 05'31" E FOR A DISTANCE OF 46.03 FEET TO AN EXISTING 1-1/2" PIPE; S 07
04'18" E FOR A DISTANCE OF 53.29 FEET TO AN EXISTING #4 REBAR; S 39 03'33"
W FOR A DISTANCE OF 64.93 FEET TO AN EXISTING #5 REBAR WITH CAP; S 12
30'46" E FOR A DISTANCE OF 111.22 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG SAID HUNT CLUB ROAD (SR 40-1975) 60' R/W S 77
24'38" W FOR A DISTANCE OF 649.56 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE
CONTINUING ALONG SAID HUNT CLUB ROAD (SR 40-1975) 60' R/W S 77 25'43" W FOR A
DISTANCE OF 400.02' TO THE PLACE AND POINT OF BEGINNING.
Said property containing 14.487 acres according to plat of ALTA/ACSM Land Title
Survey for Cornerstone Realty Income Trust, Inc., prepared by Power Engineering
Company, Inc., dated August 30, 1999 and last revised September 21, 1999, which
plat is incorporated by this reference for purposes of this description.
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<PAGE>
EXHIBIT B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the rent roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
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<PAGE>
EXHIBIT C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12) month minimum,
but with respect to the entire Portfolio securing the Loan (as
defined in the Instrument) up to thirty-five percent (35%) of
the total units at any one time may be leased to tenants for a
term of less than twelve (12) months, of which up to thirteen
percent (13%) of the total units at any one time may be leased
for original or renewal terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and, if
applicable, gas heating and cooking separately metered to
tenants.
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EXHIBIT 4.10
PREPARED OUT OF STATE AND LOAN NO. 6 103 651
UPON RECORDATION RETURN
TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") is made as of
September 27, 1999, by CRIT-NC, LLC, a Virginia limited liability company having
its principal office and place of business at 306 East Main Street, Richmond,
Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation, having an office at Two Ravinia Drive, Suite 1400,
Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Mecklenburg County,
North Carolina, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Twenty-Two Million
Nine Hundred Fifty Thousand and No/100 Dollars ($22,950,000.00) ("LOAN")
evidenced by that certain Promissory Note dated as of the date of this
Assignment ("NOTE") and secured by, among other things, that certain Deed of
Trust and Security Agreement executed by Borrower in favor of Lender dated as of
the date of this Assignment and to be recorded in the real estate records of
Mecklenburg County, North Carolina ("INSTRUMENT") (capitalized terms used
without definition shall have the meanings ascribed to them in the Instrument)
and the Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower assigned the
Leases and Rents to Lender in the manner provided below to secure payment of the
Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally assigns,
transfers, and sets over to Lender all of the right, title, interest, and
estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all guaranties thereof);
(b) the Rents; (c) all proceeds from the cancellation, surrender, sale or other
disposition of the Leases; (d) the right to collect and receive all the Rents;
and (e) the right to
<PAGE>
enforce and exercise, whether at law or in equity or by any other means, all
terms and conditions of the Leases ("LEASE PROVISIONS"). This assignment is
intended by Borrower and Lender to constitute a present, absolute assignment and
not a collateral assignment for additional security only. Upon full payment and
satisfaction of the Obligations and written request by Borrower, Lender shall
transfer, set over, and assign to Borrower all right, title, and interest of
Lender in, to, and under the Leases and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall have a
revocable license ("LICENSE") from Lender to exercise all rights extended to the
landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the License shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment, Lender, and
not Borrower, shall be the creditor of any Tenant in respect of assignments for
the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution
or receivership proceedings affecting any such Tenant; provided, however, that
Borrower shall be the party obligated to make timely filings of claims in such
proceedings or to otherwise pursue creditor's rights therein. Notwithstanding
the foregoing, Lender shall have the right, but not the obligation, to file such
claims instead of Borrower and if Lender does file a claim, Borrower agrees that
Lender (a) is entitled to all distributions on such claim to the exclusion of
Borrower and (b) has the exclusive right to vote such claim and otherwise to
participate in the administration of the estate in connection with such claim.
Lender shall have the option to apply any monies received by it as such creditor
to the Obligations in the order set forth in the Documents. If a petition is
filed under the Bankruptcy Code by or against Borrower, and Borrower, as
landlord under any Lease, decides to reject such Lease pursuant to Section
365(a) of the Bankruptcy Code, then Borrower shall give Lender at least ten (10)
days' prior written notice of the date when Borrower shall apply to the
bankruptcy court for authority to reject the Lease. Lender may, but shall not be
obligated to, send Borrower within such ten-day period a written notice stating
that (a) Lender demands that Borrower assume and assign the Lease to Lender
pursuant to Section 365 of the Bankruptcy Code and (b) Lender covenants to cure
or provide adequate assurance of future performance under the Lease. If Lender
sends such notice, Borrower shall not reject the Lease provided Lender complies
with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. Upon demand and notice of an Event
of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay all Rents to Lender and (b) rely upon any such
notice from Lender without any obligation to inquire as to the actual existence
of the default, notwithstanding any claim of Borrower
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<PAGE>
to the contrary. Borrower shall have no claim against any Tenant for any Rents
paid by Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold
Lender harmless from any and all Losses that Lender may incur under the Leases
or by reason of this Assignment, except for Losses incurred as a direct result
of Lender's willful misconduct or gross negligence. Nothing in this Assignment
shall be construed to bind Lender to the performance of any Lease Provisions or
to otherwise impose any liability on Lender including, without limitation, any
liability under covenants of quiet enjoyment in the Leases in the event that any
Tenant shall have been joined as party defendant in any action to foreclose the
Instrument and shall have been barred thereby of all right, title, interest, and
equity of redemption in the premises. This Assignment imposes no liability upon
Lender for the operation and maintenance of the Property or for carrying out the
terms of any Lease before Lender has entered and taken actual possession and
complete control of all operations of the Property. Any Losses incurred by
Lender, by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Lender's request, be
reimbursed by Borrower. Such reimbursement shall include interest at the Default
Rate and Costs. Lender may, upon entry and taking of possession, collect the
Rents and apply them to reimbursement for any such items.
6. Representations and Warranties. Borrower represents and warrants that (a)
Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any Lease
that is in default, (b) enter into new, bona-fide, arm's length Leases (or renew
existing Leases) provided each Lease satisfies the minimum leasing requirements
in Exhibit C attached hereto and incorporated herein and is on Borrower's
standard form lease (approved by Lender) with no
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<PAGE>
modifications that increase the obligations of the landlord, and (c) take such
actions as are customary and reasonable for apartment owners. Upon Lender's
request and at Borrower's expense, Borrower shall (i) promptly deliver to Lender
copies of all notices of default Borrower has sent to any Tenant, (ii) enforce
the Leases and all remedies available to Borrower upon any Tenant's default,
(iii) deliver to Lender copies of all papers served in connection with any such
enforcement proceedings, and (iv) consult with Lender, its agents and attorneys
with respect to the conduct thereof. Borrower shall not enter into any
settlement of any such proceeding without Lender's prior written consent except
in the ordinary course of business, and so long as such actions are reasonable
and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent of
Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect, notwithstanding
any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
BORROWER:
CRIT-NC, LLC, a Virginia limited liability
company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a Virginia
corporation, Managing Member
Attest: /s/ David S. McKenney By: /s/ S. J. Olander
--------------------------- ---------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
--------------------------- ---------------------------------
Title: Sr. Vice President Title: Chief Financial Officer
--------------------------- ---------------------------------
[CORPORATE SEAL]
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<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA
CITY OF RICHMOND
I, a Notary Public of the County and State aforesaid, certify that
Stanley J. Olander, Jr. personally came before me this day and acknowledged that
(s)he is a Secretary of Cornerstone Realty Income Trust, Inc. a Virginia
corporation, which is the Managing Member of CRIT-NC, LLC, a Virginia limited
liability company, and that by authority duly given and as the act of the
company, the foregoing instrument was signed in its name by, Stanley J. Olander,
Jr., its duly authorized Chief Financial Officer,as the act and deed of the
corporation on behalf of the limited liability company.
Witness my hand and official stamp or seal this 27th day of September,
1999.
/s/ Jacquelyn B. Owens
-----------------------
Notary Public
My Commission Expires: 6/30/03
----------
[NOTARY SEAL]
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<PAGE>
EXHIBIT A
(Legal Description of Real Property)
(Stone Point)
BEGINNING at a set iron rod on the Northerly right-of-way line of York Road
(N.C. Highway 49) as described in Deed Book 10610, Page 448 of the Mecklenburg
County Public Registry, said point being located N 60(degrees) 18' 1" W - 130.69
feet from a found NCDOT right-of-way disc nominal to station 15+09.315, also
being a point on the Easterly line of Orion Development Corporation (now or
formerly) as described in Deed Book 5338, Page 484 of the Mecklenburg County
Public registry; thence from said Point of Beginning, along the Easterly and
Northerly lines of said Orion Development Corporation, N 44(degrees) 25'14" W -
357.13 feet to a found 1" pipe and S 45(degrees) 34'46" W - 209.57 feet to an
existing iron located in the Northeasterly margin of the property of Gretta L.
Neely (now or formerly) as described in Deed Book 7428, Page 776 of the
Mecklenburg County Public Registry; thence, along the Northeasterly line of the
Neely property N 44(degrees) 23'25" W - 382.48 feet to an existing iron located
in the Easterly line of the property of Steele Creek Partnership (nor or
formerly) as described in Deed Book 5732, Page 247 of the Mecklenburg County
Public Registry; thence along the Easterly line of the Steele Creek Partnership
property and the Easterly line of the property of York Ridge Apartments
Associates (now or formerly) as described in Deed Bok 7843, Page 106 of the
Mecklenburg County Public Registry N 05(degrees) 18'13" W -649.66 feet to a
found concrete monument having grid coordinates N=504,343.752 and
E=1,413,664.771 and being located N 08(degrees) 55'17" E - 1647.959 feet
(Ground) 1647.713 feet (Grid) from NCGS Monument "Moss" having grid coordinates
N=502,710.6542 and E=1,413,445.7971, combined grid factor = 0.99985065; thence
along the Southerly line of Lots 4, 3, 2 and 1 as shown on a map recorded in Map
Book 24, Page 820 of the Mecklenburg County Public Registry the following (2)
courses and distances:
(1) N 85(degrees)58' 16" E - 341.53 feet to a found 1" inch pipe;
(2) N 59(degrees) 50' 40" E - 490.88 feet to a set "PK" nail
located in the centerline of the right-of-way of John Price
Road; Thence along the centerline of John Price Road the
following (3) courses:
(1) along the arc of a curve to the left having a central angle of
23(degrees) 09' 07", a radius of 855.00' feet, an arc length
of 345.49' feet and whose chord bears S 09(degrees) 01' 08" E
- 343.14' feet to a point'
(2) S 20(degrees) 35' 42" E - 346.00 feet to a point;
(3) along the arc of a curve to the right having a central angle
of 9(degrees) 43' 47", a radius of 623.36 feet, an arc length
of 105.86 feet and whose chord bears S 15(degrees) 45' 14" E -
105.73 feet to the most Northeasterly corner of said "NCDOT"
right-of-way as described in Deed Book 10610, Page 448 of the
Mecklenburg County Public Registry.
Thence along the Northerly and Westerly line of said "NCDOT"
right-of-way the following (5) courses:
(1) S 79(degrees) 07' 52" W - 30.00 feet to a found "NCDOT"
right-of-way disc;
(2) S 03(degrees) 46' 19" W - 140.16 feet to a found "NCDOT"
right-of-way disc;
(3) S 02(degrees) 47' 22" W - 251.56 feet to a set iron rod
passing a "NCDOT" right-of-way disc at 245.00 feet;
(4) S 39(degrees) 12'49" W - 71.52 feet to a set iron rod
(5) S 60(degrees) 32' 17" W - 167.61 feet to the Point of
Beginning, passing an "NCDOT" Right-Of- Way disc at 9.81 feet,
containing 18.903 acres more or less (including right-of-way).
Said property is described according to plat of survey entitled "Stone Point
Apartments" prepared for Cornerstone Realty Income Trust, Inc. by Delta Land
Services, Inc., dated September 1, 1999 and last revised September 15, 1999,
which plat is incorporated by this reference for purposes of this description.
-7-
<PAGE>
(Charleston Place)
Lying and being in the City of Charlotte, Mecklenburg County, State of North
Carolina and more particularly described as follows:
To find the true point of BEGINNING, commence at the intersection of the
centerlines of Monroe Road (which has a 90' right-of-way) and Timber Springs
Drive (which has a variable width right-of-way) and run thence with the
centerline of Monroe Road S. 26-02-08 E., 750.37 feet to a point; thence leaving
said centerline S. 80-09-57 E., 56.26 feet to an existing rebar in the center of
a broken concrete monument in the northeasterly margin of the right-of-way of
Monroe Road, the true point of BEGINNING; thence from said point of BEGINNING
with the northeasterly margin of the right-of-way of Monroe Road N. 26-02-08 W.,
720.81 feet to an existing bent #4 rebar; thence with the arc of a circular
curve to the right having a radius of 20.00 feet (chord bearing N. 18-57-53 E.,
a chord distance of 28.28 feet) an arc distance of 31.42 feet to an existing
bent #4 rebar located on the southerly margin of Timber Springs Drive; thence
with the southerly margin of Timber Springs Drive the following nine (9) courses
and distances; (1) N. 63-57-52 E., 67.30 feet to a set #5 rebar; (2) with the
arc of a circular curve to the left having a radius of 313.01 feet (chord
bearing N. 56-58-53 E., a chord distance of 76.21 feet) an arc distance of 76.40
feet to an existing #4 rebar; (3) with the arc of a circular curve to the right
having a radius of 160.00 feet (chord bearing N. 56-58-53 E., a chord distance
of 38.90 feet) an arc distance of 39.00 feet to an existing #4 rebar; (4) with
the arc of a circular curve to the right having a radius of 286.00 feet (chord
bearing S. 82-08-34 E., a chord distance of 318.97 feet) an arc distance of
338.36 feet to an existing #4 rebar; (5) S. 48-15-00 E., 258.50 feet to an
existing #5 rebar; (6) with the arc of a circular curve to the left having a
radius of 200.00 feet (chord bearing S. 68-10-00 E., a chord distance of 136.26
feet), an arc distance of 139.04 feet to an existing #4 rebar; (7) S. 88-05-00
E., 100.00 feet to an existing bent 1/2" pipe; (8) with the arc of a circular
curve to the right having a radius of 195.00 feet (chord bearing S. 77-40-00 E.,
a chord distance of 70.51 feet), an arc distance of 70.90 feet to an existing
bent 1/2" pipe; and (9) S. 67-15-00 E., 89.25 feet to an existing 1" rod located
in the westerly boundary of the property conveyed to Timber Crest Apartments,
LLC by instrument recorded in Book 9213, Page 495, Mecklenburg County Public
Registry; thence with the westerly boundary of Timber Crest Apartments, LLC (now
or formerly) S. 10-33-53 E., 604.43 feet to an existing concrete monument
located in the northerly boundary of the property conveyed to American Store &
Lock #4 by instrument recorded in Book 5622, Page 646, Mecklenburg County Public
Registry (said concrete monument lying N. 80-09-57 W., 387.77 feet from another
concrete monument); thence with the northerly boundary of the American Store &
Lock #4 (now or formerly) and the northerly boundary of the property conveyed to
Hide-A-Way Inn, Inc. by instrument recorded in Book 4228, Page 191, Mecklenburg
County Public Registry N. 80-09-57 W., 859.70 feet to the BEGINNING, containing
14.949 acres.
TOGETHER WITH so much of the right-of-way of Monroe Road as lies between the
following boundaries: the centerline thereof; the northeasterly margin of the
right-of-way thereof; and between the centerline of Timber Springs Drive and the
southerly boundary line of the above-described real property (hereinabove called
N. 80-09-57 W. 859.70 feet), extended until said southerly boundary line
intersects the centerline of the right-of-way of Monroe Road.
Said property containing 14.949 acres according to Final As Built Plat of
Charleston Place prepared by James E. Davis of Concord Engineering & Surveying,
Inc., dated August 23, 1999 and last revised September 22, 1999, which plat is
incorporated by this reference for purposes of this description.
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<PAGE>
Exhibit B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the Rent Roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
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<PAGE>
Exhibit C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12) month minimum, but
with respect to the entire Portfolio securing the Loan (as defined
in the Instrument) up to thirty-five percent (35%) of the total
units at any one time may be leased to tenants for a term of less
than twelve (12) months, of which up to thirteen percent (13%) of
the total units at any one time may be leased for original or
renewal terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and, if applicable,
gas heating and cooking separately metered to tenants.
-10-
EXHIBIT 4.11
RECORDING REQUESTED BY AND LOAN NO. 6 103 650
WHEN RECORDED RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
(CLAYTON COUNTY, GEORGIA)
This Assignment of Leases and Rents (this "ASSIGNMENT") is made as of
September 27, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation having its principal office and place of business at 306 East Main
Street, Richmond, Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Gwinnett
County, Georgia, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Fifty
Million Five Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00) ("LOAN")
evidenced by that certain Promissory Note dated as of the date of this
Assignment ("NOTE") and secured by, among other things, that certain Deed to
Secure Debt and Security Agreement executed by Borrower in favor of Lender dated
as of the date of this Assignment and to be recorded in the real estate records
of Clayton County, Georgia ("INSTRUMENT") (capitalized terms used without
definition shall have the meanings ascribed to them in the Instrument) and the
Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower
assigned the Leases and Rents to Lender in the manner provided below to secure
payment of the Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally
assigns, transfers, and sets over to Lender all of the right, title, interest,
and estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all
<PAGE>
guaranties thereof); (b) the Rents; (c) all proceeds from the cancellation,
surrender, sale or other disposition of the Leases; (d) the right to collect and
receive all the Rents; and (e) the right to enforce and exercise, whether at law
or in equity or by any other means, all terms and conditions of the Leases
("LEASE PROVISIONS"). This assignment is intended by Borrower and Lender to
constitute a present, absolute assignment and not a collateral assignment for
additional security only. Upon full payment and satisfaction of the Obligations
and written request by Borrower, Lender shall transfer, set over, and assign to
Borrower all right, title, and interest of Lender in, to, and under the Leases
and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall
have a revocable license ("LICENSE") from Lender to exercise all rights extended
to the landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the License shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment,
Lender, and not Borrower, shall be the creditor of any Tenant in respect of
assignments for the benefit of creditors and bankruptcy, reorganization,
insolvency, dissolution or receivership proceedings affecting any such Tenant;
provided, however, that Borrower shall be the party obligated to make timely
filings of claims in such proceedings or to otherwise pursue creditor's rights
therein. Notwithstanding the foregoing, Lender shall have the right, but not the
obligation, to file such claims instead of Borrower and if Lender does file a
claim, Borrower agrees that Lender (a) is entitled to all distributions on such
claim to the exclusion of Borrower and (b) has the exclusive right to vote such
claim and otherwise to participate in the administration of the estate in
connection with such claim. Lender shall have the option to apply any monies
received by it as such creditor to the Obligations in the order set forth in the
Documents. If a petition is filed under the Bankruptcy Code by or against
Borrower, and Borrower, as landlord under any Lease, decides to reject such
Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall
give Lender at least ten (10) days' prior written notice of the date when
Borrower shall apply to the bankruptcy court for authority to reject the Lease.
Lender may, but shall not be obligated to, send Borrower within such ten-day
period a written notice stating that (a) Lender demands that Borrower assume and
assign the Lease to Lender pursuant to Section 365 of the Bankruptcy Code and
(b) Lender covenants to cure or provide adequate assurance of future performance
under the Lease. If Lender sends such notice, Borrower shall not reject the
Lease provided Lender complies with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. Upon demand and notice of an
Event of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay
-2-
<PAGE>
all Rents to Lender and (b) rely upon any such notice from Lender without any
obligation to inquire as to the actual existence of the default, notwithstanding
any claim of Borrower to the contrary. Borrower shall have no claim against any
Tenant for any Rents paid by Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and
hold Lender harmless from any and all Losses that Lender may incur under the
Leases or by reason of this Assignment, except for Losses incurred as a direct
result of Lender's willful misconduct or gross negligence. Nothing in this
Assignment shall be construed to bind Lender to the performance of any Lease
Provisions or to otherwise impose any liability on Lender including, without
limitation, any liability under covenants of quiet enjoyment in the Leases in
the event that any Tenant shall have been joined as party defendant in any
action to foreclose the Instrument and shall have been barred thereby of all
right, title, interest, and equity of redemption in the premises. This
Assignment imposes no liability upon Lender for the operation and maintenance of
the Property or for carrying out the terms of any Lease before Lender has
entered and taken actual possession and complete control of all operations of
the Property. Any Losses incurred by Lender, by reason of actual entry and
taking possession under any Lease or this Assignment or in the defense of any
claims shall, at Lender's request, be reimbursed by Borrower. Such reimbursement
shall include interest at the Default Rate and Costs. Lender may, upon entry and
taking of possession, collect the Rents and apply them to reimbursement for any
such items.
6. Representations and Warranties. Borrower represents and warrants that
(a) Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any
Lease that is in default, (b) enter into new, bona-fide, arm's length Leases (or
renew existing Leases)
-3-
<PAGE>
provided each Lease satisfies the minimum leasing requirements in Exhibit C
attached hereto and incorporated herein and is on Borrower's standard form lease
(approved by Lender) with no modifications that increase the obligations of the
landlord, and (c) take such actions as are customary and reasonable for
apartment owners. Upon Lender's request and at Borrower's expense, Borrower
shall (i) promptly deliver to Lender copies of all notices of default Borrower
has sent to any Tenant, (ii) enforce the Leases and all remedies available to
Borrower upon any Tenant's default, (iii) deliver to Lender copies of all papers
served in connection with any such enforcement proceedings, and (iv) consult
with Lender, its agents and attorneys with respect to the conduct thereof.
Borrower shall not enter into any settlement of any such proceeding without
Lender's prior written consent except in the ordinary course of business, and so
long as such actions are reasonable and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent
of Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect,
notwithstanding any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
Signed, sealed, and delivered BORROWER:
in the presence of:
CORNERSTONE REALTY INCOME
/s/ Mark A. Babb TRUST, INC., a Virginia corporation
- --------------------------------
Witness
Printed Name: Mark A. Babb By: /s/ Stanley J. Olander, Jr.
------------------ -------------------------------
Name: Stanley J. Olander, Jr.
-------------------------
/s/ Jacquelyn B. Owens Title: Chief Financial Officer
- -------------------------------- -------------------------
Notary Public
Printed Name: Jacquelyn B. Owens (CORPORATE SEAL)
------------------
[NOTARY SEAL]
My Commission Expires: 6/30/03
----------
-5-
<PAGE>
EXHIBIT A
(Legal Description of Real Property)
(Spring Lake)
All that tract or parcel of land lying and being in Land Lot 82 of the
12th District of Clayton County, Georgia and being more particularly described
as follows:
Beginningat a point on the easterly r/w of Southlake Parkway (80' r/w)
a distance of 434.88 feet southerly from the intersection formed by the easterly
r/w of Southlake Parkway (80'r/w) and the southerly r/w of Nolan Court (said
point lying 33.0 feet southerly from the centerline of said Nolan Court) and
running thence South 87(degrees)13' 52" East, and departing the easterly r/w of
Southlake Parkway, a distance of 1166.69 feet to a point; running thence South
00(degrees) 25' 11" West a distance of 986.99 feet to a point; running thence
North 89(degrees) 36' 58" West a distance of 1283.91 feet to a point on the
easterly r/w of Southlake Parkway (80'r/w); running thence northerly along the
easterly r/w of Southlake Parkway (80'r/w) the following courses and distances:
North 07(degrees) 33' 11" East, 831.83 feet; thence along the arc of a curve to
the left 210.86 feet to the point of beginning (said arc having a chord distance
of 210.76 feet on a bearing of North 04(degrees) 28' 29" East and a radius of
1962.354 feet); said property containing 28.35027 acres or 1,234,938 square
feet.
Said property is described according to plat of ALTA/ACSM
Land Title Survey for Cornerstone Realty Income Trust, Inc.,
The Prudential Insurance Company of America and Lawyers Title
Insurance Corporation by Watts & Browning Engineers, Inc.,
dated August 18, 1999 and last revised September 10, 1999,
which plat is incorporated by this reference for purposes of
this description.
