SECURED PROMISSORY NOTE
-----------------------
D- 750905
$13,150,000.00 December 14, 1995
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, COMMERCIAL NET LEASE REALTY, INC., a
Maryland corporation, hereby promises to pay to the order of PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY, an Iowa corporation, at the Home Office of Principal
Mutual Life Insurance Company at 711 High Street, Des Moines, Iowa 50392, or at
such other place as the holder of this Note may designate, the principal sum of
Thirteen Million One Hundred Fifty Thousand and No/100 Dollars ($13,150,000.00)
or so much thereof as shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from the date of disbursement at the
rate of six and seventy-five one hundredth percent (6.75%) per annum, computed
on the basis of a 360 day year composed of twelve 30-day months, in installments
as follows:
Beginning on January 15, 1996, interest shall be due and
payable in installments of Seventy-Three Thousand Nine
Hundred Sixty-Eight and 75/100th Dollars ($73,968.75)
with an installment in a like amount due and payable on
the same day of each month thereafter except that all
remaining principal and interest shall be due and
payable on December 15, 1999 ("Maturity Date"). All such
payments shall be made by wire transfer of immediately
available funds to the registered holder hereof at
Norwest Bank, Iowa, N.A., 7th and Walnut Streets, Des
Moines, Iowa 50304, for credit to Principal Mutual Life
Insurance Company, General Account No. 014752, RE:
D-750905 with reference to the undersigned. If on the
date of the first installment, interest is accrued for
more or less than one installment period, the amount of
said installment shall be increased or decreased by the
amount that the interest accrued exceeds or is less than
the interest for one installment period based on the
actual number of days elapsed to the date of said
installment. All principal and interest shall be paid
in lawful money of the United States of America.
No privilege is reserved by the undersigned to prepay any principal of
this Note prior to the Maturity Date, except that anytime after the date
hereof, so long as no default or Event of Default exists under this Note
or any instrument by which it is secured, privilege is reserved, after
giving sixty (60) days' prior written notice to the holder of this Note,
to prepay in full, but not in part, all principal and interest to the date
of payment, along with all sums, amounts, advances, or charges due under
any instrument or agreement by which this Note is secured, upon the
payment of a "Make Whole Premium." The "Make Whole Premium" shall be the
greater of (a) one percent (1%) of the principal amount to be prepaid, or
(b) the excess, if any, of:
(i) the aggregate present value as of the date of payment or prepayment
noticed as set forth above (hereinafter, the "Payment Date") of each
dollar of principal being paid or prepaid (taking into account the
application of such prepayment as set forth herein) and the amount of
interest (exclusive of interest accrued to the Payment Date) that would
have been payable in respect of such dollar of principal being paid or
prepaid if such payment or prepayment had not been made, determined by
discounting such amounts monthly at a rate which is equal to the "Treasury
Rate" from the due date of this Note, plus fifty (50) basis points, over
(ii) 100% of the principal amount being paid or prepaid.
The "Treasury Rate" will be equal to the arithmetic mean of the yields to
maturity converted to a monthly equivalent of United States Treasury
obligations with a constant maturity (as compiled by and published in the
United States Federal Reserve Bulletin [H.R. 15] (hereinafter "H.R. 15")
or its successor publication for each of the two weeks immediately
preceding the Payment Date) most nearly equal to the remaining "Weighted
Average Life to Maturity" of this Note as of the Payment Date. If the
yields referred to in the preceding sentence shall not have been so
published, the yields corresponding to the Payment Date shall be
calculated on the basis of the arithmetic mean of the arithmetic means of
the secondary market ask rates, as of approximately 3:30 P.M., New York
City time, on the last business days of each of the two weeks preceding
the Payment Date, for the actively traded U.S. Treasury security or
securities with a maturity or maturities most closely corresponding to the
"Weighted Average Life to Maturity", as reported by three primary United
States Government securities dealers in New York City of national standing
selected in good faith by the holder of this Note. If no maturity exactly
corresponding to such remaining "Weighted Average Life to Maturity" should
appear therein, yields for the next longer and the next shorter published
maturities shall be calculated pursuant to the foregoing sentence and the
Treasury Rate shall be interpolated from such yields on a straight-line
basis (rounding to the nearest month).
The "Weighted Average Life to Maturity" with respect to this Note means,
at the Payment Date, the number of years obtained by dividing the
"Remaining Dollar-years" of this Note by the outstanding principal amount
hereof. "Remaining Dollar-years" means the sum of the product obtained by
multiplying (A) the amount of each then remaining required principal
repayment (including repayment of any principal at the due date of this
Note) by (B) the number of years (rounded to the nearest one-twelfth)
which will elapse between the Payment Date and the date such required
payment is due.
