Common use of PIP Reserve Clause in Contracts

PIP Reserve. (i) Contemporaneously with the execution of this Agreement, Borrower or Operating Tenant has established with Lender a reserve in the amount of $1,315,870.15 (the “PIP Reserve”), by depositing such amount with Lender. Borrower or Operating Tenant shall complete the repairs and renovations identified in the Property Improvement Plan dated April 6, 2012 (the “PIP Report”) established by Homewood Suites by Hilton (the “PIP Repairs”), and provide evidence reasonably satisfactory to Lender and the Franchisor, that the PIP Repairs have been completed within the required deadlines as set forth in the PIP Report or as otherwise agreed by the Franchisor (the “PIP Repairs Deadline”). If the PIP Repairs are not completed or if the funds are not completely drawn down by the PIP Repairs Deadline, Lender may, in its sole discretion, in addition to any other remedies Lender may have, undertake the PIP Repairs (at Borrower’s and Operating Tenant’s expense, and to the extent sufficient, using funds in the PIP Reserve). Failure to make the PIP Repairs by the PIP Repairs Deadline shall constitute an Event of Default under the Loan Documents, at the election of Lender, and Lender shall have all remedies provided therein including the right to apply the PIP Reserve against amounts owed with respect to the Loan and the right to make the PIP Repairs and obtain reimbursement from the Borrower or Operating Tenant. Upon completion of the PIP Repairs to Lender’s and Franchisor’s reasonable satisfaction, Lender shall disburse to Borrower or Operating Tenant, as directed by such parties, the PIP Reserve (to the extent it has not been applied to the Loan following an Event of Default or used to pay or reimburse Lender) for PIP Repairs. Borrower and Operating Tenant shall be entitled to perform any of the PIP Repairs in a manner that is more extensive than what is described in the PIP Report; provided, however, that to the extent Lender permits Borrower or Operating Tenant to obtain reimbursement from the PIP Reserve for any item described in the PIP Report before completion of all items described in the PIP Report, Borrower’s or Operating Tenant’s disbursement from the PIP Reserve shall be limited to the lesser of actual cost or one hundred twenty-five (125%) of the estimated cost for such item as stated in the PIP Report. (ii) So long as no Event of Default has occurred and is continuing (i) all sums in the PIP Reserve shall be held by Lender in the PIP Reserve to pay the costs and expenses of completing the PIP Repairs and (ii) Lender shall, provided each item of PIP Repairs has been completed in accordance with the PIP Report and to the extent funds are available for such purpose in the PIP Reserve and no more frequently two times a month, disburse to Borrower or Operating Tenant the amount paid or incurred by Borrower or Operating Tenant in completing and performing the PIP Repairs; provided, however, (a) the minimum draw request hereunder shall be $10,000.00, (b) Lender shall receive a written request from Borrower or Operating Tenant for disbursement from the PIP Reserve which shall include a certification by Borrower or Operating Tenant that the applicable item of PIP Repairs has been completed in accordance with the terms of the Security Instrument and the PIP Report, and (c) Lender shall receive invoices, receipts or other evidence satisfactory to Lender verifying the costs of the PIP Repairs to be paid or reimbursed have been incurred, and such other information and documentation as Lender shall request in its reasonable discretion. Draw requests for individual invoices in excess of $50,000.00 shall include, in addition to the items specified in (b) and (c) above, affidavits, and/or unconditional lien waivers (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an applicable unconditional lien waiver accompanies each succeeding funding request for the particular contractor and/or vendor) or other evidence reasonably satisfactory to Lender showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished materials or labor to the Property have been paid all amounts due for such labor and materials furnished to the Property. Borrower and Operating Tenant shall pay to Lender a processing fee of $200 for each draw request. At Lender’s discretion, such processing fee may be taken from the PIP Reserve provided it does not cause the balance of the PIP Reserve to fall below an amount equal to one hundred twenty-five percent (125%) of the estimated cost for the remaining PIP Repairs. At Lender’s reasonable discretion, disbursement may be made by joint check payable to Borrower or Operating Tenant on the one hand, and the applicable contractor on the other. (iii) Lender, in its reasonable discretion, may require Borrower or Operating Tenant to engage, at Borrower’s or Operating Tenant’s expense, as applicable, an independent construction consultant reasonably acceptable to the Lender, to verify the completion of work and the value of the completed work and, if applicable, certify that the Property is, as a result of such work, in compliance with all applicable laws, ordinances, rules and regulations relating to the PIP Repairs so performed. Lender, in its reasonable discretion, may, from time to time, request that Borrower or Operating Tenant