-6-
<PAGE>
Exhibit B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the rent roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
-7-
<PAGE>
Exhibit C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12) month
minimum, but with respect to the entire Property portfolio
securing the Loan (as defined in the Instrument) up to
thirty-five percent (35%) of the total units at any one time
may be leased to tenants for a term of less than twelve (12)
months, of which up to thirteen percent (13%) of the total
units at any one time may be leased for original or renewal
terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and, if
applicable, gas heating and cooking separately metered to
tenants.
-8-
EXHIBIT 4.12
RECORDING REQUESTED BY AND LOAN NO. 6 103 650
WHEN RECORDED RETURN TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
(GWINNETT COUNTY, GEORGIA)
This Assignment of Leases and Rents (this "ASSIGNMENT") is made as of
September 27, 1999, by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation having its principal office and place of business at 306 East Main
Street, Richmond, Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at Two Ravinia
Drive, Suite 1400, Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Gwinnett County,
Georgia, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00) ("LOAN") evidenced by
that certain Promissory Note dated as of the date of this Assignment ("NOTE")
and secured by, among other things, that certain Deed to Secure Debt and
Security Agreement executed by Borrower in favor of Lender dated as of the date
of this Assignment and to be recorded in the real estate records of Gwinnett
County, Georgia ("INSTRUMENT") (capitalized terms used without definition shall
have the meanings ascribed to them in the Instrument) and the Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower assigned the
Leases and Rents to Lender in the manner provided below to secure payment of the
Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally assigns,
transfers, and sets over to Lender all of the right, title, interest, and
estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all
<PAGE>
guaranties thereof); (b) the Rents; (c) all proceeds from the cancellation,
surrender, sale or other disposition of the Leases; (d) the right to collect and
receive all the Rents; and (e) the right to enforce and exercise, whether at law
or in equity or by any other means, all terms and conditions of the Leases
("LEASE PROVISIONS"). This assignment is intended by Borrower and Lender to
constitute a present, absolute assignment and not a collateral assignment for
additional security only. Upon full payment and satisfaction of the Obligations
and written request by Borrower, Lender shall transfer, set over, and assign to
Borrower all right, title, and interest of Lender in, to, and under the Leases
and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall have a
revocable license ("LICENSE") from Lender to exercise all rights extended to the
landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the License shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment, Lender, and
not Borrower, shall be the creditor of any Tenant in respect of assignments for
the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution
or receivership proceedings affecting any such Tenant; provided, however, that
Borrower shall be the party obligated to make timely filings of claims in such
proceedings or to otherwise pursue creditor's rights therein. Notwithstanding
the foregoing, Lender shall have the right, but not the obligation, to file such
claims instead of Borrower and if Lender does file a claim, Borrower agrees that
Lender (a) is entitled to all distributions on such claim to the exclusion of
Borrower and (b) has the exclusive right to vote such claim and otherwise to
participate in the administration of the estate in connection with such claim.
Lender shall have the option to apply any monies received by it as such creditor
to the Obligations in the order set forth in the Documents. If a petition is
filed under the Bankruptcy Code by or against Borrower, and Borrower, as
landlord under any Lease, decides to reject such Lease pursuant to Section
365(a) of the Bankruptcy Code, then Borrower shall give Lender at least ten (10)
days' prior written notice of the date when Borrower shall apply to the
bankruptcy court for authority to reject the Lease. Lender may, but shall not be
obligated to, send Borrower within such ten-day period a written notice stating
that (a) Lender demands that Borrower assume and assign the Lease to Lender
pursuant to Section 365 of the Bankruptcy Code and (b) Lender covenants to cure
or provide adequate assurance of future performance under the Lease. If Lender
sends such notice, Borrower shall not reject the Lease provided Lender complies
with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. Upon demand and notice of an Event
of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay
-2-
<PAGE>
all Rents to Lender and (b) rely upon any such notice from Lender without any
obligation to inquire as to the actual existence of the default, notwithstanding
any claim of Borrower to the contrary. Borrower shall have no claim against any
Tenant for any Rents paid by Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold
Lender harmless from any and all Losses that Lender may incur under the Leases
or by reason of this Assignment, except for Losses incurred as a direct result
of Lender's willful misconduct or gross negligence. Nothing in this Assignment
shall be construed to bind Lender to the performance of any Lease Provisions or
to otherwise impose any liability on Lender including, without limitation, any
liability under covenants of quiet enjoyment in the Leases in the event that any
Tenant shall have been joined as party defendant in any action to foreclose the
Instrument and shall have been barred thereby of all right, title, interest, and
equity of redemption in the premises. This Assignment imposes no liability upon
Lender for the operation and maintenance of the Property or for carrying out the
terms of any Lease before Lender has entered and taken actual possession and
complete control of all operations of the Property. Any Losses incurred by
Lender, by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Lender's request, be
reimbursed by Borrower. Such reimbursement shall include interest at the Default
Rate and Costs. Lender may, upon entry and taking of possession, collect the
Rents and apply them to reimbursement for any such items.
6. Representations and Warranties. Borrower represents and warrants that (a)
Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any Lease
that is in default, (b) enter into new, bona-fide, arm's length Leases (or renew
existing Leases)
-3-
<PAGE>
provided each Lease satisfies the minimum leasing requirements in Exhibit C
attached hereto and incorporated herein and is on Borrower's standard form lease
(approved by Lender) with no modifications that increase the obligations of the
landlord, and (c) take such actions as are customary and reasonable for
apartment owners. Upon Lender's request and at Borrower's expense, Borrower
shall (i) promptly deliver to Lender copies of all notices of default Borrower
has sent to any Tenant, (ii) enforce the Leases and all remedies available to
Borrower upon any Tenant's default, (iii) deliver to Lender copies of all papers
served in connection with any such enforcement proceedings, and (iv) consult
with Lender, its agents and attorneys with respect to the conduct thereof.
Borrower shall not enter into any settlement of any such proceeding without
Lender's prior written consent except in the ordinary course of business, and so
long as such actions are reasonable and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent of
Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect, notwithstanding
any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
Signed, sealed, and delivered BORROWER:
in the presence of:
CORNERSTONE REALTY INCOME TRUST,
/s/ Mark A. Babb INC., a Virginia corporation
- --------------------------------
Witness
Printed Name: Mark A. Babb By: /s/ Stanley J. Olander, Jr.
------------------- ----------------------------------
Name: Stanley J. Olander, Jr.
---------------------------
Title: Chief Financial Officer
---------------------------
/s/ Jacquelyn B. Owens
- -----------------------------------
Notary Public (CORPORATE SEAL)
Printed Name: Jacquelyn B. Owens
---------------------
[NOTARY SEAL]
My Commission Expires: 6/30/03
-------------
-5-
<PAGE>
EXHIBIT A
(Legal Description of Real Property)
(Ashley Run)
All that tract of parcel of land lying and being in Land Lots 281 and 306 of the
6th District, Gwinnett County, Georgia, being more particularly described as
follows:
Beginning at a point marked by an iron pin found located at the common corner of
Land Lots 280, 281, 306 and 307 of the 6th District, Gwinnett County, Georgia
(being hereinafter called "Point A"); thence N 31(degrees) 25' 45" W along the
Land Lot line dividing Land Lots 306 and 307 of the aforesaid District and
County, a distance of 29.73 feet, more or less, to a point on the center line of
a creek (and being the southernmost point of Lot 6, Unit 1, Section II,
Lockridge Forest, Block "A"); thence in a generally northeasterly direction
along the center line of said creek and following the meanderings thereof a
distance of 951 feet, more or less, to a point, being hereinafter called "Point
B," said Point B also being located by commencing at Point A and proceeding the
following courses and distances; N 44(degrees) 44' 26" E a distance of 203.54
feet to a point; thence N 86(degrees) 24' 31" E a distance of 319.45 feet to a
point; thence N 53(degrees) 44' 58" E a distance of 152.63 feet to a point;
thence 66(degrees) 44' 16" E a distance of 154.17 feet to a point; thence N
74(degrees) 14' 39" E a distance of 81.04 feet to Point B; thence N 44(degrees)
30' 49" E a distance of 288.56 feet to a point; thence N 49(degrees) 53' 52" E a
distance of 235.99 feet to a point; thence N 52(degrees) 15' 37" E a distance of
139.32 feet to a point marked by an iron pin found; thence N 53(degrees) 05' 05"
E a distance of 224.96 feet to a point; thence N 56(degrees) 38' 28" E a
distance of 322.26 feet to a point; thence N 67(degrees) 13' 03" E a distance of
325.13 feet to a point marked by an iron pin found; thence S 31(degrees) 36' 58"
E a distance of 540 feet, more or less, to an iron pin placed in the center line
of a creek and marked "Point X"; thence northeasterly and northerly along the
center line of said creek and following the meanderings thereof a distance of
1,491 feet, more or less, to an iron pin placed at the intersection of the
center line of said creek and the Land Lot line dividing Land Lots 305 and 306
of the aforesaid District and County marked "Point Y" and being located N
30(degrees) 48' 58" W 458 feet, more or less, from the common corner of Land
Lots 281, 282, 305 and 306 of the aforesaid District and County; thence S
30(degrees) 48' 58" E along the Land Lot line dividing Land Lots 305 and 306 of
the aforesaid District and County, a distance of 422.45 feet, to a point marked
by an iron pin found located at the common corner of Land Lots 281, 282, 305 and
306 of the aforesaid District and County; thence S 30(degrees) 55' 56" E along
the Land Lot line dividing Land Lots 281 and 282 of the aforesaid District and
County, a distance of 81.08 feet to a point marked by an iron pin placed; thence
S 12(degrees) 03' 16" W a distance of 859.74 feet to a point; thence S
07(degrees) 31' 41" E a distance of 396.39 feet to a point; thence N 60(degrees)
33' 37" W a distance of 533.39 feet to a point; thence N 31(degrees) 36' 04" W a
distance 0f 300.05 feet to a point; thence N 89(degrees) 59' 42" W a distance of
293.76 feet to a point; thence S 35(degrees) 56' 25" W a distance of 502.75 feet
to a point; thence S 03(degrees) 05' 57" W a distance of 370.60 feet to a point;
thence S 87(degrees) 51' 51" E a distance of 215.18 feet to a point; thence S
28(degrees) 55' 51" E a distance of 140.57 feet to a point; thence S 09(degrees)
47' 25" W a distance of 645.86 feet to a point, said point being located on the
northern margin of the right-of-way of Jones Mill Road (having an 80-foot
right-of-way at this point); thence proceeding along the northern and
northeastern margin of the right-of-way of Jones Mill Road along an arc of a
curve to the right a distance of 587.75 feet to a point (said arc being
subtended by a chord having a bearing of N 79(degrees) 19' 42" W and a chord
distance of 577.94 feet); thence N 61(degrees) 09' 01" W along the northern
margin of the right-of-way of Jones Mill Road a distance of 140.25 feet to a
point; thence northerly, northeasterly, westerly and southwesterly along the arc
of a curve to the left and being the cul-de-sac of Jones Mill Road a distance of
207.42 feet (said arc being subtended by a chord having a bearing of N
76(degrees) 49' 28" W and a chord distance of 129.96 feet); thence along the
center line of Jones Mill Road the following courses and distances N 59(degrees)
43' 00" W a distance of 145.74 feet to a point; thence northwesterly and
westerly along an arc of a curve to the left a distance of 158.60 feet to a
point (said arc being subtended by a chord having a bearing of N 73(degrees) 36'
43" W and a chord distance of 157.05 feet); thence N 87(degrees) 30' 26" W a
distance of 126.58 feet to a point; thence westerly along an arc of a curve to
the left a distance of 338.79 feet to a point, said point being located on the
Land Lot line dividing Land Lots 280 and 281 of the aforesaid District and
County (said arc being subtended by a chord having a bearing of S 87(degrees)
47' 04" W and a chord distance of 338.41 feet); thence departing from the center
line of Jones Mill Road and proceeding N 31(degrees) 25' 45" W along the Land
Lot line dividing Land Lots 280 and 281 of the aforesaid District and County, a
distance of 333.32 feet to the Point of Beginning, containing 45.1055 acres,
more or less, as shown and delineated on the ALTA/ACSM Survey dated August 25,
1999, prepared by Samuel G. Evans, Jr., Georgia Registered Land Surveyor No.
1159, of EDI Engineers & Surveyors, Inc., which as-built survey is incorporated
herein by reference thereto.
-6-
<PAGE>
(Stone Brook)
ALL THAT TRACT OR PARCEL OF LAND LYING AND BEING IN LAND LOT 184 OF THE
6TH DISTRICT, GWINNETT COUNTY, GEORGIA AND BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS: BEGINNING AT A POINT FOUND AT THE INTERSECTION OF
THE NORTHERLY LINE OF LAND LOT 184 AND THE SOUTHERLY RIGHT-OF-WAY LINE
OF BEAVER RUIN ROAD (BEING A 130-FOOT RIGHT-OF-WAY); THENCE FOLLOWING
SAID SOUTHERLY RIGHT-OF-WAY LINE OF BEAVER RUIN ROAD 719.0 FEET
SOUTHEASTERLY TO THE TRUE POINT OF BEGINNING; THENCE FROM SAID POINT OF
BEGINNING CONTINUING ALONG THE SOUTHERLY RIGHT-OF-WAY LINE OF BEAVER
RUIN ROAD S 79(DEGREES) 13' 05" E A DISTANCE OF 307.39 FEET TO THE
POINT OF CURVATURE OF A CURVE TO THE RIGHT HAVING A RADIUS OF 1,024.49
FEET, A CHORD BEARING OF S 67(DEGREES) 32' 44" E AND A CHORD DISTANCE
OF 414.55 FEET; ALONG SAID CURVE AN ARC DISTANCE OF 417.43 FEET TO A
POINT; THENCE S 55(DEGREES) 52' 23" E A DISTANCE OF 685.77 FEET TO A
POINT; THENCE DEPARTING SAID RIGHT-OF-WAY LINE S 82(DEGREES) 36' 58" W
A DISTANCE OF 237.50 FEET TO A POINT; THENCE S 58(DEGREES) 37' 55" W A
DISTANCE OF 35.92 FEET TO A POINT; THENCE S 78(DEGREES) 10' 49" W A
DISTANCE OF 35.24 FEET TO A POINT; THENCE S 58(DEGREES) 37' 55" W A
DISTANCE OF 77.00 FEET TO A POINT; THENCE S 43(DEGREES) 13' 22" W A
DISTANCE OF 26.97 FEET TO A POINT; THENCE S 57(DEGREES) 26' 19" W A
DISTANCE OF 103.92 FEET TO A POINT; THENCE S 31(DEGREES) 22' 05" E A
DISTANCE OF 17.30 FEET TO A POINT; THENCE S 58(DEGREES) 35' 48" W A
DISTANCE OF 118.79 FEET TO A POINT; THENCE S 55(DEGREES) 53' 23" E A
DISTANCE OF 128.95 FEET TO A POINT; THENCE S 58(DEGREES) 36' 00" W A
DISTANCE OF 125.00 FEET TO A POINT; THENCE S 31(DEGREES) 24' 55" E A
DISTANCE OF 449.94 FEET TO A POINT; THENCE N 58(DEGREES) 35' 26" E A
DISTANCE OF 250.00 FEET TO A POINT; THENCE S 31(DEGREES) 24' 34" E A
DISTANCE OF 88.08 FEET TO A POINT; THENCE S 58(DEGREES) 6' 09" W A
DISTANCE OF 385.01 FEET TO A POINT; THENCE N 31(DEGREES) 24' 34" W A
DISTANCE OF 91.36 FEET TO A POINT; THENCE N 58(DEGREES) 35' 26" E A
DISTANCE OF 80.00 FEET TO A POINT; THENCE N 31(DEGREES) 24' 34" W A
DISTANCE OF 200.00 FEET TO A POINT; THENCE S 58(DEGREES) 35' 26" W A
DISTANCE OF 030.00 FEET TO A POINT; THENCE N 31(DEGREES) 24' 32" W A
DISTANCE OF 249.96 FEET TO A POINT; THENCE S 58(DEGREES) 36' 00" W A
DISTANCE OF 252.63 FEET TO A POINT; THENCE N 30(DEGREES) 27' 48" W A
DISTANCE OF 890.13 FEET TO A POINT; THENCE N 59(DEGREES)29' 15" E A
DISTANCE OF 245.06 FEET TO A POINT; THENCE N 30(DEGREES) 30' 15" W A
DISTANCE OF 314.52 FEET TO A POINT ON THE SOUTHERLY RIGHT-OF-WAY LINE
OF BEAVER RUIN ROAD, SAID POINT BEING THE TRUE POINT OF BEGINNING, AND
CONTAINING 18.035 ACRES AS SHOWN ON A PLAT ENTITLED "SURVEY FOR HAL
BARNETT" PREPARED BY HAYES, JAMES & ASSOCIATES, INC., LAWRENCEVILLE,
GEORGIA, DATED OCTOBER 02, 1985, AND ON AS BUILT SURVEY OF BARRINGTON
PARC FOR CORNERSTONE REALTY INCOME TRUST, INC. AND CHICAGO TITLE
INSURANCE COMPANY, PREPARED BY HAYES, JAMES & ASSOCIATES, INC., DATED
JULY 21, 1989, LAST REVISED OCTOBER 23, 1997 AND ALTA/ACSM AS BUILT
SURVEY OF STONE BROOK FOR CRIT-NC; THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA AND LAWYERS TITLE INS. CORP., DATED SEPT. 20, 1999.
TOGETHER WITH those easement rights arising under the following:
1. Easement Agreement by and between Georgia Waste Systems, Inc.,
successor by merger with Whitaker & Sons, Inc., and Hal W. Barnett,
dated as of May ___, 1985, filed for record July 3, 1985, at 9:23 a.m.,
recorded in Deed Book 3086 at page 585, records of Gwinnett County,
Georgia.
2. Sewer Easement from James M. Conley and Barbara M. Conley to Hal W.
Barnett, dated as of May ___, 1985, filed for record July 3, 1985, at
9:23 a.m., recorded in Deed Book 3086, page 583, aforesaid records.
3. Sewer Easement from Marvin's, Inc., to Hal W. Barnett, dated as of May
29, 1985, filed for record July 3, 1985, at 9:23 a.m., recorded in Deed
Book 3086 at page 600, aforesaid records.
4. Sewer Easement from Red Plum Industrial Park, a Joint Venture,
comprised of George T. Baker, William H. Coffer, Jr., Donald F.
Palmieri and MB & Lane Enterprises, Inc., a Georgia corporation, to Hal
W. Barnett, dated as of June 18, 1985, filed for record July 3, 1984,
at 9:23 a.m., recorded in deed Book 3086 at page 606, aforesaid
records.
-7-
<PAGE>
Exhibit B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the rent roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
-8-
<PAGE>
Exhibit C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12) month minimum,
but with respect to the entire Portfolio securing the Loan (as
defined in the Instrument) up to thirty-five percent (35%) of
the total units at any one time may be leased to tenants for a
term of less than twelve (12) months, of which up to thirteen
percent (13%) of the total units at any one time may be leased
for original or renewal terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and, if
applicable, gas heating and cooking separately metered to
tenants.
-9-
EXHIBIT 4.13
PREPARED OUT OF STATE AND LOAN NO. 6 103 651
UPON RECORDATION RETURN
TO:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Christina K. Braisted
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") is made as of
September 27, 1999, by CRIT-NC, LLC, a Virginia limited liability company having
its principal office and place of business at 306 East Main Street, Richmond,
Virginia 23219 ("BORROWER"), to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a
New Jersey corporation, having an office at Two Ravinia Drive, Suite 1400,
Atlanta, Georgia 30346 ("LENDER").
RECITALS:
A. Borrower is the sole owner of (a) the premises located in Wake County,
North Carolina, more particularly described in Exhibit A attached hereto and
incorporated herein ("PROPERTY") and (b) the landlord's interest under the
leases described in Exhibit B attached hereto and incorporated herein ("SPECIFIC
LEASES");
B. Lender has made a loan to Borrower in the principal sum of Twenty-Two
Million Nine Hundred Fifty Thousand and No/100 Dollars ($22,950,000.00) ("LOAN")
evidenced by that certain Promissory Note dated as of the date of this
Assignment ("NOTE") and secured by, among other things, that certain Deed of
Trust and Security Agreement executed by Borrower in favor of Lender dated as of
the date of this Assignment and to be recorded in the real estate records of
Mecklenburg County, North Carolina ("INSTRUMENT") (capitalized terms used
without definition shall have the meanings ascribed to them in the Instrument)
and the Documents; and
C. Lender was willing to make the Loan to Borrower only if Borrower
assigned the Leases and Rents to Lender in the manner provided below to secure
payment of the Obligations.
IN CONSIDERATION of the principal sum of the Note and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower agrees as follows:
1. Assignment. Borrower irrevocably, absolutely and unconditionally
assigns, transfers, and sets over to Lender all of the right, title, interest,
and estates that Borrower may now or later have in, to and under (a) the Leases
(which term shall also include the Specific Leases and all guaranties thereof);
(b) the Rents; (c) all proceeds from the cancellation, surrender, sale or other
disposition of the Leases; (d) the right to collect and receive all the Rents;
and (e) the right to
<PAGE>
enforce and exercise, whether at law or in equity or by any other means, all
terms and conditions of the Leases ("LEASE PROVISIONS"). This assignment is
intended by Borrower and Lender to constitute a present, absolute assignment and
not a collateral assignment for additional security only. upon full payment and
satisfaction of the Obligations and written request by Borrower, Lender shall
transfer, set over, and assign to Borrower all right, title, and interest of
Lender in, to, and under the Leases and the Rents.
2. Borrower's License. Until an Event of Default occurs, Borrower shall
have a revocable license ("LICENSE") from Lender to exercise all rights extended
to the landlord under the Leases. Borrower shall hold the Rents, or an amount
sufficient to discharge all current sums due on the Obligations, in trust for
use in the payment of the Obligations. Upon an Event of Default, whether or not
legal proceedings have commenced and without regard to waste, adequacy of
security for the Obligations or the solvency of Borrower, the license shall
automatically terminate without notice by Lender (any such notice being
expressly waived by Borrower). Upon such termination, Borrower shall deliver to
Lender within seven (7) days (a) all Rents (including prepaid Rents) held by
Borrower, (b) all unapplied security or other deposits paid pursuant to the
Leases, and (c) all previously paid charges for services, facilities or
escalations, to the extent, in each of the foregoing instances, allocable to any
period after the Event of Default. Borrower agrees and stipulates that upon
execution of this Assignment, Borrower's only interest in the Leases or Rents is
as a licensee revocable upon an Event of Default.
3. Lender as Creditor of Tenant. Upon execution of this Assignment,
Lender, and not Borrower, shall be the creditor of any Tenant in respect of
assignments for the benefit of creditors and bankruptcy, reorganization,
insolvency, dissolution or receivership proceedings affecting any such Tenant;
provided, however, that Borrower shall be the party obligated to make timely
filings of claims in such proceedings or to otherwise pursue creditor's rights
therein. Notwithstanding the foregoing, Lender shall have the right, but not the
obligation, to file such claims instead of Borrower and if Lender does file a
claim, Borrower agrees that Lender (a) is entitled to all distributions on such
claim to the exclusion of Borrower and (b) has the exclusive right to vote such
claim and otherwise to participate in the administration of the estate in
connection with such claim. Lender shall have the option to apply any monies
received by it as such creditor to the Obligations in the order set forth in the
Documents. If a petition is filed under the Bankruptcy Code by or against
Borrower, and Borrower, as landlord under any Lease, decides to reject such
Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall
give Lender at least ten (10) days' prior written notice of the date when
Borrower shall apply to the bankruptcy court for authority to reject the Lease.
Lender may, but shall not be obligated to, send Borrower within such ten-day
period a written notice stating that (a) Lender demands that Borrower assume and
assign the Lease to Lender pursuant to Section 365 of the Bankruptcy Code and
(b) Lender covenants to cure or provide adequate assurance of future performance
under the Lease. If Lender sends such notice, Borrower shall not reject the
Lease provided Lender complies with clause (b) of the preceding sentence.
4. Notice to Tenant of an Event of Default. upon demand and notice of an
Event of Default by Borrower sent by Lender to Tenants, Borrower irrevocably
authorizes each Tenant to (a) pay all Rents to Lender and (b) rely upon any such
notice from Lender without any obligation to inquire as to the actual existence
of the default, notwithstanding any claim of Borrower to the
-2-
<PAGE>
contrary. Borrower shall have no claim against any Tenant for any Rents paid by
Tenant to Lender.