The undersigned agrees that if the holder of this Note accelerates the
whole or any part of the principal sum evidenced hereby, or applies any proceeds
as if such application had been made as a result of such acceleration, pursuant
to the provisions of those certain mortgages and/or deeds of trust of even date
herewith between the undersigned and Principal Mutual Life Insurance Company
(collectively, the Mortgage ), the undersigned waives any right to prepay said
principal sum in whole or in part without premium and agrees to pay, as yield
maintenance protection and not as a penalty, the "Make Whole Premium" defined
herein.
Time is of the essence with respect to the payment of this Note.
If any payment of principal, interest or premium is not made when due,
damages will be incurred by the holder of this Note, including additional
expense in handling overdue payments, the amount of which is difficult and
impractical to ascertain. The undersigned therefore agrees to pay, upon demand,
the sum of four cents ($.04) for each one dollar ($1.00) of each said payment
which becomes overdue as a reasonable estimate of the amount of said damages,
subject, however, to the limitations contained in the second immediately
succeeding paragraph.
If any payment of principal, interest or premium is not made for a period
exceeding ten (10) days after due, or if any Event of Default has occurred or is
continuing under any instrument by which this Note is, or may hereafter be,
secured, the entire principal balance, interest then accrued, and premium,
whether or not otherwise then due, shall at the option of the holder of this
Note, become immediately due and payable without demand or notice, and whether
or not the holder of this Note has exercised said option, interest shall accrue
on the entire principal balance, interest then accrued, and any premium then
due, at a rate equal to the lesser of (i) four percent (4%) per annum above the
then applicable rate of interest payable under this Note or (ii) the maximum
rate allowed by applicable law until fully paid or if the holder of this Note
has not exercised said option, for the duration of such Event of Default.
Notwithstanding anything herein or in any of the Loan Documents
(hereinafter defined) to the contrary, no provision contained herein or therein
which purports to obligate the undersigned to pay any amount of interest or any
fees, costs or expenses which are in excess of the maximum permitted by
applicable law, shall be effective to the extent it calls for the payment of any
interest or other amount in excess of such maximum. Any such excess shall, if
inadvertently collected, be credited as a reduction of principal, effective as
of the date inadvertently collected. Any payment of principal in excess of the
then outstanding principal balance resulting from the inadvertent collection of
interest shall be refunded to the undersigned, effective as of the date
inadvertently collected, together with interest at the rate specified in
Subsection 687.04(2) of the Florida Statutes or any successor statute. All
agreements between the undersigned and the holder hereof, whether now existing
or hereafter arising and whether written or oral, are hereby limited so that in
no contingency, whether by reason of demand for payment or acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged or
received by the holder hereof exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would otherwise
be payable to the holder hereof in excess of the maximum lawful amount, the
interest payable to the holder hereof shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the holder hereof
shall ever receive anything of value deemed interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excessive interest shall,
at the option of the holder hereof, be applied to the reduction of the principal
hereof and not to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal hereof such excess shall be refunded to the
undersigned. This paragraph shall control all agreements between the
undersigned and the holder hereof.
The undersigned and any endorsers or guarantors waive presentment, protest
and demand, notice of protest, demand and dishonor and nonpayment and notice of
acceleration and notice of intent to accelerate maturity, and agree the due date
of this Note or any installment may be extended without affecting any liability
hereunder, and further promise to pay all reasonable costs and expenses,
including attorney's and paralegal s fees, incurred by the holder hereof in
connection with any default or in any proceeding (whether incurred in any trial,
appellate, bankruptcy, condemnation or any other proceeding) to interpret and/or
enforce any provision of this Note or any instrument by which it is secured. No
release of the undersigned from liability hereunder shall release any other
maker, endorser or guarantor hereof.
This Note is secured by instruments and agreements of even date herewith
executed and delivered by the undersigned to Principal Mutual Life Insurance
Company creating among other things legal and valid encumbrances on and an
assignment of all of the undersigned's interest in any leases of certain
Premises set forth on Schedule A attached hereto and made a part hereof
(collectively, the Premises ). Terms used herein which are defined in such
instruments or agreements and not otherwise defined herein have the same
definition as in such instruments and agreements. In no event shall such
documents be construed inconsistently with the terms of this Note, and in the
event of any discrepancy between any such documents and this Note, the terms
hereof shall govern. The proceeds of this Note are to be used for business,
commercial, investment or other similar purposes, and no portion thereof will be
used for any personal, family or household use. This Note shall be governed by
and construed in accordance with the laws of the State of Florida.
