EXHIBIT 4.4
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CORNERSTONE REALTY INCOME TRUST, INC., a Virginia corporation, as
mortgagor
(Borrower)
to
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as mortgagee
(Lender)
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MORTGAGE AND SECURITY AGREEMENT
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Dated: As of September 27, 1999
Location:
Arbors at Windsor Lake, Richland County, South Carolina
PREPARED BY AND UPON
RECORDATION RETURN TO:
▇▇▇▇▇▇ & Bird LLP
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Loan No. 6 103 650
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THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND IS
ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS UNDER THE NAMES OF
BORROWER, AS "DEBTOR", AND LENDER, AS "SECURED PARTY".
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...................................................................4
SECTION 2.05 TAX STATUS OF BORROWER...............................................................5
SECTION 2.06 BANKRUPTCY AND EQUIVALENT VALUE......................................................5
SECTION 2.07 DISCLOSURE...........................................................................5
SECTION 2.08 ILLEGAL ACTIVITY.....................................................................6
ARTICLE III COVENANTS AND AGREEMENTS.............................................................6
SECTION 3.01 PAYMENT OF OBLIGATIONS...............................................................6
SECTION 3.02 CONTINUATION OF EXISTENCE............................................................6
SECTION 3.03 TAXES AND OTHER CHARGES..............................................................6
SECTION 3.04 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS........................7
SECTION 3.05 OPERATION AND MAINTENANCE OF PROPERTY................................................7
SECTION 3.06 INSURANCE............................................................................8
SECTION 3.07 DAMAGE AND DESTRUCTION OF PROPERTY..................................................10
SECTION 3.08 CONDEMNATION........................................................................12
SECTION 3.09 LIENS AND LIABILITIES...............................................................13
SECTION 3.10 TAX AND INSURANCE DEPOSITS..........................................................13
SECTION 3.11 ERISA 14
SECTION 3.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS............................15
SECTION 3.13 ELECTRONIC PAYMENTS.................................................................16
SECTION 3.14 INSPECTION..........................................................................16
SECTION 3.15 RECORDS, REPORTS, AND AUDITS........................................................17
SECTION 3.16 BORROWER'S CERTIFICATES.............................................................18
SECTION 3.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES..................................18
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SECTION 3.18 ADDITIONAL SECURITY.................................................................18
SECTION 3.19 FURTHER ACTS........................................................................19
ARTICLE IV ADDITIONAL ADVANCES; EXPENSES; SUBROGATION..........................................19
SECTION 4.01 EXPENSES AND ADVANCES...............................................................19
SECTION 4.02 SUBROGATION.........................................................................19
ARTICLE V SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................19
SECTION 5.01 DUE-ON-SALE OR ENCUMBRANCE..........................................................19
SECTION 5.02 PERMITTED TRANSFER..................................................................20
SECTION 5.03 PERMITTED (ONE TIME) TRANSFER.......................................................21
ARTICLE VI DEFAULTS AND REMEDIES...............................................................22
SECTION 6.01 EVENTS OF DEFAULT...................................................................22
SECTION 6.02 REMEDIES 24
SECTION 6.03 EXPENSES 26
SECTION 6.04 RIGHTS PERTAINING TO SALES..........................................................26
SECTION 6.05 APPLICATION OF PROCEEDS.............................................................26
SECTION 6.06 ADDITIONAL PROVISIONS AS TO REMEDIES................................................26
SECTION 6.07 WAIVER OF RIGHTS AND DEFENSES.......................................................27
ARTICLE VII SECURITY AGREEMENT..................................................................27
SECTION 7.01 SECURITY AGREEMENT..................................................................27
ARTICLE VIII LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES....................................27
SECTION 8.01 LIMITED RECOURSE LIABILITY..........................................................27
SECTION 8.02 GENERAL INDEMNITY...................................................................28
SECTION 8.03 TRANSACTION TAXES INDEMNITY.........................................................28
SECTION 8.04 ERISA INDEMNITY.....................................................................28
SECTION 8.05 ENVIRONMENTAL INDEMNITY.............................................................28
SECTION 8.06 DUTY TO DEFEND, COSTS AND EXPENSES..................................................28
SECTION 8.07 RECOURSE OBLIGATION AND SURVIVAL....................................................29
ARTICLE IX ADDITIONAL PROVISIONS...............................................................29
SECTION 9.01 USURY SAVINGS CLAUSE................................................................29
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SECTION 9.02 NOTICES.............................................................................29
SECTION 9.03 SOLE DISCRETION OF LENDER...........................................................30
SECTION 9.04 APPLICABLE LAW AND SUBMISSION TO JURISDICTION.......................................30
SECTION 9.05 CONSTRUCTION OF PROVISIONS..........................................................30
SECTION 9.06 TRANSFER OF LOAN....................................................................31
SECTION 9.07 MISCELLANEOUS.......................................................................31
SECTION 9.08 ENTIRE AGREEMENT....................................................................32
SECTION 9.9 WAIVER OF TRIAL BY JURY.............................................................32
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL..........................................32
SECTION 10.01 PARTIAL RELEASE.....................................................................32
SECTION 10.02 SUBSTITUTION OF COLLATERAL..........................................................34
ARTICLE XI AMORTIZATION AND REQUIRED REPAIRS...................................................36
SECTION 11.01 AMORTIZATION REQUIRED...............................................................36
SECTION 11.02 REQUIRED REPAIRS, CAPITAL IMPROVEMENTS AND REPLACEMENTS.............................37
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
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DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage and Security Agreement:
Action Section 9.04
Additional Funds Section 3.07 (c)
Affecting the Property Section 3.12 (a)
All Section 9.05 (m)
Any Section 9.05 (m)
Assessments Section 3.03 (a)
Assignment Recitals, Section 2 (B)
Awards Section 3.08 (b)
Bankruptcy Code Recitals, Section 2 (A) (ix)
Borrower Preamble
Costs Section 4.01
Damage Section 3.07 (a)
Debt Service Coverage Ratio Section 5.03
Default Rate Section 1.01 (a)
Deposits Section 3.10
Documents Section 1.02
Environmental Indemnity Section 8.05
Environmental Law Section 3.12 (a)
Environmental Liens Section 3.12 (b)
Environmental Report Section 3.12 (a)
ERISA Section 3.11
Event of Default Section 6.01
Flood Acts Section 2.04 (a)
Foreign Person Section 2.05
Full Insurable Value Section 3.06 (a)
GAAP Section 3.15 (a)
Grace Period Section 6.01(b)
Guarantor Section 1.02
Guaranty Section 1.02
Hazardous Materials Section 3.12 (a)
Impositions Section 3.10
Improvements Recitals, Section 2 (A) (ii)
Include, Including Section 9.05 (f)
Indemnified Parties Section 8.02
Indemnify Section 8.02
Instrument Preamble
Insurance Premiums Section 3.10
Investors Section 9.06
Land Recitals, Section 2 (A) (i)
Laws Section 3.05(c)
Lease Section 9.05 (k)
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Leases Recitals, Section 2 (A) (ix)
Lender Preamble
Lessee Section 9.05 (k)
Lessor Section 9.05 (k)
Liens Section 3.09
Loan Recitals, Section 1
Loan to Value Ratio Section 5.03
Losses Section 8.02
Major Tenants Section 3.08 (d)
Net Proceeds Section 3.07 (d)
Note Recitals, Section 1
Notice Section 9.02
Obligations Section 1.01
On Demand Section 9.05 (n)
Organization State Section 2.01
Owned Section 9.05 (l)
Permitted Encumbrances Recitals, Section 2 (B)
Person Section 9.05 (I)
Personal Property Section 6.02 (j)
Portfolio Section 5.03
Prepayment Premium Section 1.01(a)
Property Recitals, Section 2 (A)
Property State Section 2.01
Provisions Section 9.05 (j)
Rating Agency Section 3.06 (c)
Release Section 3.12 (a)
Rent Loss Proceeds Section 3.07 (c)
Rents Recitals, Section 2 (A) (x)
Restoration Section 3.07 (a)
Securities Section 9.06
Security agreement Section 7.01
Taking Section 3.08 (a)
Tenant Recitals, Section 2 (A) (vi)
Tenants Section 9.05 (k)
Transaction Taxes Section 3.03 (c)
U.C.C. Section 2.02
Upon Demand Section 9.05 (n)
Violation Section 3.11
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MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "INSTRUMENT") is made as of September
27, 1999, by Cornerstone Realty Income Trust, Inc., a Virginia corporation,
having its principal office and place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as mortgagor ("BORROWER"), to THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, having an office at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, as mortgagee ("LENDER").
RECITALS:
1. Borrower, by the terms of its promissory note executed on the same date as
this Instrument ("NOTE") and in connection with the loan ("LOAN") from Lender to
Borrower, is indebted to Lender in the principal sum of Fifty Million Five
Hundred Fifty Thousand and No/100 Dollars ($50,550,000.00).
2. Borrower desires to secure the payment of and the performance of all of its
obligations under the Note and certain additional Obligations (as defined in
Section 1.01). The Maturity Date (as that term is defined in the Note) of the
Note is October 15, 2006.
IN CONSIDERATION of the principal sum of the Note, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, Borrower
irrevocably:
A. Has granted, bargained, sold, released, assigned, transferred, pledged,
mortgaged, warranted and conveyed, and by these presents does grant, bargain,
sell, release, assign, transfer, pledge, mortgage, warrant and convey unto the
said Lender, and grants Lender a security interest in the following property,
rights, interests and estates owned by Borrower (collectively, the "Property"):
(i) The real property in Richland County, South Carolina and described
in Exhibit A ("LAND");
(ii) All buildings, structures and improvements (including fixtures)
now or later located in or on the Land ("IMPROVEMENTS");
(iii) All easements, estates, and interests including hereditaments,
servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights,
air rights, development power or rights, options, reversion and remainder
rights, and any other rights owned by Borrower and relating to or usable in
connection with or access to the Property;
(iv) All right, title, and interest owned by Borrower in and to all
land lying within the rights-of-way, roads, or streets, open or proposed,
adjoining the Land to the center line thereof, and all sidewalks, alleys, and
strips and gores of land adjacent to or used in connection with the Property;
(v) All right, title, and interest of Borrower in, to, and under all
plans, specifications, surveys, studies, reports, permits, licenses, agreements,
contracts, instruments, books of account, insurance policies, and any other
documents relating to the use, construction, occupancy, leasing, activity, or
operation of the Property;
(vi) All of the fixtures and personal property described in Exhibit B
owned by Borrower and replacements thereof; but excluding all personal property
owned by any tenant (a "TENANT") of the Property;
(vii) All of Borrower's right, title and interest in the proceeds
(including conversion to cash or liquidation claims) of (A) insurance relating
to the Property and (B) all awards made for the taking by eminent domain (or by
any proceeding or purchase in lieu thereof ) of the Property, including awards
resulting from a change of any streets (whether as to grade, access, or
otherwise) and for severance damages;
(viii) All tax refunds, including interest thereon, tax rebates, tax
credits, and tax abatements, and the right to receive the same, which may be
payable or available with respect to the Property;
(ix) All leasehold estates, ground leases, leases, subleases, licenses,
or other agreements affecting the use, enjoyment or occupancy of the Property
now or later existing (including any use or occupancy arrangements created
pursuant to Title 7 or 11 of the United States Code, as amended from time to
time, or any similar federal or state laws now or later enacted for the relief
of debtors (the "BANKRUPTCY CODE") and all extensions and amendments thereto
(collectively, the "LEASES") and all Borrower`s right, title and interest under
the Leases, including all guaranties thereof; and
(x) All rents, issues, profits, royalties, receivables, use and
occupancy charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any portion or use
of the Property (including any payments received with respect to any Tenant or
the Property pursuant to the Bankruptcy Code) and all cash, security deposits,
advance rentals, or similar payments relating thereto (collectively, the
"RENTS") and all proceeds from the cancellation, termination, surrender, sale or
other disposition of the Leases, and the right to receive and apply the Rents to
the payment of the Obligations.
B. Absolutely and unconditionally assigns, sets over, and transfers to Lender
all of Borrower's right, title, interest and estates in and to the Leases and
the Rents, subject to the terms and license granted to the Borrower under that
certain Assignment of Leases and Rents made by Borrower to Lender dated the same
date as this Instrument (the "ASSIGNMENT"), which document shall govern and
control the provisions of this assignment.
TO HAVE AND TO HOLD the Property unto the Lender and its successors and assigns
forever, subject to the matters listed in Exhibit C ("PERMITTED ENCUMBRANCES")
and the provisions of this Instrument.
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PROVIDED, HOWEVER, if Borrower shall pay and perform the Obligations as provided
for in the Documents (defined below) and shall comply with all the provisions in
the Documents, these presents and the estates hereby granted (except for the
obligations of Borrower set forth in Sections 3.11 and 3.12 and Article VIII
hereof) shall cease, terminate and be void.