5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold
Lender harmless from any and all Losses that Lender may incur under the Leases
or by reason of this Assignment, except for Losses incurred as a direct result
of Lender's willful misconduct or gross negligence. Nothing in this Assignment
shall be construed to bind Lender to the performance of any Lease provisions or
to otherwise impose any liability on Lender including, without limitation, any
liability under covenants of quiet enjoyment in the Leases in the event that any
Tenant shall have been joined as party defendant in any action to foreclose the
Instrument and shall have been barred thereby of all right, title, interest, and
equity of redemption in the premises. This Assignment imposes no liability upon
Lender for the operation and maintenance of the Property or for carrying out the
terms of any Lease before Lender has entered and taken actual possession and
complete control of all operations of the Property. Any Losses incurred by
Lender, by reason of actual entry and taking possession under any Lease or this
Assignment or in the defense of any claims shall, at Lender's request, be
reimbursed by Borrower. Such reimbursement shall include interest at the Default
Rate and Costs. Lender may, upon entry and taking of possession, collect the
Rents and apply them to reimbursement for any such items.
6. Representations and Warranties. Borrower represents and warrants that
(a) Borrower is the absolute owner of the lessor's interest in the Leases, (b)
Borrower has the right, power and authority to assign, transfer, and set over
all of its right, title and interest in, to and under the Leases and Rents and
no other person (other than the respective Tenants) has any right, title or
interest therein, (c) the Leases are valid and in full force and effect and have
not been materially modified, amended or terminated, nor have any of the terms
and conditions of the Leases been waived, except as stated in the Leases, (d)
there are no outstanding assignments or pledges of the Leases or Rents, (d)
there are no outstanding leasing commissions due under the Leases for the
initial term or for any extensions, renewals or expansions, (f) except as
disclosed to Lender in writing, there are no existing defaults or, to any
material extent, any state of facts which, with the giving of notice and/or
passage of time, would constitute a default under the Leases by either party,
(g) no Tenant has any defense, set-off or counterclaim against Borrower to any
material extent, (h) each Tenant is in possession and paying Rent and other
charges as provided in its Lease, (i) no Rents have been or will later be
anticipated, discounted, released, waived, compromised or otherwise discharged,
except in the ordinary course of Borrower's exercise of prudent management
decisions, so long as such decisions are customary and reasonable for apartment
owners, or as may be expressly permitted by the Lease, (j) except as specified
in the Leases and shown on the rent roll delivered to Lender in connection with
the funding of the Loan (the "RENT ROLL"), there are no (i) unextinguished rent
concessions, abatements or other inducements relating to the Leases or (ii)
options or other rights to acquire any interest in the Property in favor of any
Tenant, and (k) the Rent Roll discloses all currently existing Leases and is
true, complete and accurate in all respects.
7. New Leases, Amendments and Terminations. Borrower may (a) terminate any
Lease that is in default, (b) enter into new, bona-fide, arm's length Leases (or
renew existing Leases) provided each Lease satisfies the minimum leasing
requirements in Exhibit C attached hereto and incorporated herein and is on
Borrower's standard form lease (approved by Lender) with no
-3-
<PAGE>
modifications that increase the obligations of the landlord, and (c) take such
actions as are customary and reasonable for apartment owners. Upon Lender's
request and at Borrower's expense, Borrower shall (i) promptly deliver to Lender
copies of all notices of default Borrower has sent to any Tenant, (ii) enforce
the Leases and all remedies available to Borrower upon any Tenant's default,
(iii) deliver to Lender copies of all papers served in connection with any such
enforcement proceedings, and (iv) consult with Lender, its agents and attorneys
with respect to the conduct thereof. Borrower shall not enter into any
settlement of any such proceeding without Lender's prior written consent except
in the ordinary course of business, and so long as such actions are reasonable
and customary for apartment owners.
8. Covenants. Borrower shall not, except with the prior written consent
of Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise
transfer or encumber (except hereby) any of the Leases, Rents or any right,
title or interest of Borrower therein; (b) except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners, accept prepayments of any Rents for a period of more than one (1) month
in advance of the due dates thereof; (c) in any manner intentionally or
materially impair the value of the Property or the benefits to Lender of this
Assignment; (d) except as otherwise permitted in this Assignment, waive, excuse,
condone, discount, set off, compromise, or in any manner release or discharge
any Tenant from any of its obligations under the Leases except in the ordinary
course of business, and so long as such actions are reasonable and customary for
apartment owners; (e) except as otherwise permitted herein, enter into any
settlement of any action or proceeding arising under, or in any manner connected
with, the Leases or with the obligations of the landlord or the Tenants
thereunder except in the ordinary course of business, and so long as such
actions are reasonable and customary for apartment owners; or (f) modify, cancel
or terminate any guaranties under any Lease except in the ordinary course of
business, and so long as such actions are reasonable and customary for apartment
owners. Borrower shall, at its sole cost and expense, duly and timely keep,
observe, perform, comply with and discharge all of the material obligations of
the landlord under the Leases, or cause the foregoing to be done, and Borrower
shall not take any actions that would, either presently or with the passage of
time, cause a default by Borrower under any of the Leases.
9. No Merger. Each Lease shall remain in full force and effect,
notwithstanding any merger of Borrower's and Tenant's interest thereunder.
10. Documents Incorporated. The terms and conditions of the Documents are
incorporated into this Assignment as if fully set forth in this Assignment.
11. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-4-
<PAGE>
IN WITNESS WHEREOF, Borrower has duly executed this Assignment as of
the date first above written.
BORROWER:
CRIT-NC, LLC, a Virginia limited
liability company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a
Virginia corporation, Managing
Member
Attest: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
--------------------------- ---------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
-------------------- --------------------------
Title: Assistant Secretary Title: Chief Financial Officer
-------------------- --------------------------
[CORPORATE SEAL]
-5-
<PAGE>
ACKNOWLEDGMENT
STATE OF VIRGINIA
CITY OF RICHMOND
I, a Notary Public of the County and State aforesaid, certify that
David S. McKenney personally came before me this day and acknowledged that (s)he
is an Assistant Secretary of Cornerstone Realty Income Trust, a Virginia
corporation, which is the Managing Member of CRIT-NC, LLC, a Virginia limited
liability company, and that by authority duly given and as the act of the
company, the foregoing instrument was signed in its name by its duly authorized
Chief Financial Officer as the act and deed of the corporation on behalf of the
limited liability company.
Witness my hand and official stamp or seal this 27th day of September,
1999.
/s/ Jacquelyn B. Owens
-----------------------------------
Notary Public
My Commission Expires: 6/30/03
---------
[NOTARY SEAL]
-6-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
(St. Regis)
BEGINNING AT AN EXISTING IRON PIPE LOCATED IN THE EASTERN RIGHT OF WAY OF
INTERSTATE 40, SAID IRON BEING S 41(DEGREE) 50' 23" E 1,731.98' FROM NCGS
MONUMENT "CARY MALL", SAID MONUMENT HAVING NC GRID COORDINATES N-739,227.5142
E-2,074,232.4091; THENCE FROM THE POINT OF BEGINNING ALONG THE SOUTHERN PROPERTY
LINE OF WESTERN BLVD. L.L.C. AS DESCRIBED IN D.B. 6927 PG. 115, N 61(DEGREE) 36'
07" E 707.54' TO AN EXISTING IRON PIPE IN THE WESTERN RIGHT OF WAY OF FARMGATE
ROAD (60' PUBLIC RIGHT OF WAY)): THENCE ALONG THE RIGHT OF WAY OF FARMGATE ROAD
ON A CURVE TO THE LEFT HAVING A RADIUS OF 420.95', AN ARC LENGTH OF 425.68', AND
A CHORD BEARING AND DISTANCE OF S 44(DEGREE) 17' 42" E 407.78' TO AN EXISTING
IRON PIPE; THENCE LEAVING SAID RIGHT OF WAY AND ALONG THE NORTHWESTERN PROPERTY
LINE OF SUNPOINTE CONDOMINIUMS AS DESCRIBED IN D.B. 3567 PG. 521, S42(DEGREE)
32' 32" W 112.09' TO AN EXISTING IRON PIPE; THENCE ALONG SAID LINE S 27(DEGREE)
27' 46" W 173.53' TO AN EXISTING IRON PIPE; THENCE ALONG THE NORTHWESTERN
PROPERTY LINE OF SUNPOINTE CONDOMINIUMS AS DESCRIBED IN D.B. 3652 PG. 430, S
33(DEGREE) 12' 51" W 128.02' TO AN EXISTING IRON PIPE; THENCE ALONG SAID LINE S
33(DEGREE) 24' 01" W 148.67' TO AN EXISTING IRON PIPE, THENCE S 20(DEGREE) 54'
44" W 295.85' TO AN EXISTING IRON PIPE IN THE EASTERN RIGHT OF WAY OF INTERSTATE
40, THENCE ALONG SAID RIGHT OF WAY ON A CURVE TO THE RIGHT HAVING A RADIUS OF
7,439.44', AN ARC LENGTH OF 560.61', AND A CHORD BEARING AND DISTANCE OF N
38(DEGREE) 31' 09" W 560.48' TO A RIGHT OF WAY MONUMENT; THENCE N 35(DEGREE) 40'
06" W 187.40' TO A RIGHT OF WAY MONUMENT; THENCE N 18(DEGREE) 02' 21" W 114.36'
TO THE POINT OF BEGINNING CONTAINING 10.358 ACRES.
Said property is described according to plat of ALTA/ACSM Land Title Survey by
M.M. Weeks Land Surveying, dated October 27, 1997 and last revised August 30,
1999, which plat is incorporated by this reference for purposes of this
description.
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<PAGE>
(Remington Place)
BEGINNING AT AN EXISTING IRON PIPE LOCATED IN THE WESTERN RIGHT OF WAY
LINE OF LAKE DAM ROAD, SAID IRON PIPE ALSO BEING LOCATED N 22(DEGREE)
29' 44" E, 417.21 FEET FROM NCGS "LAKE DAM" (Y=728550.112 AND
X=2086847.21); RUNS THENCE FROM SAID POINT OF BEGINNING ALONG AND WITH
THE NORTHERN RIGHT OF WAY LINE OF THE I-440 BELTLINE RAMP A COURSE OF
S81(DEGREE) 31' 29" W FOR A DISTANCE OF 70.40 FEET TO A NCDOT RIGHT OF
WAY MONUMENT; THENCE CONTINUING WITH THE LINE OF SAID RAMP A COURSE OF
N 77(DEGREE) 24' 07" W FOR A DISTANCE OF 481.83 FEET TO AN EXISTING
IRON PIPE; THENCE DEPARTING SAID RAMP AND WITH THE LINE OF THE CITY OF
RALEIGH (LAKE JOHNSON CITY PARK) THE FOLLOWING EIGHT (8) COURSES
1) A COURSE OF N 17(DEGREE)22' 32" W FOR A DISTANCE OF 141.99 FEET TO
AN EXISTING IRON PIPE;
2) A COURSE OF N 8(DEGREE)37' 31" E FOR A DISTANCE OF 140.05 FEET TO AN
EXISTING IRON PIPE;
3) A COURSE OF N 35(DEGREE)37' 04" E FOR A DISTANCE OF 124.95 FEET TO
AN EXISTING IRON PIPE;
4) A COURSE OF N 87(DEGREE)33' 56" E FOR A DISTANCE OF 333.93 FEET TO
AN EXISTING IRON PIPE;
5) A COURSE OF N 88(DEGREE)17' 57" E FOR A DISTANCE OF 19.86 FEET TO AN
EXISTING IRON PIPE;
6) A COURSE OF N 24(DEGREE)27' 08" E FOR A DISTANCE OF 256.35 FEET TO
AN EXISTING IRON PIPE;
7) A COURSE OF N 33(DEGREE)00' 07" E FOR A DISTANCE OF 503.99 FEET TO
AN EXISTING IRON PIPE;
8) A COURSE OF N 24(DEGREE) 08' 03" E FOR A DISTANCE OF 445.63 FEET TO
AN EXISTING IRON PIPE IN THE WESTERN RIGHT OF WAY LINE OF LAKE DAM ROAD
(PUBLIC, 60' R/W); THENCE A COURSE OF N 24(DEGREE) 25' 18" E FOR A
DISTANCE OF 14.05 FEET TO AN EXISTING IRON PIPE; THENCE A COURSE OF N
85(DEGREE) 56' 56" E FOR A DISTANCE OF 24.08 FEET TO A PK NAIL IN THE
CENTERLINE OF SAID LAKE DAM ROAD; THENCE WITH THE CENTERLINE OF SAID
LAKE DAM ROAD THE FOLLOWING ELEVEN (11) COURSES:
1) A COURSE OF S 1(DEGREE)03' 28" E FOR A DISTANCE OF 298.38 FEET TO A
PK NAIL;
2) A COURSE OF S 0(DEGREE)51' 19" E FOR A DISTANCE OF 138.69 FEET TO A
PK NAIL;
3) A COURSE OF S 0(DEGREE)35' 42" E FOR A DISTANCE OF 95.82 FEET TO A
PK NAIL;
4) A COURSE OF S 0(DEGREE)39' 03" W FOR A DISTANCE OF 104.60 FEET TO A
PK NAIL;
5) A COURSE OF S 6(DEGREE)33' 35" W FOR A DISTANCE OF 102.72 FEET TO A
PK NAIL;
6) A COURSE OF S 12(DEGREE)41' 16" W FOR A DISTANCE OF 98.19 FEET TO A
PK NAIL;
7) A COURSE OF S 17(DEGREE)46' 18" W FOR A DISTANCE OF 96.73 FEET TO A
PK NAIL;
8) A COURSE OF S 23(DEGREE)00' 25" W FOR A DISTANCE OF 92.71 FEET TO A
PK NAIL;
9) A COURSE OF S 27(DEGREE)40' 21" W FOR A DISTANCE OF 92.48 FEET TO A
PK NAIL;
10) A COURSE OF S 28(DEGREE)35' 34" W FOR A DISTANCE OF 126.83 FEET TO
A PK NAIL;
11) A COURSE OF S 28(DEGREE) 42' 47" W FOR A DISTANCE OF 213.50 FEET TO
A PK NAIL; THENCE A COURSE OF N 61(DEGREE) 25' 55" W FOR A DISTANCE OF
29.35 FEET TO A NCDOT RIGHT OF WAY MONUMENT; THENCE A COURSE OF N
61(DEGREE) 27' 41" W FOR A DISTANCE OF 30.08 FEET TO A NCDOT RIGHT OF
WAY MONUMENT; THENCE WITH THE WESTERN RIGHT OF WAY LINE OF LAKE DAM
ROAD (AT THIS POINT 59 FEET FROM CENTERLINE) A COURSE OF S 28(DEGREE)
34' 34" W FOR A DISTANCE OF 224.84 FEET TO AN EXISTING IRON PIPE, THE
POINT AND PLACE OF BEGINNING AND CONTAINING 14.637 ACRES, MORE OR LESS.
Said property is described according to plat of As Built Survey for Cornerstone
Realty Income Trust, Inc. prepared by Murphy Hobson Sacks, Professional Land
Surveyors, dated August 1999, which plat is incorporated by this reference for
purposes of this description.
-8-
<PAGE>
Exhibit B
DESCRIPTION OF LEASES
All leases, subleases, lettings and licenses of or affecting the
Property, now or hereafter in effect, and all amendments, extensions,
modifications, replacements or revenues thereof, including, but not limited to,
leases of the Property to the tenants listed on the rent roll attached to that
certain Closing Certification executed by Borrower in favor of Lender of even
date herewith.
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<PAGE>
Exhibit C
MINIMUM LEASING REQUIREMENTS
All additional Leases and renewal Leases covering the Property shall satisfy the
following conditions:
1. Minimum (original or renewal) Term: Twelve (12) month minimum,
but with respect to the entire Portfolio securing the Loan (as
defined in the Instrument) up to thirty-five percent (35%) of
the total units at any one time may be leased to tenants for a
term of less than twelve (12) months, of which up to thirteen
percent (13%) of the total units at any one time may be leased
for original or renewal terms of less than six (6) months.
2. Rental Basis: Monthly rent with electricity and, if
applicable, gas heating and cooking separately metered to
tenants.
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EXHIBIT 10.1
Loan No. 6 103 650
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") is made as of
September 27, 1999 by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation, having an office at 306 East Main Street, Richmond, Virginia 23219
("INDEMNITOR"), in favor of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation ("LENDER").
RECITALS:
A. Indemnitor is the sole owner of each of the premises in Exhibit A
attached hereto and incorporated herein by reference (collectively, the
"PROPERTY");
B. Lender has made a loan to Indemnitor in the principal sum of Fifty
Million Five Hundred Fifty Thousand and No/100 Dollars ($50, 550,000.00)
("LOAN") evidenced by that certain Promissory Note dated as of the date of this
Agreement ("NOTE") and secured by, among other things (i) two (2) Mortgages and
Security Agreements dated as of the date of this Agreement executed by
Indemnitor in favor of Lender to be recorded in the real estate records of
Charleston County, South Carolina and Richland County, South Carolina, and (ii)
two (2) Deeds to Secure Debt and Security Agreements dated as of the date of
this Agreement executed by Indemnitor in favor of Lender to be recorded in the
real estate records of Gwinnett County, Georgia and Clayton County, Georgia
(collectively, the "INSTRUMENT") (capitalized terms used without definition
shall have the meanings ascribed to them in the Instrument) and the Documents;
and
C. Lender was willing to make the Loan to Indemnitor only if Indemnitor
entered into this Agreement.
AGREEMENT
IN CONSIDERATION of the principal sum of the Note and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitor, jointly and severally, agrees as follows:
1. Instrument Incorporated. The terms and conditions of the Instrument are
incorporated into this Agreement as if fully set forth in this Agreement.
2. Representations and Warranties. Indemnitor makes and reaffirms the
representations and warranties set forth in Sections 2.01(iii), 2.01(iv), 2.02,
2.03, 2.06, 2.07, and 3.12(a) of the Instrument, as if set forth herein.
3. Environmental Covenants. Indemnitor covenants and agrees to comply with
Section 3.12(b) of the Instrument, and, for the purpose of this covenant, all
references in Section 3.12(a) to "Borrower" shall be deemed to refer to
"Indemnitor."
<PAGE>
4. Lender's Rights, Cooperation and Access. Lender and any other person
("PERSON" in this Agreement shall have the same meaning as in the Instrument)
designated by Lender shall have the rights set forth in Section 3.12(c).
5. Indemnification. Indemnitor covenants and agrees, at its sole cost and
expense, to indemnify (as defined in the Instrument) any or all of the
Indemnified Parties from and against any and all Losses imposed on, incurred by
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with any one or more of the following: (a) the presence of
any Hazardous Materials affecting the Property ("AFFECTING THE PROPERTY" in this
Agreement shall have the same meaning as in the Instrument); (b) any past,
present, future or threatened Release of Hazardous Materials affecting the
Property; (c) any activity by any Indemnitor, person affiliated with any
Indemnitor ("AFFILIATE"), Tenant or other user of the Property in connection
with any actual, proposed or threatened use, treatment, storage, holding,
existence, disposition or other Release, generation, production, manufacturing,
processing, refining, control, management, abatement, handling, transfer or
transportation to or from the Property, or removal of any Hazardous Materials at
any time affecting the Property; (d) any activity by any Indemnitor, Affiliate,
Tenant or other user of the Property in connection with any actual or proposed
Remediation of any Hazardous Materials at any time affecting the Property,
whether or not such Remediation is voluntary or pursuant to court or
administrative order, including ("INCLUDING" in this Agreement shall have the
same meaning as in the Instrument) any removal, remedial or corrective action,
penalties or fines; (e) any past, present, future or threatened non-compliance
or violations of any Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations thereon,
including any failure by any Indemnitor, Affiliate, Tenant or other user of the
Property to comply with any order of any governmental authority in connection
with any Environmental Laws; (f) the actual or threatened imposition, recording
or filing of any Environmental Lien encumbering the Property; (g) any
administrative processes or proceedings or judicial proceedings in any way
connected with any matter addressed in this Agreement; (h) any past, present,
future or threatened injury to, destruction of, or loss of natural resources to
the extent connected with the Property, including costs to investigate and
assess such injury, destruction or loss; (i) any acts of any Indemnitor,
Affiliate, Tenant or other user of the Property in arranging for disposal or
treatment of Hazardous Materials at any facility or incineration vessel
containing such or similar Hazardous Materials, including arrangements with any
transporter; (j) any acts of any Indemnitor, Affiliate, Tenant or other user of
the Property in accepting any Hazardous Materials for transport to disposal or
treatment facilities, incineration vessels or sites from which there is a
Release, or a threatened Release of any Hazardous Material which causes the
incurrence of costs for Remediation; (k) any personal injury, wrongful death,
property or other damage arising under any statutory, common law or tort law
theory, including damages assessed for trespass or for private or public
nuisance or for operation of an abnormally dangerous activity on or near the
Property, with respect to Hazardous Materials or violations of Environmental
Laws; and (l) any misrepresentation, inaccurate representation or warranty,
material breach or failure to perform under the provisions of this Agreement.
Notwithstanding the foregoing, Indemnitor shall not be obligated to indemnify
the Indemnified Parties to the extent that (1) the contamination of the Property
was caused solely by actions, conditions, or events that occurred after the date
Lender (or any purchaser at a foreclosure sale) actually acquired title to the
Property and (2) the contamination of the Property was not caused, contributed
to, enhanced, or exacerbated by the
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<PAGE>
direct or indirect, actions or inactions, of any Indemnitor or any partners,
officers, members, shareholders, employees, or agents of any Indemnitor or (3)
the contamination of the Property was caused solely by the gross negligence or
willful misconduct of Lender or any officers, employees or agents of Lender.
6. Duty to Defend, Attorneys and Other Fees and Expenses. Indemnitor
agrees that the provisions of (a) Section 8.06 of the Instrument shall apply to
this Agreement except all references to "Article VIII" or "this Section" shall
be deemed to include this Agreement, and, for the purpose of this covenant, all
references in Section 8.06 to "Borrower" shall be deemed to refer to
"Indemnitor," and (b) Section 6.03 of the Instrument shall apply to all Costs,
expenses or other amounts paid or incurred by the Indemnified Parties under this
Agreement. The term "ON DEMAND" shall have the same meaning as in the
Instrument.
7. Recourse Obligations and Survivability. Indemnitor agrees that the
provisions of Section 8.07 of the Instrument shall apply to this Agreement
except all references to "Section 8.05" and "Article VIII" shall be deemed to
include this Agreement, and, for the purpose of this covenant, all references in
Section 8.07 to "Borrower" shall be deemed to refer to "Indemnitor." In
addition, Indemnitor acknowledges and agrees that each Indemnitor, jointly and
severally, is fully and personally liable for the obligations under this
Agreement, and such liability is not limited to the original or amortized
principal balance of the Loan or the value of the Property.
8. Unimpaired Liability. The liability of Indemnitor under this Agreement
shall in no way be limited or impaired by, and Indemnitor consents to and agrees
to be bound by, any amendment or modification of the provisions of the Documents
(other than this Agreement) by any Indemnitor or successor-in-interest to any
Indemnitor. In addition, the liability of Indemnitor shall in no way be limited
or impaired by (a) any extension(s) of time for performance required under the
Documents, (b) any sale or transfer of all or part of the Property, (c) except
as provided in this Agreement or in the Documents, any exculpatory provision in
the Documents limiting Lender's recourse to the Property or to any other
security for the Note, or limiting Lender's rights to a deficiency judgment
against any Indemnitor, (d) the accuracy or inaccuracy of the representations
and warranties made by any Indemnitor under the Documents, (e) the release of
any Indemnitor or person from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of the Documents by
operation of law, Lender's voluntary act, or otherwise, (f) the release or
substitution in whole or in part of any security for the Note, or (g) Lender's
failure to record or file (or improper filing or recording of) any of the
Documents or Lender's failure to otherwise perfect, protect, secure or insure
any security interest or lien given as security for the Note; and, in all such
cases, whether with or without notice to Indemnitor and with or without
consideration.
