Exhibit 10.26
LOAN AGREEMENT
FOR
TERM LOAN CREDIT FACILITY
THIS AGREEMENT is made as of this 20th day of October, 1999, by and
between Supertel Hospitality, Inc., a Delaware corporation ("Borrower"), and
U.S. Bank National Association, a national banking association ("Bank"). In
consideration of the promises and mutual agreements hereinafter contained, the
Borrower and the Bank agree as follows:
SECTION 1. TERM LOAN
1.1 TERM LOAN. Upon the execution of this Agreement, the Bank agrees to
loan to the Borrower the principal sum of Ten Million and No/100 Dollars
($10,000,000) (herein the "Term Loan Commitment" or "Term Loan").
1.2 TERM LOAN NOTE. The loan to the Borrower under this Section 1 shall
be evidenced by a certain Term Loan Note (herein, together with any and all
extensions, renewals, modifications and substitutions thereof or exchanges
therefor, referred to as the "Term Loan Note") dated the date of issuance,
payable to the order of the Bank, in the principal amount of the Term Loan
Commitment. A copy of the Term Loan Note is attached hereto as Exhibit "A" and
is incorporated herein by this reference.
1.3 INTEREST. The unpaid principal amount of the Term Loan Note
outstanding from time to time shall bear interest at the following rates per
year:
(a) Fixed Rate. The interest rate on the Term Loan Note shall
be 8.53% per annum. The interest rate shall be calculated on the basis
of the actual number of days elapsed in a 360-day year.
(b) Default Rate. After maturity, whether by lapse of time,
default, acceleration or otherwise, at a rate equal to the Reference
Rate plus three percent (3%) per annum (the "Default Rate").
"Reference Rate" shall mean the rate of interest per annum
which has been publicly announced by U.S. Bank National Association in
Minneapolis, Minnesota (USBNA) as its "Reference Rate," which is not
necessarily the lowest rate charged by the Bank or USBNA on loans and
is set by the Bank in its sole discretion.
1.4 INTEREST AND PRINCIPAL DATES. Principal and interest shall be
amortized over a fifteen-year period and paid in monthly payments of Ninety-Nine
Thousand Six Hundred Thirty-Four and 20/100 Dollars ($99,634.20) commencing on
November 30, 1999 and continuing monthly on the last day of each month
thereafter. The total unpaid principal balance and all accrued but unpaid
interest shall be paid at maturity on October 15, 2004 (the "Term Loan Maturity
Date").
1.5 FUNDS. Payments and prepayments of principal and interest shall be
made in immediately available funds to the Bank by payment at its main office at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the
Bank or the holder hereof may designate in writing to the Borrower.
1.6 PREPAYMENTS. The Borrower acknowledges that the Borrower shall have
no right to prepay the Term Loan Note without the Bank's consent, which the Bank
will not grant except upon the terms and subject to the conditions hereinafter
provided. In order to induce the Bank to agree to accept voluntary prepayments,
the Borrower agrees to pay the Bank a prepayment premium as described in this
section upon any prepayment, voluntary or involuntary. Because there is no
readily available index of rates payable on loans such as that from the Bank to
the Borrower, nor any assurance that the Bank could replace the loan with a
similar loan, the Borrower and the Bank agree that the changes in the yields on
U.S. Government securities provide a reasonable approximation for changes in
interest rates generally. For purposes of this section, the following terms
shall have the meanings given below:
"Average Maturity Period": The weighted average time to
scheduled maturity of all principal prepaid at any one time. Average
Maturity Period shall be computed by multiplying the dollar amount of
each installment of principal prepaid by the number of days until the
scheduled maturity of that installment, adding together the resulting
products and dividing the resulting sum by the total dollar amount of
principal being prepaid.
"Government Yield": As of any date of determination, the yield
(converted as necessary to the equivalent semi-annual compound rate) on
U.S. Treasury securities having a maturity date closest to the Average
Maturity Period, as published in The Wall Street Journal (or, if not so
published, as determined by the Bank by using the average of quotes
obtained by the Bank from three primary dealers that market U.S.
Treasury securities in the secondary market). "U.S. Treasury
securities" means actively traded U.S. Treasury bonds, bills and notes
and, if more than one issue of U.S. Treasury securities is scheduled to
mature at or about the time of the scheduled maturity of the Term Loan
Note, then to the extent possible the U.S. Treasury security issued
most recently prior to the date of determination will be chosen as the
basis of the Government Yield.
"Interest Differential": As of the date of any full or partial
prepayment, the Note Rate minus the sum of the Government Yield as of
the date of prepayment and the Issuance Spread.