Notwithstanding any provision to the contrary in this Note, the Mortgage,
or any other instrument or agreement by which this Note is secured (collectively
referred to herein as the "Loan Documents"), and except as otherwise provided in
this paragraph, the liability of the undersigned under the Loan Documents shall
be limited to the interest of the undersigned in the Premises and the rents,
issues, proceeds and profits thereof. In the event of foreclosure of the liens
evidenced by the Loan Documents, no judgment for any deficiency upon the
indebtedness evidenced by the Loan Documents shall be sought or obtained by the
holder of this Note against the undersigned . Nothing contained in this
paragraph shall:
(a) prevent the failure of the undersigned to make any payment or to
perform any obligation under any of the Loan Documents within the time
periods provided therein from being an Event of Default thereunder;
(b) be construed as limiting the obligations of the undersigned to any
lessee under any lease of the Premises;
(c) in any way limit or impair the lien or enforcement of the Loan
Documents pursuant to the terms thereof; or
(d) limit the obligations of any indemnitor or guarantor, if any, of
obligations of the undersigned under the Loan Documents.
Notwithstanding the foregoing paragraph, the undersigned, but not its
shareholders, officers, directors, employees or agents, shall be personally
liable to the holder of this Note for:
(a) failure of the undersigned to comply with paragraphs 2 (taxes and
assessments) and 3 (insurance) of the Mortgage with respect to
amounts accruing prior to a Sale of the Premises, as defined below;
(b) any event or circumstance for which the undersigned indemnifies the
holder of this Note under paragraph 1(m) (environmental indemnity)
of the Mortgage;
(c) failure of the undersigned to pay utilities accruing prior to a Sale
of the Premises, as defined below, on or before the date such
payments are due;
(d) operation and maintenance of the Premises applicable to the time
period prior to a Sale of the Premises, as defined below;
(e) any sums expended by the holder of this Note in fulfilling the
obligations of the undersigned as lessor under any lease of the
Premises prior to a sale of the Premises pursuant to foreclosure or
power of sale, a bona fide sale (permitted by the terms of paragraph
1(l) of the Mortgage or consented to in writing by the holder of
this Note) to an unrelated third party or upon conveyance to the
holder of this Note of the Premises by a deed acceptable to the
holder of this Note in form and content (each of which shall be
referred to as a "Sale" for purposes of this paragraph) or expended
by the holder of this Note after a Sale of the Premises for
obligations of the undersigned which arose prior to a Sale of the
Premises;
(f) any rents or other income regardless of type or source of payment
(including, but not limited to, CAM charges, lease termination
payments, refunds of any type, prepayment of rents, settlements of
litigation, or settlements of past due rents) from the Premises
which the undersigned has received or has a right to receive after
an Event of Default under the Loan Documents or an event which with
the passage of time, the giving of notice or both would constitute
an Event of Default, either or both of which has occurred and is
continuing, and which are not applied to (A) expenses of operation
and maintenance of the Premises and the taxes, assessments, utility
charges and insurance of the Premises, taking into account
sufficient reserves for the same and for replacements and recurring
items, and (B) payment of principal, interest and other charges when
due under the Loan Documents; provided that any payments to parties
related to the undersigned shall be considered expenses of operation
only if they are at market rates or fees consistent with market
rates or fees for the same or similar services;
(g) any security deposits of tenants not turned over to the holder of
this Note upon conveyance of the Premises to the holder of this Note
pursuant to foreclosure or power of sale or by a deed acceptable to
the holder of this Note in form and content;
(h) misapplication or misappropriation of tax reserve accounts, tenant
improvement reserve accounts, security deposits, prepaid rents or
other similar sums paid to or held by the undersigned or any other
entity or person in connection with the operation of the Premises;
(i) any waste committed or allowed by the undersigned with respect to
the Premises prior to a Sale of the Premises,;
(j) any insurance or condemnation proceeds or other similar funds or
payments with respect to a casualty or condemnation occurring prior
to a Sale of the Premises, applied by the undersigned in a manner
other than as expressly provided in the Loan Documents;
(k) any breach or violation of paragraph 1(l) (due on sale or
encumbrance) of the Mortgage, other than the filing of a nonmaterial
mechanic's lien affecting the Premises, the granting of any utility
or other nonmaterial easement or servitude burdening the Premises,
or any other transfer or encumbrance not in the nature of a
transfer, reduction or impairment of any material economic interest
in the Premises; and
(l) any fraud or willful misrepresentation by the undersigned regarding
the Premises, the making or delivery of any of the Loan Documents or
in any materials or information provided by the undersigned in
connection with the loan.