provide a No Further Changes Certificate pursuant to the laws of the State of Texas evidencing that there are no liens of record on the Property other than those in favor of the Lender. If there is any cost associated with obtaining this Certificate, Lender will allow Borrower or Operating Tenant to utilize funds in the PIP Reserve to pay said costs provided that following such payment the PIP Reserve contains a balance equal to or greater than one hundred twenty-five percent (125%) of the estimated cost for the remaining PIP Repairs. (iv) The disbursement of the last ten percent (10%) of the funds in the PIP Reserve shall be conditioned on (a) Borrower’s or Operating Tenant’s satisfaction of all other draw requirements under this Section B-3 including, without limitation, Borrower’s or Operating Tenant’s provision of invoices and other reasonable evidence that Borrower or Operating Tenant has incurred costs equal to the amount required (if not already provided with previous draw requests), (b) completion of the PIP Repairs as evidenced by a third party inspection acceptable to Lender, including delivery of the following, if applicable: (1) a final certificate of occupancy from the appropriate building authority; (2) a certificate from Franchisor or another third party acceptable to Lender certifying that the PIP Repairs have been completed in accordance with the PIP Report; (3) final lien waivers for individual invoices of $50,000.00 or more (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an unconditional lien waiver is delivered in conjunction with subsequent draw requests pertaining to said contractor and/or vendor); (4) an affidavit from Borrower or Operating Tenant stating that all contractors have been paid in full or will be paid in full upon the release of funds from the PIP escrow and an affidavit from each contractor stating that all subcontractors have been paid in full or will be paid in full upon receipt of requested final funds (which Lender’s consent for release of funds from the PIP escrow to pay for said requests will not be unreasonably withheld); and (5) a No Further Changes Certificate pursuant to the laws of the State of Texas showing no intervening liens of record on the Property other than those in favor of the Lender. (v) Lender shall not be required to make advances from the PIP Reserve more frequently than two times in any calendar month. Borrower acknowledges that Lender’s standard disbursement frequency is once per month; however, Lender agrees to make commercially reasonable efforts to process up to two disbursements requests each month. In making any payment from the PIP Reserve, Lender shall be entitled to rely on such request from Borrower or Operating Tenant without any inquiry into the accuracy, validity or contestability of any such amount. Interest or other earnings on the funds contained in the PIP Reserve shall be credited to Operating Tenant in accordance with Section 5.28 of the Security Instrument. In the event that the amounts on deposit or available in the PIP Reserve are inadequate to pay the costs of the PIP Repairs, Borrower or Operating Tenant shall pay the amount of such deficiency. To the extent that all of the PIP Repairs have been completed at a cost less than the aggregate PIP Reserve, then the residual balance of the PIP Reserve shall be disbursed to Operating Tenant.

PIP Reserve. (a) Funds on deposit in the PIP Reserve and, until the completion of all repairs, improvements and replacements required under the Property Improvement Plans, in the Capital Expenditure Reserve are to be used solely for the cost of the repairs, improvements and replacements required under the Property Improvement Plans (collectively, the “PIP Work”), in each case to the extent identified in the PIP Budget. For purposes of this Section 5.9(3), the term PIP Reserve shall be deemed to include all funds in the Capital Expenditure Reserve until such time as the PIP Work has been completed. (b) The Borrowers may submit an application requesting that the Administrative Agent make a lump sum disbursement from the PIP Reserve to pay for expenses incurred in accordance with the PIP Budgets for completed PIP Work. The Administrative Agent shall disburse funds from the PIP Reserve to or for the benefit of the Borrowers for expenses incurred by the Borrowers completing PIP Work in accordance with the PIP Budgets if each of the following conditions is met: (i) Contemporaneously The Borrowers shall make such request for a disbursement from the PIP Reserve via delivery to the Administrative Agent of a draw request that will include the following: (A) an Officer’s Certificate making the request for a disbursement from the PIP Reserve substantially in the form of Exhibit M attached hereto; (B) a summary schedule of payments identifying expenditures on an Individual Property basis showing the job number, job name, vendor name, invoice number and, if applicable, the check number, check date and check amount and sub-total for each Individual Property in the form attached hereto as Exhibit N; and (C) unconditional lien waivers and releases from all parties that have provided materials and/or services in connection with any prior disbursements from the PIP Reserve. (ii) If the Borrowers’ disbursement request is properly made and documented in accordance