IN FURTHERANCE of the foregoing, Borrower warrants, represents, covenants and
agrees as follows:
ARTICLE I - OBLIGATIONS
SECTION 1.01 Obligations. This Instrument is executed, acknowledged, and
delivered by Borrower to secure and enforce the following obligations
(collectively, the "OBLIGATIONS"):
(a) Payment of all obligations, indebtedness and liabilities under the
Documents including (i) the Prepayment Premium (as defined in the Note)
("PREPAYMENT PREMIUM"), (ii) interest at both the rate specified in the Note and
at the Default Rate (as defined in the Note) ("DEFAULT RATE"), if applicable and
to the extent permitted by Laws (defined below), and (iii) renewals, extensions,
and amendments of the Documents;
(b) Performance of every obligation, covenant, and agreement under the
Documents including renewals, extensions, and amendments of the Documents;
(c) Payment of all sums advanced (including costs and expenses) by
Lender pursuant to the Documents including renewals, extensions, and amendments
of the Documents;
SECTION 1.02 Loan Documents. The "DOCUMENTS" shall mean (i) this Instrument,
(ii) the Note, (iii) the Assignment, (iv) that certain Unconditional Guaranty of
Payment and Performance (Cross-Collateralization) between Borrower and Lender of
even date herewith, (v) that certain Mortgage and Security Agreement between
Borrower and Lender of even date herewith securing the Note and to be recorded
in the real estate records of Richland County, South Carolina, (vi) that certain
Deed to Secure Debt and Security Agreement between Borrower and Lender of even
date herewith securing the Note and to be recorded in the real estate records of
Gwinnett County, Georgia and ▇▇▇▇▇▇▇ County, Georgia, (vii) that certain
Unconditional Guaranty of Payment and Performance (Cross-Collateralization) (the
"Guaranty") of even date herewith from CRIT-NC, LLC ("Guarantor") to Lender,
(viii) that certain Deed of Trust and Security Agreement between Guarantor and
Lender of even date herewith securing the Guaranty and to be recorded in the
real estate records of Wake County, North Carolina, (ix) that certain Deed of
Trust and Security Agreement between Guarantor and Lender of even date herewith
securing the Guaranty and to be recorded in the real estate records of
Mecklenburg County, North Carolina, (x) any additional mortgages, deeds of trust
and deeds to secure debt and other instruments given to secure the Note pursuant
to the substitution of collateral provisions of Section 10.02 below, and (xi)
any other written agreement executed in connection with the closing of the Loan
(but excluding the Loan application and Loan commitment) and by the party
against whom enforcement is sought, including those given to evidence or further
secure the payment and performance of any of the Obligations, and any written
renewals, extensions, and amendments of the foregoing, executed
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by the party against whom enforcement is sought. All of the provisions of the
Documents are incorporated into this Instrument as if fully set forth in this
Instrument.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
SECTION 2.01 Title, Legal Status and Authority. Borrower (i) is seized of the
Land and Improvements in fee simple and has good and marketable title to the
Property, free and clear of all liens, charges, encumbrances, and security
interests, except the Permitted Encumbrances; (ii) will forever warrant and
defend its title to the Property and the validity, enforceability, and priority
of the lien and security interest created by this Instrument against the claims
of all persons; (iii) is a Virginia corporation duly organized, validly
existing, and in good standing and qualified to transact business under the laws
of its state of organization or incorporation ("ORGANIZATION STATE") and the
state where the Property is located ("PROPERTY STATE"); and (iv) has all
necessary approvals, governmental and otherwise, and full power and authority to
own its properties (including the Property) and carry on its business.
SECTION 2.02 Validity of Loan Documents. The execution, delivery and performance
of the Documents and the borrowing evidenced by the Note (i) are within the
power of Borrower; (ii) have been authorized by all requisite action; (iii) have
received all necessary approvals and consents; (iv) will not violate, conflict
with, breach, or constitute (with notice or lapse of time, or both) a default
under (1) any law, order or judgment of any court, governmental authority, or
the governing instrument of Borrower or (2) any indenture, agreement, or other
instrument to which Borrower is a party or by which it or any of its property is
bound or affected; (v) will not result in the creation or imposition of any
lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument; and (vi) will not require any authorization or license
from, or any filing with, any governmental or other body (except for the
recordation of this Instrument and Uniform Commercial Code ("U.C.C.") filings).
The Documents constitute valid and binding obligations of Borrower.
SECTION 2.03 Litigation. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform its
obligations.
SECTION 2.04 Status of Property.
(a) The Land and Improvements are not located in an area identified by
the Secretary of Housing and Urban Development, or any successor, as an area
having special flood hazards pursuant to the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973, or the National Flood Insurance
Reform Act of 1994, as each have been or may be amended, or any successor law
(collectively, the "FLOOD ACTS") or, if located within any such area, Borrower
has and will maintain the insurance prescribed in Section 3.06 below.
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(b) Borrower has all necessary (i) certificates, licenses, and other
approvals, governmental and otherwise, for the operation of the Property and the
conduct of its business and (ii) zoning, building code, land use, environmental
and other similar permits or approvals, all of which are currently in full force
and effect and not subject to revocation, suspension, forfeiture, or
modification. The Property and its use and occupancy is in full compliance with
all Laws and Borrower has received no notice of any violation or potential
violation of the Laws which has not been remedied or satisfied.
(c) The Property is served by all utilities (including water and sewer)
required for its use.
(d) All public roads and streets necessary to serve the Property for
its use have been completed, are serviceable, are legally open, and have been
dedicated to and accepted by the appropriate governmental entities.
(e) The Property is free from damage caused by fire or other casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid in full
except for the Permitted Encumbrances.
(g) Borrower owns and has paid in full for all furnishings, fixtures,
and equipment (other than Tenants' property) used in connection with the
operation of the Property, free of all security interests, liens, or
encumbrances except the Permitted Encumbrances and those created by this
Instrument.
(h) The Property is assessed for real estate tax purposes as one or
more wholly independent tax lot(s), separate from any adjoining land or
improvements and no other land or improvements is assessed and taxed together
with the Property.
SECTION 2.05 Tax Status of Borrower. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
SECTION 2.06 Bankruptcy and Equivalent Value. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, any general partner of Borrower (if Borrower
is a partnership), or any manager or managing member of Borrower (if Borrower is
a limited liability company). Borrower has received reasonably equivalent value
for granting this Instrument.
SECTION 2.07 Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. There has been no adverse
change in any condition, fact, circumstance, or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
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SECTION 2.08 Illegal Activity. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
ARTICLE III - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
SECTION 3.01 Payment of Obligations. Borrower shall timely pay and cause to be
performed the Obligations.
SECTION 3.02 Continuation of Existence. Borrower shall not (a) dissolve,
terminate, or otherwise dispose of, directly, indirectly or by operation of law,
all or substantially all of its assets; (b) reorganize or change its legal
structure without Lender's prior written consent; (c) change its name, address,
or the name under which Borrower conducts its business without promptly
notifying Lender; or (d) do anything to cause the representations in Section
2.02 to become untrue.
SECTION 3.03 Taxes and Other Charges.
(a) Payment of Assessments. Borrower shall pay when due all taxes,
liens, assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and public
and other charges of any character (including penalties and interest) assessed
against, or which could become a lien against, the Property ("ASSESSMENTS") ten
(10) days prior to the date any fine, penalty, interest or charge for nonpayment
may be imposed. Unless Borrower is making deposits per Section 3.10, Borrower
shall provide Lender with receipts evidencing such payments (except for income
taxes, franchise taxes, ground rents, maintenance charges, and utility charges)
within thirty (30) days after their due date.
(b) Right to Contest. So long as no Event of Default (defined below) is
continuing, Borrower may, prior to delinquency and at its sole expense, contest
any Assessment, but this shall not change or extend Borrower's obligation to pay
the Assessment as required above unless (i) Borrower gives Lender prior written
notice of its intent to contest an Assessment; (ii) Borrower demonstrates to
Lender's reasonable satisfaction that (1) the Property will not be sold to
satisfy the Assessment prior to the final determination of the legal
proceedings, (2) it has taken such actions as are required or permitted to
accomplish a stay of any such sale, or (3) it has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a sale of the
Property; (iii) at Lender's option, Borrower has deposited the full amount
necessary to pay any unpaid portion of the Assessments with Lender; and (iv)
such proceeding shall be permitted under any other instrument to which Borrower
or the Property is subject (whether superior or inferior to this Instrument);
provided, however, that the foregoing shall not apply to the contesting of any
income taxes, franchise taxes, ground rents, maintenance charges, and utility
charges.
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(c) Documentary Stamps and Other Charges. Borrower shall pay all taxes,
assessments, charges, expenses, costs and fees (including registration and
recording fees and revenue, transfer, stamp, intangible, indebtedness and any
similar taxes) (collectively, the "TRANSACTION TAXES") required in connection
with the making and/or recording of the Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to) pay these
and Borrower shall reimburse Lender on demand for any amount so paid with
interest at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws.
(d) Changes in Laws Regarding Taxation. If any law (i) deducts from the
value of real property for the purpose of taxation any lien or encumbrance
thereon, (ii) taxes mortgages or debts secured by mortgages for federal, state
or local purposes or changes the manner of the collection of any such existing
taxes, and/or (iii) imposes a tax, either directly or indirectly, on any of the
Documents or the Obligations, Borrower shall, if permitted by law, pay such tax
within the statutory period or within twenty (20) days after demand by Lender,
whichever is less; provided, however, that if, in the opinion of Lender,
Borrower is not permitted by law to pay such taxes, Lender shall have the option
to declare the Obligations immediately due and payable (without any Prepayment
Premium) upon six (6) months' notice to Borrower.
(e) No Credits on Account of the Obligations. Borrower will not claim
or be entitled to any credit(s) on account of the Obligations for any part of
the Assessments and no deduction shall be made or claimed from the taxable value
of the Property for real estate tax purposes by reason of the Documents or the
Obligations. If such claim, credit or deduction is required by law, Lender shall
have the option to declare the Obligations immediately due and payable (without
any Prepayment Premium) upon sixty (60) days' notice to Borrower.
SECTION 3.04 Defense of Title, Litigation, and Rights under Loan Documents.
Borrower shall forever warrant, defend and preserve Borrower's title to the
Property, the validity, enforceability and priority of this Instrument and the
lien or security interest created thereby, and any rights of Lender under the
documents against the claims of all persons, and shall promptly notify Lender of
any such claims. Lender (whether or not named as a party to such proceedings) is
authorized and empowered (but shall not be obligated) to take such additional
steps as it may deem necessary or proper for the defense of any such proceeding
or the protection of the lien, security interest, validity, enforceability, or
priority of this Instrument, title to the Property, or any rights of Lender
under the Documents, including the employment of counsel, the prosecution and/or
defense of litigation, the compromise, release, or discharge of such adverse
claims, the purchase of any tax title, the removal of such any liens and
security interests, and any other actions Lender deems necessary to protect its
interests. Borrower authorizes Lender to take any actions required to be taken
by Borrower, or permitted to be taken by Lender, in the Documents in the name
and on behalf of Borrower. Borrower shall reimburse Lender on demand for all
expenses (including attorneys' fees) incurred by it in connection with the
foregoing and Lender's exercise of its rights under the Documents. All such
expenses of Lender, until reimbursed by Borrower, shall be part of the
Obligations, bear interest at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, and shall be
secured by this Instrument.
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SECTION 3.05 Operation and Maintenance of Property.
(a) Repair and Maintenance. Borrower will operate and maintain the
Property in good order, repair, and operating condition. Borrower will promptly
make all necessary repairs, replacements, additions, and improvements necessary
to ensure that the Property shall not in any way be diminished or impaired.
Borrower will not cause or allow any of the Property to be misused, wasted, or
to deteriorate and Borrower will not abandon the Property. No new building,
structure, or other improvement shall be constructed on the Land which
diminishes or impairs the value of the Property, nor shall any material part of
the Improvements be removed, demolished, or structurally or materially altered,
without Lender's prior written consent.
(b) Replacement of Property. Borrower will keep the Property fully
equipped and will replace all worn out or obsolete Property with new, comparable
fixtures or Property. Borrower will not, without Lender's prior written consent,
remove any Property covered by this Instrument unless the same is replaced by
Borrower with a new or better, comparable article (i) owned by Borrower free and
clear of any lien or security interest (other than the Permitted Encumbrances
and those created by this Instrument) or (ii) leased by Borrower (A) with
Lender's prior written consent or (B) if the replaced Property was leased at the
time of execution of this Instrument.
(c) Compliance with Laws. Borrower and the Property shall be
maintained, used, and operated in compliance with all (i) present and future
laws, Environmental Laws (defined below), ordinances, regulations, and
requirements (including zoning and building codes) of any governmental or
quasi-governmental authority or agency applicable to Borrower or the Property
(collectively, the "Laws"); (ii) orders, rules, and regulations of any
regulatory, licensing, accrediting, insurance underwriting or rating
organization, or other body exercising similar functions; (iii) duties or
obligations of any kind imposed under any Permitted Encumbrance or by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it or the Property is
not in compliance with any of the foregoing, Borrower will promptly send Lender
notice and a copy of the proceeding or violation notice. If the Property is not
in compliance with all Laws, Lender may impose additional requirements upon
Borrower including monetary reserves or financial equivalents.
(d) Zoning and Title Matters. Borrower shall not, without Lender's
prior written consent, (i) initiate or support any zoning reclassification of
the Property or variance under existing zoning ordinances; (ii) modify or
supplement any of the Permitted Encumbrances; (iii) impose any restrictive
covenants or encumbrances upon the Property except for subordinate utility
easements and rights-of-way that solely benefit the Property; (iv) execute or
file any subdivision plat affecting the Property; (v) consent to the annexation
of the Property to any municipality; (vi) permit the Property to be used by the
public or any person in a way that might make a claim of adverse possession or
any implied dedication or easement possible; (vii) cause or permit the Property
to become a non-conforming use under zoning ordinances or any present or future
non-conforming use of the Property to be discontinued; or (viii) fail to comply
with the material terms of the Permitted Encumbrances.
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SECTION 3.06 Insurance.
(a) Casualty Insurance. Borrower shall keep the Property insured for
the benefit of Lender by (i) an "All Risk of Physical Loss" policy or the
broadest form of extended coverage endorsement in an amount sufficient to
prevent Lender from ever becoming a co-insurer under the policy or Laws, but in
no event less than the lesser of (A) the Obligations or (B) the Full Insurable
Value (defined below) of the Property, subject to verification by Lender, and
with a deductible not to exceed Ten Thousand Dollars ($10,000.00). "FULL
INSURABLE VALUE" shall mean the one hundred percent (100%) replacement cost of
the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender; (ii) rent, business interruption, and/or use and occupancy insurance in
an amount equal to one (1) year's total income from the Property including all
rent, other income, and reimbursement of operating expenses; (iii) against
damage by flood if the Property is located in an area identified by the
Secretary of Housing and Urban Development, or any successor, as an area having
special flood hazards and in which flood insurance has been made available under
the Flood Acts in an amount equal to the lesser of (1) the original amount of
the Note or (2) the maximum limit of coverage available for the Property under
the Flood Acts; (iv) against damage or loss from (1) sprinkler system leakage
and (2) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, in the amount required by
Lender; (v) during the period of any construction, repair, restoration, or
replacement of the Property, a standard builder's risk policy with extended
coverage in an amount at least equal to the Full Insurable Value of such
Property, and worker's compensation, in statutory amounts; and (vi) against
damage or loss by earthquake and other natural phenomenon as reasonably required
by Lender and in the amounts reasonably required by Lender.
