EXHIBIT 10.4
CRIT SPECIAL, INC.
ARTICLES OF INCORPORATION
ARTICLE I
NAME
1. Name. The name of the Corporation is CRIT Special, Inc.
ARTICLE II
PURPOSE
2. Purpose. Notwithstanding any provision hereof to the contrary,
the following shall govern: The business, operations and purposes of the
Corporation are limited solely to the following:
(a) To serve as the sole member of, and to have the
entire membership interest in, CRIT-NC II, LLC, a Delaware limited liability
company (the "LLC"), in accordance with the provisions hereof and the LLC's
Operating Agreement, which by its terms limits the business of the LLC to the
ownership, operation and management of those certain parcels of real property
listed on Schedule A hereto, together with all improvements located thereon
(collectively, the "Properties"), and limits the indebtedness of the LLC to a
first lien mortgage on the Properties arising from financing by First Union
National Bank (the "Mortgage"), any other indebtedness permitted under the
Mortgage, and normal trade accounts payable in the ordinary course of the LLC's
business; and
(b) To exercise all powers that are enumerated in the
Virginia Stock Corporation Act and that are necessary or convenient for the
business, operations or purposes of the Corporation as set forth herein.
ARTICLE III
PROHIBITIONS
3. Certain Prohibited Activities. Notwithstanding any provision
hereof to the contrary, the following shall govern:
(a) For so long as any obligation secured by the Mortgage
remains outstanding and not paid in full, the Corporation's indebtedness shall
consist only of indebtedness it is permitted to have under the Mortgage and
normal trade accounts payable in the ordinary course of business, and the
Corporation shall not cause or permit the LLC to have any indebtedness other
than the following: (i) the Mortgage, (ii) any other indebtedness the LLC is
permitted to have under the Mortgage, and (iii) normal trade accounts payable in
the ordinary course of the LLC's business.
(b) The Corporation shall not consolidate or merge with
or into any other entity, or convey or transfer its properties and assets
substantially as an entirety to any entity, unless:
(i) the entity that is formed upon such
consolidation, that survives such merger (if other than the Corporation), or
that acquires by conveyance or transfer the properties and assets of the
Corporation substantially as an entirety, shall: (A) be organized and existing
under the laws of the United States of America or any State or the District of
Columbia, (B) include in its organizational documents the same limitations set
forth in this Article III and in Article VII (Separateness Covenants), and (C)
expressly assume the due and timely performance of the Corporation's
obligations; and
(ii) immediately after giving effect to such
transaction, no default or event of default will have occurred under any
agreement to which the Corporation is a party.
(c) The Corporation shall not cause or permit the LLC to
consolidate or merge with or into any other entity, or to convey or transfer its
properties and assets substantially as an entirety to any entity, unless:
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(i) the entity that is formed upon such
consolidation, that survives such merger (if other than the LLC), or that
acquires by conveyance or transfer the properties and assets of the LLC
substantially as an entirety, shall: (A) be organized and existing under the
laws of the United States of America or any State or the District of Columbia,
(B) include in its organizational documents the same limitations set forth in
this Article III and in Article VII (Separateness Covenants), and (C) expressly
assume the due and punctual performance of the LLC's obligations; and
(ii) immediately after giving effect to such
transaction, no default or event of default will have occurred under any
agreement to which the LLC is a party.
(d) For so long as any obligation secured by the Mortgage
remains outstanding and not paid in full, the Corporation shall not, without the
unanimous consent of the Board of Directors (i) voluntarily commence a case with
respect to itself, as debtor, under the Federal Bankruptcy Code or any similar
federal or state statute; or (ii) cause or permit the LLC to voluntarily
commence a case with respect to the LLC, as debtor, under the Federal Bankruptcy
Code or any similar federal or state statute. For so long as any obligation
secured by the Mortgage remains outstanding and not paid in full, no material
amendment to these Articles of Incorporation or to the Corporation's Bylaws may
be made without the prior approval of the mortgagee holding the Mortgage, and
the Corporation shall not cause or permit any material amendment to be made to
the LLC's Certificate of Formation or Operating Agreement without the prior
approval of the mortgagee holding the Mortgage.