"Issuance Spread": 1.79% per annum (approximately the amount
by which the Bank's cost of funds exceeds the Government Yield as of
the date of the Term Loan Note).
"Note Rate": The rate of interest payable under the Term Loan
Note.
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The Term Loan Note may be prepaid in whole or in part at any time, with
partial prepayments in the amount of $100,000.00 or an integral multiple
thereof. Any partial prepayments shall be applied to installments due under the
Term Loan Note in the inverse order of their maturity. If at the time of any
prepayment (whether voluntary or involuntary, and specifically including, but
not limited to, any payment prior to scheduled maturity following acceleration
of the Term Loan Note), the sum of the Government Yield as of the date of
prepayment plus the Issuance Spread is less than the Note Rate, the Borrower
shall pay to the Bank a prepayment premium equal to the present value
(determined in accordance with standard financial practice) of the product of
the Interest Differential times the amount prepaid times the Average Maturity
Period. The amount of the prepayment premium shall be calculated as follows. The
amount prepaid shall be multiplied by (a) the Interest Differential, times (b) a
fraction, the numerator of which is the number of days in the Average Maturity
Period and the denominator of which is 360. The resulting product shall then be
divided by the number of whole months (using a thirty-day month) in the Average
Maturity Period, yielding a quotient (the "Quotient"). The amount of the
prepayment premium shall be the present value (determined in accordance with
standard financial practice) on the date of prepayment (using the Government
Yield as of the date of such prepayment as the discount factor) of a stream of
equal monthly payments in number equal to the number of whole months (using a
thirty-day month) in the Average Maturity Period, with the amount of each
hypothetical monthly payment equal to the Quotient and with the first payment
payable thirty days after the date of prepayment.
Prepayments shall be applied first against the unpaid interest, then
any remaining sum shall be applied against unpaid installments of the Term Loan
Note in the inverse order of their scheduled maturity. Such prepayments shall
not relieve the undersigned of the obligation to continue any regularly
scheduled repayment of the outstanding indebtedness hereunder.
1.7 PERMISSIBLE BORROWING PURPOSES. The Term Loan extended to the
Borrower hereunder shall be used for general corporate purposes of the Borrower.
1.8 COMMITMENT FEE. Upon the execution of this Agreement, Borrower
shall pay the Bank a commitment fee in the amount of $50,000.
1.9 LATE FEES. Borrower shall pay the Bank a late fee of 5% of the
amount of any payment received 15 days or more after its due date.
SECTION 2. COLLATERAL AND SECURITY
2.1 SECURITY. As security for the payment of the Term Loan Note, which
Term Loan Note is executed in connection herewith (including any and all
extensions, renewals, modifications and substitutions thereof or exchanges
therefor), any and all future advances of credit to the Borrower, the
performance of this Agreement and any other agreement executed in connection
herewith, the payment of any and all amounts advanced by the Bank hereunder on
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behalf of the Borrower, any legal fees and all other fees, charges, expenses, or
costs incurred by the Bank in connection herewith (herein collectively called
the "Obligations"), the Borrower will execute and deliver to the Bank certain
documents in connection with this Agreement as follows:
(a) Deeds of Trust or Mortgages, in form and substance
satisfactory to the Bank, on all of the real estate described on
Exhibit "B" attached hereto and incorporated herein by this reference,
and any additions thereto or substitutions therefor approved by the
Bank (the "Term Loan Properties"), giving the Bank a first lien on all
of the real estate described on Exhibit "B" to secure the Obligations.
(b) Assignments of Leases and Rents, in the form attached
hereto as Exhibit "C", assigning the rights of the Borrower as lessor
of each of the Term Loan Properties that are leased by the Borrower,
together with resolutions of authority as applicable to Borrower. The
foregoing provision notwithstanding, Borrower shall not lease any of
the Term Loan Properties without the Bank's prior written consent. The
Bank consents to the lease of the Term Loan Properties to Supertel
Hospitality Management, Inc. provided that the merger between Supertel
Hospitality, Inc. ("Supertel") and ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc.
("HH Trust") described in the Disclosure Schedule has been consummated
and all conditions of this Agreement have been satisfied.
(c) Lease Subordination Agreements, in the form attached
hereto as Exhibit "D", from the lessees of each of the Term Loan
Properties.
(d) Collateral Assignment of Franchise Agreements in form and
substance satisfactory to the Bank and in substantially the form
attached hereto as Exhibit "E", from the lessees of each of the Term
Loan Properties.