(b) Liability and Other Insurance. Borrower shall maintain
comprehensive general liability insurance on an occurrence basis covering
Borrower and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property or any
street, drive, sidewalk, curb, or passageway adjacent thereto, in the amount
reasonably required by Lender (but in no event less than Ten Million Dollars
($10,000,000.00) combined single limit per occurrence, which may be based on a
combination of primary coverage plus umbrella coverage), which insurance shall
include operations and blanket contractual liability coverage which insures
contractual liability under the indemnifications set forth in Section 8.02 below
(but such coverage or the amount thereof shall in no way limit such
indemnifications). Upon request, Borrower shall maintain insurance or carry
additional amounts of insurance covering Borrower or the Property as Lender
shall reasonably require including against war risks.
(c) Form of Policy. All insurance required under this Section shall be
fully paid for, non-assessable, and the policies shall contain such provisions,
endorsements, and expiration dates as Lender shall reasonably require. The
policies shall be issued by insurance companies authorized to do business in the
Property State, approved by Lender, and having (i) an investment grade rating or
claims paying ability assigned by one or more credit rating agencies approved by
Lender (a "RATING AGENCY") and (ii) a general policy rating of A or better and a
financial class of VI or better by A.M. Best Company, Inc. (or if a rating of
A.M. Best Company,
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Inc. is no longer available, a similar rating from a similar or successor
service). In addition, all policies shall (x) include a standard mortgagee
clause, without contribution, in the name of Lender and (y) provide that they
shall not be canceled, amended, or materially altered (including reduction in
the scope or limits of coverage) without at least thirty (30) days' prior notice
to Lender.
(d) Original Policies. Borrower shall deliver to Lender (i) original or
certified copies of all policies (and renewals) required under this Section and
(ii) receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal policies are
unavailable or if coverage is under a blanket policy, Borrower shall deliver
duplicate originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified copies of the
original policies.
(e) General Provisions. Borrower shall not carry separate or additional
insurance concurrent in form or contributing in the event of loss with that
required under this Section unless endorsed in favor of Lender as per this
Section and approved by Lender in all respects. In the event of foreclosure of
this Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right, title, and
interest of Borrower in and to all policies of insurance then in force regarding
the Property and all proceeds payable thereunder and unearned premiums thereon
shall immediately vest in the purchaser or other transferee of the Property. No
approval by Lender of any insurer shall be construed to be a representation,
certification, or warranty of its solvency. No approval by Lender as to the
amount, type, or form of any insurance shall be construed to be a
representation, certification, or warranty of its sufficiency. Borrower shall
comply with all insurance requirements and shall not cause or permit any
condition to exist which would be prohibited by an insurance requirement or
would invalidate the insurance coverage on the Property.
SECTION 3.07 Damage and Destruction of Property.
(a) Borrower's Obligations. If any damage to, loss, or destruction of
the Property occurs (any "DAMAGE"), (i) Borrower shall promptly notify Lender
and take all necessary steps to preserve any undamaged part of the Property and
(ii) if the insurance proceeds are made available for Restoration (defined
below) (but regardless of whether any proceeds are sufficient for Restoration),
Borrower shall promptly commence and diligently pursue to completion the
restoration, replacement, and rebuilding of the Property as nearly as possible
to its value and condition immediately prior to the Damage or a Taking (defined
below) in accordance with plans and specifications approved by Lender
("RESTORATION"). Borrower shall comply with other reasonable requirements
established by Lender to preserve the security under this Instrument.
(b) Lender's Rights. If any Damage occurs and some or all of it is
covered by insurance, then (i) Lender may, but is not obligated to, make proof
of loss if not made promptly by Borrower and if the estimated cost to repair the
Damage exceeds $1,000,000.00 or if there is an Event of Default under the
Documents, Lender is authorized and empowered by Borrower to settle, adjust, or
compromise any claims for the Damage; (ii) each insurance company concerned is
authorized and directed to make payment directly to Lender for the Damage; and
(iii) Lender may apply the insurance proceeds in any order it determines (1) to
reimburse Lender for all Costs
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(defined below) related to collection of the proceeds and (2) subject to Section
3.07(c) and at Lender's option, to (A) payment (without any Prepayment Premium)
of all or part of the Obligations, whether or not then due and payable, in the
order determined by Lender (provided that if any Obligations remains outstanding
after this payment, the unpaid Obligations shall continue in full force and
effect and Borrower shall not be excused in the payment thereof); (B) the cure
of any default under the Documents; or (C) the Restoration. Any insurance
proceeds held by Lender shall be held by Lender, and interest shall be earned
thereon at the rate paid by Lender at that time on other impound or escrow
accounts in connection with its mortgage portfolio business. If Borrower
receives any insurance proceeds for the Damage, Borrower shall promptly deliver
the proceeds to Lender. Notwithstanding anything in this Instrument or at law or
in equity to the contrary, none of the insurance proceeds paid to Lender shall
be deemed trust funds and Lender may dispose of these proceeds as provided in
this Section. Borrower expressly assumes all risk of loss from any Damage,
whether or not insurable or insured against.
(c) Application of Proceeds to Restoration. Lender shall make the Net
Proceeds (defined below) available to Borrower for Restoration if: (i) there
shall then be no Event of Default; (ii) Lender shall be satisfied that (A)
Restoration can and will be completed within one (1) year after the Damage
occurs and at least one (1) year prior to the maturity of the Note and (B)
Leases which are terminated or terminable as a result of the Damage cover an
aggregate of less than ten percent (25%) of the total rentable square footage
contained in the Property at the closing of the Loan, and, in the event that
more than one of the properties in the Portfolio (as hereinafter defined) are
affected by such Damage, Leases are terminated or terminable with respect to not
more than 250 apartment units over the entire Portfolio, or such Tenants agree
in writing to continue their Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not less
than ten percent (10%) until final completion of the Restoration; and (iv) in
Lender's reasonable judgment, after Restoration has been completed the net cash
flow of the Property will be sufficient to cover all costs and operating
expenses of the Property, including payments due and reserves required under the
Documents. Notwithstanding any provision of this Instrument to the contrary,
Lender shall not be obligated to make any portion of the Net Proceeds available
for Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be completed at
a cost which does not exceed the aggregate of the remaining Net Proceeds
(defined below) and any funds deposited with Lender by Borrower ("ADDITIONAL
FUNDS") and (z) the aggregate of any loss of rental income insurance proceeds
which the carrier has acknowledged to be payable ("RENT LOSS PROCEEDS") and any
funds deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves required
under the Documents.
(d) Disbursement of Proceeds. If Lender elects or is required to make
insurance proceeds available for Restoration, Lender shall, through a
disbursement procedure established by Lender, periodically make available to
Borrower in installments, as such amounts become due under the construction
contract for Restoration, the net amount of all insurance proceeds received by
Lender after deduction of all reasonable costs and expenses incurred by Lender
in connection with the collection and disbursement of such proceeds ("NET
PROCEEDS") and, if any, the Additional Funds. The amounts periodically disbursed
to Borrower shall be based upon the
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amounts currently due under the construction contract for Restoration and
Lender's receipt of (i) appropriate lien waivers, (ii) a certification of the
percentage of Restoration completed by an architect or engineer acceptable to
Lender, and (iii) title insurance protection against materialmen's and
mechanic's liens. Lender shall disburse the funds within seven (7) days after
satisfaction of the conditions set forth in the preceding sentence. At Lender's
election, the disbursement of funds may be handled by a disbursing agent
selected by Lender, and such agent's reasonable fees and expenses shall be paid
by Borrower. The Net Proceeds, Rent Loss Proceeds, and any Additional Funds
shall constitute additional security for the Loan and Borrower shall execute,
deliver, file and/or record, at its expense, such instruments as Lender requires
to grant to Lender a perfected, first-priority security interest in these funds.
If the Net Proceeds are made available for Restoration and (x) Borrower refuses
or fails to complete the Restoration, (y) an Event of Default occurs, or (z) the
Net Proceeds or Additional Funds are not applied by Borrower to Restoration,
then any undisbursed portion may, at Lender's option, be applied to the
Obligations in any order of priority and any such application to principal shall
be deemed a voluntary prepayment subject to the Prepayment Premium.
SECTION 3.08 Condemnation.
(a) Borrower's Obligations. Borrower will promptly notify Lender of any
threatened or instituted proceedings for the condemnation or taking by eminent
domain of the Property including any change in any street (whether as to grade,
access, or otherwise) (a "TAKING"). Borrower shall, at its expense, (i)
diligently prosecute these proceedings, (ii) deliver to Lender copies of all
papers served in connection therewith, and (iii) consult and cooperate with
Lender in the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower without Lender's prior written consent, provided
Lender's response is not unreasonably delayed and such consent is not
unreasonably conditioned or withheld. Lender may participate in these
proceedings (but shall not be obligated to do so) and Borrower will sign and
deliver all instruments requested by Lender to permit this participation.
(b) Lender's Rights to Proceeds. All condemnation awards, judgments,
decrees, or proceeds of sale in lieu of condemnation ("AWARD") are assigned and
shall be paid to Lender. Borrower authorizes Lender to collect and receive them,
to give receipts for them, to accept them in the amount received without
question or appeal, and/or to appeal any judgment, decree, or award. Borrower
will sign and deliver all instruments requested by Lender to permit these
actions.
(c) Application of Award. Lender shall have the right to apply any
Award, subject to Section 3.08(d), as per Section 3.07 for insurance proceeds
held by Lender, and the Prepayment Premium shall likewise be waived. If Borrower
receives any Award, Borrower shall promptly deliver them to Lender.
Notwithstanding anything in this Instrument or at law or in equity to the
contrary, none of the Award paid to Lender shall be deemed trust funds and
Lender may dispose of these proceeds as provided in this Section.
(d) Application of Award to Restoration. With respect to any portion of
the Award that is not for loss of value or property, Lender shall permit the
application of the Award to Restoration in accordance with the provisions of
Section 3.07 if: (i) no more than (A) twenty
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(20%) of the gross area of the Improvements or (B) ten percent (10%) of the
parking spaces is affected by the Taking, (ii) the amount of the loss does not
exceed twenty percent (20%) of the original amount of the Note; (iii) the Taking
does not affect access to the Property from any public right-of-way; (iv) there
is no Event of Default at the time of application; (v) after Restoration, the
Property and its use will be in compliance with all Laws; (vi) in Lender's
reasonable judgment, Restoration is practical and can be completed within one
(1) year after the Taking and at least one (1) year prior to the maturity of the
Note; and (vii) the Tenants listed in Exhibit D ("MAJOR TENANTS") agree in
writing to continue their Leases without abatement of rent. Any portion of the
Award that is (i) for loss of value or property or (ii) in excess of the cost of
any Restoration permitted above, may, in Lender's sole discretion, be applied
against the Obligations or paid to Borrower.
(e) Effect on the Obligations. Notwithstanding any Taking, Borrower
shall continue to pay and perform the Obligations as provided in the Documents.
Any reduction in the Obligations due to application of the Award shall take
effect only upon Lender's actual receipt and application of the Award to the
Obligations. If the Property shall have been foreclosed, sold pursuant to any
power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure
prior to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs incurred by
Lender in connection with such sale.
SECTION 3.09 Liens and Liabilities. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. Nothing in the Documents shall be deemed or
construed as constituting the consent or request by Lender, express or implied,
to any contractor, subcontractor, laborer, mechanic or materialman for the
performance of any labor or the furnishing of any material for any improvement,
construction, alteration, or repair of the Property. Borrower further agrees
that Lender does not stand in any fiduciary relationship to Borrower. Any
contributions made, directly or indirectly, to Borrower by or on behalf of any
of its partners, members, principals or any party related to such parties shall
be treated as equity and shall be subordinate and inferior to the rights of
Lender under the Documents.
SECTION 3.10 Tax and Insurance Deposits. Lender shall retain a firm to monitor
payment of real estate taxes at Borrower's expense. After an Event of Default
hereunder, or if Borrower shall fail promptly to send evidence of timely payment
of real estate taxes and insurance premiums, then, at Lender's option, Borrower
shall make monthly deposits ("DEPOSITS") with Lender equal to one-twelfth (1/12)
of the annual Assessments (except for income taxes, franchise taxes, ground
rents, maintenance charges and utility charges) and the premiums for insurance
required under Section 3.06 (the "INSURANCE PREMIUMS") together with amounts
sufficient to pay these items thirty (30) days before they are due
(collectively, the "IMPOSITIONS"). Lender shall estimate the amount of the
Deposits until ascertainable. At that time, Borrower shall promptly deposit any
deficiency. Borrower shall promptly notify Lender of any changes to the amounts,
schedules and instructions for payment of the Impositions. Borrower authorizes
Lender or its agent to obtain the bills for Assessments directly from the
appropriate tax or governmental authority. All Deposits are pledged to Lender
and shall constitute additional
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security for the Obligations. The Deposits shall be held by Lender without
interest (except to the extent required under Laws) and may be commingled with
other funds. If (i) there is no Event of Default at the time of payment, (ii)
Borrower has delivered bills or invoices to Lender for the Impositions in
sufficient time to pay them when due, (iii) the Deposits are sufficient to pay
the Impositions or Borrower has deposited the necessary additional amount, then
Lender shall pay the Impositions prior to their due date. Any Deposits remaining
after payment of the Impositions shall, at Lender's option, be credited against
the Deposits required for the following year or paid to Borrower. If an Event of
Default occurs, the Deposits may, at Lender's option, be applied to the
Obligations in any order of priority. Any application to principal shall be
deemed a voluntary prepayment subject to the Prepayment Premium. Borrower shall
not claim any credit against the principal and interest due under the Note for
the Deposits. Upon an assignment or other transfer of this Instrument, Lender
may pay over the Deposits in its possession to the assignee or transferee and
then it shall be completely released from all liability with respect to the
Deposits. Borrower shall look solely to the assignee or transferee with respect
thereto. This provision shall apply to every transfer of the Deposits to a new
assignee or transferee. Subject to Article V, a transfer of title to the Land
shall automatically transfer to the new owner the beneficial interest in the
Deposits. Upon full payment and satisfaction of this Instrument or, at Lender's
option, at any prior time, the balance of the Deposits in Lender's possession
shall be paid over to the record owner of the Land and no other party shall have
any right or claim to the Deposits. Lender may transfer all its duties under
this Section to such service or financial institution as Lender may periodically
designate and Borrower agrees to make the Deposits to such service or
institution.