ARTICLE IV
AUTHORIZED SHARES
4.1. Number and Designation. The number of shares the Corporation
is authorized to issue is set forth below, together with the designation thereof
and the par value per share:
Number of Shares Class Designation Par Value Per Share
---------------- ----------------- -------------------
5,000 Common no par value
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4.2 Preemptive Rights. No holder of outstanding shares shall have
any preemptive right with respect to: (a) any shares of any class of the
Corporation, whether now or hereafter authorized; (b) any warrants, rights or
options to purchase any such shares; or (c) any obligations convertible into any
such shares or into warrants, rights or options to purchase any such shares.
4.3 Voting and Distributions. The holders of the Common Shares
shall have unlimited voting rights and shall be entitled to receive the net
assets of the Corporation upon the liquidation of the Corporation, its
dissolution or the winding up of its affairs.
ARTICLE V
INITIAL REGISTERED OFFICE AND AGENT
5.1 Initial Registered Office. The initial registered office of
the Corporation is located in the City of Richmond, Virginia, at the following
address:
McGuireWoods LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
5.2 Initial Registered Agent. The initial registered agent of the
Corporation is Martin B. Richards, Esquire, whose business office is identical
with the initial registered office and who is a resident of Virginia and a
member of the Virginia State Bar.
ARTICLE VI
LIMIT ON LIABILITY AND INDEMNIFICATION
6.1 Limit on Liability. To the maximum extent that the Virginia
Stock Corporation Act, as it exists on the date hereof or may hereafter be
amended, permits elimination of, or limitations upon, the liability of a
director or officer of a corporation, the directors and officers of the
Corporation shall have, as applicable, no liability or limited liability to the
Corporation or its shareholders.
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6.2 Indemnification, Advancement of Expenses and Related Matters.
(a) The Corporation, in accordance with the mandatory
indemnification provisions of the Virginia Stock Corporation Act, shall
indemnify a director who entirely prevails in the defense of any proceeding to
which he was a party because he is or was a director of the Corporation against
reasonable expenses incurred by him in connection with the proceeding. An
officer of the Corporation shall be entitled to such mandatory indemnification
to the same extent as a director.
(b) In addition to any mandatory indemnification, the
Corporation shall provide the maximum indemnification permitted by law to any
director, officer, employee or agent of the Corporation in connection with any
proceeding (including any proceeding by or in the right of the Corporation) that
is brought against such person and that is based on the actions taken or not
taken by such person on behalf of the Corporation, or on the status of such
person as a director, officer, employee or agent of the Corporation, except to
the extent that such person has engaged in (i) willful misconduct, or (ii) a
knowing violation of the criminal law.
(c) The provisions of this Article shall not be deemed to
prevent, deny or limit (i) the indemnification or insurance permitted under
applicable law to the directors, officers, employees or agents of the
Corporation, or (ii) the authority of the Corporation under applicable law to
advance, reimburse or pay expenses for the benefit of any director, officer,
employee or agent.
(d) The determination of whether the Corporation is
required or permitted, in a particular case, to indemnify a director, officer,
employee or agent (or to provide such person with related advances,
reimbursements or other payments of expenses) shall be conducted in accordance
with Section 13.1-701 of the Virginia Stock Corporation Act, or any successor
provision.
6.3 Mandatory Subordination. Notwithstanding any provision hereof
to the contrary, the following shall govern: Any indemnification shall be fully
subordinated to any obligations of
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the Corporation in regard to the Properties and shall not constitute a claim
against the Corporation in the event that cash flow is insufficient to pay such
obligations.
6.4 Amendments. No amendment, modification or repeal of this
Article shall diminish the rights provided hereunder to any person arising from
conduct or events occurring before the adoption of such amendment, modification
or repeal.