9. Enforcement. Lender may enforce the obligations of Indemnitor under
this Agreement without first resorting to or exhausting any security or
collateral or without first having recourse to the Documents or any of the
Property, through foreclosure proceedings or otherwise; provided, however, that
nothing herein shall inhibit or prevent Lender from suing on the Note or
exercising any other rights or remedies in the Documents. This Agreement is not
collateral or security for the debt of Indemnitor pursuant to the Loan, unless
Lender expressly elects in
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<PAGE>
writing to make this Agreement additional collateral or security for the debt of
Indemnitor pursuant to the Loan. It is not necessary for an Event of Default to
have occurred under the Documents for Lender to exercise its rights under this
Agreement.
10. Waivers and Delays. To the fullest extent Indemnitor may do so under
Laws, Indemnitor makes the waivers and agrees to be bound by the provisions of
Section 6.06 and Section 6.07 of the Instrument, and, for the purpose of this
covenant, all references in Section 6.06 and Section 6.07 to "Borrower" shall be
deemed to refer to "Indemnitor." In addition, Indemnitor waives and relinquishes
all rights and remedies under Laws for the benefit of Indemnitor or guarantors
except any rights of subrogation which any Indemnitor may have; provided,
however, that the indemnity in this Agreement is not (a) contingent upon the
existence of any such rights of subrogation or (b) subject to any claims or
defenses which may be asserted in connection with the enforcement of such
subrogation rights including any claim that such rights were abrogated by any
acts of Lender. Notwithstanding the foregoing, Indemnitor agrees to postpone the
exercise of any rights of subrogation with respect to the Property and any other
collateral securing the Loan until the Loan shall have been paid in full. No
delay by Lender in exercising any right, power or privilege under this Agreement
shall operate as a waiver of any such privilege, power or right.
11. Subrogation. Indemnitor shall take all reasonable actions, including
institution of legal action against third parties, necessary or appropriate to
obtain reimbursement, payment or compensation from persons responsible for the
presence of any Hazardous Materials affecting the Property or otherwise
obligated by Laws to bear the cost. Lender shall be subrogated to all of
Indemnitor's present and future rights in such claims.
12. Notice of Legal Actions. Indemnitor shall, within seven (7) days of
receipt, give written notice to Lender and to any other Indemnitor (a) any
notice, advice or other communication from any governmental entity or any source
with respect to Hazardous Materials affecting the Property and (b) any legal
action brought against such party or related to the Property, with respect to
which any Indemnitor may have liability under this Agreement.
13. Notices. All notices or other written communications under this
Agreement shall be given in accordance with and governed by Section 9.02 of the
Instrument. Notices to Indemnitor and Lender shall be sent to the addresses in
said Section 9.02.
14. Applicable Law and Submission to Jurisdiction. Indemnitor agrees that
the provisions of Section 9.04 of the Instrument shall apply to this Agreement,
and, for the purpose of this covenant, all references in Section 9.04 to
"Borrower" shall be deemed to refer to "Indemnitor."
15. No Third Party Beneficiary. The terms of this Agreement are for the
sole and exclusive protection and use of the Indemnified Parties. No other party
shall be a third party beneficiary under this Agreement, and no provision of
this Agreement shall operate or inure to the use and benefit of any such third
party. It is agreed that those persons included in the definition of Indemnified
Parties are not excluded third party beneficiaries.
-4-
<PAGE>
16. Joint and Several Liability. If Indemnitor consist of more than one
person or entity, the obligations and liabilities of each such person hereunder
are joint and several.
17. WAIVER OF TRIAL BY JURY. INDEMNITOR AND LENDER HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY
ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, Indemnitor has duly executed this Agreement as of the date
first above written.
INDEMNITOR:
CORNERSTONE REALTY INCOME
TRUST, INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
---------------------------------
Name: Stanley J. Olander, Jr.
--------------------------
Title: Chief Financial Officer
--------------------------
(CORPORATE SEAL)
-5-
EXHIBIT 10.2
Loan No. 6 103 651
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") is
made as of September 27, 1999 by CRIT-NC, LLC, a Virginia limited liability
company, having an office at 306 East Main Street, Richmond, Virginia 23219
("BORROWER"), and CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation
("PRINCIPAL") (Borrower and Principal, individually and collectively, as the
context requires, shall be referred to as "INDEMNITOR"), in favor of THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("LENDER").
RECITALS:
A. Borrower is the sole owner of the premises in Exhibit A attached to the
Security Instrument (hereinafter defined) and incorporated herein by reference
thereto ("PROPERTY");
B. Lender has made a loan to Borrower in the principal sum of Twenty-Two
Million Nine Hundred Fifty Thousand and No/100 Dollars ($22,950,000.00) ("LOAN")
evidenced by that certain Promissory Note dated as of the date of this Agreement
("NOTE") and secured by, among other things, those certain two (2) Deeds of
Trust and Security Agreements dated as of the date of this Agreement executed by
Borrower in favor of Lender to be recorded in the real estate records of
Mecklenburg County, North Carolina and Wake County, North Carolina
(collectively, the "INSTRUMENT") (capitalized terms used without definition
shall have the meanings ascribed to them in the Instrument) and the Documents;
and
C. Lender was willing to make the Loan to Borrower only if Indemnitor
entered into this Agreement; and
D. Principal is an owner of a legal and/or beneficial interest in Borrower
and thus will derive substantial benefit from the Loan. Each of the Indemnitor
enters into this Agreement to induce Lender to make the Loan.
AGREEMENT
IN CONSIDERATION of the principal sum of the Note and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitor, jointly and severally, agrees as follows:
1. Instrument Incorporated. The terms and conditions of the Instrument
are incorporated into this Agreement as if fully set forth in this Agreement.
Principal acknowledges that it has received and reviewed the Instrument.
2. Representations and Warranties. Principal makes and Borrower makes
and reaffirms the representations and warranties set forth in Sections
2.01(iii), 2.01(iv), 2.02, 2.03, 2.06, 2.07, and 3.12(a) of the Instrument, as
if set forth herein.
<PAGE>
3. Environmental Covenants. Indemnitor covenants and agrees to comply with
Section 3.12(b) of the Instrument, and, for the purpose of this covenant, all
references in Section 3.12(a) to "Borrower" shall be deemed to refer to
"Indemnitor."
4. Lender's Rights, Cooperation and Access. Lender and any other person
("PERSON" in this Agreement shall have the same meaning as in the Instrument)
designated by Lender shall have the rights set forth in Section 3.12(c).
5. Indemnification. Indemnitor covenants and agrees, at its sole cost and
expense, to indemnify (as defined in the Instrument) any or all of the
Indemnified Parties from and against any and all Losses imposed on, incurred by
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with any one or more of the following: (a) the presence of
any Hazardous Materials affecting the Property ("AFFECTING THE PROPERTY" in this
Agreement shall have the same meaning as in the Instrument); (b) any past,
present, future or threatened Release of Hazardous Materials affecting the
Property; (c) any activity by any Indemnitor, person affiliated with any
Indemnitor ("AFFILIATE"), Tenant or other user of the Property in connection
with any actual, proposed or threatened use, treatment, storage, holding,
existence, disposition or other Release, generation, production, manufacturing,
processing, refining, control, management, abatement, handling, transfer or
transportation to or from the Property, or removal of any Hazardous Materials at
any time affecting the Property; (d) any activity by any Indemnitor, Affiliate,
Tenant or other user of the Property in connection with any actual or proposed
Remediation of any Hazardous Materials at any time affecting the Property,
whether or not such Remediation is voluntary or pursuant to court or
administrative order, including ("INCLUDING" in this Agreement shall have the
same meaning as in the Instrument) any removal, remedial or corrective action,
penalties or fines; (e) any past, present, future or threatened non-compliance
or violations of any Environmental Laws (or permits issued pursuant to any
Environmental Law) in connection with the Property or operations thereon,
including any failure by any Indemnitor, Affiliate, Tenant or other user of the
Property to comply with any order of any governmental authority in connection
with any Environmental Laws; (f) the actual or threatened imposition, recording
or filing of any Environmental Lien encumbering the Property; (g) any
administrative processes or proceedings or judicial proceedings in any way
connected with any matter addressed in this Agreement; (h) any past, present,
future or threatened injury to, destruction of, or loss of natural resources in
any way connected with the Property, including costs to investigate and assess
such injury, destruction or loss; (i) any acts of any Indemnitor, Affiliate,
Tenant or other user of the Property in arranging for disposal or treatment of
Hazardous Materials at any facility or incineration vessel containing such or
similar Hazardous Materials, including arrangements with any transporter; (j)
any acts of any Indemnitor, Affiliate, Tenant or other user of the Property in
accepting any Hazardous Materials for transport to disposal or treatment
facilities, incineration vessels or sites from which there is a Release, or a
threatened Release of any Hazardous Material which causes the incurrence of
costs for Remediation; (k) any personal injury, wrongful death, property or
other damage arising under any statutory, common law or tort law theory,
including damages assessed for trespass or for private or public nuisance or for
operation of an abnormally dangerous activity on or near the Property, with
respect to Hazardous Materials or violations of Environmental Laws; and (l) any
misrepresentation, inaccurate representation or warranty, material breach or
failure to perform
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<PAGE>
under the provisions of this Agreement. Notwithstanding the foregoing,
Indemnitor shall not be obligated to indemnify the Indemnified Parties to the
extent that (1) the contamination of the Property was caused solely by actions,
conditions, or events that occurred after the date Lender (or any purchaser at a
foreclosure sale) actually acquired title to the Property and (2) the
contamination of the Property was not caused, contributed to, enhanced, or
exacerbated by the direct or indirect, actions or inactions, of any Indemnitor
or any partners, officers, members, shareholders, employees, or agents of any
Indemnitor, or (3) the contamination of the Property was caused solely by the
gross negligence or willful misconduct of Lender or any officers, employees or
agents of Lender.
6. Duty to Defend, Attorneys and Other Fees and Expenses. Indemnitor
agrees that the provisions of (a) Section 8.06 of the Instrument shall apply to
this Agreement except all references to "Article VIII" or "this Section" shall
be deemed to include this Agreement, and, for the purpose of this covenant, all
references in Section 8.06 to "Borrower" shall be deemed to refer to
"Indemnitor," and (b) Section 6.03 of the Instrument shall apply to all Costs,
expenses or other amounts paid or incurred by the Indemnified Parties under this
Agreement. The term "ON DEMAND" shall have the same meaning as in the
Instrument.
7. Recourse Obligations and Survivability. Indemnitor agrees that the
provisions of Section 8.07 of the Instrument shall apply to this Agreement
except all references to "Section 8.05" and "Article VIII" shall be deemed to
include this Agreement, and, for the purpose of this covenant, all references in
Section 8.07 to "Borrower" shall be deemed to refer to "Indemnitor." In
addition, Indemnitor acknowledges and agrees that each Indemnitor, jointly and
severally, is fully and personally liable for the obligations under this
Agreement, and such liability is not limited to the original or amortized
principal balance of the Loan or the value of the Property.
8. Unimpaired Liability. The liability of Indemnitor under this Agreement
shall in no way be limited or impaired by, and Indemnitor consents to and agrees
to be bound by, any amendment or modification of the provisions of the Documents
(other than this Agreement) by any Indemnitor or successor-in-interest to any
Indemnitor. In addition, the liability of Indemnitor shall in no way be limited
or impaired by (a) any extension(s) of time for performance required under the
Documents, (b) any sale or transfer of all or part of the Property, (c) except
as provided in this Agreement or in the Documents, any exculpatory provision in
the Documents limiting Lender's recourse to the Property or to any other
security for the Note, or limiting Lender's rights to a deficiency judgment
against any Indemnitor, (d) the accuracy or inaccuracy of the representations
and warranties made by any Indemnitor under the Documents, (e) the release of
any Indemnitor or person from performance or observance of any of the
agreements, covenants, terms or conditions contained in any of the Documents by
operation of law, Lender's voluntary act, or otherwise, (f) the release or
substitution in whole or in part of any security for the Note, or (g) Lender's
failure to record or file (or improper filing or recording of) any of the
Documents or Lender's failure to otherwise perfect, protect, secure or insure
any security interest or lien given as security for the Note; and, in all such
cases, whether with or without notice to Indemnitor and with or without
consideration.
-3-
<PAGE>
9. Enforcement. Lender may enforce the obligations of Indemnitor under
this Agreement without first resorting to or exhausting any security or
collateral or without first having recourse to the Documents or any of the
Property, through foreclosure proceedings or otherwise; provided, however, that
nothing herein shall inhibit or prevent Lender from suing on the Note or
exercising any other rights or remedies in the Documents. This Agreement is not
collateral or security for the debt of Borrower pursuant to the Loan, unless
Lender expressly elects in writing to make this Agreement additional collateral
or security for the debt of Borrower pursuant to the Loan. It is not necessary
for an Event of Default to have occurred under the Documents for Lender to
exercise its rights under this Agreement.
10. Waivers and Delays. To the fullest extent Indemnitor may do so under
Laws, Indemnitor makes the waivers and agrees to be bound by the provisions of
Section 6.06 and Section 6.07 of the Instrument, and, for the purpose of this
covenant, all references in Section 6.06 and Section 6.07 to "Borrower" shall be
deemed to refer to "Indemnitor." In addition, Indemnitor waives and relinquishes
all rights and remedies under Laws for the benefit of Indemnitor or guarantors
except any rights of subrogation which any Indemnitor may have; provided,
however, that the indemnity in this Agreement is not (a) contingent upon the
existence of any such rights of subrogation or (b) subject to any claims or
defenses which may be asserted in connection with the enforcement of such
subrogation rights including any claim that such rights were abrogated by any
acts of Lender. Notwithstanding the foregoing, Indemnitor agrees to postpone the
exercise of any rights of subrogation with respect to the Property and any other
collateral securing the Loan until the Loan shall have been paid in full. No
delay by Lender in exercising any right, power or privilege under this Agreement
shall operate as a waiver of any such privilege, power or right.
11. Subrogation. Indemnitor shall take all reasonable actions, including
institution of legal action against third parties, necessary or appropriate to
obtain reimbursement, payment or compensation from persons responsible for the
presence of any Hazardous Materials affecting the Property or otherwise
obligated by Laws to bear the cost. Lender shall be subrogated to all of
Indemnitor's present and future rights in such claims.
12. Notice of Legal Actions. Indemnitor shall, within seven (7) days of
receipt, give written notice to Lender and to any other Indemnitor (a) any
notice, advice or other communication from any governmental entity or any source
with respect to Hazardous Materials affecting the Property and (b) any legal
action brought against such party or related to the Property, with respect to
which any Indemnitor may have liability under this Agreement.
13. Notices. All notices or other written communications under this
Agreement shall be given in accordance with and governed by Section 9.02 of the
Instrument. Notices to Borrower and Lender shall be sent to the addresses in
said Section 9.02, and notices to Principal shall be addressed as follows:
-4-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to Principal: With a copy to notices sent to Principal to:
Cornerstone Realty Income Trust, Inc. McGuire Woods Battle & Boothe LLP
306 East Main Street 901 East Cary Street
Richmond, Virginia 23219 Richmond, Virginia 23219-4030
Attn: Stanley J. Olander, Jr. Attn: Martin B. Richards
</TABLE>
14. Applicable Law and Submission to Jurisdiction. Indemnitor agrees that
the provisions of Section 9.04 of the Instrument shall apply to this Agreement,
and, for the purpose of this covenant, all references in Section 9.04 to
"Borrower" shall be deemed to refer to "Indemnitor."
15. No Third Party Beneficiary. The terms of this Agreement are for the
sole and exclusive protection and use of the Indemnified Parties. No other party
shall be a third party beneficiary under this Agreement, and no provision of
this Agreement shall operate or inure to the use and benefit of any such third
party. It is agreed that those persons included in the definition of Indemnified
Parties are not excluded third party beneficiaries.
16. Joint and Several Liability. If Indemnitor consist of more than one
person or entity, the obligations and liabilities of each such person hereunder
are joint and several.
17. WAIVER OF TRIAL BY JURY. INDEMNITOR AND LENDER HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY
ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.
-5-
<PAGE>
IN WITNESS WHEREOF, Indemnitor has duly executed this Agreement as of the date
first above written.
<TABLE>
<CAPTION>
<S> <C>
BORROWER:
CRIT-NC, LLC, a Virginia limited liability
company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a Virginia
corporation, Managing Member
By: Stanley J. Olander, Jr.
-----------------------------------
Attest: /s/ David S. McKenney Name: Stanley J. Olander, Jr.
----------------------------- ----------------------------
Name: David S. McKenney Title: Chief Financial Officer
----------------------- ----------------------------
Title: Sr. Vice President
-----------------------
[CORPORATE SEAL]
PRINCIPAL:
CORNERSTONE REALTY INCOME
TRUST, INC., a Virginia corporation
Attest: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
----------------------------- ---------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
----------------------- -------------------------
Title: Sr. Vice President Title: Chief Financial Officer
----------------------- -------------------------
[CORPORATE SEAL]
</TABLE>
-6-
EXHIBIT 10.3
Loan No. 6 103 651
UNCONDITIONAL AND IRREVOCABLE
GUARANTY OF PAYMENT AND PERFORMANCE
(RECOURSE CARVEOUTS)
Dated as of September 27, 1999
DEFINITIONS: In this Guaranty the following terms shall have the
following meanings:
1. BORROWER: CRIT-NC, LLC, a Virginia limited liability company
2. LENDER: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey Corporation
3. GUARANTOR: CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation
4. LOAN: That loan from Lender to Borrower in the principal
amount of Twenty-Two Million Nine Hundred Fifty
Thousand and No/100 Dollars ($22,950,000.00),
evidenced by the Note, secured by the Security
Instrument.
5. NOTE: That certain Promissory Note dated as of September
27, 1999 made by Borrower in favor of Lender in the
principal amount of the Loan.
6. SECURITY
INSTRUMENT: Those certain two (2) Deeds of Trust and Security
Agreements dated as of September 27, 1999 executed by
Borrower and securing the repayment of the Note, to
be recorded in the real estate records of Wake
County, North Carolina and Mecklenburg County, North
Carolina.
7. DEBT: The principal amount evidenced by the Note and
secured by the Security Instrument, together with all
renewals, extensions and modifications thereof, or so
much thereof as may be outstanding from time to time,
including any future advances made thereunder,
together with interest thereon at the rate of
interest which may or shall become due and payable
pursuant to the provisions of the Note, the Security
Instrument, or any other instrument evidencing or
securing the Loan, together with all renewals,
extensions and modifications of the foregoing, and
together with all expenses,
<PAGE>
including but not limited to legal fees and costs,
incurred by the Lender in connection with the
collection of all or any portion thereof.
8. LOAN
DOCUMENTS: The Note, Security Instrument, this Guaranty, any
loan agreement of even date herewith between Lender
and Borrower and all documents collateral or
pertaining to the foregoing instruments, together
with all renewals, extensions, and modifications of
the foregoing.
9. OBLIGATIONS: All covenants, duties, promises, agreements,
conditions, undertakings and all other obligations
(other than payment of the Debt) which Borrower is to
perform, satisfy or cause to occur, or not to occur,
as the case may be, and which are set forth in the
Loan Documents, together with all reasonable
expenses, including, but not limited to legal fees
and costs, incurred by Lender in connection with the
enforcement of any of the foregoing.
10. PROPERTY: The real property and improvements covered by and
more particularly described in the Security
Instrument and securing the Note, being four
apartment projects located in Mecklenburg County,
North Carolina and Wake County, North Carolina
commonly known as Charleston Place, Stone Point, St.
Regis and Remington Place.
RECITALS:
- ---------
Borrower has applied to the Lender for the Loan. The Lender is willing to make
the Loan to Borrower only if the Guarantor executes and delivers this Guaranty
and guarantees payment to the Lender of the Debt and the payment and performance
of all Paragraph 8 and Paragraph 9 recourse indebtedness of Borrower under the
Note.
CONSIDERATION:
- --------------
As an inducement to the Lender to make the Loan and because the
Guarantor will benefit from the Loan and the transactions relating thereto, the
Guarantor makes this Guaranty.
-2-
<PAGE>
COVENANTS:
1. NATURE AND SCOPE OF GUARANTY.
1.1 The Guarantor, jointly and severally (if executed by more than
one person), irrevocably, absolutely and unconditionally
guarantees to the Lender, its successors and assigns, the
payment and performance of all Paragraph 8 and Paragraph 9
recourse indebtedness of Borrower under the Note, including,
but not limited to, full personal recourse liability for
payment of all of the Debt and the performance of all of the
Obligations pursuant to the terms of Paragraph 9 of the Note.
This Guaranty is a primary and absolute obligation of the
Guarantor.
1.2 Guarantor will make all payments hereunder in lawful money of
the United States of America in immediately available funds
without set-off, counterclaim or defense.
1.3 Guarantor's liability hereunder shall remain unchanged
irrespective of any invalidity, illegality or unenforceability
of any other guaranty, pledge, assignment or other security
for the Debt or Obligations, and without regard to any claim,
counterclaim, set-off or defense which Borrower, any other
guarantor, surety or obligor might be privileged to assert
with respect to the validity, legality or enforceability of
the Debt or Obligations and irrespective of any present or
future law or order of any government or any agency thereof
purporting to reduce, amend or otherwise affect any obligation
of the Borrower or of any other guarantor, surety or other
obligor or to vary the terms of payment of the Debt or the
terms of any of the Obligations. If for any reason whatsoever
(including but not limited to ultra vires, lack of authority,
illegality, force majeure, act of God or impossibility) the
Debt or the Obligations cannot be enforced against Borrower,
such unenforceability shall in no manner affect the liability
of Guarantor hereunder and Guarantor shall be liable hereunder
notwithstanding that Borrower may not be liable for such Debt
or such Obligations.
1.4 The obligations of the Guarantor hereunder are independent of
the obligations of the Borrower relative to the Debt and
Obligations, and a separate action or actions for payment,
damages or performance may be brought and prosecuted against
Guarantor, or any of them should there be more than one,
regardless of whether an action is or could be brought against
Borrower, any security for the Debt and/or any of the
Obligations or any other party obligated to pay the Debt
and/or pay or perform any of the Obligations. Guarantor will
not be privileged to assert, and hereby waives the right to
assert, in any action(s) by Lender against Guarantor any
defense, set-off or counterclaim which Borrower or any other
obligor might then be privileged to assert. Guarantor
acknowledges and agrees that, as between Guarantor and the
Lender, the Debt and Obligations guaranteed hereunder may be
declared to be due and payable for purposes of this Guaranty
notwithstanding any stay, injunction or other prohibition
arising from the filing of a voluntary or an involuntary
bankruptcy petition by or against Borrower, or
-3-
<PAGE>
otherwise, which may prevent or delay any such declaration as
against the Borrower. In addition, in the event that Borrower
does not or is unable so to pay the Debt or perform the
Obligations for any reason, including, without limitation,
liquidation, dissolution, receivership, conservatorship,
insolvency, bankruptcy, assignment for the benefit of
creditors, sale of all or substantially all assets,
reorganization, arrangement, composition, or readjustment of,
or other similar proceedings affecting the status,
composition, identity, existence, assets or obligations of
Borrower, or the disaffirmance or termination of any of the
Debt or Obligations in or as a result of any such proceeding,
Guarantor shall pay the Debt and perform the Obligations and
no such occurrence shall in any way affect Guarantor's
obligations hereunder.
1.5 If any claim is ever made upon Lender for repayment or
recovery of any amount received by Lender in payment or on
account of the Debt and/or any of the Obligations by virtue of
such amount having been a preference under applicable
bankruptcy laws or for any other reason and Lender repays all
or part of said amount pursuant to any judgment, decree or
order of any court or administrative body having jurisdiction
over Lender or any of its property or any settlement or
compromise of any such claim effected by Lender with any such
claimant (including but not limited to the Borrower or any
other guarantor), then any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
and, notwithstanding any prior satisfaction or cancellation of
this Guaranty, of the Note or any other instrument evidencing
the Debt and any of the Obligations, this Guaranty shall
continue to be effective or shall be automatically reinstated,
as the case may be, and the Guarantor shall be and remain
liable to Lender hereunder for the amount so repaid or
recovered to the same extent as if such amount had never
originally been received by Lender. Such amount shall be paid
by Guarantor to Lender on demand.