with the execution provisions of this AgreementSection, Borrower or Operating Tenant has established with Lender a reserve in the amount of $1,315,870.15 (Administrative Agent shall disburse the “PIP Reserve”), by depositing such amount with Lender. Borrower or Operating Tenant shall complete the repairs and renovations identified in the Property Improvement Plan dated April 6, 2012 (the “PIP Report”) established by Homewood Suites by Hilton (the “PIP Repairs”), and provide evidence reasonably satisfactory to Lender and the Franchisor, that applicable funds from the PIP Repairs have been completed Reserve within the required deadlines five (5) Business Days of receipt of a complete draw request so long as set forth in the PIP Report or as otherwise agreed by the Franchisor (the “PIP Repairs Deadline”). If the PIP Repairs there are not completed or if the funds are not completely drawn down by the PIP Repairs Deadline, Lender may, in its sole discretion, in addition to any other remedies Lender may have, undertake the PIP Repairs (at Borrower’s and Operating Tenant’s expense, and to the extent sufficient, using sufficient funds in the PIP Reserve). Failure Reserve to make the PIP Repairs by the PIP Repairs Deadline shall constitute an Event of Default under the Loan Documents, at the election of Lender, and Lender shall have all remedies provided therein including the right to apply the PIP Reserve against amounts owed with respect to the Loan and the right to make the PIP Repairs and obtain reimbursement from the Borrower or Operating Tenant. Upon completion of the PIP Repairs to Lender’s and Franchisor’s reasonable satisfaction, Lender shall disburse to Borrower or Operating Tenant, as directed by satisfy such parties, the PIP Reserve (to the extent it has not been applied to the Loan following an Event of Default or used to pay or reimburse Lender) for PIP Repairs. Borrower and Operating Tenant shall be entitled to perform any of the PIP Repairs in a manner that is more extensive than what is described in the PIP Reportrequest; provided, however, that to if at the extent Lender permits Borrower time of any disbursement an unconditional lien waiver or Operating Tenant to obtain reimbursement release remains outstanding from a party that furnished materials and/or services and for which a payment has previously been disbursed from the PIP Reserve for any item described Reserve, the Administrative Agent shall have the right to reserve funds in the PIP Reserve in an amount equal to the amount previously disbursed for such materials and/or services. (iii) Requests may be submitted no more frequently than on a monthly basis for any of the Properties unless reasonably necessary under the circumstances, and requests shall not be in an amount less than $500,000. (iv) On a quarterly basis, Borrowers will deliver to the Administrative Agent copies of the Job Cost Report before completion – CapEx for each Individual Property in the form attached hereto as Exhibit O. The Administrative Agent reserves the right to request copies of invoices and to challenge the validity of payments included in previous disbursements and may require an inspection of any applicable Individual Property related thereto, all items described at the Borrowers’ expense. The Administrative Agent shall also have the right to reserve funds in the PIP Report, Borrower’s or Operating Tenant’s Reserve in an amount equal to any funds previously disbursed if the Administrative Agent subsequently determines that all the conditions precedent and subsequent for such prior disbursement from the PIP Reserve were not satisfied. A disbursement by the Administrative Agent from the PIP Reserve shall not be limited construed as evidence that all of the conditions for such disbursement were met. Notwithstanding the foregoing, the Administrative Agent shall not have the right to withhold any disbursements based on the insufficiency of draw requests or supporting information for disbursements paid more than sixteen (16) months prior thereto, unless prior to the lesser expiration of actual cost or one hundred twenty-five such sixteen (125%16) month period the Administrative Agent notified the Borrowers of the estimated cost for insufficiency of such item as stated in the PIP Reportdraw requests or supporting information. (iic) So long as no Event of Default has occurred and is continuing Default, Cash Trap Event or Franchisor Warning Event exists, (i) all sums the Administrative Agent will, upon Borrowers’ request, commingle in the PIP Reserve the deposits made by Borrowers pursuant to Section 5.8(2) of this Agreement and said funds shall not be held by Lender the Administrative Agent in the PIP Reserve separate accounts for each Individual Property and will not be required to pay the costs and expenses of completing the PIP Repairs be disbursed on an Individual Property by Individual Property basis; and (ii) Lender shall, provided each item of PIP Repairs has been completed in accordance with the PIP Report and to the extent funds are available for such purpose in the PIP Reserve and no more frequently two times a month, disburse to request by a Borrower or Operating Tenant the amount paid or incurred by Borrower or Operating Tenant in completing and performing the PIP Repairs; provided, however, (a) the minimum draw request