(e) Agreements from the franchisors or licensors of all of the
Term Loan Properties in form and substance satisfactory to the Bank
providing the Bank with assurances in substantially the form attached
hereto as Exhibit "F" to the effect that they will not terminate the
franchises with Borrower in the event the Bank enforces its rights
under the Security Documents or in the event of a default under the
franchises.
(f) Security Agreement(s) and Financing Statement(s) on all
the personal property now owned or held or hereafter acquired, and any
proceeds thereof together with resolutions of authority as applicable
to Borrower giving the Bank a first lien on all personal property of
Borrower relating to or pertaining to the Term Loan Properties. A copy
of the Security Agreement is attached hereto as Exhibit "G" and is
incorporated herein by this reference. A copy of the form of Financing
Statement to be used is attached hereto as Exhibit "H" and is
incorporated herein by this reference.
Borrower hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Bank the attorney-in-fact
of Borrower coupled with an interest, to execute, deliver, and if
appropriate, to file with the appropriate filing officer or office such
security agreements, financing statements or other instruments as Bank
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may request or require in order to impose or perfect the lien or
security interest hereof more specifically thereon.
2.2 RIGHTS IN PROPERTY HELD BY BANK. As further security for the prompt
satisfaction of all the Obligations of the Borrower to the Bank, the Borrower
hereby assigns, transfers, and sets over to the Bank all of its right, title and
interest in and to, and grants the Bank a lien on and a security interest in,
and agrees that the Bank may set off against, all amounts that may be owing from
time to time by the Borrower to the Bank in any capacity, including, but without
limitation, any balances, credits, deposits, accounts, monies, or any other
property of the Borrower, now or hereafter in the possession of the Bank.
2.3 SECURITY DOCUMENTS. The executed Deeds of Trust, Mortgages,
Assignments of Leases and Rents, Lease Subordination Agreements, Collateral
Assignments, Agreements with franchisors, Security Agreement(s) and Financing
Statements described in Section 2.1 and the rights, liens and security interests
and setoff described in Section 2.2 are collectively and individually referred
to as "Security Documents."
2.4 SUBSTITUTION AND ADDITION TO TERM LOAN PROPERTIES. Subject to the
approval of the Bank, as hereinafter set forth, Borrower may request permission
for any reason to substitute real estate and obtain the release of real estate
that is a part of the Term Loan Properties, and Borrower may also request
permission to add real estate to the Term Loan Properties to maintain compliance
with, or cure any failure to maintain compliance with, any of the ratios set
forth in Section 4.4 of this Agreement. At the time of making any such request,
the Borrower shall provide the Bank with such information and documents as the
Bank may require, including, without limitation, the following: an appraisal, a
title insurance commitment, an ALTA survey, an environmental report, a U.C.C.
search, flood hazard certification, evidence of insurance, zoning information,
the franchise agreement, tax and judgment lien searches, and a building
inspection report. The Bank shall have thirty (30) days after the request by the
Borrower to determine, in its sole discretion, if the real estate proposed to be
substituted or added is of appropriate character, quality and value. Any request
to add real estate to the Term Loan Properties to cure a failure to comply with
any ratios set forth in Section 4.4 shall be made within the thirty-day period
provided herein to cure any noncompliance with this Agreement.
If the Bank determines in its sole discretion that it will permit the
substitution and release or addition of real estate to the Term Loan Properties,
Borrower shall provide the Bank with documentation, in form and substance
acceptable to the Bank, to provide the Bank with the same rights with respect to
the substituted or added real estate and related personal property and franchise
rights as are provided by the Security Documents described herein with respect
to the existing Term Loan Properties. The documentation shall be provided by the
Borrower within the time required by the Bank. The documentation relating to the
substituted or additional real estate and related personal property and
franchise rights shall thereafter be considered to be a part of the Security
Documents for purposes of this Agreement and all other documents relating to or
pertaining to this Agreement.
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SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Bank to make the Term Loan, the Borrower represents and
warrants to the Bank that:
3.1 ORGANIZATION. Borrower is a corporation existing and in good
standing under the laws of the State of Delaware. The Borrower is duly
qualified, in good standing and authorized to do business in each jurisdiction
where, because of the nature of its activities or properties, such qualification
is required, and where a failure to so qualify would have a material adverse
effect on the Borrower; and the Borrower has the power and authority as a
corporation to own its properties and to carry on its business as now being
conducted.