1.6 This Guaranty shall automatically remain in effect for a
period of one hundred (100) days after the date on which all
of the Debt and Obligations are last fully paid and performed,
and, if no bankruptcy petition is filed against Borrower
within ninety (90) days after such date, then, in that event
this Guaranty shall be deemed to have been canceled as of the
aforesaid date on which all of the Debt and Obligations were
last fully paid and performed, subject to being automatically
reinstated for the reasons stated in Subsection 1.5 above. If,
however, a bankruptcy petition is filed by or against the
Borrower during said ninety (90) day period, this Guaranty
shall continue in effect unless and until a final,
non-appealable decision by a court of competent jurisdiction
has been rendered or an agreement has been entered or reached
pursuant to which Lender shall be entitled to retain all
monies paid by Borrower to Lender. If Lender is obligated to
return to the Borrower, to the estate of the Borrower or to a
bankruptcy trustee for the Borrower any monies previously paid
by the Borrower, then this Guaranty shall continue in effect
and Guarantor, as provided in Subsection 1.5 above, shall
continue to be liable to Lender for repayment of such monies.
-4-
<PAGE>
2. DISCHARGE OF GUARANTOR.
Guarantor shall only be discharged from liability hereunder
upon the payment in full of the Debt and the payment and complete performance of
all the Obligations, but subject, however, to the provisions of Subsections 1.1,
1.5 and 1.6 hereinabove.
3. ASSENT TO AGREEMENTS MADE BY BORROWER.
Guarantor assents to all terms and agreements heretofore or
hereafter made by Borrower with Lender insofar as same may affect the Loan, the
Debt or any of the Obligations.
4. CONSENT TO LENDER'S ACTIONS REGARDING THE BORROWER, THE
GUARANTOR, AND THE COLLATERAL.
Guarantor consents that Lender may from time to time, before
or after any default by the Borrower, with or without further notice to or
assent from Guarantor:
4.1 Exchange with, release or surrender, either with or without
consideration, to the Borrower or to any Guarantor, pledgor or
grantor any collateral, or waive, release or subordinate any
security interest, in whole or in part, now or hereafter held
as security for the Debt and/or any of the Obligations;
4.2 Waive or delay the exercise of any of its rights or remedies
against any person or entity, including but not limited to the
Borrower and/or any guarantor, which waiver or delay shall not
preclude the Lender from further exercise of any of its
rights, powers or privileges expressly provided for herein or
otherwise available, it being understood that all such rights
and remedies are cumulative;
4.3 Release, either fully or partially, any person or entity,
including but not limited to the Borrower, guarantor,
endorser, surety or any judgment debtor;
4.4 Proceed against the Guarantor for payment of the Debt and for
the payment and performance of the Obligations, or any part of
either, without first proceeding against or joining the
Borrower, any other guarantor, surety, endorser of the Note,
or any property securing payment of the Note, the Security
Instrument, or any other Loan Documents;
4.5 Renew, extend or modify the terms of the Loan or any
instrument or agreement evidencing the Debt and/or any of the
Obligations;
4.6 Apply payments by the Borrower, the Guarantor, or any other
person or entity to the reduction of the Debt and/or
Obligations in such manner and in such amounts and at such
time or times and in such order and priority as Lender shall
determine;
4.7 Permit any sale, transfer or encumbrance of the Property or
any part thereof; and
-5-
<PAGE>
4.8 Generally deal with the Borrower or any of the security or
other person or party as the Lender shall determine.
The Guarantor hereby ratifies and confirms any such exchange,
release, surrender, subordination, waiver, delay, proceeding, renewal,
extension, modification or application, or other dealing, all of which actions
shall be binding upon Guarantor who hereby waives all defenses, counterclaims or
set-offs which Guarantor might otherwise have as a result of such actions, and
who hereby agrees to remain bound under this Guaranty.
5. WAIVER OF NOTICE.
Guarantor waives all notices whatsoever with respect to this
Guaranty or with respect to the Debt and/or any of the Obligations guaranteed
hereby, including, but not limited to, notice of:
5.1 The Lender's acceptance of this Guaranty or its intention to
act, or its action, in reliance hereon;
5.2 The making of the Loan by Lender to Borrower and of the
creation and existence of the Debt and Obligations;
5.3 Presentment and demand for payment of the Debt or any portion
thereof and demand for the payment and/or performance of any
of the Obligations;
5.4 Protest and notice of dishonor or nonpayment with respect to
the Debt and/or Obligations or any portion of either;
5.5 Any default by Borrower or any pledgor, grantor of security,
or guarantor, including the Guarantor under any of the Loan
Documents;
5.6 Any suit or the taking of other action by Lender against
Borrower and any other notice to any other party liable for
the Debt and/or any of the Obligations;
5.7 Any other notices to which the Guarantor may otherwise be
entitled with respect to the Loan, the Debt and/or any of the
Obligations; and
5.8 Any demand for payment under this Guaranty.
Notwithstanding the foregoing, or anything else herein to the contrary,
to the extent the Loan Documents permit the Borrower to cure a default after
notice, Guarantor shall have no obligation hereunder until Borrower fails to
cure such default after notice required under the Loan Documents.
-6-
<PAGE>
6. ADDITIONAL WAIVERS.
Guarantor waives the following:
6.1 Failure by Lender to obtain and perfect any security interest
or lien on any property to secure the Debt and/or Obligations
or any portion thereof.
6.2 All defenses, counterclaims and set-offs which Guarantor may
have at any time to any claim of Lender against Borrower.
6.3 All diligence by Lender in the collection of, protection of or
realization upon the Debt and/or Obligations or any part
thereof, any obligations hereunder or any security for any of
the foregoing or in enforcing any remedy available to it under
any of the Loan Documents or otherwise available at law or in
equity.
6.4 Any claim, right or remedy which Guarantor may now have or
hereafter acquire against the Borrower that arises hereunder
and/or from the performance by any Guarantor hereunder
including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, indemnification, or
participation in any claim, right or remedy of Lender against
the Borrower or any security which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or
otherwise.
6.5 The right to require the Lender to proceed against the
Borrower or any other person liable on the indebtedness, to
proceed against or exhaust any security held from the Borrower
or any other person, or to pursue any other remedy in Lender's
power whatsoever and Guarantor waives the right to have the
property of the Borrower first applied to the discharge of the
indebtedness. Lender may, at its election, exercise any right
or remedy it may have against the Borrower or any security
held by Lender, including, without limitation, the right to
foreclose upon any such security by one or more judicial or
nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, without affecting or
impairing in any way the liability of Guarantor hereunder,
except to the extent the indebtedness has been paid, and
Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution
or subrogation or any other right or remedy of Guarantor
against the Borrower or any such security, whether resulting
from such election by Lender or otherwise.
6.6 Any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation from any
cause whatsoever (including without limitation, any
intervention or omission by Lender) of the liability, either
in whole or in part, of the Borrower to Lender for the
indebtedness. Guarantor understands that if all or any part of
the liability of the Borrower to Lender for the indebtedness
is secured by real property Guarantor shall be liable for the
full amount of its liability hereunder notwithstanding
foreclosure on such real
-7-
<PAGE>
property by trustee sale or any other reason impairing
Guarantor's right to proceed against the Borrower.
6.7 To the fullest extent permitted by law, all rights and
benefits under any applicable law of the State of North
Carolina purporting to reduce a guarantor's obligations in
proportion to the obligation of the principal; provided that
Guarantor's obligations shall not exceed the obligations set
forth in Section 1.1 above.
6.8 Any defense arising by reason of any claim relating to (i) the
incapacity, death, disability, dissolution or termination of
Guarantor, Borrower, Lender or any other person or entity;
(ii) the failure by Lender to file or enforce a claim against
the estate (either in administration, bankruptcy or other
proceeding) of Borrower or any other person or entity; (iii)
recovery from Borrower or any other person or entity becomes
barred by any statute of limitations or is otherwise
prevented; (iv) any transfer or transfers of any of the
property covered by the Security Instrument or any other
instrument securing the payment of the Note; (v) any
modifications, extensions, amendments, consents, releases or
waivers with respect to the Note, the Deed of Trust, any other
instrument now or hereafter securing the payment of the Note,
or this Guaranty; or (vi) Guarantor is or becomes liable for
any indebtedness owing by Borrower to Lender other than under
this Guaranty; Guarantor hereby covenanting and agreeing with
Lender that the obligations and liabilities of Guarantor shall
not be modified, changed, released, limited or impaired in any
manner whatsoever on account of any or all of the foregoing.
6.9 To the fullest extent permitted by law, (i) any defense
arising as a result of any election by Lender, in any
proceeding instituted under the Bankruptcy Code, under Section
1111(b)(2) of the Bankruptcy Code, (ii) any defense based on
any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code, and (iii) any defense arising as a
result of any election made by Lender under Section 9-501 of
the Uniform Commercial Code. For purposes hereof, the term
"Bankruptcy Code" shall refer to the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.
In addition, Guarantor expressly acknowledges that Guarantor will be and remain
fully liable for the indebtedness hereunder even if, as a result of any exercise
of the power of sale under the Security Instrument and/or any other election of
remedies by Lender under the Security Instrument and/or any of the other Loan
Documents or for any other reason, any rights of reimbursement, contribution or
subrogation on the part of Guarantor against the Borrower, in respect of the
Property or from or against any other Guarantor has been destroyed or impaired.
Guarantor further expressly acknowledges that Guarantor could, in the absence of
the waivers and agreements set forth herein, have one or more defenses to or
otherwise be exonerated from the obligations and liabilities arising under
Guaranty as a result of any such election of remedies by Lender, including,
without limitation, exercise of the power of sale under the Security Instrument,
and Guarantor hereby knowingly, expressly and irrevocably waives each and every
such defense to his liability hereunder, and expressly acknowledges the reliance
hereon of Lender.
-8-
<PAGE>
7. SUBORDINATION.
7.1 All rights and claims of Guarantor against Borrower or any of
Borrower's property now or hereafter existing shall be
subordinate and subject in right of payment to the prior
payment in full of the Debt to Lender and/or to the payment
and prior performance, in full, of all the Obligations to
Lender.
7.2 Without Lender's prior written consent, Guarantor will not ask
for, demand, sue for, take or receive from Borrower, by
set-off or otherwise, any sums now or hereafter owed by
Borrower to Guarantor, nor any security therefor. Guarantor
hereby transfers, conveys and assigns to the Lender, as
collateral security for any and all of the Debt and
Obligations, all of the said rights and claims of the
Guarantor against the Borrower (and any security therefor),
with full right on the part of the Lender, in its own name or
in the name of the Guarantor, to collect and enforce said
claims, by suit, proof of debt in bankruptcy, or other claims,
by liquidation proceedings or otherwise. Should any payment,
security or proceeds of security be received by the Guarantor
for or on account of any of said claims or rights prior to the
full payment of the Debt and full payment and performance of
any of the Obligations subject to the provisions of
Subsections 1.5 and 1.6 hereinabove, the Guarantor will
forthwith deliver same to the Lender in precisely the form
received (except for the Guarantor's endorsement where
necessary) for application on account of the Debt and/or
Obligations in accordance with Subsection 4.6 hereinabove,
and, until so delivered, the same shall be held in trust by
the Guarantor as property of the Lender. In the event of the
failure of the Guarantor to endorse any instrument for the
payment of money so received by the Guarantor, payable to the
Guarantor's order, the Lender or any officer or employee of
the Lender is hereby constituted and appointed attorney in
fact for the Guarantor, with full power to make any such
endorsement and with full power of substitution, which agency
shall be deemed to be coupled with an interest and, therefore,
is irrevocable.
7.3 The Guarantor hereby further covenants and agrees that any
lease or leases by and between the Borrower, as lessor, and
the Guarantor, as lessee, with respect to the property (real
and personal) covered by the Security Instrument and/or any
security agreement from Borrower to Lender shall, at all
times, be junior, inferior and subordinate to the lien of the
Security Instrument and/or security interest created by the
security agreement as the same now exist or may hereafter be
amended or modified, it being the intent and agreement of the
Guarantor that any and all leases may be terminated by the
Lender through any foreclosure or similar proceeding involving
the Security Instrument and/or security agreement or property
encumbered by either.
-9-
<PAGE>
8. SUBROGATION RIGHTS.
Guarantor will not assert any right to which it may be or may
become entitled, whether by subrogation, contribution or otherwise, against the
Borrower or any other guarantor, or against any of their respective properties,
by reason of the performance by the Guarantor of its obligations under this
Guaranty, except after payment in full of the Debt and the full payment and
performance of the Obligations subject to the provisions of Subsections 1.5 and
1.6 hereinabove. If any amount shall be paid to or received by Guarantor on
account of any such right of subrogation or contribution before the Debt and
Obligations have been fully paid and performed, such amount shall be held by
Guarantor for the benefit of Lender and shall be promptly paid to Lender
(without further demand from Lender being necessary). Lender may credit and
apply any such sums to such of the Debt and/or Obligations as Lender may desire
in accordance with Subsection 4.6 hereinabove.
9. PERIODIC FINANCIAL STATEMENTS.
Within sixty (60) days after the end of Guarantor's fiscal
year, Guarantor will furnish to Lender, Guarantor's financial condition and
consolidated balance sheet as of the end of said preceding year and Guarantor's
statement of profit and loss for said preceding year and such additional
financial data as Lender may reasonably request, all such balance sheets, profit
and loss statements, and additional data to be prepared in accordance with
generally accepted accounting principles consistently applied and be certified
as being so prepared by Guarantor or, at Lender's election, by Guarantor's
certified public accountant. Guarantor will provide to Lender such other
financial information and statements concerning Guarantor's financial status as
Lender may request from time to time, all of which shall be in form and
substance acceptable to Lender. Guarantor shall be in default hereunder if there
is any falsity in any material respect or any material omission in any
representation or statement made by Guarantor to Lender or in any information
furnished Lender, by or on behalf of Borrower or Guarantor, in connection with
the Debt and/or any of the Obligations or if there is a material adverse change
in the financial condition of Guarantor, as reasonably determined by Lender.
10. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants to Lender that:
10.1 The Guarantor has received good, valuable and sufficient
consideration for Guarantor's execution and delivery of this
Guaranty.
10.2 If any Guarantor is a corporation, limited partnership,
trustee or other entity that is not a natural person, it is
(i) a duly organized and valid existing entity under the laws
of the state or country of its incorporation; (ii) that it is
qualified to do business in each state in which qualification
is necessary; (iii) that it has the power to execute this
Guaranty; (iv) that the execution of this Guaranty has been
duly authorized and that it is a binding and valid obligation
of the entity permitted by its articles of incorporation,
bylaws, partnership agreement, trust agreement or like
instrument that authorizes or limits its actions; (v) that no
governmental
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<PAGE>
consent or approval is required in connection with the
execution, delivery or performance of this Guaranty.
10.3 If any Guarantor is a partnership, the obligations of said
Guarantor shall remain in force notwithstanding any changes in
the individuals composing the partnership and the term
"Guarantor" shall include any altered or successive
partnerships, but the predecessor partnerships and their
partners shall not thereby be released from any obligations or
liability hereunder.
10.4 This Guaranty constitutes the valid and binding obligation of
the Guarantor.
10.5 All balance sheets, statements of profit and loss, and other
financial data that have been given to Lender with respect to
Guarantor (i) are complete and correct in all material
respects; (ii) accurately present the financial condition of
Guarantor as of the stated dates, and the results of its or
their operations, for the periods for which the same have been
furnished; and (iii) have been prepared in accordance with
generally accepted accounting principles consistently followed
throughout the periods covered thereby.
10.6 All balance sheets disclose all known liabilities, direct and
contingent, as of their respective dates.
10.7 There has been no change in the condition of the Guarantor,
financial or otherwise, since the date of the most recent
financial statements given to the Lender with respect to
Guarantor other than changes in the ordinary course of
business, none of which changes has been materially adverse.
This representation shall apply to all financial statements
and financial data hereafter given to Lender by Guarantor as
of the time the same are given to Lender.
10.8 There are no actions, suits or proceedings pending or
threatened against or affecting Guarantor that will have a
material and adverse effect on Guarantor and that will not be
removed in the ordinary course of business.
10.9 There are no judgments or tax liens against Guarantor or any
property of Guarantor that will have a material and adverse
effect on Guarantor and that will not be removed in the
ordinary course of business.
10.10 Guarantor's execution, delivery or performance of this
Guaranty will not violate any provision of law, governmental
rule or regulation, order, writ, judgment, injunction, decree,
determination or award of any court, arbitrator, governmental
department, commission, board, bureau, or agency, or any
provision of any indenture, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of
Guarantor's properties or assets is bound, will not conflict
with, result in breach of or constitute a default under any
such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of
any type on any properties or assets of Guarantor.
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<PAGE>
11. CHANGE IN OWNERSHIP OF GUARANTOR.
Guarantor will not, without the prior written consent of
Lender, do or permit another to do any of the following:
11.1 If Guarantor or any constituent of Guarantor is a corporation,
(i) transfer, assign, sell or encumber any stock in Guarantor
or in any such constituent held by any stockholder of
Guarantor or of any such constituent as of the date hereof
(whether such purported transfer shall be by direct transfer
by such stockholder, by operation of law, the result of
encumbrance of such stock by such stockholder, the result of
action by any party against such stockholder, or otherwise) or
(ii) issue any additional stock of Guarantor or any such
constituent after the date hereof;
11.2 If Guarantor or any constituent of Guarantor is a partnership,
(i) transfer, assign, sell or encumber any partnership
interest in Guarantor or in any such constituent of Guarantor
held by any partner (general or limited) of Guarantor or of
any such constituent as of the date hereof (whether such
purported transfer shall be by direct transfer by such
partner, by operation of law, the result of encumbrance of
such partnership interest by such partner, the result of any
action by any party against such partner, or otherwise), or
(ii) admit to Guarantor or any such constituent any partner,
whether general or limited).
11.3 If Guarantor or any constituent of Guarantor is the trustee
pursuant to a trust, (i) transfer, assign, sell or encumber or
allow any transfer, assignment, sale or encumbrance of any
beneficial interest in any such trust as of the date hereof
(whether such purported transfer shall be by direct transfer,
by operation of law, the result of encumbrance of such
beneficial interest, the result of action by a party against
any beneficiary, or otherwise), or (ii) admit any new
beneficiary of the trust.
11.4 Effect any change in ownership of Borrower in violation of the
Security Instrument or any transfer or encumbrance of the
Property, as defined in the Security Instrument, or any
portion thereof, in violation of the Security Instrument.
12. DEFAULT, SECURITY INTEREST/RIGHT OF SET-OFF.
12.1 In the event of any default by Guarantor hereunder or if
Guarantor shall die, Lender may, at its option, accelerate all
sums due and payable under the Loan Documents and declare the
same immediately due and payable.
12.2 At any time when any of the Debt shall then be due and payable
and/or any of the Obligations payable or performable by
Guarantor under this Guaranty, Lender, without prior demand or
notice of any kind to Guarantor, may, from time to time,
appropriate, set-off and apply toward payment of the Debt
and/or payment or
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<PAGE>
performance of any of the Obligations any funds or property in
which it then has a security interest under this Section and
may transfer into its own name or that of its nominee any such
funds or property which are then in its possession, custody or
control. Lender will promptly notify Guarantor after any such
set-off and application, but failure to give such notice will
not affect the validity of any such set-off and application.
13. ASSIGNMENT BY LENDER.
Lender may, without notice of any kind to Guarantor, sell,
assign, transfer, participate, syndicate or pool (as collateral or otherwise)
the Debt and/or any of the Obligations, and any security therefor, and in such
event, each and every immediate and successive assignee, transferee or holder of
the Debt and/or any of the Obligations, or any interest therein, shall have the
right to enforce this Guaranty, by suit or otherwise, for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, powers and benefits,
but Lender shall have, to the extent permitted by Laws (as defined in the
Security Instrument) an unimpaired right, prior and superior to that of any such
assignee, transferee or holder, to enforce this Guaranty for the benefit of
Lender as to such part of the Debt and/or any of the Obligations as it has not
sold, assigned or transferred.
14. COSTS OF ENFORCEMENT.
Guarantor shall pay Lender, on demand, all costs and expenses
paid or incurred by Lender in enforcing the obligations of Guarantor hereunder,
including, by way of illustration and not by way of limitation, all court costs
and reasonable attorneys' fees regardless of whether suit is filed and also
including such costs and attorneys' fees at trial and on appeal. If Lender
obtains a judgment against Guarantor for the Debt and/or any of the Obligations,
Guarantor hereby agrees that the amount due under such judgment shall bear
interest at the Default Rate, as defined in the Note, which definition is
incorporated herein by this reference, from date of judgment until such judgment
is paid in full.
15. CUMULATIVE REMEDIES.
Lender's rights and remedies hereunder are cumulative with any
and all other rights and remedies which Lender has or may hereafter have under
the other Loan Documents or which are otherwise available at law or in equity.
No delay on the part of Lender in exercising any of its rights or remedies shall
constitute a waiver thereof.
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<PAGE>
16. ENTIRE AGREEMENT BETWEEN LENDER AND GUARANTOR.
Guarantor hereby agrees that this instrument contains the
entire agreement between the parties and there is and can be no other oral or
written agreement or understanding whereby the provisions of this instrument
have been or can be affected, varied, waived or modified in any manner unless
the same be set forth in writing and signed by a duly authorized officer of the
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
17. NOTICES.
Any notice from Lender to Guarantor under this Guaranty shall
be given by sending it by a recognized overnight courier which provides receipts
such as Federal Express, delivering it, or by mailing it, postage prepaid, by
United States Certified Mail, return receipt requested, addressed to Guarantor's
address as set forth below or such other address as Guarantor hereafter
designates by advance written notice to Lender.
If to Guarantor:
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attn: Stanley J. Olander, Jr.
With a copy to:
McGuire Woods Battle & Boothe LLP
901 East Cary Street
Richmond, Virginia 23219-4030
Attn: Martin B. Richards
Any notice to Lender under this Guaranty shall be given by
sending it by a recognized overnight courier which provides receipts such as
Federal Express, delivering it or by mailing it, postage prepaid, by United
States Certified Mail, return receipt requested addressed to Lender's address
set forth herein or such other address as Lender hereafter designates by advance
written notice to Guarantor.
If to the Lender:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Vice President-Mortgage Loan Servicing;
Reference Loan No. 6 103 651
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<PAGE>
With a copy to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Regional Counsel; Reference Loan
No. 6 103 651
Any notice under this Guaranty shall be deemed to have been given to
Guarantor or Lender when delivered, in the case of personal delivery, and the
earlier of actual receipt or three (3) days after mailing when mailed in
compliance with the requirements of this Section.
18. JURISDICTION.
In the event Lender seeks to enforce this Guaranty by legal
action, the Guarantor hereby waives the right to be sued in the county of the
Guarantor's residence or principal place of business and hereby consents to
being sued in Mecklenburg or Wake County, North Carolina. Guarantor further
agrees that any suit hereunder by Lender may be brought in either the United
States District Court for the Eastern or Western District of North Carolina or
in the applicable state court for Mecklenburg or Wake County, North Carolina.
Guarantor waives any right to trial by jury in any civil action arising out of
or based upon this Guaranty. Should Guarantor, or any resident agent appointed
hereunder, be or become a non-resident of the State of North Carolina, Guarantor
shall, by written notice to Lender setting forth the name and address of the
appointed person, appoint a resident agent residing in North Carolina to
receive, for and on Guarantor's behalf, service of process in the State of North
Carolina, which service shall be deemed effective when delivered whether or not
such resident agent gives notice thereof to the Guarantor, provided that Lender
has simultaneously sent said service of process to Guarantor by United States
Certified Mail return receipt requested in the manner of notices under this
Guaranty. The Guarantor hereby appoints Martin B. Richards, whose address is c/o
McGuire Woods Battle & Boothe LLP, 901 East Cary Street, Richmond, Virginia
23219-4030, as its resident agent to receive, for and on its behalf, service of
process in the State of North Carolina.
19. CONFLICT OF LAW.
This Guaranty shall be governed by and construed and
enforced in accordance with the laws of the State of North Carolina.
20. GENDER AND NUMBER.
In this Guaranty, wherever the context so requires, the
neuter gender includes the masculine and/or feminine gender, the singular
numbers include the plural, and the plural numbers include the singular.
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<PAGE>
21. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of the Lender, its
successors and assigns, and shall be binding upon the Guarantor and its
respective successors and assigns.
22. SAVINGS CLAUSE.
Whenever possible, each provision or portion of this
Guaranty shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision or portion of this Guaranty is
declared or found by a court of competent jurisdiction to be unenforceable or
null and void, such provision or portion thereof shall be deemed stricken and
severed from this Guaranty, and the remaining provisions and portions thereof
shall continue in full force and effect. To the extent permitted by applicable
law Guarantor hereby waives any provision of law that renders any provision
hereof unenforceable. The provisions of this Section shall prevail over and
control over every other provision of this Guaranty.