hereunder shall be $10,000.00, (b) Lender shall receive a written request from Borrower or Operating Tenant for disbursement from the PIP Reserve with respect to any Individual Property need not be limited to the amount of funds on deposit in the PIP Reserve which are allocable to such Individual Property. (d) If an Event of Default, Cash Trap Event or Franchisor Warning Event exists, the Administrative Agent reserves the right to require the Borrowers to establish separate PIP Reserve accounts for each Individual Property or group of Individual Properties and shall include not be required, in connection with any request by a certification Borrower for a disbursement related to any Individual Property or, if applicable, group of Individual Properties, to disburse from the PIP Reserve any amounts which are in excess of the funds then on deposit in the PIP Reserve which are allocable to such Individual Property or, if applicable, group of Individual Properties. (e) The Administrative Agent shall have no obligation to make disbursements from the PIP Reserve while any Event of Default exists. (f) On or prior to November 30, 2004, the Borrowers shall submit to the Administrative Agent a detailed budget for the PIP Work for each Individual Property, said budgets are individually referred to as a “PIP Budget” and collectively referred to as the “PIP Budgets.” The PIP Budgets shall be subject to the approval of the Administrative Agent. No disbursements shall be made by Borrower or Operating Tenant that the applicable item of Administrative Agent from PIP Repairs Reserve until the Administrative Agent has been completed approved the PIP Budgets; provided, however, the Administrative Agent shall make disbursements from the PIP Reserve in accordance with the terms provisions of this Section 5.9(3) prior to the Security Instrument and the PIP Report, and (c) Lender shall receive invoices, receipts or other evidence satisfactory to Lender verifying the costs approval of all of the PIP Repairs Budgets in an aggregate amount not to be paid or reimbursed have exceed $2,000,000, but only for Individual Properties for which the PIP Budget has been incurredapproved by the Administrative Agent. Unless otherwise agreed upon in writing by the Administrative Agent, and such other information and documentation as Lender shall request in its reasonable discretion. Draw requests for individual invoices in excess of $50,000.00 shall include, in addition to the items specified in (b) and (c) above, affidavits, and/or unconditional lien waivers (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an applicable unconditional lien waiver accompanies each succeeding funding request for the particular contractor and/or vendor) or other evidence reasonably satisfactory to Lender showing that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished materials or labor to the Property have been paid all amounts due for such labor and materials furnished to the Property. Borrower and Operating Tenant shall pay to Lender a processing fee of $200 for each draw request. At Lender’s discretion, such processing fee may be taken disbursements from the PIP Reserve provided it does not cause the balance of shall be made in accordance with the PIP Reserve to fall below an amount equal to one hundred twenty-five percent (125%) of Budgets. The Administrative Agent shall have the estimated cost for the remaining PIP Repairs. At Lender’s reasonable discretion, disbursement may be made by joint check payable to Borrower or Operating Tenant on the one hand, and the applicable contractor on the other. (iii) Lenderright, in its reasonable discretion, may to periodically review the PIP Budgets to determine whether they continue to accurately reflect the cost to complete the PIP Work and to require Borrower or Operating Tenant to engage, at Borrower’s or Operating Tenant’s expense, as applicable, an independent construction consultant reasonably acceptable to the Lender, to verify the completion of work and the value of the completed work and, if applicable, certify that the Property is, as a result of such work, in compliance with all applicable laws, ordinances, rules and regulations relating revisions to the PIP Repairs so performed. Lender, in its reasonable discretion, may, from time to time, request that Borrower or Operating Tenant provide a No Further Changes Certificate pursuant Budgets. (g) Notwithstanding any provision of this Section 5.9(3) to the laws contrary, the Administrative Agent shall not make (and the Borrowers shall not be entitled to receive) any disbursements from the PIP Reserve if such disbursement will cause the balance of the State of Texas evidencing that there are no liens of record on the Property other than those in favor of the Lender. If there is any cost associated with obtaining this Certificate, Lender will allow Borrower or Operating Tenant to utilize funds in the PIP Reserve to pay said costs provided be less than Two Million Dollars ($2,000,000) until such time as all of the PIP Work has been completed and approved by the Administrative Agent and the Borrowers have delivered to the Administrative Agent a written certification that following such payment all requirements under the Franchise Agreements have been satisfied with respect to the PIP Work. (h) The Borrowers shall continue