3.2 AUTHORIZATION; NO CONFLICT. The borrowings hereunder, the execution
and delivery of the Term Loan Note and the Security Documents and the
performance by the Borrower of its obligations under this Agreement, the Term
Loan Note and Security Documents are within the Borrower's corporate powers,
have been authorized by all necessary corporate action, have received all
necessary governmental approval (if any shall be required) and do not and will
not contravene or conflict with any provision of law or of the articles of
incorporation or bylaws of the Borrower or of any agreement binding upon the
Borrower and are and will continue to be enforceable under the laws of the State
of Nebraska in accordance with their respective terms, except as such
enforcement may be qualified or limited by bankruptcy, insolvency, or other
similar laws affecting creditors rights in general.
3.3 FINANCIAL STATEMENTS; CONTINGENT LIABILITIES. The financial
statements of Borrower dated June 30, 1999, copies of which have been furnished
to the Bank, were prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a basis consistent with that of Borrower's
preceding fiscal year, and accurately present the financial condition of
Borrower as at such dates and the results of their operations for the respective
period then ended. Since the date of such financial statements, no material
adverse change in the business, properties, assets, operations, conditions or
prospects of Borrower has occurred. There are no contingent liabilities of
Borrower in an amount in excess of $100,000 individually, or $1,000,000 in the
aggregate, which is known to the Borrower or which should reasonably be known to
the Borrower, which is not reflected in such financial statements or which is
not disclosed in the Disclosure Schedule attached hereto at Exhibit "I" (the
"Disclosure Schedule") and incorporated herein by this reference. The Bank
hereby acknowledges that it is aware of the proposed merger of Supertel into HH
Trust, as described in the Disclosure Schedule.
3.4 TAXES. The Borrower has filed or caused to be filed all federal,
state, county and local tax returns which are required to be filed, and has paid
or caused to be paid all personal property taxes, real estate taxes, income
taxes, other taxes, special assessments, assessments, withholding, contributions
and governmental charges or levies (collectively and individually referred to as
"Taxes") as shown on such returns and reports, or on any assessment received by
them, to the extent that such Taxes have become due (except for current Taxes
not delinquent and Taxes being contested as provided by law, in good faith and
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by appropriate legal proceedings for which adequate reserves have been provided
on the books of the Borrower, and as to which no foreclosure, distraint, sale or
similar proceedings have been commenced).
3.5 LIENS. Borrower has good and marketable title to all of the assets
described in the Security Documents, including, without limitation, the Term
Loan Properties. None of the assets of the Borrower described in the Security
Documents are subject to any mortgage, pledge, title retention lien, or other
lien, encumbrance or security interest, except for: (a) liens in favor of the
Bank granted hereunder; (b) current Taxes not delinquent or Taxes being
contested as provided by law in good faith and by appropriate legal proceedings;
(c) liens arising in the ordinary course of business for sums not due or sums
being contested in good faith and by appropriate legal proceedings, but not
involving any deposits or advances of borrowed money or the deferred purchase
price of property or services; (d) to the extent specifically shown in the
financial statements referred to above; and (e) to the extent reflected in the
attached Disclosure Schedule.
3.6 ADVERSE CONTRACTS. The Borrower is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction, nor is it
subject to any judgment, decree or order of any court or governmental body,
which Borrower knows or reasonably should know may have a material and adverse
effect on the business, assets, liabilities, financial condition, operations or
business obligations under this Agreement or the Term Loan Note or Security
Documents. Except as disclosed in the Disclosure Schedule, the Borrower has no,
nor with reasonable diligence should have had, knowledge of or notice that it is
in default on the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument,
charter or other corporate restriction, judgment, decree or order of any court
or governmental body that might have a material adverse impact on the Borrower.
The Bank hereby acknowledges that it is aware of the proposed merger of Supertel
into HH Trust, as described in the Disclosure Schedule.
3.7 REGULATION U. The Borrower is not engaged principally in, nor is
one of the Borrower's important activities, the business of extending credit for
the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereinafter in effect.
3.8 LITIGATION. No litigation (including derivative actions),
arbitration proceedings or governmental proceedings are pending or threatened
against the Borrower which would (singly or in the aggregate), if adversely
determined, have a material and adverse effect on the financial condition,
continued operations or prospects of the Borrower, except as set forth
(including estimates of the dollar amounts involved) in the Disclosure Schedule.
3.9 SELL, CONVEY AND TRANSFER. Except in the ordinary course of
business, the Borrower has not sold, conveyed, transferred, disposed of, or
otherwise further encumbered, any of the Borrower's assets within the last
ninety (90) days that is not disclosed in the Disclosure Schedule.