SECTION 3.11 ERISA. Borrower represents and warrants to Lender that (i) Borrower
is not an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; (iii) the assets of the Borrower do not constitute "plan
assets" of one or more plans within the meaning of 29 C.F.R. Section 2510.3-101;
and (iv) one or more of the following circumstances is true: (1) Equity
interests in Borrower are publicly offered securities, within the meaning of 29
C.F.R. Section 2510.3-101(b)(2); (2) Less than twenty-five percent (25%) of all
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (3) Borrower qualifies as an
"operating company" or a "real estate operating company" within the meaning of
29 C.F.R. Section 2510.3-101(c) or (e). Borrower shall deliver to Lender such
certifications and/or other evidence periodically requested by Lender, in its
sole discretion, to verify these representations and warranties. Failure to
deliver these certifications or evidence, breach of these representations and
warranties, or consummation of any transaction which would cause this Instrument
or any exercise of Lender's rights under this Instrument to (i) constitute a
non-exempt prohibited transaction under ERISA or (ii) violate ERISA or any state
statute regulating governmental plans (collectively, a "VIOLATION"), shall be an
Event of Default. Notwithstanding anything in the Documents to the contrary, no
sale, assignment, or transfer of any direct or indirect right, title, or
interest in Borrower or the Property (including creation of a junior lien,
encumbrance or leasehold interest) shall be permitted which would, in Lender's
opinion, negate Borrower's representations in this Section or cause a Violation.
At least fifteen (15) days before consummation of any of the foregoing, Borrower
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shall obtain from the proposed transferee or lienholder (i) a certification to
Lender that the representations and warranties of this Section will be true
after consummation and (ii) an agreement to comply with this Section.
SECTION 3.12 Environmental Representations, Warranties, and Covenants.
(a) Environmental Representations and Warranties. Borrower represents
and warrants, to the best of Borrower's knowledge (after due inquiry and
investigation) and additionally based upon the environmental site assessment
report of the Property (the "ENVIRONMENTAL REPORT"), that except as fully
disclosed in the Environmental Report delivered to and approved by Lender: (i)
there are no Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("AFFECTING THE PROPERTY" shall mean "in, on, under,
stored, used or migrating to or from the Property") except for (A) routine
office, cleaning, janitorial and other materials and supplies necessary to
operate the Property for its current use and (B) Hazardous Materials that are
(1) in compliance with Environmental Laws (defined below), (2) have all required
permits, and (3) are in only the amounts necessary to operate the Property; (ii)
there are no past, present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law affecting the Property; (iii)
there is no past or present non-compliance with Environmental Laws or with
permits issued pursuant thereto; (iv) Borrower does not know of, and has not
received, any written or oral notice or communication from any person relating
to Hazardous Materials affecting the Property; and (v) Borrower has provided to
Lender, in writing, all information relating to environmental conditions
affecting the Property known to Borrower or contained in Borrower's files.
"ENVIRONMENTAL LAW" means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that apply to
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act. "HAZARDOUS MATERIALS" shall mean
petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive
materials; polychlorinated biphenyls ("PCBs") and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a "hazardous substance," "hazardous material",
"hazardous waste", "toxic substance", "toxic pollutant", "contaminant", or
"pollutant" within the meaning of any Environmental Law. "RELEASE" of any
Hazardous Materials includes any release, deposit, discharge, emission, leaking,
spilling, seeping, migrating, pumping, pouring, escaping, dumping, disposing or
other movement of Hazardous Materials.
(b) Environmental Covenants. Borrower covenants and agrees that: (i)
all use and operation of the Property shall be in compliance with all
Environmental Laws and required permits; (ii) there shall be no Releases of
Hazardous Materials affecting the Property; (iii) there shall be no Hazardous
Materials affecting the Property except (A) routine office, cleaning and
janitorial supplies, (B) in compliance with all Environmental Laws, (C) with all
required permits,
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and (D) (1) in only the amounts necessary to operate the Property or (2) fully
disclosed to and approved by Lender in writing; (iv) Borrower shall keep the
Property free and clear of all liens and encumbrances imposed by any
Environmental Laws due to any act or omission by Borrower or any person (the
"ENVIRONMENTAL LIENS"); (v) Borrower shall, at its sole expense, fully and
expeditiously cooperate in all activities in Section 3.12(c) including providing
all relevant information and making knowledgeable persons available for
interviews; (vi) Borrower shall, at its sole expense, (A) perform any reasonable
environmental site assessment or other investigation of environmental conditions
at the Property upon Lender's request based on Lender's reasonable belief that
the Property is not in compliance with all Environmental Laws, (B) share with
Lender the results and reports and Lender and the Indemnified Parties (defined
below) shall be entitled to rely on such results and reports, and (C) complete
any remediation of Hazardous Materials affecting the Property or other actions
required by any Environmental Laws; (vii) Borrower shall not allow any Tenant or
other user of the Property to violate any Environmental Law; and (viii) Borrower
shall immediately notify Lender in writing after it becomes aware of (A) the
presence, Release, or threatened Release of Hazardous Materials affecting the
Property, (B) any non-compliance of the Property with any Environmental Laws,
(C) any actual or potential Environmental Lien, (D) any required or proposed
remediation of environmental conditions relating to the Property, and (E) any
written or oral communication or notice from any person relating to Hazardous
Materials.
(c) Lender's Rights. Lender and any person designated by Lender may
enter the Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the scope of
which shall be determined by Lender in a commercially reasonable manner) and
(ii) taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable times
(provided Lender returns the Property as near as reasonably practical to its
pre-sampling or testing condition) when (A) a default has occurred under the
Documents, (B) Lender reasonably believes that a Release has occurred or the
Property is not in compliance with all Environmental Laws, or (C) the Loan is
being considered for sale. Borrower shall cooperate with and provide access to
Lender and such person.
SECTION 3.13 Electronic Payments. All payments due under the Documents shall be
made by electronic funds transfer from a bank account established and maintained
by Borrower for this purpose with a depository reasonably satisfactory to
Lender. Borrower shall direct the depository to transmit such payments on or
before their respective due dates to an account designated in writing by Lender.
If Lender determines in its reasonable judgment that a change in Borrower's bank
or financial institution is necessary to appropriately effectuate the payments
by electronic funds transfer, Lender shall have the right to require Borrower to
select a different depository after thirty (30) days' prior notice. As of the
date of this Instrument, First Union National Bank has been deemed acceptable to
Lender. All costs of (i) establishing and maintaining such account and (ii) the
electronic funds transfers shall be paid by Borrower.
SECTION 3.14 Inspection. Borrower shall allow Lender and any person designated
by Lender to enter upon the Property and conduct tests (provided Lender returns
the Property as near as reasonably practical to its pre-sampling or testing
condition) or inspect the Property at all reasonable times after two (2) days
prior written notice, which prior written notice shall not be
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required after a default under the Documents. Borrower shall assist Lender and
such person in effecting said inspection, subject, however, to the rights of
tenants in possession.
SECTION 3.15 Records, Reports, and Audits.
(a) Records and Reports. Borrower shall maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and accurate books
and records with respect to all operations of or transactions involving the
Property. Annually, Borrower shall furnish Lender financial statements for the
most current fiscal year (including a schedule of all related Obligations and
contingent liabilities) for (i) Borrower, (ii) any general partner(s) of
Borrower and any general partners of such partners, (iii) any guarantors or
sureties of the Note, and (iv) any Major Tenants, to the extent reasonably
available. Annually (or quarterly upon Lender's request), Borrower shall furnish
Lender (i) operating statements for the Property including income and expenses
(before and after Obligations service), major capital improvements, and a
schedule showing the gross sales of each Tenant paying percentage rent; (ii)
copies of paid tax receipts for the Property; (iii) a certified rent roll
including security deposits held, the expiration of the terms of the Leases, and
identification and explanation of any Tenants in default; (iv) a budget showing
projected income and expenses (before and after Obligations service) for the
next twelve (12) month budget period; and (v) upon Lender's request, (A) a
schedule showing the Borrower's tax basis in the Property, (B) the distribution
of economic interests in the Property (provided, however, that so long as the
Borrower as of the date of this Instrument is the Borrower under this
Instrument, such information shall not be required), and (C) copies of any other
loan documents affecting and secured by the Property.
(b) Delivery of Reports. All of the reports, statements, and items
required under this Section shall be (i) certified as being true, correct, and
accurate by an authorized person, partner, or officer of the delivering party
or, at the deliverer's option, audited by a Certified Public Accountant; (ii)
prepared in accordance with GAAP and satisfactory to Lender in form and
substance, except that annual operating statements for the Property need not be
prepared in accordance with GAAP, but shall be certified by an authorized person
or officer of Borrower; and (iii) delivered within (A) ninety (90) days after
the end of Borrower's fiscal year for annual reports and (B) forty-five (45)
days after the end of each calendar quarter for quarterly reports. If any one
report, statement, or item is not received by Lender within fifteen (15) days
after Lender has given Borrower written notice that such report, statement or
item was not received on its due date, then a late fee of Five Hundred and
No/100 Dollars ($500.00) per month shall be due and payable by Borrower. In
addition, if any one report, statement, or item is not received within thirty
(30) days after such notice, Lender may immediately declare an Event of Default
under the Documents. Borrower shall (i) provide Lender with such additional
financial, management, or other information regarding Borrower, any general
partner of Borrower, or the Property, as Lender may reasonably request and (ii)
upon Lender's request, deliver all items required by Section 3.15 in an
electronic format (i.e. on computer disks) or by electronic transmission
acceptable to Lender.
(c) Inspection of Records. Borrower shall allow Lender or any person
designated by Lender to examine, audit, and make copies of all such books and
records and all supporting data at the place where these items are located
between 9:00 a.m. and 5:00 p.m. during any Business
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Day (as defined in the Note) after two (2) days prior written notice; provided
that no notice shall be required after any default under the Documents. Borrower
shall assist Lender in effecting such examination. All such inspections shall be
performed in a commercially reasonable manner. Upon five (5) days' prior notice,
Lender may inspect and make copies of Borrower's or any general partner of
Borrower's income tax returns with respect to the Property for the purpose of
verifying any items referenced in this Section.
SECTION 3.16 Borrower's Certificates. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors (defined below) as to (a) the amount of the Obligations outstanding;
(b) the interest rate, terms of payment, and maturity date of the Note; (c) the
date to which payments have been paid under the Note; (d) whether any offsets or
defenses exist against the Obligations and a detailed description of any listed;
(e) whether all Leases are in full force and effect and have not been modified
(or if modified, setting forth all modifications); (f) the date to which the
Rents have been paid; (g) whether, to the best knowledge of Borrower, any
defaults exist under the Leases and a detailed description of any listed; (h)
the security deposit held by Borrower under each Lease and that such amount is
the amount required under such Lease; (i) whether there are any defaults (or
events which with the passage of time and/or notice would constitute a default)
under the Documents and a detailed description of any listed; (j) whether the
Documents are in full force and effect; and (k) any other matters reasonably
requested by Lender related to the Leases, the Obligations, the Property, or the
Documents. For all non-residential properties and promptly upon Lender's
request, Borrower shall use its best efforts to deliver a written certification
to Lender and Investors from Tenants specified by Lender that: (a) their Leases
are in full force and effect; (b) there are no defaults (or events which with
the passage of time and/or notice would constitute a default) under their Leases
or a detailed description of any listed; (c) none of the Rents have been paid
more than one month in advance; (d) there are no offsets or defenses against the
Rents or a detailed description of any listed; and (e) any other matters
reasonably requested by Lender related to the Leases; provided, however, that
Borrower shall not have to pay money to a Tenant to obtain such certification,
but it will deliver a landlord's certification for any certification it cannot
obtain.
SECTION 3.17 Full Performance Required; Survival of Warranties. All
representations and warranties of Borrower in the Loan application or made in
connection with the Loan shall survive the execution and delivery of the
Documents and shall remain continuing warranties, and representations of
Borrower.
SECTION 3.18 Additional Security. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Documents
and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Documents nor their enforcement shall
prejudice or affect Lender's right to realize upon or enforce any other security
now or later held by Lender. Lender may enforce the Documents or any other
security in such order and manner as it may determine in its discretion.
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SECTION 3.19 Further Acts. Borrower shall take all necessary actions to (i) keep
valid and effective the lien and rights of Lender under the Documents and (ii)
protect the lawful owner of the Documents. Promptly upon request by Lender and
at Borrower's expense, Borrower shall execute additional instruments and take
such actions as Lender reasonably believes are necessary or desirable to (a)
maintain or grant Lender a first-priority, perfected lien on the Property, (b)
correct any error or omission in the Documents; and (c) effect the intent of the
Documents, including filing/recording the Documents, additional mortgages or
deeds of trust, financing statements, and other instruments.