to make monthly deposits into the PIP Reserve contains a balance until such time as Borrowers have deposited into the PIP Reserve (and the Capital Expenditure Reserve) an amount equal to or greater than one hundred twenty-five percent the sum of (125%i) the budgeted cost of all of the estimated cost for PIP Work, as set forth in the remaining PIP RepairsBudgets approved by the Administrative Agent, and (ii) Two Million Dollars ($2,000,000). (ivi) The disbursement initial $10,000,000 deposit into the PIP Reserve may, at the Borrowers’ election, be made in cash or by delivery to the Administrative Agent of an irrevocable evergreen sight draft letter of credit in the last ten percent amount of $10,000,000 (10%the “PIP LC”). If said initial $10,000,000 deposit into the PIP Reserve is made by the Borrowers in cash, the Borrowers may substitute the PIP LC for said cash deposit at any time within sixty (60) of days following the funds Modification Closing Date. If the Borrowers satisfy the requirement to deposit with the Administrative Agent the initial $10,000,000 in the PIP Reserve by delivering the PIP LC, the PIP LC shall be conditioned on (a) Borrower’s issued Citibank, N.A. or Operating Tenant’s satisfaction of all other draw requirements under this Section B-3 including, without limitation, Borrower’s or Operating Tenant’s provision of invoices by another bank that is “A” rated by at least two national rating agencies and other reasonable evidence that Borrower or Operating Tenant has incurred costs equal is satisfactory to the amount required (if not already provided with previous draw requests), (b) completion Administrative Agent in its sole discretion. The PIP LC shall be in form and on terms and conditions satisfactory to the Administrative Agent in its sole discretion and shall be deemed to be collateral for the Loans pursuant to Section 5.10 of this Agreement. So long as no Event of Default exists and Borrowers have fully funded the PIP Repairs as evidenced by a third party inspection acceptable to Lender, including delivery of the following, if applicable: (1) a final certificate of occupancy from the appropriate building authority; (2) a certificate from Franchisor or another third party acceptable to Lender certifying that the PIP Repairs have been completed Reserve in accordance with the PIP Report; (3requirements of Section 5.9(3)(h) final lien waivers above, upon satisfaction by the Borrowers of all conditions for individual invoices of $50,000.00 or more (provided, however, Lender shall not unreasonably withhold its consent to Borrower’s or Operating Tenant’s provision of a conditional lien waiver subject only to the payment of the amount specified in such disbursement request so long as an unconditional lien waiver is delivered in conjunction with subsequent draw requests pertaining to said contractor and/or vendor); (4) an affidavit from Borrower or Operating Tenant stating that all contractors have been paid in full or will be paid in full upon the release of funds from the PIP escrow and an affidavit Reserve, the Borrowers may, in lieu of a cash disbursement from each contractor stating the PIP Reserve, elect to reduce the amount of the PIP LC by the amount that the Borrowers would otherwise be entitled to have disbursed from the PIP Reserve; provided, however, the Borrowers shall have satisfied all subcontractors have been paid in full or will be paid in full upon receipt of requested final funds (which Lender’s consent for release the conditions precedent to a disbursement of funds from the PIP escrow to pay for said requests will not be unreasonably withheldReserve set forth in this Section 5.9(3); , and (5i) a No Further Changes Certificate pursuant to Borrowers shall have paid for the laws PIP Work that is the subject of the State of Texas showing no intervening liens of record on the Property other than those in favor of the Lender. (v) Lender shall not be required to make advances requested disbursement from the PIP Reserve more frequently than two times in any calendar month. Borrower acknowledges that Lender’s standard disbursement frequency is once per month; howeverand have delivered to the Administrative Agent unconditional lien waivers for such work, Lender agrees to make commercially reasonable efforts to process up to two disbursements requests each month. In making any payment from the PIP Reserve, Lender shall be entitled to rely on (ii) such request from Borrower or Operating Tenant without any inquiry into the accuracy, validity or contestability of any such amount. Interest or other earnings on the funds contained reductions in the PIP Reserve shall be credited to Operating Tenant in accordance with Section 5.28 of the Security Instrument. In the event that the amounts on deposit or available in the PIP Reserve are inadequate to pay the costs amount of the PIP Repairs, Borrower or Operating Tenant LC shall pay the amount be in increments of such deficiency. To the extent that all of the PIP Repairs have been completed at a cost not less than $500,000 and shall occur not more than once in any thirty (30) day period, and (iii) the aggregate replacement PIP Reserve, then the residual balance of the PIP Reserve LC shall be disbursed in form and substance satisfactory to Operating Tenantthe Administrative Agent in is sole discretion.