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
================================================================================
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-
CONTENTS
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
-iii-
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
-iv-
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
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-
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-
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-
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,
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-
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-
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.
-4-
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.
-5-
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;
-6-
(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
-7-
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.
-8-
(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
-9-
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
-10-
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
-11-
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.
-12-
(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.
-13-
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
-14-
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
-15-
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.
-16-
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
-17-
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.
-18-
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
-19-
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;
-20-
(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;
-21-
(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
-22-
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;
-23-
(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;
-24-
(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;
-25-
(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.
-26-
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.
-27-
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
-28-
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.
-29-
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:
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
-30-
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
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
-31-
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
-32-
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.
-33-
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;
-34-
(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.
-35-
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;
-36-
(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.
-37-
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.
-38-
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.
------------------------------ ------------------------------------
Name: David S. McKenney Name: Stanley J. Olander, Jr.
------------------------- Title: Chief Financial Officer
Title: Sr. Vice President and
------------------------
Assistant Secretary
------------------------
[CORPORATE SEAL]
-39-
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]
-40-
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.
-41-
(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-
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-
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-
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-
Exhibit D
LIST OF MAJOR TENANTS
NONE
-46-
Exhibit E
Allocated Loan Amounts and Individual Property List
-------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------
-47-
EXHIBIT F
Sheet 1
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
- ----------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING IMPROVE- ADJUSTED IMPROVE-
COMMUNITY UNITS DATE MENTS PER UNIT MENT
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------
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-