ARTICLE IV - ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
SECTION 4.01 Expenses and Advances. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), U.C.C. search, escrow, attorneys' (both in-house staff and retained
attorneys), engineers', environmental engineers', environmental testing, and
architects' fees, costs (including travel), expenses, and disbursements incurred
by Borrower or Lender in connection with the granting, closing, servicing, and
enforcement of (a) the Loan and Documents or (b) attributable to Borrower as
owner of the Property. The term "COSTS" shall mean any of the foregoing incurred
in connection with (a) any default by Borrower under the Documents, (b) the
servicing of the Loan, or (c) the exercise, enforcement, compromise, defense,
litigation, or settlement of any of Lender's rights or remedies under the
Documents or relating to the Loan or the Obligations. If Borrower fails to pay
any amounts or perform any actions required under the Documents, Lender may (but
shall not be obligated to) advance sums to pay such amounts or perform such
actions. Borrower grants Lender the right to enter upon and take possession of
the Property to prevent or remedy any such failure and the right to take such
actions in Borrower's name. No advance or performance shall be deemed to have
cured a default by Borrower. All (a) sums advanced by or payable to Lender per
this Section or under applicable Laws, (b) except as expressly provided in the
Documents, payments due under the Documents which are not paid in full when due,
and (c) all Costs, shall: (i) be deemed demand obligations, (ii) bear interest
at the applicable interest rate specified in the Note, which shall be the
Default Rate unless prohibited by Laws, until paid if not paid on demand, (iii)
be part of, together with such interest, the Obligations , and (iv) be secured
by the Documents. Lender, upon making any such advance, shall also be subrogated
to rights of the person receiving such advance.
SECTION 4.02 Subrogation. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender shall be subrogated to all rights, claims, liens,
titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and (ii) are merged with the lien and security interest created by the Documents
as cumulative security for the payment and performance of the Obligations.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
SECTION 5.01 Due-on-Sale or Encumbrance. It shall be an Event of Default and, at
the sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including
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any Prepayment Premium) shall become immediately due and payable, if Borrower,
without Lender's prior written consent (which may be withheld for any or no
reason including the possibility of an ERISA violation or the proposed
transferee's failure to agree in writing to Lender increasing the interest
payable on the Obligations to any rate, changing any other terms (including
maturity) of the Obligations or Documents, or requiring the payment of a
transfer fee), (a) shall sell, convey, assign, transfer, dispose of or be
divested of its title to, convey security title to, mortgage, encumber or caused
to be encumbered (except for the imposition of mechanics' or materialmans' liens
and except for subordinate easements and rights of way) the Property or any
interest therein, in any manner or way, whether voluntary or involuntary, or (b)
in the event of (i) any merger, consolidation or dissolution involving the sale
or transfer of all or substantially all of the assets of Borrower or any general
partner of Borrower; (ii) the transfer of any general partnership interest in
Borrower; or any partnership which is a direct or indirect general partner of
Borrower; or (iii) the conversion of any general partnership interest in
Borrower to a limited partnership interest; or (iv) any change, removal, or
resignation of a managing member (or if no managing member, any member) if
Borrower is a limited liability company. This provision shall not apply to
transfers under any will or applicable law of descent. This provision does not
prohibit the transfer of any existing limited partnership interest in (i)
Borrower, (ii) any partner of Borrower, or (iii) any partner of a partner of
Borrower.
SECTION 5.02 Permitted Transfer. Notwithstanding the foregoing, Lender
agrees that, upon fifteen (15) days prior written request of Borrower, Borrower,
and any transferee of Borrower permitted below, may engage in the transactions
described below, provided that all of the following conditions are met:
(i) no Event of Default (or event which with the passage of
time or the giving of notice or both would be an Event of Default) has
occurred and is continuing;
(ii) the proposed transferee complies with and delivers the
ERISA Certificate and Indemnification Agreement described in the
guidelines with respect thereto then applicable to Lender's mortgage
loans (the "Guidelines") (or, if the statements required by the
certification are not true with respect to the proposed transferee,
Lender shall have received such evidence as it may require in its sole
discretion to determine that the proposed transfer is not and would not
render the Loan a prohibited transaction under ERISA);
(iii) payment by Borrower or the proposed transferee of (1)
all reasonable costs and expenses incurred by Lender for the processing
of said transfer including a processing fee and (2) all other costs and
expenses (including attorneys' fees and expenses for Lender's staff
attorneys and outside counsel).
Provided all of the foregoing conditions are fulfilled with respect to each such
transfer, Borrower may engage in the following transactions, and the provisions
of Section 5.01 shall not apply to (and no other provision of the Loan Documents
shall prohibit) the merger of Borrower with another entity so long as the
surviving entity (i) has a net worth (as reasonably determined by Lender in
accordance with GAAP or a GAAP equivalent) equal to or greater than the net
worth of Borrower as of the closing date of the Loan, (ii) has a ratio of total
debt (both secured
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and unsecured) to total assets of less than fifty percent (50%); and (iii) in
the judgment of Lender, has financial capability and creditworthiness,
reputation and experience in the ownership, operation, management, and leasing
of similar properties, equal to or greater than Borrower.
SECTION 5.03 Permitted (One Time) Transfer. Notwithstanding the foregoing
Section 5.01, if no Event of Default (or event which with the passage of time or
the giving of notice or both would be an Event of Default) has occurred and is
continuing, Lender agrees that, upon thirty (30) days prior written request of
Borrower, Lender shall consent to one and only one transfer by the Borrower of
all of the properties of Borrower then encumbered by the Loan (collectively,
"Borrower Property"), together with all of the properties (the "CRIT-NC LLC
Properties") owned by Guarantor, that are encumbered by that certain loan from
Lender to Guarantor in the amount of $22,950,000 (the "CRIT-NC, LLC Loan")
evidenced by the CRIT-NC, LLC Note (as defined in the Note) and the documents
and obligations securing the CRIT-NC, LLC Note (the Borrower Property and the
CRIT-NC, LLC Property being collectively referred to herein as the "PORTFOLIO")
to a single entity which must own the entire Portfolio in the same entity (the
"Third Party Single Entity") following such transfer, if:
(i) the proposed transferee of the entire Portfolio is a
Person (defined below) which, in the judgment of Lender, has financial
capability and creditworthiness, reputation and experience in the
ownership, operation, management, and leasing of similar properties,
equal to or greater than Borrower, including without limitation, a net
worth of at least $300,000,000.00;
(ii) at the time of transfer the Loan to Value Ratio (defined
below) does not exceed 62% of the entire Portfolio;
(iii) Borrower pays Lender a non-refundable servicing fee (as
specified by Lender) at the time of the request and an additional fee
equal to 1.0% of the outstanding principal balance of the Loan and the
CRIT-NC, LLC Loan at the time of the transfer;
(iv) at Lender's option, Lender's title policy is endorsed to
verify the first priority of the Documents (and the documents securing
the CRIT-NC, LLC Loan) at Borrower's expense;
(v) the Debt Service Coverage Ratio (defined below) for the
entire Portfolio is at least 1.90 to 1.00 for the preceding twelve
month period and Lender receives satisfactory evidence that this Debt
Service Coverage Ratio for the entire Portfolio will be maintained for
the next succeeding twelve (12) months;
(vi) the transferee expressly assumes all obligations under
the Documents (and the documents securing the CRIT-NC, LLC Loan) and
executes any documents reasonably required by Lender, and all of these
documents are satisfactory in form and substance to Lender;
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(vii) Lender reasonably approves the form and content of all
transfer documents, and Lender is furnished with a certified copy of
the recorded transfer documents;
(viii) the transferee complies with and delivers the ERISA
Certificate and Indemnification Agreement described in the Guidelines
with respect thereto then applicable to Lender's mortgage loans; and
(ix) Borrower or the transferee pays all reasonable fees,
costs, and expenses incurred by Lender in connection with the proposed
transfer, including, without limitation, all legal (for both outside
counsel and Lender's staff attorneys), accounting, title insurance,
documentary stamps taxes, intangibles taxes, mortgage taxes, recording
fees, and appraisal fees, whether or not the transfer is actually
consummated.
The term "LOAN TO VALUE RATIO" shall mean the ratio, as reasonably determined by
Lender, of (i) the aggregate principal balance of all encumbrances against the
entire Portfolio to (ii) the fair market value of the entire Portfolio. The term
"DEBT SERVICE COVERAGE RATIO" shall mean the ratio, as reasonably determined by
Lender, calculated by dividing (i) net operating income ("NOI") by (ii) total
annual debt service ("TADS"). NOI is the gross annual income realized from
operations of the entire Portfolio for the applicable twelve (12) month period
after subtracting all necessary and ordinary operating expenses (both fixed and
variable) for that twelve (12) month period (assuming for expense purposes only
that the entire Portfolio is 95% leased and occupied if actual leasing is less
than 95%), including, without limitation, utilities, administrative, cleaning,
landscaping, security, repairs, and maintenance, ground rent payments,
management fees (the higher of actual or 3.5% of gross revenues), reserves for
replacements (a minimum of $300 per unit), real estate and other taxes,
assessments and insurance, but excluding deduction for federal, state and other
income taxes, debt service expense, depreciation or amortization of capital
expenditures, and other similar non-cash items. Gross income shall not be
anticipated for any greater time period than that approved by generally accepted
accounting principles and ordinary operating expenses shall not be prepaid.
Documentation of NOI and expenses shall be certified by an officer of Borrower
with detail satisfactory to Lender and shall be subject to the approval of
Lender. TADS shall mean the aggregate debt service payments for any given
calendar year on the Loan and on all other indebtedness secured, or to be
secured, by any part of the entire Portfolio.
ARTICLE VI - DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default. The following shall be an "EVENT OF DEFAULT":
(a) if Borrower fails to make any payment required under the Documents
when due and such failure continues for five (5) days after written notice;
provided, however, that if Lender gives one (1) notice of default within any
twelve (12) month period, Borrower shall have no further right to any notice of
monetary default during that twelve (12) month period;
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(b) except for defaults listed in the other subsections of this Section
6.01, if Borrower fails to perform or comply with any other provision contained
in the Documents and the default is not cured within thirty (30) days after
written notice from Lender (the "GRACE PERIOD"); provided, however, that Lender
shall extend the Grace Period up to an additional sixty (60) days (for a total
of ninety (90) days from the date of default) if (i) Borrower immediately
commences and diligently pursues the cure of such default and delivers (within
the Grace Period) to Lender a written request for more time and (ii) Lender
determines in good faith that (1) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days after the default, (2) no lien
or security interest created by the Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any remedies
provided hereunder or by law is not necessary for the protection or preservation
of the Property or Lender's security interest;
(c) if any representation made (i) in connection with the Loan or
Obligations or (ii) in the Loan application or Documents shall be false or
misleading in any material respect;
(d) if any default under Article V occurs;
(e) if Borrower shall (i) become insolvent, (ii) make a transfer in
fraud of creditors, (iii) make an assignment for the benefit of its creditors,
(iv) not be able to pay its debts as such debts become due, or (v) admit in
writing its inability to pay its debts as they become due;
(f) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Borrower, and, if instituted against Borrower, is
allowed, consented to, or not dismissed within the earlier to occur of (i)
ninety (90) days after such institution or (ii) the filing of an order for
relief;
(g) if any of the events in Sections 6.01 (e) or (f) shall occur with
respect to any (i) general partner of Borrower or (ii) guarantor of payment or
performance of any of the Obligations;
(h) if the Property shall be taken, attached, or sequestered on
execution or other process of law in any action against Borrower; or
(i) if any default occurs under the Environmental Indemnity (defined
below) and such default is not cured within any applicable grace period in that
document;
(j) if Borrower shall fail at any time to obtain, maintain, renew, or
keep in force the insurance policies required by Section 3.06 within ten (10)
days after written notice;
(k) if Borrower shall be in default under any other mortgage, deed of
trust, deed to secure debt, or security agreement covering any part of the
Property, whether it be superior or junior in lien to this Instrument;
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(l) if any claim of priority (except based upon a Permitted
Encumbrance) to the Documents by title, lien, or otherwise shall be finally
upheld by any court of competent jurisdiction (and not immediately paid by
Borrower) or shall be consented to by Borrower;
(m) (i) the consummation by Borrower of any transaction which would
cause (A) the Loan or any exercise of Lender's rights under the Documents to
constitute a non-exempt prohibited transaction under ERISA or (B) a violation of
a state statute regulating governmental plans; (ii) the failure of any
representation in Section 3.11 to be true and correct in all respects; or (iii)
the failure of Borrower to provide Lender with the written certifications
required by Section 3.11; or
(n) if any Event of Default (as defined therein) occurs under any of
the Documents.