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3.10 LAWFUL INTEREST. The amounts to be received by Bank as interest
payments under the Term Loan Note shall constitute lawful interest and shall be
neither usurious nor illegal under the laws of the State of Nebraska.
3.11 SECURITY DOCUMENTS. The provisions of the Security Documents as
provided herein, are effective to create, in favor of the Bank, legal, valid and
enforceable liens on all of the real estate and personal property described
therein. The Deeds of Trust, Mortgages and Assignments of Leases and Rents when
filed with the recording offices listed on Exhibit "B" and the Financing
Statements when filed with the Secretaries of State (or other appropriate
recording office) in Nebraska, Texas, Iowa, Virginia and Maryland, will
constitute fully perfected first security interests and liens on all right,
title and interest of the Borrower in the real estate and personal property
described therein (to the extent perfection is controlled by the Uniform
Commercial Code), prior and superior to all other liens.
3.12 PLACE OF BUSINESS. Borrower's principal place of business and
chief executive offices are located in Norfolk, Nebraska. In the event of the
merger described in Section 4.1, Borrower's principal place of business and
chief executive offices shall be located in Silver Spring, Maryland.
3.13 ENVIRONMENTAL COMPLIANCE. Except as set forth in the Disclosure
Statement, the Borrower and its subsidiaries are in material compliance with all
environmental protection laws in each jurisdiction where they are presently
doing business, the violation of which would have a material adverse effect on
the use, operation or value of the Term Loan Properties, or any of them. The
Borrower is not subject to any liabilities nor have they received any notice
from any governmental agency regarding any action, pending or contemplated,
pertaining to any alleged violation of any environmental protection laws with
respect to any of the present or previously owned real properties of the
Borrower where the effect of which could be reasonably expected to have a
material adverse effect on the Borrower or any of its properties.
3.14 ERISA. Borrower has fulfilled all obligations under the Employee
Retirement Income Security Act of 1974, as amended, in respect of any employee
benefit plan maintained for employees of the Borrower, and no reportable event
or prohibited transaction has occurred with respect to any such employee benefit
plan.
3.15 DEFAULTS. The Borrower is not in default, nor has any event or
circumstance occurred which, but for the passage of time or the giving of
notice, or both, would constitute an Event of Default, as defined herein.
3.16 COMPLIANCE WITH THE LAW. Borrower (a) is not in violation of any
federal, state or county governmental rule, regulation or ordinance; and (b) has
not failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of Borrower's properties or the conduct
of its business; which violation or failure (in the event that such violation or
failure were asserted by any person or entity by appropriate action) would
result in a material impediment to the conduct of the Borrower's regular
business generally or at any of its properties.
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3.17 INVESTMENT COMPANY ACT. The Borrower is not a "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.18 SUBSIDIARIES. Exhibit "J", attached hereto lists all of the
subsidiaries and affiliates of Borrower. Borrower represents that all of its
subsidiaries and affiliates are duly organized and existing under the laws of
their respective jurisdictions of their creation, and are duly qualified, in
good standing and authorized to do business in each jurisdiction where, because
of the nature of its activities or properties, such qualification is required,
and where a failure to so qualify would have a material adverse effect on the
Borrower; and the Borrower has the corporate power and authority to own its
properties and to carry on its business as now being conducted.
3.19 Y2K COMPLIANCE. Borrower has reviewed and assessed its business
operations and computer systems and applications to address the "year 2000
problem" (that is, that computer applications and equipment used by Borrower,
directly or indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1, 2000). Borrower
reasonably believes that the year 2000 problem will not result in a material
adverse change in Borrower's business condition (financial or otherwise),
operations, properties or prospects or ability to repay the Bank. Borrower
agrees that this representation will be true and correct on and shall be deemed
made by Borrower on each date Borrower requests any advance under this Agreement
or the Term Loan Note or delivers any information to the Bank. Borrower will
promptly deliver to the Bank such information relating to this representation as
the Bank requests from time to time.
3.20 FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower possesses, and
will at all times possess, all franchises, including, without limitation, motel
franchises or licenses, patents, copyrights, trademarks, trade names, licenses
and permits, and rights in respect of the foregoing, adequate for the conduct of
its business substantially as now conducted or as it is intended to be
conducted, without known conflict with any rights of others.
3.21 SALE TO SUPERTEL HOSPITALITY MANAGEMENT, INC. Borrower represents
that all personal property assets relating to or pertaining to the Term Loan
Properties, excluding furniture, fixtures and equipment, will, immediately prior
to the merger, be sold to Supertel Hospitality Management, Inc., as described in
the Disclosure Schedule.