23. WAIVER OF TRIAL BY JURY.
GUARANTOR AND LENDER (AS ACKNOWLEDGED BY ITS ACCEPTANCE OF THIS
GUARANTY) HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE
LOAN, THIS GUARANTY, THE LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF LENDER OR
GUARANTOR IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, the Guarantor, intending to be jointly and
severally legally bound hereby (if executed by more than one person), has duly
executed and delivered this Guaranty under seal as of the day and year first set
forth above.
GUARANTOR:
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
-----------------------------------
Name: Stanley J. Olander, Jr.
-----------------------------
Title: Chief Financial Officer
----------------------------
(CORPORATE SEAL)
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EXHIBIT 10.4
Loan No. 6 103 651
Loan No. 6 103 650
UNCONDITIONAL AND IRREVOCABLE
GUARANTY OF PAYMENT AND PERFORMANCE
(CROSS-COLLATERALIZATION)
Dated as of September 27, 1999
DEFINITIONS: In this Guaranty the following terms shall have the
following meanings:
1. BORROWER: CRIT-NC, LLC, a Virginia limited liability company
2. LENDER: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation
3. GUARANTOR: CORNERSTONE REALTY INCOME TRUST, INC., a Virginia
corporation
4. LOAN: That loan from Lender to Borrower in the principal
amount of Twenty-Two Million Nine Hundred Fifty
Thousand and No/100 Dollars ($22,950,000.00),
evidenced by the Note, and secured by the Security
Instrument.
5. NOTE: That certain Promissory Note dated as of September
27, 1999 made by Borrower in favor of Lender in the
principal amount of the Loan.
6. SECURITY
INSTRUMENT: Those certain two Deeds of Trust and Security
Agreements dated as of September 27, 1999 executed by
Borrower and securing the repayment of the Note, to
be recorded in the real estate records of Wake
County, North Carolina and Mecklenburg County, North
Carolina.
7. DEBT: The principal amount evidenced by the Note and
secured by the Security Instrument, together with all
renewals, extensions and modifications thereof, or so
much thereof as may be outstanding from time to time,
including any future advances made thereunder,
together with interest thereon at the rate of
interest which may or shall become due and payable
pursuant to the provisions of the Note, the Security
Instrument, or any other instrument evidencing
<PAGE>
or securing the Loan, together with all renewals,
extensions and modifications of the foregoing, and
together with all reasonable expenses, including, but
not limited to, legal fees and costs, incurred by the
Lender in connection with the collection of all or
any portion thereof.
8. LOAN
DOCUMENTS: The Note, Security Instrument, this Guaranty, any
loan agreement of even date herewith between Lender
and Borrower and all documents collateral or
pertaining to the foregoing instruments, together
with all renewals, extensions, and modifications of
the foregoing.
9. OBLIGATIONS: All covenants, duties, promises, agreements,
conditions, undertakings and all other obligations
(other than payment of the Debt) which Borrower is to
perform, satisfy or cause to occur, or not to occur,
as the case may be, and which are set forth in the
Loan Documents, together with all expenses,
including, but not limited to, legal fees and costs,
incurred by Lender in connection with the enforcement
of any of the foregoing.
10. PROPERTY: The real property and improvements covered by and
more particularly described in the Security
Instrument and securing the Note, being four
apartment projects located in Wake County, North
Carolina and Mecklenburg County, North Carolina known
commonly as Charleston Place, Remington Place, St.
Regis and Stone Point.
RECITALS:
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A. Borrower and Guarantor applied for a loan in the aggregate amount of
$73,500,000.00 (the "Aggregate Loan") pursuant to that certain First Mortgage
Loan Application dated July 2, 1999 (the "Application"). Lender, by that certain
Loan Commitment Letter dated September 24, 1999, has committed to make the
Aggregate Loan in accordance with the Application.
B. The Aggregate Loan is divided into two individual loans: (i) the
Loan made by Lender to Borrower in the amount of $22,950,000.00; and (ii) a
simultaneous loan made by Lender to Guarantor in the amount of $50,550,000.00
(the "Cornerstone Loan"). The Application requires that the Loan and the
Cornerstone Loan be cross-defaulted and cross-collateralized.
C. The Cornerstone Loan is evidenced by a promissory note from
Guarantor to Lender of even date herewith (the "Cornerstone Note") and secured
by (i) one (1) Deed to Secure Debt and Security Agreement to be recorded in
Gwinnett County, Georgia and Clayton County, Georgia, and (ii) two (2) Mortgages
and Security Agreements to be recorded in Charleston County, South
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<PAGE>
Carolina and Richland County, South Carolina of even date herewith
(collectively, the "Cornerstone Security Instrument") and other loan documents
described therein (the Cornerstone Note, the Cornerstone Security Instrument and
such other loan documents, collectively, the "Cornerstone Loan Documents").
D. Guarantor derives financial benefit from the execution of this
Guaranty. Guarantor acknowledges that the provisions set forth in this Guaranty
and otherwise set forth in the Loan Documents and the Cornerstone Loan Documents
relating to cross-default and cross-collateralization have resulted in more
favorable economic terms for the Cornerstone Loan to Guarantor, and that
Guarantor would be unable to receive financing in the amount, or at the rate, or
otherwise under more favorable terms, than those set forth therein and,
therefore, there exists direct and valuable consideration for Guarantor's
consent and agreement to the cross- default and cross-collateralization
provisions.
E. Guarantor derives further benefit from the additional security for
repayment of the Cornerstone Loan afforded by that certain Unconditional and
Irrevocable Guaranty of Payment and Performance (Cross-Collateralization)
executed by Borrower in favor of Lender of even date herewith guaranteeing the
Cornerstone Loan and Cornerstone Loan Documents and which Guaranty by Borrower
is secured by the Loan Documents encumbering the Property. Guarantor
acknowledges that the value of the combined collateral securing the Aggregate
Loan substantially exceeds the amount of the Aggregate Loan, that the value of
the Property substantially exceeds the amount of the Loan and that the value of
the collateral described in the Cornerstone Loan Documents substantially exceeds
the amount of the Cornerstone Loan.
F. The execution and delivery of this Guaranty by Guarantor is a
condition precedent to the advancement by Lender of both the Loan and the
Cornerstone Loan in order to evidence the obligation of Guarantor for repayment
of the Obligations of Borrower, and this Guaranty is intended to evidence the
separate obligations of Guarantor as a guarantor of that portion of the
Aggregate Loan extended to Borrower as and to the extent described herein.
CONSIDERATION:
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As an inducement to the Lender to make the Loan and because the
Guarantor will benefit from the Loan and the transactions relating thereto, the
Guarantor makes this Guaranty.
COVENANTS:
- ----------
1. NATURE AND SCOPE OF GUARANTY.
1.1 The Guarantor, jointly and severally (if executed by more than
one person), irrevocably, absolutely and unconditionally
guarantees to the Lender, its successors and assigns, the
payment of the Debt and the payment and performance of all the
Obligations, subject to the recourse limitations of Paragraphs
8 and 9 of the Note. This Guaranty is a primary and absolute
obligation of the Guarantor.
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<PAGE>
1.2 Guarantor will make all payments hereunder in lawful money of
the United States of America in immediately available funds
without set-off, counterclaim or defense.
1.3 Guarantor's liability hereunder shall remain unchanged
irrespective of any invalidity, illegality or unenforceability
of any other guaranty, pledge, assignment or other security
for the Debt or Obligations, and without regard to any claim,
counterclaim, set-off or defense which Borrower, any other
guarantor, surety or obligor might be privileged to assert
with respect to the validity, legality or enforceability of
the Debt or Obligations and irrespective of any present or
future law or order of any government or any agency thereof
purporting to reduce, amend or otherwise affect any obligation
of the Borrower or of any other guarantor, surety or other
obligor or to vary the terms of payment of the Debt or the
terms of any of the Obligations. If for any reason whatsoever
(including but not limited to ultra vires, lack of authority,
illegality, force majeure, act of God or impossibility) the
Debt or the Obligations cannot be enforced against Borrower,
such unenforceability shall in no manner affect the liability
of Guarantor hereunder and Guarantor shall be liable hereunder
notwithstanding that Borrower may not be liable for such Debt
or such Obligations.
1.4 The obligations of the Guarantor hereunder are independent of
the obligations of the Borrower relative to the Debt and
Obligations, and a separate action or actions for payment,
damages or performance may be brought and prosecuted against
Guarantor, or any of them should there be more than one,
regardless of whether an action is or could be brought against
Borrower, any security for the Debt and/or any of the
Obligations or any other party obligated to pay the Debt
and/or pay or perform any of the Obligations. Guarantor will
not be privileged to assert, and hereby waives the right to
assert, in any action(s) by Lender against Guarantor any
defense, set-off or counterclaim which Borrower or any other
obligor might then be privileged to assert. Guarantor
acknowledges and agrees that, as between Guarantor and the
Lender, the Debt and Obligations guaranteed hereunder may be
declared to be due and payable for purposes of this Guaranty
notwithstanding any stay, injunction or other prohibition
arising from the filing of a voluntary or an involuntary
bankruptcy petition by or against Borrower, or otherwise,
which may prevent or delay any such declaration as against the
Borrower. In addition, in the event that Borrower does not or
is unable so to pay the Debt or perform the Obligations for
any reason, including, without limitation, liquidation,
dissolution, receivership, conservatorship, insolvency,
bankruptcy, assignment for the benefit of creditors, sale of
all or substantially all assets, reorganization, arrangement,
composition, or readjustment of, or other similar proceedings
affecting the status, composition, identity, existence, assets
or obligations of Borrower, or the disaffirmance or
termination of any of the Debt or Obligations in or as a
result of any such proceeding, Guarantor shall pay the Debt
and perform the Obligations and no such occurrence shall in
any way affect Guarantor's obligations hereunder.
-4-
<PAGE>
1.5 If any claim is ever made upon Lender for repayment or
recovery of any amount received by Lender in payment or on
account of the Debt and/or any of the Obligations by virtue of
such amount having been a preference under applicable
bankruptcy laws or for any other reason and Lender repays all
or part of said amount pursuant to any judgment, decree or
order of any court or administrative body having jurisdiction
over Lender or any of its property or any settlement or
compromise of any such claim effected by Lender with any such
claimant (including but not limited to the Borrower or any
other guarantor), then any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
and, notwithstanding any prior satisfaction or cancellation of
this Guaranty, of the Note or any other instrument evidencing
the Debt and any of the Obligations, this Guaranty shall
continue to be effective or shall be automatically reinstated,
as the case may be, and the Guarantor shall be and remain
liable to Lender hereunder for the amount so repaid or
recovered to the same extent as if such amount had never
originally been received by Lender. Such amount shall be paid
by Guarantor to Lender on demand.
1.6 This Guaranty shall automatically remain in effect for a
period of one hundred (100) days after the date on which all
of the Debt and Obligations are last fully paid and performed,
and, if no bankruptcy petition is filed against Borrower
within ninety (90) days after such date, then, in that event
this Guaranty shall be deemed to have been canceled as of the
aforesaid date on which all of the Debt and Obligations were
last fully paid and performed, subject to being automatically
reinstated for the reasons stated in Subsection 1.5 above. If,
however, a bankruptcy petition is filed by or against the
Borrower during said ninety (90) day period, this Guaranty
shall continue in effect unless and until a final,
non-appealable decision by a court of competent jurisdiction
has been rendered or an agreement has been entered or reached
pursuant to which Lender shall be entitled to retain all
monies paid by Borrower to Lender. If Lender is obligated to
return to the Borrower, to the estate of the Borrower or to a
bankruptcy trustee for the Borrower any monies previously paid
by the Borrower, then this Guaranty shall continue in effect
and Guarantor, as provided in Subsection 1.5 above, shall
continue to be liable to Lender for repayment of such monies.
2. DISCHARGE OF GUARANTOR.
Guarantor shall only be discharged from liability hereunder
upon the payment in full of the Debt and the payment and complete performance of
all the Obligations, but subject, however, to the provisions of Subsections 1.1,
1.5 and 1.6 hereinabove.
3. ASSENT TO AGREEMENTS MADE BY BORROWER.
Guarantor assents to all terms and agreements heretofore or
hereafter made by Borrower with Lender insofar as same may affect the Loan, the
Debt or any of the Obligations.
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4. CONSENT TO LENDER'S ACTIONS REGARDING THE BORROWER, THE
GUARANTOR, AND THE COLLATERAL.
Guarantor consents that Lender may from time to time, before
or after any default by the Borrower, with or without further notice to or
assent from Guarantor:
4.1 Exchange with, release or surrender, either with or without
consideration, to the Borrower or to any Guarantor, pledgor or
grantor any collateral, or waive, release or subordinate any
security interest, in whole or in part, now or hereafter held
as security for the Debt and/or any of the Obligations;
4.2 Waive or delay the exercise of any of its rights or remedies
against any person or entity, including but not limited to the
Borrower and/or any guarantor, which waiver or delay shall not
preclude the Lender from further exercise of any of its
rights, powers or privileges expressly provided for herein or
otherwise available, it being understood that all such rights
and remedies are cumulative;
4.3 Release, either fully or partially, any person or entity,
including but not limited to the Borrower, guarantor,
endorser, surety or any judgment debtor;
4.4 Proceed against the Guarantor for payment of the Debt and for
the payment and performance of the Obligations, or any part of
either, without first proceeding against or joining the
Borrower, any other guarantor, surety, endorser of the Note,
or any property securing payment of the Note, the Security
Instrument, or any other Loan Documents;
4.5 Renew, extend or modify the terms of the Loan or any
instrument or agreement evidencing the Debt and/or any of the
Obligations;
4.6 Apply payments by the Borrower, the Guarantor, or any other
person or entity to the reduction of the Debt and/or
Obligations in such manner and in such amounts and at such
time or times and in such order and priority as Lender shall
determine;
4.7 Permit any sale, transfer or encumbrance of the Property or
any part thereof; and
4.8 Generally deal with the Borrower or any of the security or
other person or party as the Lender shall determine.
The Guarantor hereby ratifies and confirms any such exchange,
release, surrender, subordination, waiver, delay, proceeding, renewal,
extension, modification or application, or other dealing, all of which actions
shall be binding upon Guarantor who hereby waives all defenses, counterclaims or
set-offs which Guarantor might otherwise have as a result of such actions, and
who hereby agrees to remain bound under this Guaranty.
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5. WAIVER OF NOTICE.
Guarantor waives all notices whatsoever with respect to this
Guaranty or with respect to the Debt and/or any of the Obligations guaranteed
hereby, including, but not limited to, notice of:
5.1 The Lender's acceptance of this Guaranty or its intention to
act, or its action, in reliance hereon;
5.2 The making of the Loan by Lender to Borrower and of the
creation and existence of the Debt and Obligations;
5.3 Presentment and demand for payment of the Debt or any portion
thereof and demand for the payment and/or performance of any
of the Obligations;
5.4 Protest and notice of dishonor or nonpayment with respect to
the Debt and/or Obligations or any portion of either;
5.5 Any default by Borrower or any pledgor, grantor of security,
or guarantor, including the Guarantor under any of the Loan
Documents;
5.6 Any suit or the taking of other action by Lender against
Borrower and any other notice to any other party liable for
the Debt and/or any of the Obligations;
5.7 Any other notices to which the Guarantor may otherwise be
entitled with respect to the Loan, the Debt and/or any of the
Obligations; and
5.8 Any demand for payment under this Guaranty.
Notwithstanding the foregoing, or anything else herein to the
contrary, to the extent the Loan Documents permit the Borrower to cure a default
after notice, Guarantor shall have no obligation hereunder until Borrower fails
to cure such default after notice required under the Loan Documents.
6. ADDITIONAL WAIVERS.
Guarantor waives the following:
6.1 Failure by Lender to obtain and perfect any security interest
or lien on any property to secure the Debt and/or Obligations
or any portion thereof.
6.2 All defenses, counterclaims and set-offs which Guarantor may
have at any time to any claim of Lender against Borrower.
6.3 All diligence by Lender in the collection of, protection of or
realization upon the Debt and/or Obligations or any part
thereof, any obligations hereunder or any
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security for any of the foregoing or in enforcing any remedy
available to it under any of the Loan Documents or otherwise
available at law or in equity.
6.4 Any claim, right or remedy which Guarantor may now have or
hereafter acquire against the Borrower that arises hereunder
and/or from the performance by any Guarantor hereunder
including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, indemnification, or
participation in any claim, right or remedy of Lender against
the Borrower or any security which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or
otherwise.
6.5 The right to require the Lender to proceed against the
Borrower or any other person liable on the indebtedness, to
proceed against or exhaust any security held from the Borrower
or any other person, or to pursue any other remedy in Lender's
power whatsoever and Guarantor waives the right to have the
property of the Borrower first applied to the discharge of the
indebtedness. Lender may, at its election, exercise any right
or remedy it may have against the Borrower or any security
held by Lender, including, without limitation, the right to
foreclose upon any such security by one or more judicial or
nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, without affecting or
impairing in any way the liability of Guarantor hereunder,
except to the extent the indebtedness has been paid, and
Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution
or subrogation or any other right or remedy of Guarantor
against the Borrower or any such security, whether resulting
from such election by Lender or otherwise.
6.6 Any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation from any
cause whatsoever (including without limitation, any
intervention or omission by Lender) of the liability, either
in whole or in part, of the Borrower to Lender for the
indebtedness. Guarantor understands that if all or any part of
the liability of the Borrower to Lender for the indebtedness
is secured by real property, Guarantor shall be liable for the
full amount of its liability hereunder notwithstanding
foreclosure on such real property by trustee sale or any other
reason impairing Guarantor's right to proceed against the
Borrower.
6.7 To the fullest extent permitted by law, all rights and
benefits under any applicable law of the State of Georgia
purporting to reduce a guarantor's obligations in proportion
to the obligation of the principal; provided that the
Guarantor's obligations shall not exceed the obligations set
forth in Section 1.1 above.
6.8 Any defense arising by reason of any claim relating to (i) the
incapacity, death, disability, dissolution or termination of
Guarantor, Borrower, Lender or any other person or entity;
(ii) the failure by Lender to file or enforce a claim against
the estate (either in administration, bankruptcy or other
proceeding) of Borrower or any other person or entity; (iii)
recovery from Borrower or any other person or
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<PAGE>
entity becomes barred by any statute of limitations or is
otherwise prevented; (iv) any transfer or transfers of any of
the property covered by the Security Instrument or any other
instrument securing the payment of the Note; (v) any
modifications, extensions, amendments, consents, releases or
waivers with respect to the Note, the Deed of Trust, any other
instrument now or hereafter securing the payment of the Note,
or this Guaranty; or (vi) Guarantor is or becomes liable for
any indebtedness owing by Borrower to Lender other than under
this Guaranty; Guarantor hereby covenanting and agreeing with
Lender that the obligations and liabilities of Guarantor shall
not be modified, changed, released, limited or impaired in any
manner whatsoever on account of any or all of the foregoing.
6.9 To the fullest extent permitted by law, (i) any defense
arising as a result of any election by Lender, in any
proceeding instituted under the Bankruptcy Code, under Section
1111(b)(2) of the Bankruptcy Code, (ii) any defense based on
any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code, and (iii) any defense arising as a
result of any election made by Lender under Section 9-501 of
the Uniform Commercial Code. For purposes hereof, the term
"Bankruptcy Code" shall refer to the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.
In addition, Guarantor expressly acknowledges that Guarantor will be and remain
fully liable for the indebtedness hereunder even if, as a result of any exercise
of the power of sale under the Security Instrument and/or any other election of
remedies by Lender under the Security Instrument and/or any of the other Loan
Documents or for any other reason, any rights of reimbursement, contribution or
subrogation on the part of Guarantor against the Borrower, in respect of the
Property or from or against any other Guarantor has been destroyed or impaired.
Guarantor further expressly acknowledges that Guarantor could, in the absence of
the waivers and agreements set forth herein, have one or more defenses to or
otherwise be exonerated from the obligations and liabilities arising under
Guaranty as a result of any such election of remedies by Lender, including,
without limitation, exercise of the power of sale under the Security Instrument,
and Guarantor hereby knowingly, expressly and irrevocably waives each and every
such defense to his liability hereunder, and expressly acknowledges the reliance
hereon of Lender.
7. SUBORDINATION.
7.1 All rights and claims of Guarantor against Borrower or any of
Borrower's property now or hereafter existing shall be
subordinate and subject in right of payment to the prior
payment in full of the Debt to Lender and/or to the payment
and prior performance, in full, of all the Obligations to
Lender.
7.2 Without Lender's prior written consent, Guarantor will not ask
for, demand, sue for, take or receive from Borrower, by
set-off or otherwise, any sums now or hereafter owed by
Borrower to Guarantor, nor any security therefor. Guarantor
hereby transfers, conveys and assigns to the Lender, as
collateral security for any and all of the Debt and
Obligations, all of the said rights and claims of the
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Guarantor against the Borrower (and any security therefor),
with full right on the part of the Lender, in its own name or
in the name of the Guarantor, to collect and enforce said
claims, by suit, proof of debt in bankruptcy, or other claims,
by liquidation proceedings or otherwise. Should any payment,
security or proceeds of security be received by the Guarantor
for or on account of any of said claims or rights prior to the
full payment of the Debt and full payment and performance of
any of the Obligations subject to the provisions of
Subsections 1.5 and 1.6 hereinabove, the Guarantor will
forthwith deliver same to the Lender in precisely the form
received (except for the Guarantor's endorsement where
necessary) for application on account of the Debt and/or
Obligations in accordance with Subsection 4.6 hereinabove,
and, until so delivered, the same shall be held in trust by
the Guarantor as property of the Lender. In the event of the
failure of the Guarantor to endorse any instrument for the
payment of money so received by the Guarantor, payable to the
Guarantor's order, the Lender or any officer or employee of
the Lender is hereby constituted and appointed attorney in
fact for the Guarantor, with full power to make any such
endorsement and with full power of substitution, which agency
shall be deemed to be coupled with an interest and, therefore,
is irrevocable.
7.3 The Guarantor hereby further covenants and agrees that any
lease or leases by and between the Borrower, as lessor, and
the Guarantor, as lessee, with respect to the property (real
and personal) covered by the Security Instrument and/or any
security agreement from Borrower to Lender shall, at all
times, be junior, inferior and subordinate to the lien of the
Security Instrument and/or security interest created by the
security agreement as the same now exist or may hereafter be
amended or modified, it being the intent and agreement of the
Guarantor that any and all leases may be terminated by the
Lender through any foreclosure or similar proceeding involving
the Security Instrument and/or security agreement or property
encumbered by either.
8. SUBROGATION RIGHTS.
Guarantor will not assert any right to which it may be or may
become entitled, whether by subrogation, contribution or otherwise, against the
Borrower or any other guarantor, or against any of their respective properties,
by reason of the performance by the Guarantor of its obligations under this
Guaranty, except after payment in full of the Debt and the full payment and
performance of the Obligations subject to the provisions of Subsections 1.5 and
1.6 hereinabove. If any amount shall be paid to or received by Guarantor on
account of any such right of subrogation or contribution before the Debt and
Obligations have been fully paid and performed, such amount shall be held by
Guarantor for the benefit of Lender and shall be promptly paid to Lender
(without further demand from Lender being necessary). Lender may credit and
apply any such sums to such of the Debt and/or Obligations as Lender may desire
in accordance with Subsection 4.6 hereinabove.
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9. PERIODIC FINANCIAL STATEMENTS.
Within ninety (90) days after the end of Guarantor's fiscal
year, Guarantor will furnish to Lender, Guarantor's financial condition and
consolidated balance sheet as of the end of said preceding year and Guarantor's
statement of profit and loss for said preceding year and such additional
financial data as Lender may reasonably request, all such balance sheets, profit
and loss statements, and additional data to be prepared in accordance with
generally accepted accounting principles consistently applied and be certified
as being so prepared by Guarantor or, at Lender's election, by Guarantor's
certified public accountant. Guarantor will provide to Lender such other
financial information and statements concerning Guarantor's financial status as
Lender may reasonably request from time to time, all of which shall be in form
and substance reasonably acceptable to Lender. Guarantor shall be in default
hereunder if there is any falsity in any material respect or any material
omission in any representation or statement made by Guarantor to Lender or in
any information furnished Lender, by or on behalf of Borrower or Guarantor, in
connection with the Debt and/or any of the Obligations or if there is a material
adverse change in the financial condition of Guarantor, as reasonably determined
by Lender.
10. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants to Lender that:
10.1 The Guarantor has received good, valuable and sufficient
consideration for Guarantor's execution and delivery of this
Guaranty.
10.2 If any Guarantor is a corporation, limited partnership,
trustee or other entity that is not a natural person, it is
(i) a duly organized and valid existing entity under the laws
of the state or country of its incorporation; (ii) that it is
qualified to do business in each state in which qualification
is necessary; (iii) that it has the power to execute this
Guaranty; (iv) that the execution of this Guaranty has been
duly authorized and that it is a binding and valid obligation
of the entity permitted by its articles of incorporation,
bylaws, partnership agreement, trust agreement or like
instrument that authorizes or limits its actions; (v) that no
governmental consent or approval is required in connection
with the execution, delivery or performance of this Guaranty.
10.3 If any Guarantor is a partnership, the obligations of said
Guarantor shall remain in force notwithstanding any changes in
the individuals composing the partnership and the term
"Guarantor" shall include any altered or successive
partnerships, but the predecessor partnerships and their
partners shall not thereby be released from any obligations or
liability hereunder.
10.4 This Guaranty constitutes the valid and binding obligation of
the Guarantor.
10.5 All balance sheets, statements of profit and loss, and other
financial data that have been given to Lender with respect to
Guarantor (i) are complete and correct in all material
respects; (ii) accurately present the financial condition of
Guarantor as of
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the stated dates, and the results of its or their operations,
for the periods for which the same have been furnished; and
(iii) have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the
periods covered thereby.
10.6 All balance sheets disclose all known liabilities, direct and
contingent, as of their respective dates.
10.7 There has been no change in the condition of the Guarantor,
financial or otherwise, since the date of the most recent
financial statements given to the Lender with respect to
Guarantor other than changes in the ordinary course of
business, none of which changes has been materially adverse.
This representation shall apply to all financial statements
and financial data hereafter given to Lender by Guarantor as
of the time the same are given to Lender.
10.8 There are no actions, suits or proceedings pending or
threatened against or affecting Guarantor that will have a
material and adverse effect on Guarantor and that will not be
removed in the ordinary course of business.
10.9 There are no judgments or tax liens against Guarantor or any
property of Guarantor that will have a material and adverse
effect on Guarantor and that will not be removed in the
ordinary course of business.
10.10 Guarantor's execution, delivery or performance of this
Guaranty will not violate any provision of law, governmental
rule or regulation, order, writ, judgment, injunction, decree,
determination or award of any court, arbitrator, governmental
department, commission, board, bureau, or agency, or any
provision of any indenture, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of
Guarantor's properties or assets is bound, will not conflict
with, result in breach of or constitute a default under any
such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of
any type on any properties or assets of Guarantor.
11. CHANGE IN OWNERSHIP OF GUARANTOR.
Guarantor will not, without the prior written consent of
Lender, do or permit another to do any of the following:
11.1 If Guarantor or any constituent of Guarantor is a corporation,
(i) transfer, assign, sell or encumber any stock in Guarantor
or in any such constituent held by any stockholder of
Guarantor or of any such constituent as of the date hereof
(whether such purported transfer shall be by direct transfer
by such stockholder, by operation of law, the result of
encumbrance of such stock by such stockholder, the result of
action by any party against such stockholder, or otherwise) or
(ii) issue any additional stock of Guarantor or any such
constituent after the date hereof;
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11.2 If Guarantor or any constituent of Guarantor is a partnership,
(i) transfer, assign, sell or encumber any partnership
interest in Guarantor or in any such constituent of Guarantor
held by any partner (general or limited) of Guarantor or of
any such constituent as of the date hereof (whether such
purported transfer shall be by direct transfer by such
partner, by operation of law, the result of encumbrance of
such partnership interest by such partner, the result of any
action by any party against such partner, or otherwise), or
(ii) admit to Guarantor or any such constituent any partner,
whether general or limited).
11.3 If Guarantor or any constituent of Guarantor is the trustee
pursuant to a trust, (i) transfer, assign, sell or encumber or
allow any transfer, assignment, sale or encumbrance of any
beneficial interest in any such trust as of the date hereof
(whether such purported transfer shall be by direct transfer,
by operation of law, the result of encumbrance of such
beneficial interest, the result of action by a party against
any beneficiary, or otherwise), or (ii) admit any new
beneficiary of the trust.
11.4 Effect any change in ownership of Borrower in violation of the
Security Instrument or any transfer or encumbrance of the
Property, as defined in the Security Instrument, or any
portion thereof, in violation of the Security Instrument.
12. DEFAULT, SECURITY INTEREST/RIGHT OF SET-OFF.
12.1 In the event of any default by Guarantor hereunder, Lender
may, at its option, accelerate all sums due and payable under
the Loan Documents and declare the same immediately due and
payable.
12.2 At any time when any of the Debt shall then be due and payable
and/or any of the Obligations payable or performable by
Guarantor under this Guaranty, Lender, without prior demand or
notice of any kind to Guarantor, may, from time to time,
appropriate, set-off and apply toward payment of the Debt
and/or payment or performance of any of the Obligations any
funds or property in which it then has a security interest
under this Section and may transfer into its own name or that
of its nominee any such funds or property which are then in
its possession, custody or control. Lender will promptly
notify Guarantor after any such set-off and application, but
failure to give such notice will not affect the validity of
any such set-off and application.
13. ASSIGNMENT BY LENDER.
Lender may, without notice of any kind to Guarantor, sell,
assign, transfer, participate, syndicate or pool (as collateral or otherwise)
the Debt and/or any of the Obligations, and any security therefor, and in such
event, each and every immediate and successive assignee, transferee or holder of
the Debt and/or any of the Obligations, or any interest therein, shall have the
right to enforce this Guaranty, by suit or otherwise, for the benefit of such
assignee,
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transferee or holder, as fully as if such assignee, transferee or holder were
herein by name specifically given such rights, powers and benefits, but Lender
shall have, to the extent permitted by Laws (as defined in the Cornerstone
Security Instrument), an unimpaired right, prior and superior to that of any
such assignee, transferee or holder, to enforce this Guaranty for the benefit of
Lender as to such part of the Debt and/or any of the Obligations as it has not
sold, assigned or transferred.
14. COSTS OF ENFORCEMENT.
Guarantor shall pay Lender, on demand, all costs and expenses
paid or incurred by Lender in enforcing the obligations of Guarantor hereunder,
including, by way of illustration and not by way of limitation, all court costs
and reasonable attorneys' fees regardless of whether suit is filed and also
including such costs and attorneys' fees at trial and on appeal. If Lender
obtains a judgment against Guarantor for the Debt and/or any of the Obligations,
Guarantor hereby agrees that the amount due under such judgment shall bear
interest at the Default Rate, as defined in the Note, which definition is
incorporated herein by this reference, from date of judgment until such judgment
is paid in full.
15. CUMULATIVE REMEDIES.
Lender's rights and remedies hereunder are cumulative with any
and all other rights and remedies which Lender has or may hereafter have under
the other Loan Documents or which are otherwise available at law or in equity.
No delay on the part of Lender in exercising any of its rights or remedies shall
constitute a waiver thereof.
16. ENTIRE AGREEMENT BETWEEN LENDER AND GUARANTOR.
Guarantor hereby agrees that this instrument contains the
entire agreement between the parties and there is and can be no other oral or
written agreement or understanding whereby the provisions of this instrument
have been or can be affected, varied, waived or modified in any manner unless
the same be set forth in writing and signed by a duly authorized officer of the
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
17. NOTICES.
Any notice from Lender to Guarantor under this Guaranty shall
be given by sending it by a recognized overnight courier which provides receipts
such as Federal Express, delivering it, or by mailing it, postage prepaid, by
United States Certified Mail, return receipt requested, addressed to Guarantor's
address as set forth below or such other address as Guarantor hereafter
designates by advance written notice to Lender.
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If to Guarantor:
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219
Attn: Stanley J. Olander, Jr.
With a copy to:
McGuire Woods Battle & Boothe LLP
901 East Cary Street
Richmond, Virginia 23219-4030
Attn: Martin B. Richards
Any notice to Lender under this Guaranty shall be given by
sending it by a recognized overnight courier which provides receipts such as
Federal Express, delivering it or by mailing it, postage prepaid, by United
States Certified Mail, return receipt requested addressed to Lender's address
set forth herein or such other address as Lender hereafter designates by advance
written notice to Guarantor.
If to the Lender:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Mortgage Loan Customer Service;
Reference Loan No. 6 103 650
With a copy to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Regional Counsel; Reference Loan
No. 6 103 650
Any notice under this Guaranty shall be deemed to have been given to
Guarantor or Lender when delivered, in the case of personal delivery, and the
earlier of actual receipt or three (3) days after mailing when mailed in
compliance with the requirements of this Section.
18. JURISDICTION.
In the event Lender seeks to enforce this Guaranty by legal
action, the Guarantor hereby waives the right to be sued in the county of the
Guarantor's residence or principal place of business and hereby consents to
being sued in Gwinnett or Clayton County, Georgia or Charleston or Richland
County, South Carolina. Guarantor further agrees that any suit hereunder
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by Lender may be brought in either the United States District Court for the
Northern District of Georgia or the United States District Court for the State
of South Carolina or in the Superior Court for Gwinnett or Clayton County,
Georgia or the applicable state court for Charleston or Richland County, South
Carolina. Guarantor waives any right to trial by jury in any civil action
arising out of or based upon this Guaranty. Should Guarantor, or any resident
agent appointed hereunder, be or become a non-resident of the States of Georgia
or South Carolina, Guarantor shall, by written notice to Lender setting forth
the name and address of the appointed person, appoint a resident agent residing
in South Carolina to receive, for and on Guarantor's behalf, service of process
in the State of Georgia or South Carolina, which service shall be deemed
effective when delivered whether or not such resident agent gives notice thereof
to the Guarantor, provided that Lender has simultaneously sent said service of
process to Guarantor by United States Certified Mail return receipt requested in
the manner of notices under this Guaranty. The Guarantor hereby appoints Michael
W. Tighe, whose address is Callison, Tighe & Robinson, LLP, 1812 Lincoln Street,
Columbia, South Carolina 29202, as its resident agent to receive, for and on its
behalf, service of process in the State of South Carolina. The Guarantor hereby
appoints Samuel M. Chambliss, III, whose address is c/o McGuire Woods Battle &
Boothe LLP, 285 Peachtree Center Avenue, NE, Marquis Tower II, Suite 2200,
Atlanta, Georgia 30303, as its resident agent to receive, for and on its behalf,
service of process in the State of Georgia.
19. CONFLICT OF LAW.
This Guaranty shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
20. GENDER AND NUMBER.
In this Guaranty, wherever the context so requires, the
neuter gender includes the masculine and/or feminine gender, the singular
numbers include the plural, and the plural numbers include the singular.
21. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of the Lender, its
successors and assigns, and shall be binding upon the Guarantor and its
respective successors and assigns.
22. SAVINGS CLAUSE.
Whenever possible, each provision or portion of this
Guaranty shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision or portion of this Guaranty is
declared or found by a court of competent jurisdiction to be unenforceable or
null and void, such provision or portion thereof shall be deemed stricken and
severed from this Guaranty, and the remaining provisions and portions thereof
shall continue in full force and effect. To the extent permitted by applicable
law Guarantor hereby waives any provision of law that renders any provision
hereof unenforceable. The provisions of this Section shall prevail over and
control over every other provision of this Guaranty.
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23. WAIVER OF TRIAL BY JURY.
GUARANTOR AND LENDER (AS ACKNOWLEDGED BY ITS ACCEPTANCE OF THIS
GUARANTY) HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE
LOAN, THIS GUARANTY, THE LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF LENDER OR
GUARANTOR IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, the Guarantor, intending to be jointly and
severally legally bound hereby (if executed by more than one person), has duly
executed and delivered this Guaranty under seal as of the day and year first set
forth above.
GUARANTOR:
CORNERSTONE REALTY INCOME TRUST,
INC., a Virginia corporation
By: /s/ Stanley J. Olander, Jr.
--------------------------------------
Name: Stanley J. Olander, Jr.
-------------------------------
Title: Chief Financial Officer
-----------------------------
(CORPORATE SEAL)
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EXHIBIT 10.5
Loan No. 6 103 650
Loan No. 6 103 651
UNCONDITIONAL AND IRREVOCABLE
GUARANTY OF PAYMENT AND PERFORMANCE
(CROSS-COLLATERALIZATION)
Dated as of September 27, 1999
DEFINITIONS: In this Guaranty the following terms shall have the following
meanings:
1. BORROWER: CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation
2. LENDER: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation
3. GUARANTOR: CRIT-NC, LLC, a Virginia limited liability company
4. LOAN: That loan from Lender to Borrower in the principal amount of
Fifty Million Five Hundred Fifty Thousand and No/100 Dollars
($50,550,000.00), evidenced by the Note, and secured by the
Security Instrument.
5. NOTE: That certain Promissory Note dated as of September 27, 1999
made by Borrower in favor of Lender in the principal amount
of the Loan.
6. SECURITY
INSTRUMENT: Those certain: (i) two (2) Mortgages and Security Agreements
of even date herewith executed by Borrower in favor of Lender
to be recorded in the real estate records of Charleston
County, South Carolina and Richland County, South Carolina,
and (ii) Deed to Secure Debt and Security Agreement of even
date herewith executed by Borrower in favor of Lender to be
recorded in the real estate records of Gwinnett County,
Georgia and Clayton County, Georgia
7. DEBT: The principal amount evidenced by the Note and secured by
the Security Instrument, together with all renewals,
extensions and modifications thereof, or so much thereof as
may be outstanding from time to time, including any future
advances made thereunder, together with interest thereon at
the rate of interest which may or
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shall become due and payable pursuant to the provisions of
the Note, the Security Instrument, or any other instrument
evidencing or securing the Loan, together with all renewals,
extensions and modifications of the foregoing, and together
with all reasonable expenses, including, but not limited to,
legal fees and costs, incurred by the Lender in connection
with the collection of all or any portion thereof.
8. LOAN
DOCUMENTS: The Note, Security Instrument, this Guaranty, any loan
agreement of even date herewith between Lender and Borrower
and all documents collateral or pertaining to the foregoing
instruments, together with all renewals, extensions, and
modifications of the foregoing.
9. OBLIGATIONS: All covenants, duties, promises, agreements, conditions,
undertakings and all other obligations (other than payment of
the Debt) which Borrower is to perform, satisfy or cause to
occur, or not to occur, as the case may be, and which are set
forth in the Loan Documents, together with all expenses,
including, but not limited to, legal fees and costs, incurred
by Lender in connection with the enforcement of any of the
foregoing.
10. PROPERTY: The real property and improvements covered by and more
particularly described in the Security Instrument and
securing the Note, being six apartment projects located in
Charleston County, South Carolina, Richland County, South
Carolina, Gwinnett County, Georgia and Clayton County,
Georgia known commonly as Westchase, Hampton Pointe, Arbors
at Windsor Lake, Ashley Run, Stone Brook, and Spring Lake.
RECITALS:
A. Borrower and Guarantor applied for a loan in the aggregate amount of
$73,500,000.00 (the "Aggregate Loan") pursuant to that certain First Mortgage
Loan Application dated July 2, 1999 (the "Application"). Lender, by that certain
Loan Commitment Letter dated September 24, 1999, has committed to make the
Aggregate Loan in accordance with the Application.
B. The Aggregate Loan is divided into two individual loans: (i) the
Loan made by Lender to Borrower in the amount of $50,550,000.00; and (ii) a
simultaneous loan made by Lender to Guarantor in the amount of $22,950,000.00
(the "CRIT-NC Loan"). The Application requires that the Loan and the CRIT-NC
Loan be cross-defaulted and cross-collateralized.
C. The CRIT-NC Loan is evidenced by a promissory note from Guarantor to
Lender of even date herewith (the "CRIT-NC Note") and secured by two (2) Deeds
of Trust and Security
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Agreements of even date herewith to be recorded in Wake County, North Carolina
and Mecklenburg County, North Carolina (collectively, the "CRIT-NC Security
Instrument") and other loan documents described therein (the CRIT-NC Note, the
CRIT-NC Security Instrument and such other loan documents, collectively, the
"CRIT-NC Loan Documents").
D. Guarantor derives financial benefit from the execution of this
Guaranty. Guarantor acknowledges that the provisions set forth in this Guaranty
and otherwise set forth in the Loan Documents and the CRIT-NC Loan Documents
relating to cross-default and cross-collateralization have resulted in more
favorable economic terms for the CRIT-NC Loan to Guarantor, and that Guarantor
would be unable to receive financing in the amount, or at the rate, or otherwise
under more favorable terms, than those set forth therein and, therefore, there
exists direct and valuable consideration for Guarantor's consent and agreement
to the cross-default and cross-collateralization provisions.
E. Guarantor derives further benefit from the additional security for
repayment of the CRIT-NC Loan afforded by that certain Unconditional and
Irrevocable Guaranty of Payment and Performance (Cross-Collateralization)
executed by Borrower in favor of Lender of even date herewith guaranteeing the
CRIT-NC Loan and CRIT-NC Loan Documents and which Guaranty by Borrower is
secured by the Loan Documents encumbering the Property. Guarantor acknowledges
that the value of the combined collateral securing the Aggregate Loan
substantially exceeds the amount of the Aggregate Loan, that the value of the
Property substantially exceeds the amount of the Loan and that the value of the
collateral described in the CRIT-NC Loan Documents substantially exceeds the
amount of the CRIT-NC Loan.
F. The execution and delivery of this Guaranty by Guarantor is a
condition precedent to the advancement by Lender of both the Loan and the
CRIT-NC Loan in order to evidence the obligation of Guarantor for repayment of
the Obligations of Borrower, and this Guaranty is intended to evidence the
separate obligations of Guarantor as a guarantor of that portion of the
Aggregate Loan extended to Borrower as and to the extent described herein.
CONSIDERATION:
As an inducement to the Lender to make the Loan and because the
Guarantor will benefit from the Loan and the transactions relating thereto, the
Guarantor makes this Guaranty.
COVENANTS:
1. NATURE AND SCOPE OF GUARANTY.
1.1 The Guarantor, jointly and severally (if executed by more than
one person), irrevocably, absolutely and unconditionally
guarantees to the Lender, its successors and assigns, the
payment of the Debt and the payment and performance of all the
Obligations, subject to the recourse limitations of Paragraphs
8 and 9 of the Note. This Guaranty is a primary and absolute
obligation of the Guarantor.
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1.2 Guarantor will make all payments hereunder in lawful money
of the United States of America in immediately available funds
without set-off, counterclaim or defense.
1.3 Guarantor's liability hereunder shall remain unchanged
irrespective of any invalidity, illegality or unenforceability
of any other guaranty, pledge, assignment or other security
for the Debt or Obligations, and without regard to any claim,
counterclaim, set-off or defense which Borrower, any other
guarantor, surety or obligor might be privileged to assert
with respect to the validity, legality or enforceability of
the Debt or Obligations and irrespective of any present or
future law or order of any government or any agency thereof
purporting to reduce, amend or otherwise affect any obligation
of the Borrower or of any other guarantor, surety or other
obligor or to vary the terms of payment of the Debt or the
terms of any of the Obligations. If for any reason whatsoever
(including but not limited to ultra vires, lack of authority,
illegality, force majeure, act of God or impossibility) the
Debt or the Obligations cannot be enforced against Borrower,
such unenforceability shall in no manner affect the liability
of Guarantor hereunder and Guarantor shall be liable hereunder
notwithstanding that Borrower may not be liable for such Debt
or such Obligations.
1.4 The obligations of the Guarantor hereunder are independent
of the obligations of the Borrower relative to the Debt and
Obligations, and a separate action or actions for payment,
damages or performance may be brought and prosecuted against
Guarantor, or any of them should there be more than one,
regardless of whether an action is or could be brought against
Borrower, any security for the Debt and/or any of the
Obligations or any other party obligated to pay the Debt
and/or pay or perform any of the Obligations. Guarantor will
not be privileged to assert, and hereby waives the right to
assert, in any action(s) by Lender against Guarantor any
defense, set-off or counterclaim which Borrower or any other
obligor might then be privileged to assert. Guarantor
acknowledges and agrees that, as between Guarantor and the
Lender, the Debt and Obligations guaranteed hereunder may be
declared to be due and payable for purposes of this Guaranty
notwithstanding any stay, injunction or other prohibition
arising from the filing of a voluntary or an involuntary
bankruptcy petition by or against Borrower, or otherwise,
which may prevent or delay any such declaration as against the
Borrower. In addition, in the event that Borrower does not or
is unable so to pay the Debt or perform the Obligations for
any reason, including, without limitation, liquidation,
dissolution, receivership, conservatorship, insolvency,
bankruptcy, assignment for the benefit of creditors, sale of
all or substantially all assets, reorganization, arrangement,
composition, or readjustment of, or other similar proceedings
affecting the status, composition, identity, existence, assets
or obligations of Borrower, or the disaffirmance or
termination of any of the Debt or Obligations in or as a
result of any such proceeding, Guarantor shall pay the Debt
and perform the Obligations and no such occurrence shall in
any way affect Guarantor's obligations hereunder.
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1.5 If any claim is ever made upon Lender for repayment or
recovery of any amount received by Lender in payment or on
account of the Debt and/or any of the Obligations by virtue of
such amount having been a preference under applicable
bankruptcy laws or for any other reason and Lender repays all
or part of said amount pursuant to any judgment, decree or
order of any court or administrative body having jurisdiction
over Lender or any of its property or any settlement or
compromise of any such claim effected by Lender with any such
claimant (including but not limited to the Borrower or any
other guarantor), then any such judgment, decree, order,
settlement or compromise shall be binding upon the Guarantor,
and, notwithstanding any prior satisfaction or cancellation of
this Guaranty, of the Note or any other instrument evidencing
the Debt and any of the Obligations, this Guaranty shall
continue to be effective or shall be automatically reinstated,
as the case may be, and the Guarantor shall be and remain
liable to Lender hereunder for the amount so repaid or
recovered to the same extent as if such amount had never
originally been received by Lender. Such amount shall be paid
by Guarantor to Lender on demand.
1.6 This Guaranty shall automatically remain in effect for a
period of one hundred (100) days after the date on which all
of the Debt and Obligations are last fully paid and performed,
and, if no bankruptcy petition is filed against Borrower
within ninety (90) days after such date, then, in that event
this Guaranty shall be deemed to have been canceled as of the
aforesaid date on which all of the Debt and Obligations were
last fully paid and performed, subject to being automatically
reinstated for the reasons stated in Subsection 1.5 above. If,
however, a bankruptcy petition is filed by or against the
Borrower during said ninety (90) day period, this Guaranty
shall continue in effect unless and until a final,
non-appealable decision by a court of competent jurisdiction
has been rendered or an agreement has been entered or reached
pursuant to which Lender shall be entitled to retain all
monies paid by Borrower to Lender. If Lender is obligated to
return to the Borrower, to the estate of the Borrower or to a
bankruptcy trustee for the Borrower any monies previously paid
by the Borrower, then this Guaranty shall continue in effect
and Guarantor, as provided in Subsection 1.5 above, shall
continue to be liable to Lender for repayment of such monies.
2. DISCHARGE OF GUARANTOR.
Guarantor shall only be discharged from liability hereunder
upon the payment in full of the Debt and the payment and complete performance of
all the Obligations, but subject, however, to the provisions of Subsections 1.1,
1.5 and 1.6 hereinabove.
3. ASSENT TO AGREEMENTS MADE BY BORROWER.
Guarantor assents to all terms and agreements heretofore or
hereafter made by Borrower with Lender insofar as same may affect the Loan, the
Debt or any of the Obligations.
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4. CONSENT TO LENDER'S ACTIONS REGARDING THE BORROWER, THE
GUARANTOR, AND THE COLLATERAL.