SECTION 6.02 Remedies. If an Event of Default occurs, Lender or any person
(which shall be a person permitted by applicable Laws) designated by Lender may
(but shall not be obligated to) take any action (separately, concurrently,
cumulatively, and at any time and in any order) permitted under any Laws,
without notice, demand, presentment, or protest (all of which are hereby waived,
to the extent permitted by Laws), to protect and enforce Lender's rights under
the Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations immediately
due and payable, except for defaults under Section 6.01 (f), (g) or (h) which
shall automatically make the Obligations immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this Instrument
or (ii) partially foreclose this Instrument for any portion of the Obligations
due and the lien and security interest created by this Instrument as to the
Property not foreclosed shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right, title and
interest of Borrower therein and rights of redemption thereof, pursuant to power
of sale;
(d) recover judgment on the Note either before, during or after any
proceedings for the enforcement of the Documents and without any requirement of
any action being taken to (i) realize on the Property or (ii) otherwise enforce
the Documents;
(e) seek specific performance of any provisions in the Documents;
(f) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Property without (i) notice to any person,
(ii) regard for (A) the adequacy of the security for the Obligations or (B) the
solvency of Borrower or any person liable for the payment of the Obligations;
and Borrower and any person so liable waives or shall be deemed to have waived
the foregoing and any other objections to the fullest extent permitted by Laws
and consents or shall be deemed to have consented to such appointment;
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(g) with or without entering upon the Property, (i) exclude Borrower
and any person from the Property without liability for trespass, damages, or
otherwise, (ii) take possession of, and Borrower shall surrender on demand, all
books, records, and accounts relating to the Property, (iii) give notice to
Tenants or any person, make demand for, collect, receive, ▇▇▇ for, and recover
in its own name all Rents and cash collateral derived from the Property; (iv)
use, operate, manage, preserve, control, and otherwise deal with every aspect of
the Property including (A) conducting its business, (B) insuring it, (C) making
all repairs, renewals, replacements, alterations, additions, and improvements to
or on it, (D) completing the construction of any Improvements in manner and form
as Lender deems advisable, and (E) executing, modifying, enforcing, and
terminating new and existing Leases on such terms as Lender deems advisable and
evicting any Tenants in default; (v) apply the receipts from the Property to
payment of the Obligations, in any order or priority determined by Lender, after
first deducting all Costs, expenses, and liabilities incurred by Lender in
connection with the foregoing operations and all amounts needed to pay the
Impositions and other expenses of the Property, as well as just and reasonable
compensation for the services of Lender and its attorneys, agents, and
employees; and/or (vi) in every case in connection with the foregoing, exercise
all rights and powers of Borrower or Lender with respect to the Property, either
in Borrower's name or otherwise;
(h) release any portion of the Property for such consideration, if any,
as Lender may require without, as to the remainder of the Property, impairing or
affecting the lien or priority of this Instrument or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender may accept by
assignment, pledge, or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder;
(i) apply any Deposits to the following items in any order and in
Lender's sole discretion: (A) the Obligations, (B) Costs, (C) advances made by
Lender under the Documents, and/or (D) Impositions;
(j) take all actions permitted under the U.C.C. of the Property State
including (i) the right to take possession of all tangible and intangible
personal property owned by Borrower included within the Property ("PERSONAL
PROPERTY") and take such actions as Lender deems advisable for the care,
protection and preservation of the Personal Property and (ii) request Borrower
at its expense to assemble the Personal Property and make it available to Lender
at a convenient place acceptable to Lender. Any notice of sale, disposition or
other intended action by Lender with respect to the Personal Property sent to
Borrower at least five (5) days prior to such action shall constitute
commercially reasonable notice to Borrower; or
(k) take any other action permitted under any Laws.
If Lender exercises any of its rights under Section 6.02(g), Lender shall not
(a) be deemed to have entered upon or taken possession of the Property except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose; (b) be deemed a beneficiary or mortgagee in possession by
reason of such entry or taking possession; nor (c) be liable (i) to account for
any action taken pursuant to such exercise other than for Rents actually
received by
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Lender, (ii) for any loss sustained by Borrower resulting from any failure to
lease the Property, or (iii) any other act or omission of Lender except for
losses caused by Lender's willful misconduct or gross negligence. Borrower
hereby consents to, ratifies, and confirms the exercise by Lender of its rights
under this Instrument and appoints Lender as its attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and irrevocable, for
such purposes.
SECTION 6.03 Expenses. All Costs, expenses, or other amounts paid or incurred by
Lender in the exercise of its rights under the Documents, together with interest
thereon at the applicable interest rate specified in the Note, which shall be
the Default Rate unless prohibited by Laws, shall be (a) part of the
Obligations, (b) secured by this Instrument, and (c) allowed and included as
part of the Obligations in any foreclosure, decree for sale, power of sale, or
other judgment or decree enforcing Lender's rights under the Documents.
SECTION 6.04 Rights Pertaining to Sales. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion, apply to any sales of the Property under
Article VI, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower waives any right
to require otherwise; (b) any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice; and (c) Lender may acquire the
Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Documents.
SECTION 6.05 Application of Proceeds. Any proceeds received from any sale or
disposition under Article VI or otherwise, together with any other sums held by
Lender, shall, except as expressly provided by Laws to the contrary, be applied
in the order determined by Lender to: (a) payment of all Costs and expenses of
any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items, if permitted by Laws; (c) payment
of the Obligations in such order as Lender may elect; (d) payment of any other
sums secured or required to be paid by Borrower; and (e) payment of the surplus,
if any, to any person lawfully entitled to receive it. Borrower and Lender
intend and agree that during any period of time between any foreclosure judgment
that may be obtained and the actual foreclosure sale that the foreclosure
judgment will not extinguish the Documents or any rights contained therein
including the obligation of Borrower to pay all Costs and to pay interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws.
SECTION 6.06 Additional Provisions as to Remedies. No failure, refusal, waiver,
or delay by Lender to exercise any rights under the Documents upon any default
or Event of Default shall impair Lender's rights or be construed as a waiver of,
or acquiescence to, such or any subsequent default or Event of Default. No
recovery of any judgment by Lender and no levy of an execution upon the Property
or any other property of Borrower shall affect the lien and security interest
created by this Instrument and such liens, rights, powers, and remedies shall
continue unimpaired as before. Lender may resort to any security given by this
Instrument or any other security now
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given or hereafter existing to secure the Obligations, in whole or in part, in
such portions and in such order as Lender may deem advisable, and no such action
shall be construed as a waiver of any of the liens, rights, or benefits granted
hereunder. Acceptance of any payment after any Event of Default shall not be
deemed a waiver or a cure of such Event of Default and such acceptance shall be
deemed an acceptance on account only. If Lender has started enforcement of any
right by foreclosure, sale, entry, or otherwise and such proceeding shall be
discontinued, abandoned, or determined adversely for any reason, then Borrower
and Lender shall be restored to their former positions and rights under the
Documents with respect to the Property, subject to the lien and security
interest hereof.
SECTION 6.07 Waiver of Rights and Defenses. To the fullest extent Borrower may
do so under Laws, Borrower (a) will not at any time insist on, plead, claim, or
take the benefit of any statute or rule of law now or later enacted providing
for any appraisement, valuation, stay, extension, moratorium, redemption, or any
statute of limitations; (b) for itself, its successors and assigns, and for any
person ever claiming an interest in the Property (other than Lender), waives and
releases all rights of redemption, reinstatement, valuation, appraisement,
notice of intention to mature or declare due the whole of the Obligations, all
rights to a marshaling of the assets of Borrower, including the Property, or to
a sale in inverse order of alienation, in the event of foreclosure of the liens
and security interests created under the Documents; (c) shall not be relieved of
its obligation to pay the Obligations as required in the Documents nor shall the
lien or priority of the Documents be impaired by any agreement renewing,
extending, or modifying the time of payment or the provisions of the Documents
(including a modification of any interest rate), unless expressly released,
discharged, or modified by such agreement. Regardless of consideration and
without any notice to or consent by the holder of any subordinate lien, security
interest, encumbrance, right, title, or interest in or to the Property, Lender
may (a) release any person liable for payment of the Obligations or any portion
thereof or any part of the security held for the Obligations or (b) modify any
of the provisions of the Documents without impairing or affecting the Documents
or the lien, security interest, or the priority of the modified Documents as
security for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE VII - SECURITY AGREEMENT
SECTION 7.01 Security Agreement. This Instrument constitutes both a real
property mortgage and a "SECURITY AGREEMENT" within the meaning of the U.C.C.
The Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender, as
security for the Obligations, a security interest in the Personal Property to
the fullest extent that the same may be subject to the U.C.C. Borrower
authorizes Lender to file any financing or continuation statements and
amendments thereto relating to the Personal Property without the signature of
Borrower if permitted by Laws.
ARTICLE VIII - LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
SECTION 8.01 Limited Recourse Liability. The provisions of Paragraph 8 and
Paragraph 9 of the Note are incorporated into this Instrument as if such
provisions were set forth in their entirety in this Instrument.
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SECTION 8.02 General Indemnity. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless ("INDEMNIFY") the Indemnified
Parties (defined below) from any Losses (defined below) imposed on, incurred by,
or asserted against the Indemnified Parties, directly or indirectly, arising out
of or in connection with the Property, Loan, or Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including strict
liabilities), actions, proceedings, obligations, debts, damages, losses, Costs,
expenses, fines, penalties, charges, fees, judgments, awards, and amounts paid
in settlement of whatever kind including attorneys' fees (both in-house staff
and retained attorneys) and all other costs of defense. The term "INDEMNIFIED
PARTIES" shall mean (a) Lender, (b) any prior owner or holder of the Note, (c)
any existing or prior servicer of the Loan, (d) the officers, directors,
shareholders, partners, employees and trustees of any of the foregoing, and (e)
the heirs, legal representatives, successors and assigns of each of the
foregoing.
SECTION 8.03 Transaction Taxes Indemnity. Borrower shall, at its sole expense,
indemnify the Indemnified Parties from all Losses imposed upon, incurred by, or
asserted against the Indemnified Parties or the Documents relating to
Transaction Taxes.
SECTION 8.04 ERISA Indemnity. Borrower shall, at its sole expense, indemnify the
Indemnified Parties against all Losses imposed upon, incurred by, or asserted
against the Indemnified Parties (a) as a result of a Violation, (b) in the
investigation, defense, and settlement of a Violation, (c) as a result of a
breach of the representations in Section 3.11 or default thereunder, (d) in
correcting any prohibited transaction or the sale of a prohibited loan, and (e)
in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender's sole discretion.
SECTION 8.05 Environmental Indemnity. Borrower and other persons, if any, have
executed and delivered the environmental indemnity agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
SECTION 8.06 Duty to Defend, Costs and Expenses. Upon request, whether
Borrower's obligation to indemnify Lender arises under Article VIII or in the
Documents, Borrower shall defend the Indemnified Parties (in Borrower's or the
Indemnified Parties name) by attorneys and other professionals approved by the
Indemnified Parties, provided such response is not unreasonably delayed and such
approval is not unreasonably conditioned or withheld (the "Approved Attorneys").
Notwithstanding the foregoing, the Indemnified Parties (i) may, after a
determination by the Indemnified Parties in their reasonable judgment that the
Approved Attorneys are not appropriately representing Indemnified Parties'
interests, engage their own attorneys and professionals, at the sole cost and
expense of Borrower, to defend or assist the Indemnified Parties or (ii) may, in
their sole discretion, engage their own attorneys and professionals, at the sole
cost and expense of the Indemnified Parties, to defend or assist the Indemnified
Parties and, at their option in either circumstance, their attorneys shall
control the
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resolution of any claims or proceedings pertaining to ERISA. Upon demand,
Borrower shall pay or, in the sole discretion of the Indemnified Parties,
reimburse and/or indemnify the Indemnified Parties for all Costs imposed on,
incurred by, or asserted against the Indemnified Parties by reason of any items
set forth in this Article VIII and/or the enforcement or preservation of the
Indemnified Parties' rights under the Documents (except as noted in this
paragraph). Any amount payable to the Indemnified Parties under this Section
shall (a) be deemed a demand obligation, (b) be part of the Obligations, (c)
bear interest at the applicable interest rate specified in the Note, which shall
be the Default Rate unless prohibited by Laws, until paid if not paid on demand,
and (d) be secured by this Instrument.
SECTION 8.07 Recourse Obligation and Survival. Notwithstanding anything to the
contrary in the Documents and in addition to the recourse obligations in the
Note, the obligations of Borrower under Sections 8.03, 8.04, 8.05, and 8.06
shall be a full recourse obligation of Borrower, shall not be subject to any
limitation on personal liability in the Documents, and shall survive (a)
repayment of the Obligations, (b) any termination, satisfaction, assignment or
foreclosure of this Instrument, (c) the acceptance by Lender (or any nominee) of
a deed in lieu of foreclosure, (d) a plan of reorganization filed under the
Bankruptcy Code, or (e) the exercise by the Lender of any rights in the
Documents. Borrower's obligations under Article VIII shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation under any
applicable insurance policy.
ARTICLE IX - ADDITIONAL PROVISIONS
SECTION 9.01 Usury Savings Clause. All agreements in the Documents are expressly
limited so that in no event whatsoever shall the amount paid or agreed to be
paid under the Documents for the use, forbearance, or detention of money exceed
the highest lawful rate permitted by Laws. If, at the time of performance,
fulfillment of any provision of the Documents shall involve transcending the
limit of validity prescribed by Laws, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity. If Lender shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and (a) shall be canceled
automatically or (b) if paid, such excess shall be (i) credited against the
principal amount of the Obligations to the extent permitted by Laws or (ii)
rebated to Borrower if it cannot be so credited under Laws. Furthermore, all
sums paid or agreed to be paid under the Documents for the use, forbearance, or
detention of money shall to the extent permitted by Laws be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Obligations
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to the Obligations for so long as the Obligations is outstanding.
SECTION 9.02 Notices. Any notice, request, demand, consent, approval, direction,
agreement, or other communication (any "NOTICE") required or permitted under the
Documents shall be in writing and shall be validly given if sent by a
nationally-recognized courier that obtains receipts, delivered personally by a
courier that obtains receipts, or mailed by United States certified mail (with
return receipt requested and postage prepaid) addressed to the applicable person
as follows:
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If to Borrower: With a copy to notices sent to Borrower to:
Cornerstone Realty Income Trust, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Battle & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to Lender: With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Capital Group Prudential Capital Group
Two Ravinia Drive, Suite 1400 Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mortgage Loan Customer Service Attention: Regional Counsel
Reference Loan No. 6 103 650 Reference Loan No. 6 103 650
Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
SECTION 9.03 Sole Discretion of Lender. Except as otherwise expressly stated,
whenever Lender's judgment, consent, or approval is required or Lender shall
have an option or election under the Documents, such judgment, the decision as
to whether or not to consent to or approve the same, or the exercise of such
option or election shall be in the sole and absolute discretion of Lender.