SECTION 4. COVENANTS
Until all Obligations of the Borrower hereunder and under the Term Loan
Note are paid and fulfilled in full, the Borrower agrees that they shall comply
with the following covenants, unless the Bank consents otherwise in writing:
4.1 CORPORATE EXISTENCE. The Borrower shall preserve and maintain its
corporate existence, rights, franchises and licenses, and will not liquidate,
dissolve, or merge, or consolidate with or into any other corporation, or sell,
lease, transfer or otherwise dispose of all or a substantial part of its assets
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without the Bank's prior written consent. The Bank hereby consents to the
contemplated merger of Borrower into ▇▇▇▇▇▇▇▇ Hospitality Trust, Inc. ("HH
Trust"), a Virginia corporation, and the transfer of the real and personal
property of Borrower subject to the Security Documents into ▇▇▇▇▇▇▇▇ Hospitality
Limited Partnership ("HHLP"), a Virginia limited partnership; provided that HH
Trust, HHLP and ▇▇▇▇▇▇▇▇ Hospitality REIT Trust, a Maryland real estate
investment trust ("HH REIT") (HH Trust, HHLP and HH REIT are collectively
referred to herein as the "HH Parties"); agree to assume and perform the
Obligations of Borrower under this Agreement, the Term Loan Note and Security
Documents, and to execute such documents as are required by the Bank to evidence
said assumption and agreement to perform by the HH Parties. The Bank further
consents to any merger after which HH Trust is the surviving entity; provided
that the surviving entity is otherwise in compliance with the provisions of this
Agreement.
4.2 REPORTS, CERTIFICATES AND OTHER INFORMATION. The Borrower shall
furnish to the Bank:
(a) Audit Report. Within one hundred-twenty (120) days after
the end of each fiscal year of the Borrower, a copy of an unqualified
annual consolidated audit report of the Borrower prepared on a basis
and in conformity with generally accepted accounting principles
("GAAP") applied on a basis consistent with the prior audited financial
statement of Supertel duly certified by independent certified public
accountants of recognized standing reasonably satisfactory to the Bank,
and including, without limitation, footnotes required by GAAP regarding
any defaults on the Revolving Loan identified in the audit, and
including any management letter provided to the Borrower by its
accountants.
(b) Certificates. Contemporaneously with the furnishing of a
copy of each annual audit report and all required interim reports
required by subsection (e) a certificate dated the date of such annual
report and interim reports and signed by either the President or the
Chief Financial Officer of Borrower, to the effect that no Event of
Default has occurred and is continuing or, if there is any such event,
describing it and the steps, if any, being taken to cure it.
(c) Reports to SEC and to Shareholders. Copies of each filing
and report made by the Borrower to any securities exchange or the
Securities and Exchange Commission, except in respect of any single
shareholder, and of each communication from the Borrower to
shareholders generally, promptly upon the filing or making thereof.
(d) Notice of Default, Litigation and ERISA Matters.
Immediately upon learning of the occurrence of any of the following,
written notice describing the same and the steps being taken by the
Borrower or any subsidiary affected in respect thereof: (i) the
occurrence of any Event of Default or any event or condition which with
the passage of time or the giving of notice, or both, might become an
Event of Default; or (ii) the institution of, or any adverse
determination in, any litigation, arbitration or governmental
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proceeding which is material to the Borrower, or (iii) the occurrence
of a reportable event under, or the institution of any steps by
Borrower to withdraw from, or the institution of any proceedings to
terminate, any employee benefit plans as to which the Borrower may have
any liability.
(e) Interim Reports. Within forty-five (45) days after the end
of each fiscal quarter, a copy of an internally prepared financial
statement of the Borrower prepared on a basis consistent with the
audited financial statements of the Borrower, signed by an authorized
officer of the Borrower and consisting of at least (i) a balance sheet
as at the close of the preceding quarter, (ii) a statement of earnings
for the preceding quarter, and (iii) operating statements for each of
the Term Loan Properties; provided, however, that such financial
statements will not include footnotes and will be subject to normal
year-end adjustments.
(f) Annual Corporate Tax Return. A copy of Borrower's annual
tax return promptly after it is submitted to the Internal Revenue
Service.
(g) Capital Expenditure Account. A quarterly report detailing
Borrower's use of the funds in the Capital Expenditure Account created
pursuant to Section 4.25.
(h) Other Information. From time to time such other
information, financial or otherwise, concerning the Borrower as the
Bank may reasonably request.