ARTICLE VII
SEPARATENESS COVENANTS
7.1 Separateness Covenants. Notwithstanding any provision hereof
to the contrary, the following shall govern: For so long as any obligation
secured by the Mortgage remains outstanding and not paid in full, in order to
preserve and ensure the Corporation's separate and distinct corporate identity,
in addition to the other provisions set forth in these Articles of
Incorporation, the Corporation shall conduct its affairs in accordance with the
following provisions:
(a) It shall establish and maintain an office through
which its business shall be conducted separate and apart from those of its
parent and any affiliate and it shall allocate fairly and reasonably any
overhead for shared office space.
(b) It shall maintain separate corporate records and
books of account from those of its parent and any affiliate.
(c) Its Board of Directors shall hold appropriate
meetings, or act by unanimous consent, to authorize all appropriate corporate
actions and shall observe all corporate formalities in authorizing such actions.
(d) It shall not commingle assets with those of its
parent or any affiliate.
(e) It shall conduct its own business in its own name.
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(f) It shall maintain financial statements separate from
its parent and any affiliate.
(g) It shall pay any liabilities out of its own funds,
including salaries of any employees, rather than funds of its parent or any
affiliate.
(h) It shall maintain an arm's length relationship with
its parent and any affiliate.
(i) It shall not guarantee or become obligated for the debts
of any other person or entity (including, without limitation, its parent or any
affiliate) and shall not hold out its credit as being available to satisfy the
obligations of others.
(j) It shall use stationery, invoices and checks separate
from its parent and any affiliate.
(k) It shall not pledge its assets for the benefit of any
other person or entity (including, without limitation, its parent or any
affiliate).
(l) It shall hold itself out as an entity separate from
its parent and any affiliate.
(m) It shall not make any loans or advances to any third
party (including, without limitation, any affiliate).
(n) It shall comply with its obligations under the
agreements and instruments evidencing the Mortgage.
7.2 Definitions. For purpose of this Article VII, the following
terms shall have the indicated meanings:
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(a) "affiliate" means, with respect to a specified person
or entity:
(i) any person or entity directly or indirectly
owning, controlling or holding, with power to vote, ten percent (10%) or more of
the outstanding voting securities or interests of the specified entity;
(ii) any person or entity ten percent (10%) or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held, with power to vote, by the specified person or entity;
(iii) any person or entity directly or indirectly
controlling, controlled by or under common control with the specified person or
entity;
(iv) any officer, director or partner of the
specified person or entity;
(v) if the specified person or entity is an
officer, director or partner, any company for which the specified person or
entity acts in any such capacity; and
(vi) any close relative or spouse of the
specified person.
(b) "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person or entity, whether through ownership of voting securities,
by contract or otherwise.
(c) "parent" means, with respect to a corporation, any
other corporation owning or controlling, directly or indirectly, fifty percent
(50%) or more of the voting shares of such corporation.
(d) "person or entity" includes any individual,
corporation, partnership, limited liability company, joint venture, association,
joint stock company, trust (including any
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beneficiary thereof), unincorporated organization, government or any agency or
political subdivision thereof.
7.3 Actions with Respect to LLC. For so long as any obligation
secured by the Mortgage remains outstanding and not paid in full, the
Corporation shall cause the LLC's Operating Agreement to include separateness
covenants with regard to the LLC that are the same in all material respects as
the separateness covenants contained herein with regard to the Corporation.
Dated: November 29, 2000
By: /s/ William D. James
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William D. James, Incorporator
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SCHEDULE A
(LIST OF PROPERTIES)
The Properties consist of those real properties, together with all improvements
thereon, that are located at the following addresses (and that are more fully
described in agreements and instruments evidencing the Mortgage):
Heatherwood Apartments
5931 Providence Road
Charlotte, NC 28226
Summerwalk Apartments
500 Summerlake Drive
Concord, NC 28205
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