SECTION 9.04 Applicable Law and Submission to Jurisdiction. The Documents shall
be governed by and construed in accordance with the laws of the Property State
and the applicable laws of the United States of America. Without limiting
Lender's right to bring any action or proceeding against Borrower or the
Property relating to the Obligations (an "ACTION") in the courts of other
jurisdictions, Borrower irrevocably (a) submits to the jurisdiction of any state
or federal court in the Property State, (b) agrees that any Action may be heard
and determined in such court, and (c) waives, to the fullest extent permitted by
Laws, the defense of an inconvenient forum to the maintenance of any Action in
such jurisdiction.
SECTION 9.05 Construction of Provisions. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of this Instrument; (b) all
Article, Section, and Exhibit captions are used for convenience and reference
only and in no way define, limit, or in any way affect this Instrument; (c)
words of masculine, feminine, or neuter gender shall mean and include the
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correlative words of the other genders, and words importing the singular number
shall mean and include the plural number, and vice versa; (d) no inference in
favor of or against any party shall be drawn from the fact that such party has
drafted any portion of this Instrument; (e) all obligations of Borrower
hereunder shall be performed and satisfied by or on behalf of Borrower at
Borrower's sole expense; (f) the terms "INCLUDE," "INCLUDING," and similar terms
shall be construed as if followed by the phrase "WITHOUT BEING LIMITED TO"; (g)
the terms "PROPERTY", "LAND", "IMPROVEMENTS", and "PERSONAL PROPERTY" shall be
construed as if followed by the phrase "OR ANY PART THEREOF"; (h) the term
"OBLIGATIONS" shall be construed as if followed by the phrase "OR ANY OTHER SUMS
SECURED HEREBY, OR ANY PART THEREOF"; (i) the term "PERSON" shall include
natural persons, firms, partnerships, corporations, governmental authorities or
agencies, and any other public or private legal entities; (j) the term
"PROVISIONS," when used with respect hereto or to any other document or
instrument, shall be construed as if preceded by the phrase "TERMS, COVENANTS,
AGREEMENTS, REQUIREMENTS, AND/OR CONDITIONS"; (k) the term "LEASE" shall mean
"TENANCY, SUBTENANCY, LEASE, SUBLEASE, OR RENTAL AGREEMENT," the term "LESSOR"
shall mean "LANDLORD, SUBLANDLORD, LESSOR, AND SUBLESSOR," and the term
"TENANTS" or "LESSEE" shall mean "TENANT, SUBTENANT, LESSEE, AND SUBLESSEE"; (l)
the term "OWNED" shall mean "NOW OWNED OR LATER ACQUIRED"; (m) the terms "ANY"
and "ALL" shall mean "ANY OR ALL"; and (n) the term "ON DEMAND" or "UPON DEMAND"
shall mean "WITHIN FIVE (5) BUSINESS DAYS AFTER WRITTEN NOTICE".
SECTION 9.06 Transfer of Loan. Lender may, at any time, (i) sell, transfer or
assign the Documents and any servicing rights with respect thereto or (ii) grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (collectively, the "SECURITIES"). Lender may
forward to any purchaser, transferee, assignee, servicer, participant, or
investor in such Securities (collectively, "INVESTORS"), any Rating Agency
rating such Securities and any prospective Investor, all documents and
information which Lender now has or may later acquire relating to the
Obligations, Borrower, any Guarantor, any indemnitor(s), the Leases, and the
Property, whether furnished by Borrower, any Guarantor, any indemnitor(s) or
otherwise, as Lender determines advisable. Borrower, any Guarantor and any
indemnitor agree to cooperate (provided such cooperation will not create
additional liabilities or obligations beyond the liabilities and obligations set
out in the Loan Documents) with Lender in connection with any transfer made or
any Securities created pursuant to this Section including the delivery of an
estoppel certificate in accordance with Section 3.16 and such other documents as
may be reasonably requested by Lender.
SECTION 9.07 Miscellaneous. If any provision of the Documents shall be held to
be invalid, illegal, or unenforceable in any respect, this shall not affect any
other provisions of the Documents and such provision shall be limited and
construed as if it were not in the Documents. If title to the Property becomes
vested in any person other than Borrower, Lender may, without notice to
Borrower, deal with such person regarding the Documents or the Obligations in
the same manner as with Borrower without in any way vitiating or discharging
Borrower's liability under the Documents or being deemed to have consented to
the vesting. If both the lessor's and lessee's interest under any Lease ever
becomes vested in any one person, this Instrument and the lien and security
interest created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and Lender shall continue to have and enjoy all its
rights and privileges
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as to each separate estate. Upon foreclosure of this Instrument, to the extent
permitted by Laws, none of the Leases shall be destroyed or terminated as a
result of such foreclosure, by application of the doctrine of merger or as a
matter of law, unless Lender takes all actions required by law to terminate the
Leases as a result of foreclosure. All of Borrower's covenants and agreements
under the Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents listed in Sections 3.04, 3.19, 4.01 and 6.02. The Documents
cannot be amended, terminated, or discharged except in a writing signed by the
party against whom enforcement is sought. No waiver, release, or other
forbearance by Lender will be effective unless it is in a writing signed by
Lender and then only to the extent expressly stated. The provisions of the
Documents shall be binding upon Borrower and its heirs, devisees,
representatives, successors, and assigns including successors in interest to the
Property and inure to the benefit of Lender and its heirs, successors,
substitutes, and assigns. Where two or more persons have executed the Documents,
the obligations of such persons shall be joint and several, except to the extent
the context clearly indicates otherwise. The Documents may be executed in any
number of counterparts with the same effect as if all parties had executed the
same document. All such counterparts shall be construed together and shall
constitute one instrument, but in making proof hereof it shall only be necessary
to produce one such counterpart. Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of any Document which is
not of public record, and, in the case of any mutilation, upon surrender and
cancellation of the Document, Borrower will issue, in lieu thereof, a
replacement Document and indemnity reasonably satisfactory to Borrower, dated
the date of the lost, stolen, destroyed or mutilated Document containing the
same provisions.
SECTION 9.08 Entire Agreement. Except as provided in Section 3.17, (a) the
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Loan
application and Loan commitment and (b) Borrower is not relying on any
representations or warranties of Lender except as expressly set forth in the
Documents.
SECTION 9.09 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ACTS OR
OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH.
ARTICLE X PARTIAL RELEASE/SUBSTITUTION OF COLLATERAL
SECTION 10.01 Partial Release. So long as the Borrower has not transferred the
Property in accordance with Section 5.03 hereof and upon Borrower's written
request, to be received with not less than sixty (60) days prior notice, Lender
shall release not more than two (2) Individual Properties (defined below)
(during any one loan year, but subject to the cumulative limits set out below)
from the lien of the Documents ("Release Property"), upon the following terms
and conditions:
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(a) At the time of the request and the time of the release, there shall
be no Event of Default under the Documents, and there shall exist no condition
or state of facts which with the passage of time or the giving of notice or
both, would constitute an Event of Default under the Documents;
(b) Any such request may be made beginning six (6) months after the
date of this Instrument and any such partial release must occur prior to the
last six (6) months of the Loan term;
(c) For purposes of this Section 10.01, each Release Property released
shall consist of one of the Individual Properties (herein so called) as
identified by either a street address or a complex name on Exhibit E attached
hereto and by this reference made a part hereof;
(d) For each Release Property, Borrower shall have made the "Release
Price" payment to Lender, in an amount equal to one hundred fifteen percent
(115%) of the lesser of (i) the Allocated Loan Amount (as set forth on Exhibit
E) applicable to the Release Property, or (ii) the subsequently reduced
allocated Loan Amount as a result of the payments made under this subparagraph
10.01(d) and allocated under subparagraph 10.01(e) together with the applicable
Prepayment Premium under the Note (based on the Release Price);
(e) The Release Price shall be applied against the Note and Borrower
shall, in addition, pay all amounts due with respect to such Release Price with
respect to interest thereon due to the date of payment, Prepayment Premium and
costs and expenses. Lender shall apply the portion of the Release Price (but
specifically excluding any Prepayment Premium) which is in excess of the
Allocated Loan Amount to the Release Property on a pro rata basis to all of the
remaining Allocated Loan Amounts (which shall, as to subparagraph 10.01(d),
reduce the amount for calculating future Release Prices;
(f) At the time of the release, the Debt Service Coverage Ratio,
calculated with respect to the remaining property in the Portfolio (excluding
the Release Property) shall be equal to or greater than 1.90 to 1.00;
(g) At the time of the release, the Loan to Value Ratio, calculated
with respect to the remaining property in the Portfolio (excluding the Release
Property), does not exceed sixty-two percent (62%). In the event the Loan to
Value Ratio of the remaining property in the Portfolio (as determined by Lender
in its sole discretion) exceeds the required level, Borrower shall have the
right, subject to payment of the Prepayment Premium calculated in accordance
with the provisions set forth in the Note, to pay Lender the amount necessary to
reduce the Loan to Value Ratio of the remaining property in the Portfolio to the
required level. Lender shall have determined, in its sole discretion, that
following the proposed partial release, the entire Portfolio shall meet the
leasing percentage requirements in the Assignment.
(h) In no event will Lender be required to release more than five (5)
of the Individual Properties in total during the term of the Loan;
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(i) For each Release Property requested to be released, Borrower shall
pay to Lender a release fee equal to one-half percent (0.5%) of the principal
balance of the Allocated Loan Amount (as the same may be reduced by payments
described in Section 10.01(e) above) applicable to the Release Property (but in
no event shall such release fee be less than $10,000), which shall be
non-refundable and payable to Lender at the time of request for partial release;
(j) Borrower shall pay to Lender all escrow, closing and recording
costs including, but not limited to, the cost of preparing and delivering any
re-conveyance documentation and modification of the Documents, including legal
fees and costs, the cost of any title insurance endorsements that Lender may
require, any expenses incurred by the Lender in connection with the partial
release, and any sums then due and payable under the Documents;
(k) Lender has determined that following the release of the Release
Property the remaining property in the Portfolio shall have an aggregate
allocated loan balance equal to or greater than 50% of the aggregate allocated
loan balance of the property in the Portfolio on the Closing Date of the Loan;
and
(l) Such other terms and conditions as Lender shall reasonably require.
Notwithstanding anything to the contrary in this Section 10.01 and Section 10.02
below, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases,(2) two substitutions of
collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.01 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
SECTION 10.02 Substitution of Collateral. At any time during the term of the
Loan, with ninety (90) days prior written notice to Lender, Borrower shall be
entitled (during any one loan year, but subject to the cumulative limits set out
below) to substitute up to two (2) properties comprising the original Portfolio
with properties ("Substitute Collateral") which shall be satisfactory to Lender
in Lender's sole discretion and shall meet all criteria of Lender, including
without limitation, the criteria set forth in subparagraphs (a) through (k)
below. In evaluating the acceptability of the substitution, each of the
following conditions must be satisfied:
(a) No Event of Default or event which with the passage of time or
giving of notice, or both, would constitute an Event of Default shall exist
under the Documents at the time of the request or at the time of the
substitution of collateral;
(b) The Substitute Collateral shall only be an apartment complex
satisfactory to Lender in Lender's sole discretion. The ownership entity of the
Substitute Collateral shall be identical to the entity owning the Individual
Property being transferred;
-34-
(c) The location (including, without limitation, the character and
demographics of the market area) of the Substitute Collateral shall be
satisfactory to Lender in Lender's sole discretion;
(d) The Substitute Collateral shall not be less than ninety-two percent
(92%) occupied by third-party tenants in occupancy and paying rent at the time
of substitution;
(e) Lender shall have received a report from an engineer or architect
chosen by Lender conforming with the guidelines then applicable to Lender's
mortgage loans, which report shall be satisfactory in all respects to Lender in
Lender's sole discretion. In addition, Lender shall have received an
Environmental Report conforming with the guidelines then applicable to Lender's
mortgage loans, which Environmental Report shall be satisfactory in all respects
to Lender in Lender's sole discretion. The cost of preparation of all such
reports and all necessary inspections shall be paid by Borrower;
(f) The overall appearance, configuration, quality and age of the
Substitute Collateral shall be satisfactory to Lender in Lender's sole
discretion and shall equal or exceed the appearance, configuration, quality and
age of the property being transferred. Lender shall have determined in its sole
discretion, that following the proposed substitution, the entire Portfolio shall
meet the leasing percentage requirements in the Assignment.
(g) The value of the Substitute Collateral, as determined by Lender,
shall equal or exceed then-market value of the property being transferred, and
the Net Operating Income of the Substitute Collateral, as determined by Lender,
shall equal or exceed Net Operating Income of the property being transferred;
(h) To the extent applicable to the Substitute Collateral, all
conditions that Borrower was obligated to meet and satisfy under the terms of
the Application/Commitment in connection with the closing of the Loan, or, if
required by Lender, Lender's then current closing requirements, shall be
satisfied regarding the Substitute Collateral, including without limitation,
that (i) all Loan Documents shall be satisfactory to Lender, (ii) Lender
receives a satisfactory legal opinion from Borrower's counsel, (iii) title to
the Substitute Collateral shall be satisfactory in all respects to Lender
(including, without limitation, evidence that Lender shall have a first and
exclusive lien on the fee simple interest in the Substitute Collateral) and
Lender shall have received a satisfactory survey and title insurance policy,
(iv) Lender receives evidence that the Substitute Collateral complies with all
applicable government requirements, (v) construction of the Substitute
Collateral is complete and in accordance with the plans and specifications, (vi)
all bills in connection with such construction have been paid in full, and (vii)
Borrower's current financial condition shall be reasonably satisfactory to
Lender. In addition, Lender shall have the right to modify the minimum leasing
requirements for the Substitute Collateral to an appropriate level;
(i) Borrower shall pay all costs and expenses associated with the
substitution of the Substitute Collateral, including but not limited to, title
insurance and survey fees and expenses, recording costs, documentary stamp
taxes, intangible taxes, similar fees, and attorneys' fees (including attorneys'
fees and expenses for Lender's staff attorneys and outside counsel), fees of
-35-
Lender's architect and/or engineer, and fees related to the Environmental
Report. In addition, Borrower shall pay to Lender a non-refundable servicing fee
of 1.0% of the Substituted Collateral's allocated loan balance at the time of
the request for substitution;
(j) The Substitute Collateral shall not consist of any partial
interests in a property, including but not limited to partnership or joint
venture interests;
(k) The consent of Lender to the substitution of collateral is
expressly made subject to Lender's analysis and approval of the economic trends
affecting the Substitute Collateral; and
(l) At the time of the request for substitution of collateral, the Debt
Service Coverage Ratio, calculated with respect to the Portfolio as constituted
prior to any substitution, is equal to or greater than 1.30 to 1.00.