4.3 INSPECTION. The Borrower will permit the Bank or any officer,
employee or agent of the Bank at any time during the Borrower's regular business
hours to inspect their properties and to inspect and copy their books and
records. Upon the occurrence of an Event of Default, the Bank shall also be
entitled to have an independent audit of Borrower's books and records. Borrower
shall pay all costs associated with annual inspections of the real and personal
properties described in the Security Documents.
4.4 FINANCIAL REQUIREMENTS. Borrower shall comply with the following
financial covenants to be tested in accordance with GAAP consistently applied:
(a) Term Loan Debt Service Coverage Ratio. Borrower shall
maintain a Term Loan Debt Service Coverage Ratio greater than 1.5 to 1,
to be tested quarterly at the end of each calendar quarter based on the
trailing one-year period.
The Term Loan Debt Service Coverage Ratio shall be measured as
of December 31, 1999, and at quarterly intervals thereafter, and for
any period shall be determined as the quotient obtained by dividing (a)
Adjusted Net Operating Income from the Term Loan Properties for such
period by (b) the amount of debt service payments (principal and
interest) which would be required to be made under this Agreement and
related loan documents during such period.
11
"Adjusted Net Operating Income" for this and the other
financial covenants is defined as the remainder of the Net Operating
Income after reducing Net Operating Income by an amount equal to the
sum of (a) 4% of gross room revenue for FF&E reserve, plus (b) 4% of
gross room revenue for management fees and expenses.
"Net Operating Income" shall be the net operating income of
the relevant properties determined for this and the other financial
covenants from Borrower's internally generated operating statements
prepared consistently with Borrower's internally prepared 1999 Profit
and Loss Statement.
(b) Consolidated Debt Service Coverage Ratio. Borrower shall
maintain a Consolidated Debt Service Coverage Ratio greater than 1.5 to
1, to be tested at the end of each calendar quarter based on the
trailing one-year period.
The Consolidated Loan Debt Service Coverage Ratio shall be
measured as of December 31, 1999, and at quarterly intervals
thereafter, and for any period shall be determined as the quotient
obtained by dividing (a) Adjusted Net Operating Income from all of
Borrower's properties for such period by (b) the amount of Borrower's
total debt service payments (principal and interest) which would be
required to be made during such period, including Imputed Debt Service.
"Imputed Debt Service" means the annual payments of principal
and interest that would be required to fully amortize the outstanding
revolving loan balance of Borrower's aggregate revolving loan
indebtedness for the trailing one-year period as if the revolving loans
were loans to be amortized in equal monthly payments of principal and
interest over a 25-year period, with an assumed interest rate of the
yield on U.S. Treasury securities having a 10-year maturity at the time
of the determination, plus 3.0%.
(c) Term Loan to Value Ratio. The ratio of the principal
balance outstanding on the Term Loan to the value of the Term Loan
Properties shall be less than 50% tested at the end of each calendar
quarter.
For purposes of calculation of the Term Loan to Value Ratio as
of December 31, 1999, and at quarterly measurement intervals
thereafter, the value of the Term Loan Properties shall be the sum of
(i) the Adjusted Net Operating Income for the trailing one-year period
from the Term Loan Properties owned throughout that period capitalized
at 12%, plus (ii) the lesser of the acquisition cost or the appraised
value of any of the Term Loan Properties acquired by the Borrower
within the preceding 12 months.
(d) Consolidated Loan to Value Ratio. The ratio of Borrower's
aggregate interest bearing debt to the value of all of Borrower's real
estate assets shall be less than 60% tested at each fiscal year end.
12
For purposes of calculation of the Consolidated Loan to Value
Ratio as of December 31, 1999, and at yearly intervals thereafter, the
value of all of Borrower's real estate assets shall be the sum of the
Adjusted Net Operating Income for the trailing one-year period from all
of Borrower's real estate assets owned throughout that period
capitalized at 12%, plus (ii) the lesser of the acquisition cost or the
appraised value of any of Borrower's real estate assets acquired within
the preceding 12 months.
(e) IBD/EBITDA Ratio. Borrower shall maintain a ratio of
interest bearing debt divided by earnings before interest, taxes,
depreciation and amortization of less than 4.5 to 1 to be tested at
each fiscal year end.
4.5 INDEBTEDNESS, LIENS AND TAXES. Without the Bank's prior written
consent, the Borrower and its subsidiaries shall:
(a) Indebtedness. Not incur, permit to remain outstanding,
assume or in any way become committed for indebtedness in respect of
borrowed money, except indebtedness incurred hereunder, indebtedness
related to the transactions described in the Disclosure Schedule and
additional indebtedness provided that Borrower is in compliance with
all of the Financial Requirements of Section 4.4 before and immediately
after incurring any such additional indebtedness.
