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
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
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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
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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
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(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.
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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.
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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.
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Name: David S. McKenney Name: Stanley J. Olander, Jr.
Title: Senior 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 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
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Notary Public
My Commission Expires: April 30, 2003
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[NOTARY SEAL]
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