Lender shall have at least eighty (80) days in which to process any request to
substitute collateral after receipt of (1) all materials necessary to evaluate
such request and (2) the fees required by subparagraph (i) above.
Notwithstanding anything to the contrary in this Section 10.02 and Section 10.01
above, (x) Borrower and Guarantor shall only have the right, during any one loan
year, to a cumulative total of (1) two partial releases, (2) two substitutions
of collateral, or (3) one partial release and one substitution of collateral and
(y) after any partial release or substitution of collateral, the remaining
Individual Properties (including any substituted property which becomes part of
the Individual Properties) shall always be in at least three markets with no
more than thirty-five percent (35%) of the total value (as determined by Lender)
of all of the Individual Properties in any one market.
This Section 10.02 shall be personal to Borrower, and neither the Third Party
Single Entity nor any other transferee shall have any rights under this
paragraph.
ARTICLE XI - AMORTIZATION AND REQUIRED REPAIRS
SECTION 11.01 Amortization Required. If at any time during the term of the Loan,
the Debt Service Coverage Ratio (as determined by Lender) for the entire
Portfolio is less than 1.30 to 1.0 based on the Initial Loan Constant for the
Loan of 7.29%, then effective on the first monthly payment which is due
following such determination by Lender Borrower shall begin making monthly
payments (the "Amortizing Payments") on the Loan equal to the then outstanding
principal balance multiplied by 8.705% (the "Amortizing Loan Constant") (based
on a 25 year amortization schedule). The Amortizing Payments shall continue
until such time as Lender determines that the Debt Service Coverage Ratio for
the entire Portfolio is equal to or greater than 1.80 to 1.0 based on the
Initial Loan Constant for the Loan of 7.29%.
-36-
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.
-37-
IN WITNESS WHEREOF, the undersigned have executed this Instrument as of the day
first set forth above.
Signed, sealed, and delivered in the BORROWER:
presence of the following witnesses:
CORNERSTONE REALTY INCOME
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ TRUST, INC., a Virginia
-----------------------------------
Witness
Printed Name: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------- ------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇ ▇. ▇▇▇▇ Title: Chief Financial Officer
-----------------------------------
Witness
Printed Name: /s/ ▇▇▇▇ ▇. ▇▇▇▇ (CORPORATE SEAL)
-------------------
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ )
) PROBATE
CITY OF RICHMOND )
PERSONALLY APPEARED BEFORE ME, the undersigned witness, who being duly
sworn, deposes and states that (s)he saw the within named Cornerstone Realty
Income Trust, Inc., by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., the Chief Financial Officer and
Secretary, sign, seal and deliver the foregoing Mortgage and Security Agreement
and that (s)he with the other witness whose name is subscribed above witnessed
the execution thereof.
Sworn to before me this 27th day of /s/ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇
September, 1999 ------------------------------------
Witness
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (L.S.)
--------------------------------------
Notary Public for State of Virginia at-large
My Commission Expires: 6/30/03
----------
-39-
Exhibit A
(Arbors at Windsor Lake)
All that certain piece, parcel, or lot of land, with improvements, situate,
lying and being near the City of Columbia, in the County of Richland, State of
South Carolina, and having the following boundaries and measurements, to wit:
BEGINNING AT AN EXISTING 1-1/2" PIPE IN THE SOUTHWESTERN MOST CORNER OF SAID
TRACT WHERE SAID TRACT INTERSECTS WITH ▇▇▇▇ CLUB ROAD (SR 40-1975) 60' R/W AND
WINDSOR LAKE BOULEVARD (SR 40-1196) R/W WIDTH VARIES, THENCE RUNNING IN A
NORTHEASTERLY DIRECTION ALONG SAID WINDSOR LAKE BOULEVARD AS FOLLOWS:
N 02 08'16" W FOR A DISTANCE OF 100.02 FEET TO AN EXISTING 1-1/2" PIPE;
N 10 53'55" E FOR A DISTANCE OF 99.21 FEET TO A NEW #5 REBAR WITH CAP;
N 20 54'39" E FOR A DISTANCE OF 309.48 FEET TO A NEW #5 REBAR WITH CAP;
N 22 09'01" E FOR A DISTANCE OF 131.64 FEET TO AN EXISTING DISTURBED 1"
PIPE;
N 16 42'06" E FOR A DISTANCE OF 87.07 FEET TO AN EXISTING 1" PIPE;
N 05 31'41" E FOR A DISTANCE OF 98.61 FEET TO A NEW #5 REBAR WITH CAP'
N 05 36'39" E FOR A DISTANCE OF 70.74 FEET TO A NEW #5 REBAR WITH CAP;
N 27 48'41" E FOR A DISTANCE OF 68.64 FEET TO AN EXISTING RIGHT-OF-WAY
MONUMENT;
N 66 36'21" E FOR A DISTANCE OF 79.41 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (D.B. D1346-0446) S 34 59'37" E FOR A DISTANCE OF 53.35 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (D.B. D1276, 0869) S 35 01'34" E FOR A DISTANCE OF 53.03 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ (D.B. D902, 0857) S 31 29'39" E FOR A DISTANCE OF 7.78 FEET TO AN
EXISTING #4 REBAR; THENCE RUNNING WITH PROPERTIES NOW OR FORMERLY OF ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (D.B. 0902, 0857) AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (D.B. D1201-0453) S 32 18'18" E
FOR A DISTANCE OF 97.13 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (D.B.
D1201-0453) N 55 04'34" E FOR A DISTANCE OF 115.00 FEET TO AN EXISTING #4 REBAR
AT THE RIGHT-OF-WAY BAY SPRINGS ROAD 50' R/W; THENCE TURNING AND RUNNING ACROSS
BAY SPRINGS ROAD 50' R/W S 83 48'04" E FOR A DISTANCE OF 66.42 FEET TO A NEW #5
REBAR AND CAP AT THE RIGHT-OF-WAY OF BAY SPRINGS ROAD 50' R/W; THENCE TURNING
AND RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ (D.B.
D1267-0833) N 54 56'02" E FOR A DISTANCE OF 60.13 FEET TO AN EXISTING #4 REBAR;
THENCE RUNNING WITH THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ (D.B. D1012-0663) N 54 56'02" E FOR A DISTANCE OF 39.92 FEET TO A #4
REBAR; THENCE RUNNING ALONG THE PROPERTY OF ▇▇▇▇▇▇▇ ▇. AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(D.B. D1012-0663) N 74 06'22" E FOR A DISTANCE OF 8.00 FEET TO AN EXISTING #4
REBAR; THENCE RUNNING ALONG THE PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇ ▇. ▇▇▇▇▇▇ (D.B. D1173-0003) N 74 06'22" E FOR A DISTANCE OF 46.98 FEET TO
AN EXISTING #4 REBAR; THENCE TURNING AND RUNNING ALONG THE PROPERTIES NOW OR
FORMERLY OF ▇▇▇▇▇ ▇▇▇▇▇ (D.B. D1089-0296), ▇▇▇▇▇▇ ▇. & VANGALENE ▇▇▇▇▇▇ (D.B.
D1215-0568) AND K & T CORPORATION (D.B. D1418-0332) S 34 59'29" E FOR A DISTANCE
OF 110.15 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING ALONG THE
PROPERTY NOW OR FORMERLY OF ▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇ (D.B. D1054-0727) S 35 02'21"
E FOR A DISTANCE OF 59.86 FEET TO AN EXISTING DISTURBED #4 REBAR; THENCE RUNNING
ALONG PROPERTIES NOW OR FORMERLY OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (D.B. D1181-0965), ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ (D.B. D1182-0546), ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇ (D.B. D1387-0304),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (D.B. D1208-0612) AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (D.B. D1363-0403) S
35 00'29" E FOR A DISTANCE OF 344.86 FEET TO AN EXISTING #4 REBAR; THENCE
TURNING ALONG THE PROPERTY NOW OR FORMERLY OF FOX CHASE TOWNHOMES HOME OWNERS
ASSOCIATION (COMMON AREAS) (D.B. D976-0862) AS FOLLOWS:
S 07 05'31" E FOR A DISTANCE OF 46.03 FEET TO AN EXISTING 1-1/2" PIPE;
S 07 04'18" E FOR A DISTANCE OF 53.29 FEET TO AN EXISTING #4 REBAR;
S 39 03'33" W FOR A DISTANCE OF 64.93 FEET TO AN EXISTING #5 REBAR WITH
CAP;
S 12 30'46" E FOR A DISTANCE OF 111.22 FEET TO AN EXISTING 1" PIPE;
THENCE TURNING AND RUNNING ALONG SAID ▇▇▇▇ CLUB ROAD (SR 40-1975) 60' R/W S 77
24'38" W FOR A DISTANCE OF 649.56 FEET TO AN EXISTING #5 REBAR WITH CAP; THENCE
CONTINUING ALONG SAID ▇▇▇▇ CLUB ROAD (SR 40-1975) 60' R/W S 77 25'43" W FOR A
DISTANCE OF 400.02' TO THE PLACE AND POINT OF BEGINNING.
Said property containing 14.487 acres according to plat of ALTA/ACSM Land Title
Survey for Cornerstone Realty Income Trust, Inc., prepared by Power Engineering
Company, Inc., dated August 30, 1999 and last revised September 21, 1999, which
plat is incorporated by this reference for purposes of this description.
-40-
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, owned by Borrower, wherever situate, and now or hereafter located on,
attached to, now or hereafter contained in, or used or usable in connection with
the real property described in Exhibit A attached hereto and incorporated herein
(the "LAND"), and all improvements located thereon (the "IMPROVEMENTS") or
placed on any part thereof, though not attached thereto, including all screens,
awnings, shades, blinds, curtains, draperies, carpets, rugs, furniture and
furnishings, heating, electrical, lighting, plumbing, ventilating,
air-conditioning, refrigerating, incinerating and/or compacting plants, systems,
fixtures and equipment, elevators, hoists, stoves, ranges, vacuum and other
cleaning systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, ducts,
conduits, dynamos, engines, compressors, generators, boilers, stokers, furnaces,
pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Land, the Improvements, or any of the personal
property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Borrower in connection with the
Land, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Borrower in and to the name and
style by which the Land and/or the Improvements is known, including trademarks
and trade names relating thereto.
5. All right, title, and interest of Borrower in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Land and/or the
Improvements.
6. All interests, estates, or other claims or demands, in law and in
equity, which Borrower now has or may hereafter acquire in the Land, the
Improvements, or the personal property described in this Exhibit B.
7. All right, title, and interest owned by Borrower in and to all
options to purchase or lease the Land, the Improvements, or any other personal
property described in this Exhibit B, or any portion thereof or interest
therein, and in and to any greater estate in the Land, the Improvements, or any
of the personal property described in this Exhibit B.
8. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto, which Borrower now has or may hereafter
acquire in the Land, the Improvements, or any of the personal property described
in this Exhibit B, or any portion thereof or interest therein, and any and all
awards made for the taking by eminent domain, or by any proceeding or purchase
in lieu
-41-
thereof, of the whole or any part of such property, including without
limitation, any award resulting from a change of any streets (whether as to
grade, access, or otherwise) and any award for severance damages.
9. All right, title, and interest of Borrower in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements, including all of the Borrower's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Land and/or the Improvements, including, without limiting the
generality of the foregoing, all water and/or sewer capacity, all water, sewer
and/or other utility deposits or prepaid fees, and/or all water and/or sewer
and/or other utility tap rights or other utility rights, any right or privilege
of Borrower under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Land and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE BORROWER IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
-42-
Exhibit C
PERMITTED ENCUMBRANCES
As to the real property commonly known as The Arbors at Windsor Lake, those
items recorded in the records of Charleston County, South Carolina, as set forth
in Schedule B, Section 2, of that certain Commitments for Title Insurance issued
by Lawyers Title Insurance Corporation, Commitment No. 1444.023, as endorsed and
marked in connection with the making of the Loan evidenced by the Note and the
recording of this Instrument.
-43-
Exhibit D
LIST OF MAJOR TENANTS
NONE
-44-
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.: ▇▇-▇▇▇▇▇▇▇
-------------------------------------------------------------------------------------------------------------------
Ashley Run Norcross GA 1997 348 $13,700
-------------------------------------------------------------------------------------------------------------------
Spring Lake ▇▇▇▇▇▇ GA 1998 188 $6,000
-------------------------------------------------------------------------------------------------------------------
Stone ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ GA 1997 188 $6,350
-------------------------------------------------------------------------------------------------------------------
Arbors at Windsor Lake Columbia SC 1997 228 $6,450
-------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ 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.: ▇▇-▇▇▇▇▇▇▇
-------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------
-45-
EXHIBIT F
1999 & BEYOND ALLOCATED IMPROVEMENT BUDGET
Adjusted Per Unit Calculation
---------------------------------------------------------------------------------------------------------------------
2 YR. 1999 TOTAL
RENOV. BUDGETED CAPITAL
ENDING DATE IMPROVE-MENTS ADJUSTED IMPROVE-MENT
COMMUNITY UNITS PER UNIT
---------------------------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------------------------------------------
▇▇. ▇▇▇▇▇ ▇▇▇ " 204,000 $1,133
---------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ " 135,000 $ 993
---------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-----------------------------
ITS CHIEF FINANCIAL OFFICER
-----------------------------
DATE: 9/27/99
-46-