Guarantor consents that Lender may from time to time, before
or after any default by the Borrower, with or without further notice to or
assent from Guarantor:
4.1 Exchange with, release or surrender, either with or without
consideration, to the Borrower or to any Guarantor, pledgor or
grantor any collateral, or waive, release or subordinate any
security interest, in whole or in part, now or hereafter held
as security for the Debt and/or any of the Obligations;
4.2 Waive or delay the exercise of any of its rights or remedies
against any person or entity, including but not limited to the
Borrower and/or any guarantor, which waiver or delay shall not
preclude the Lender from further exercise of any of its
rights, powers or privileges expressly provided for herein or
otherwise available, it being understood that all such rights
and remedies are cumulative;
4.3 Release, either fully or partially, any person or entity,
including but not limited to the Borrower, guarantor,
endorser, surety or any judgment debtor;
4.4 Proceed against the Guarantor for payment of the Debt and for
the payment and performance of the Obligations, or any part of
either, without first proceeding against or joining the
Borrower, any other guarantor, surety, endorser of the Note,
or any property securing payment of the Note, the Security
Instrument, or any other Loan Documents;
4.5 Renew, extend or modify the terms of the Loan or any
instrument or agreement evidencing the Debt and/or any of the
Obligations;
4.6 Apply payments by the Borrower, the Guarantor, or any other
person or entity to the reduction of the Debt and/or
Obligations in such manner and in such amounts and at such
time or times and in such order and priority as Lender shall
determine;
4.7 Permit any sale, transfer or encumbrance of the Property
or any part thereof; and
4.8 Generally deal with the Borrower or any of the security or
other person or party as the Lender shall determine.
The Guarantor hereby ratifies and confirms any such exchange,
release, surrender, subordination, waiver, delay, proceeding, renewal,
extension, modification or application, or other dealing, all of which actions
shall be binding upon Guarantor who hereby waives all defenses, counterclaims or
set-offs which Guarantor might otherwise have as a result of such actions, and
who hereby agrees to remain bound under this Guaranty.
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5. WAIVER OF NOTICE.
Guarantor waives all notices whatsoever with respect to this
Guaranty or with respect to the Debt and/or any of the Obligations guaranteed
hereby, including, but not limited to, notice of:
5.1 The Lender's acceptance of this Guaranty or its intention to
act, or its action, in reliance hereon;
5.2 The making of the Loan by Lender to Borrower and of the
creation and existence of the Debt and Obligations;
5.3 Presentment and demand for payment of the Debt or any portion
thereof and demand for the payment and/or performance of any
of the Obligations;
5.4 Protest and notice of dishonor or nonpayment with respect to
the Debt and/or Obligations or any portion of either;
5.5 Any default by Borrower or any pledgor, grantor of security,
or guarantor, including the Guarantor under any of the Loan
Documents;
5.6 Any suit or the taking of other action by Lender against
Borrower and any other notice to any other party liable for
the Debt and/or any of the Obligations;
5.7 Any other notices to which the Guarantor may otherwise be
entitled with respect to the Loan, the Debt and/or any of the
Obligations; and
5.8 Any demand for payment under this Guaranty.
Notwithstanding the foregoing, or anything else herein to the
contrary, to the extent the Loan Documents permit the Borrower to cure a default
after notice, Guarantor shall have no obligation hereunder until Borrower fails
to cure such default after notice required under the Loan Documents.
6. ADDITIONAL WAIVERS.
Guarantor waives the following:
6.1 Failure by Lender to obtain and perfect any security interest
or lien on any property to secure the Debt and/or Obligations
or any portion thereof.
6.2 All defenses, counterclaims and set-offs which Guarantor may
have at any time to any claim of Lender against Borrower.
6.3 All diligence by Lender in the collection of, protection of
or realization upon the Debt and/or Obligations or any part
thereof, any obligations hereunder or any
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security for any of the foregoing or in enforcing any remedy
available to it under any of the Loan Documents or otherwise
available at law or in equity.
6.4 Any claim, right or remedy which Guarantor may now have or
hereafter acquire against the Borrower that arises hereunder
and/or from the performance by any Guarantor hereunder
including, without limitation, any claim, remedy or right of
subrogation, reimbursement, exoneration, indemnification, or
participation in any claim, right or remedy of Lender against
the Borrower or any security which Lender now has or hereafter
acquires, whether or not such claim, right or remedy arises in
equity, under contract, by statute, under common law or
otherwise.
6.5 The right to require the Lender to proceed against the
Borrower or any other person liable on the indebtedness, to
proceed against or exhaust any security held from the Borrower
or any other person, or to pursue any other remedy in Lender's
power whatsoever and Guarantor waives the right to have the
property of the Borrower first applied to the discharge of the
indebtedness. Lender may, at its election, exercise any right
or remedy it may have against the Borrower or any security
held by Lender, including, without limitation, the right to
foreclose upon any such security by one or more judicial or
nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable, without affecting or
impairing in any way the liability of Guarantor hereunder,
except to the extent the indebtedness has been paid, and
Guarantor waives any defense arising out of the absence,
impairment or loss of any right of reimbursement, contribution
or subrogation or any other right or remedy of Guarantor
against the Borrower or any such security, whether resulting
from such election by Lender or otherwise.
6.6 Any defense arising by reason of any disability or other
defense of the Borrower or by reason of the cessation from any
cause whatsoever (including without limitation, any
intervention or omission by Lender) of the liability, either
in whole or in part, of the Borrower to Lender for the
indebtedness. Guarantor understands that if all or any part of
the liability of the Borrower to Lender for the indebtedness
is secured by real property, Guarantor shall be liable for the
full amount of its liability hereunder notwithstanding
foreclosure on such real property by trustee sale or any other
reason impairing Guarantor's right to proceed against the
Borrower.
6.7 To the fullest extent permitted by law, all rights and
benefits under any applicable law of the State of Georgia
purporting to reduce a guarantor's obligations in proportion
to the obligation of the principal; provided that the
Guarantor's obligations shall not exceed the obligations set
forth in Section 1.1 above.
6.8 Any defense arising by reason of any claim relating to (i)
the incapacity, death, disability, dissolution or termination
of Guarantor, Borrower, Lender or any other person or entity;
(ii) the failure by Lender to file or enforce a claim against
the estate (either in administration, bankruptcy or other
proceeding) of Borrower or any other person or entity; (iii)
recovery from Borrower or any other person or
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entity becomes barred by any statute of limitations or is
otherwise prevented; (iv) any transfer or transfers of any of
the property covered by the Security Instrument or any other
instrument securing the payment of the Note; (v) any
modifications, extensions, amendments, consents, releases or
waivers with respect to the Note, the Deed of Trust, any other
instrument now or hereafter securing the payment of the Note,
or this Guaranty; or (vi) Guarantor is or becomes liable for
any indebtedness owing by Borrower to Lender other than under
this Guaranty; Guarantor hereby covenanting and agreeing with
Lender that the obligations and liabilities of Guarantor shall
not be modified, changed, released, limited or impaired in any
manner whatsoever on account of any or all of the foregoing.
6.9 To the fullest extent permitted by law, (i) any defense
arising as a result of any election by Lender, in any
proceeding instituted under the Bankruptcy Code, under Section
1111(b)(2) of the Bankruptcy Code, (ii) any defense based on
any borrowing or grant of a security interest under Section
364 of the Bankruptcy Code, and (iii) any defense arising as a
result of any election made by Lender under Section 9-501 of
the Uniform Commercial Code. For purposes hereof, the term
"Bankruptcy Code" shall refer to the United States Bankruptcy
Code, 11 U.S.C. Section 101 et seq.
In addition, Guarantor expressly acknowledges that Guarantor will be and remain
fully liable for the indebtedness hereunder even if, as a result of any exercise
of the power of sale under the Security Instrument and/or any other election of
remedies by Lender under the Security Instrument and/or any of the other Loan
Documents or for any other reason, any rights of reimbursement, contribution or
subrogation on the part of Guarantor against the Borrower, in respect of the
Property or from or against any other Guarantor has been destroyed or impaired.
Guarantor further expressly acknowledges that Guarantor could, in the absence of
the waivers and agreements set forth herein, have one or more defenses to or
otherwise be exonerated from the obligations and liabilities arising under
Guaranty as a result of any such election of remedies by Lender, including,
without limitation, exercise of the power of sale under the Security Instrument,
and Guarantor hereby knowingly, expressly and irrevocably waives each and every
such defense to his liability hereunder, and expressly acknowledges the reliance
hereon of Lender.
7. SUBORDINATION.
7.1 All rights and claims of Guarantor against Borrower or
any of Borrower's property now or hereafter existing shall be
subordinate and subject in right of payment to the prior
payment in full of the Debt to Lender and/or to the payment
and prior performance, in full, of all the Obligations to
Lender.
7.2 Without Lender's prior written consent, Guarantor will not ask
for, demand, sue for, take or receive from Borrower, by
set-off or otherwise, any sums now or hereafter owed by
Borrower to Guarantor, nor any security therefor. Guarantor
hereby transfers, conveys and assigns to the Lender, as
collateral security for any and all of the Debt and
Obligations, all of the said rights and claims of the
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Guarantor against the Borrower (and any security therefor),
with full right on the part of the Lender, in its own name or
in the name of the Guarantor, to collect and enforce said
claims, by suit, proof of debt in bankruptcy, or other claims,
by liquidation proceedings or otherwise. Should any payment,
security or proceeds of security be received by the Guarantor
for or on account of any of said claims or rights prior to the
full payment of the Debt and full payment and performance of
any of the Obligations subject to the provisions of
Subsections 1.5 and 1.6 hereinabove, the Guarantor will
forthwith deliver same to the Lender in precisely the form
received (except for the Guarantor's endorsement where
necessary) for application on account of the Debt and/or
Obligations in accordance with Subsection 4.6 hereinabove,
and, until so delivered, the same shall be held in trust by
the Guarantor as property of the Lender. In the event of the
failure of the Guarantor to endorse any instrument for the
payment of money so received by the Guarantor, payable to the
Guarantor's order, the Lender or any officer or employee of
the Lender is hereby constituted and appointed attorney in
fact for the Guarantor, with full power to make any such
endorsement and with full power of substitution, which agency
shall be deemed to be coupled with an interest and, therefore,
is irrevocable.
7.3 The Guarantor hereby further covenants and agrees that any
lease or leases by and between the Borrower, as lessor, and
the Guarantor, as lessee, with respect to the property (real
and personal) covered by the Security Instrument and/or any
security agreement from Borrower to Lender shall, at all
times, be junior, inferior and subordinate to the lien of the
Security Instrument and/or security interest created by the
security agreement as the same now exist or may hereafter be
amended or modified, it being the intent and agreement of the
Guarantor that any and all leases may be terminated by the
Lender through any foreclosure or similar proceeding involving
the Security Instrument and/or security agreement or property
encumbered by either.
8. SUBROGATION RIGHTS.
Guarantor will not assert any right to which it may be or may
become entitled, whether by subrogation, contribution or otherwise, against the
Borrower or any other guarantor, or against any of their respective properties,
by reason of the performance by the Guarantor of its obligations under this
Guaranty, except after payment in full of the Debt and the full payment and
performance of the Obligations subject to the provisions of Subsections 1.5 and
1.6 hereinabove. If any amount shall be paid to or received by Guarantor on
account of any such right of subrogation or contribution before the Debt and
Obligations have been fully paid and performed, such amount shall be held by
Guarantor for the benefit of Lender and shall be promptly paid to Lender
(without further demand from Lender being necessary). Lender may credit and
apply any such sums to such of the Debt and/or Obligations as Lender may desire
in accordance with Subsection 4.6 hereinabove.
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9. PERIODIC FINANCIAL STATEMENTS.
Within ninety (90) days after the end of Guarantor's fiscal
year, Guarantor will furnish to Lender, Guarantor's financial condition and
consolidated balance sheet as of the end of said preceding year and Guarantor's
statement of profit and loss for said preceding year and such additional
financial data as Lender may reasonably request, all such balance sheets, profit
and loss statements, and additional data to be prepared in accordance with
generally accepted accounting principles consistently applied and be certified
as being so prepared by Guarantor or, at Lender's election, by Guarantor's
certified public accountant. Guarantor will provide to Lender such other
financial information and statements concerning Guarantor's financial status as
Lender may reasonably request from time to time, all of which shall be in form
and substance reasonably acceptable to Lender. Guarantor shall be in default
hereunder if there is any falsity in any material respect or any material
omission in any representation or statement made by Guarantor to Lender or in
any information furnished Lender, by or on behalf of Borrower or Guarantor, in
connection with the Debt and/or any of the Obligations or if there is a material
adverse change in the financial condition of Guarantor, as reasonably determined
by Lender.
10. REPRESENTATIONS AND WARRANTIES.
Guarantor represents and warrants to Lender that:
10.1 The Guarantor has received good, valuable and sufficient
consideration for Guarantor's execution and delivery of this
Guaranty.
10.2 If any Guarantor is a corporation, limited partnership,
trustee or other entity that is not a natural person, it is
(i) a duly organized and valid existing entity under the laws
of the state or country of its incorporation; (ii) that it is
qualified to do business in each state in which qualification
is necessary; (iii) that it has the power to execute this
Guaranty; (iv) that the execution of this Guaranty has been
duly authorized and that it is a binding and valid obligation
of the entity permitted by its articles of incorporation,
bylaws, partnership agreement, trust agreement or like
instrument that authorizes or limits its actions; (v) that no
governmental consent or approval is required in connection
with the execution, delivery or performance of this Guaranty.
10.3 If any Guarantor is a partnership, the obligations of
said Guarantor shall remain in force notwithstanding any
changes in the individuals composing the partnership and the
term "Guarantor" shall include any altered or successive
partnerships, but the predecessor partnerships and their
partners shall not thereby be released from any obligations or
liability hereunder.
10.4 This Guaranty constitutes the valid and binding obligation of
the Guarantor.
10.5 All balance sheets, statements of profit and loss, and other
financial data that have been given to Lender with respect to
Guarantor (i) are complete and correct in all material
respects; (ii) accurately present the financial condition of
Guarantor as of
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the stated dates, and the results of its or their operations,
for the periods for which the same have been furnished; and
(iii) have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the
periods covered thereby.
10.6 All balance sheets disclose all known liabilities, direct and
contingent, as of their respective dates.
10.7 There has been no change in the condition of the Guarantor,
financial or otherwise, since the date of the most recent
financial statements given to the Lender with respect to
Guarantor other than changes in the ordinary course of
business, none of which changes has been materially adverse.
This representation shall apply to all financial statements
and financial data hereafter given to Lender by Guarantor as
of the time the same are given to Lender.
10.8 There are no actions, suits or proceedings pending or
threatened against or affecting Guarantor that will have a
material and adverse effect on Guarantor and that will not be
removed in the ordinary course of business.
10.9 There are no judgments or tax liens against Guarantor or
any property of Guarantor that will have a material and
adverse effect on Guarantor and that will not be removed in
the ordinary course of business.
10.10 Guarantor's execution, delivery or performance of this
Guaranty will not violate any provision of law, governmental
rule or regulation, order, writ, judgment, injunction, decree,
determination or award of any court, arbitrator, governmental
department, commission, board, bureau, or agency, or any
provision of any indenture, agreement or other instrument to
which Guarantor is a party or by which Guarantor or any of
Guarantor's properties or assets is bound, will not conflict
with, result in breach of or constitute a default under any
such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of
any type on any properties or assets of Guarantor.
11. CHANGE IN OWNERSHIP OF GUARANTOR.
Guarantor will not, without the prior written consent of
Lender, do or permit another to do any of the following:
11.1 If Guarantor or any constituent of Guarantor is a corporation,
(i) transfer, assign, sell or encumber any stock in Guarantor
or in any such constituent held by any stockholder of
Guarantor or of any such constituent as of the date hereof
(whether such purported transfer shall be by direct transfer
by such stockholder, by operation of law, the result of
encumbrance of such stock by such stockholder, the result of
action by any party against such stockholder, or otherwise) or
(ii) issue any additional stock of Guarantor or any such
constituent after the date hereof;
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11.2 If Guarantor or any constituent of Guarantor is a partnership,
(i) transfer, assign, sell or encumber any partnership
interest in Guarantor or in any such constituent of Guarantor
held by any partner (general or limited) of Guarantor or of
any such constituent as of the date hereof (whether such
purported transfer shall be by direct transfer by such
partner, by operation of law, the result of encumbrance of
such partnership interest by such partner, the result of any
action by any party against such partner, or otherwise), or
(ii) admit to Guarantor or any such constituent any partner,
whether general or limited).
11.3 If Guarantor or any constituent of Guarantor is the trustee
pursuant to a trust, (i) transfer, assign, sell or encumber or
allow any transfer, assignment, sale or encumbrance of any
beneficial interest in any such trust as of the date hereof
(whether such purported transfer shall be by direct transfer,
by operation of law, the result of encumbrance of such
beneficial interest, the result of action by a party against
any beneficiary, or otherwise), or (ii) admit any new
beneficiary of the trust.
11.4 Effect any change in ownership of Borrower in violation of
the Security Instrument or any transfer or encumbrance of the
Property, as defined in the Security Instrument, or any
portion thereof, in violation of the Security Instrument.
12. DEFAULT, SECURITY INTEREST/RIGHT OF SET-OFF.
12.1 In the event of any default by Guarantor hereunder,
Lender may, at its option, accelerate all sums due and payable
under the Loan Documents and declare the same immediately due
and payable.
12.2 At any time when any of the Debt shall then be due and payable
and/or any of the Obligations payable or performable by
Guarantor under this Guaranty, Lender, without prior demand or
notice of any kind to Guarantor, may, from time to time,
appropriate, set-off and apply toward payment of the Debt
and/or payment or performance of any of the Obligations any
funds or property in which it then has a security interest
under this Section and may transfer into its own name or that
of its nominee any such funds or property which are then in
its possession, custody or control. Lender will promptly
notify Guarantor after any such set-off and application, but
failure to give such notice will not affect the validity of
any such set-off and application.
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13. ASSIGNMENT BY LENDER.
Lender may, without notice of any kind to Guarantor, sell,
assign, transfer, participate, syndicate or pool (as collateral or otherwise)
the Debt and/or any of the Obligations, and any security therefor, and in such
event, each and every immediate and successive assignee, transferee or holder of
the Debt and/or any of the Obligations, or any interest therein, shall have the
right to enforce this Guaranty, by suit or otherwise, for the benefit of such
assignee, transferee or holder, as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, powers and benefits,
but Lender shall have, to the extent permitted by Laws (as defined in the
CRIT-NC Security Instrument), an unimpaired right, prior and superior to that of
any such assignee, transferee or holder, to enforce this Guaranty for the
benefit of Lender as to such part of the Debt and/or any of the Obligations as
it has not sold, assigned or transferred.
14. COSTS OF ENFORCEMENT.
Guarantor shall pay Lender, on demand, all costs and expenses
paid or incurred by Lender in enforcing the obligations of Guarantor hereunder,
including, by way of illustration and not by way of limitation, all court costs
and reasonable attorneys' fees regardless of whether suit is filed and also
including such costs and attorneys' fees at trial and on appeal. If Lender
obtains a judgment against Guarantor for the Debt and/or any of the Obligations,
Guarantor hereby agrees that the amount due under such judgment shall bear
interest at the Default Rate, as defined in the Note, which definition is
incorporated herein by this reference, from date of judgment until such judgment
is paid in full.
15. CUMULATIVE REMEDIES.
Lender's rights and remedies hereunder are cumulative with any
and all other rights and remedies which Lender has or may hereafter have under
the other Loan Documents or which are otherwise available at law or in equity.
No delay on the part of Lender in exercising any of its rights or remedies shall
constitute a waiver thereof.
16. ENTIRE AGREEMENT BETWEEN LENDER AND GUARANTOR.
Guarantor hereby agrees that this instrument contains the
entire agreement between the parties and there is and can be no other oral or
written agreement or understanding whereby the provisions of this instrument
have been or can be affected, varied, waived or modified in any manner unless
the same be set forth in writing and signed by a duly authorized officer of the
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
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17. NOTICES.
Any notice from Lender to Guarantor under this Guaranty shall
be given by sending it by a recognized overnight courier which provides receipts
such as Federal Express, delivering it, or by mailing it, postage prepaid, by
United States Certified Mail, return receipt requested, addressed to Guarantor's
address as set forth below or such other address as Guarantor hereafter
designates by advance written notice to Lender.
If to Guarantor:
CRIT-NC, LLC
306 East Main Street
Richmond, Virginia 23219
Attn: Stanley J. Olander, Jr.
With a copy to:
McGuire Woods Battle & Boothe LLP
901 East Cary Street
Richmond, Virginia 23219-4030
Attn: Martin B. Richards
Any notice to Lender under this Guaranty shall be given by
sending it by a recognized overnight courier which provides receipts such as
Federal Express, delivering it or by mailing it, postage prepaid, by United
States Certified Mail, return receipt requested addressed to Lender's address
set forth herein or such other address as Lender hereafter designates by advance
written notice to Guarantor.
If to the Lender:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Mortgage Loan Customer Service; Reference Loan No. 6 103 650
With a copy to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attn: Regional Counsel; Reference Loan No. 6 103 650
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<PAGE>
Any notice under this Guaranty shall be deemed to have been given to
Guarantor or Lender when delivered, in the case of personal delivery, and the
earlier of actual receipt or three (3) days after mailing when mailed in
compliance with the requirements of this Section.
18. JURISDICTION.
In the event Lender seeks to enforce this Guaranty by legal
action, the Guarantor hereby waives the right to be sued in the county of the
Guarantor's residence or principal place of business and hereby consents to
being sued in Gwinnett or Clayton County, Georgia or Charleston or Richland
County, South Carolina. Guarantor further agrees that any suit hereunder by
Lender may be brought in either the United States District Court for the
Northern District of Georgia or the United States District Court for the State
of South Carolina or in the Superior Court for Gwinnett or Clayton County,
Georgia or the applicable state court for Charleston or Richland County, South
Carolina. Guarantor waives any right to trial by jury in any civil action
arising out of or based upon this Guaranty. Should Guarantor, or any resident
agent appointed hereunder, be or become a non-resident of the States of Georgia
or South Carolina, Guarantor shall, by written notice to Lender setting forth
the name and address of the appointed person, appoint a resident agent residing
in South Carolina to receive, for and on Guarantor's behalf, service of process
in the State of Georgia or South Carolina, which service shall be deemed
effective when delivered whether or not such resident agent gives notice thereof
to the Guarantor, provided that Lender has simultaneously sent said service of
process to Guarantor by United States Certified Mail return receipt requested in
the manner of notices under this Guaranty. The Guarantor hereby appoints Michael
W. Tighe, whose address is Callison, Tighe & Robinson, LLP, 1812 Lincoln Street,
Columbia, South Carolina 29202, as its resident agent to receive, for and on its
behalf, service of process in the State of South Carolina. The Guarantor hereby
appoints Samuel M. Chambliss, III, whose address is c/o McGuire Woods Battle &
Boothe LLP, 285 Peachtree Center Avenue, NE, Marquis Tower II, Suite 2200,
Atlanta, Georgia 30303, as its resident agent to receive, for and on its behalf,
service of process in the State of Georgia.
19. CONFLICT OF LAW.
This Guaranty shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
20. GENDER AND NUMBER.
In this Guaranty, wherever the context so requires, the
neuter gender includes the masculine and/or feminine gender, the singular
numbers include the plural, and the plural numbers include the singular.
21. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of the Lender, its
successors and assigns, and shall be binding upon the Guarantor and its
respective successors and assigns.
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22. SAVINGS CLAUSE.
Whenever possible, each provision or portion of this
Guaranty shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision or portion of this Guaranty is
declared or found by a court of competent jurisdiction to be unenforceable or
null and void, such provision or portion thereof shall be deemed stricken and
severed from this Guaranty, and the remaining provisions and portions thereof
shall continue in full force and effect. To the extent permitted by applicable
law Guarantor hereby waives any provision of law that renders any provision
hereof unenforceable. The provisions of this Section shall prevail over and
control over every other provision of this Guaranty.
23. WAIVER OF TRIAL BY JURY.
GUARANTOR AND LENDER (AS ACKNOWLEDGED BY ITS ACCEPTANCE OF THIS
GUARANTY) HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE
LOAN, THIS GUARANTY, THE LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF LENDER OR
GUARANTOR IN CONNECTION THEREWITH.
IN WITNESS WHEREOF, the Guarantor, intending to be jointly and
severally legally bound hereby (if executed by more than one person), has duly
executed and delivered this Guaranty under seal as of the day and year first set
forth above.
GUARANTOR:
CRIT-NC, LLC, a Virginia limited
liability company (SEAL)
By: CORNERSTONE REALTY
INCOME TRUST, INC., a Virginia
corporation, Managing Member
Attest: /s/ David S. McKenney By: /s/ Stanley J. Olander, Jr.
---------------------------- ------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
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Title: Sr. Vice President Title: Chief Financial Officer
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[CORPORATE SEAL]
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