Notwithstanding anything herein contained to the contrary, the
undersigned, but not its shareholders, officers, directors, employees, or
agents shall be personally liable to the holder of the Note for the amount
set forth on Schedule B attached hereto and made a part hereof which is
allocated to the respective portion of the Premises (the Applicable
Portion of the Premises ), plus the Make Whole Premium calculated on such
amount had such amount been prepaid as of the date of the occurrence set
forth below:
(a) in the event of any amendment, modification or termination by the
undersigned of the particular Lease (as defined in the Mortgage or
Deed of Trust with respect to the Applicable Portion of the
Premises) for the Applicable Portion of the Premises without the
prior written consent of the holder of the Note;
(b) in the event the Lessee (as defined in the Mortgage or Deed of Trust
with respect to the Applicable Portion of the Premises) under the
particular Lease for the Applicable Portion of the Premises is not
obligated to notify the holder of the Note of a default by the
undersigned and the undersigned defaults under said Lease and the
holder of the Note does not receive notice of said default following
the occurrence thereof within a reasonable period of time to effect
cure of said default; or
(c) in the event the undersigned violates any exclusive use or non-
compete provision granted to the Lessee under the particular lease
for the Applicable Portion of the Premises.
If more than one, all obligations and agreements of the undersigned are
joint and several.
This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. All of the rights
privileges and obligations hereunder shall inure to the benefit of the heirs,
successors and assigns of the holder hereof and shall bind the heirs, successors
and assigns of the undersigned.
The parties hereto intend and believe that each provision of this Note
comports with all applicable law. However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this note to be unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
provision shall be given full force and effect to the fullest possible extent
that it is legal, valid and enforceable, that the remainder of this Note shall
be construed as if such unlawful, void or unenforceable provision were not
contained herein, and that the rights, obligations and interests of the
undersigned and the holder hereof under the remainder of this Note shall
continue in full force and effect.
AFTER CONSULTING WITH COUNSEL AND CAREFUL CONSIDERATION, THE UNDERSIGNED
AND THE HOLDER (BY ITS ACCEPTANCE HEREOF) KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS NOTE OR ANY OTHER
INSTRUMENT OR AGREEMENT BY WHICH THIS NOTE IS, OR MAY HEREAFTER BE,
SECURED, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(ORAL OR WRITTEN), OR ACTIONS OF THE UNDERSIGNED OR THE HOLDER. THIS
WAIVER IS A MATERIAL INDUCEMENT TO THE HOLDER'S ACCEPTANCE OF THIS NOTE.
COMMERCIAL NET LEASE REALTY, INC.,
a Maryland corporation
By:/s/Kevin B. Habicht
-------------------------------
Name: Kevin B. Habicht
Title: Executive Vice President
SCHEDULE A
[LIST OF PREMISES]
SEARS BARNES & NOBLE
15701 U.S. Highway 19 4136 N. Road 98
Clearwater, FL Lakeland, FL
BEST BUY LINENS 'N THINGS
5625 S. Padre Island Drive 200 Trotters Way
Corpus Christi, TX Freehold, NJ
OFFICEMAX F/N/A BIZMART MARSHALL'S
5625 S. Padre Island Drive 200 Trotters Way
Corpus Christi, TX Freehold, NJ
FOOD LION
2303 Bedford Avenue
Lynchburg, VA
SCHEDULE B
[ALLOCATED LOAN AMOUNTS]
PREMISES ALLOCATED LOAN AMOUNT
1. Sears $3,431,523
15701 U.S. Highway 19
Clearwater, FL
2. Food Lion $1,666,804
2303 Bedford Avenue
Lynchburg, VA
3. Best Buy $1,585,849
5625 S. Padre Island Drive
Corpus Christi, TX
4. OfficeMax f/n/a Bizmart $1,799,500
5625 S. Padre Island Drive
Corpus Christi, TX
5. Barnes & Noble $2,088,720
4136 N. Road 98
Lakeland, FL
6. Linens 'n Things $3,664,355
200 Trotters Way
Freehold, NJ
7. Marshalls $4,289,470
200 Trotters Way
Freehold, NJ