(b) Liens. Not create, suffer or permit to exist any lien or
encumbrance of any kind or nature upon any of the real and personal
property subject to the Security Documents now or hereafter owned or
acquired, or acquire or agree to acquire any property or assets of any
character under any conditional sale agreement or other title retention
agreement, but this Section shall not be deemed to apply to: (i) liens
for taxes, assessments and other governmental charges not yet due or
which are being contested in good faith and for which such reserves as
shall be required by generally accepted accounting principles shall
have been made therefor; (ii) liens of landlords, vendors, carriers,
warehousemen, mechanics, laborers and materialmen arising at law in the
ordinary course of business for sums not yet due or being contested in
good faith if such reserves as shall be required by generally accepted
accounting principles shall have been made therefor; (iii) pledges or
deposits in connection with or to secure worker's compensation,
unemployment insurance, pensions or other employee benefits; and (iv)
liens and encumbrances arising out of the transactions described on the
attached Disclosure Schedule.
(c) Taxes. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it, upon its income or
profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for labor,
materials and supplies when due, except that no such tax, assessment,
charge, levy or claim need be paid which is being contested in good
faith and by appropriate legal proceedings and as to which adequate
13
reserves shall have been established, and as to which no foreclosure,
distraint, sale or similar proceedings have commenced.
(d) Guarantee/Indemnity Agreements. Not assume, guarantee,
borrow, indorse or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets, goods
or services, or to supply or advance any funds, assets, goods or
services, or otherwise) with respect to the obligation of any other
person or entity, except by the indorsement of negotiable instruments
for deposit or collection in the ordinary course of business, and
except with respect to the acquisition of motels in the ordinary course
of Borrower's business. The Bank acknowledges that Borrower intends to
pay a dividend prior to the merger of Supertel into HH Trust, as
described in the Disclosure Schedule, and the Bank agrees that the
payment of the dividend will not violate this covenant.
4.6 INVESTMENT AND LOANS. Borrower shall not make any loan, advance,
extension of credit, or capital contribution to any person or legal entity; nor
purchase or otherwise acquire for a consideration, evidences of indebtedness,
capital stock or other securities of any person or legal entity, and except with
respect to the acquisition of motels in the ordinary course of Borrower's
business.
4.7 DIVIDENDS AND TRANSFERS. Borrower shall not issue any dividends or
other distribution: (i) in excess of seventy-five percent (75%) of Borrower's
funds from operations per year, or such higher amounts as may be required to
maintain the status of Borrower as a real estate investment trust, or (ii) after
the occurrence of an Event of Default that continues for a period of sixty (60)
days or more.
4.8 MAINTENANCE OF PROPERTIES. The Borrower shall maintain, or cause to
be maintained, in good repair, working order and condition (ordinary wear and
tear excepted), all of its properties (whether owned or held under lease), and
from time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements, additions, betterments and improvements thereto, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.
4.9 INSURANCE. The Borrower shall maintain insurance in responsible
companies in such amounts and against such risks as is required by the Bank and,
at a minimum, insurance on its respective businesses, fixed assets, inventory
and other properties, including specifically, but without limitation, flood and
title insurance, worker's compensation or similar insurance as required by law,
and adequate public liability (including product liability) insurance against
claims for personal injury, death or property damage arising out of its
services, products, facilities or operations, as is usually carried by similar
businesses conducting operations in similar areas, all such policies naming the
Bank as loss payee with respect to the real and personal properties subject to
the Security Documents and the business operations related thereto.
14
4.10 USE OF PROCEEDS.
(a) The Borrower shall not use or permit any proceeds of the
Term Loan Note to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying any margin stock" within the meaning of Regulations U or X of
the Board of Governors of the Federal Reserve System, as amended from
time to time. If requested by the Bank, the Borrower will furnish to
the Bank a statement in conformity with the requirements of Federal
Reserve Form U-1 to the foregoing effect. No part of the proceeds of
the Term Loan Note will be used for any purpose which violates or is
inconsistent with the provisions of Regulations U or X of the Board of
Governors.
(b) Tender Offers and Going Private. The Borrower shall not
use (or permit to be used) any proceeds of the Term Loan Note to
acquire any security in any transaction which is subject to Section 13
or 14 of the Securities Exchange Act of 1934, as amended, or any
regulations or rulings thereunder.
4.11 LIMITATION ON BUSINESS. The Borrower shall not engage in any
business or activity other than the business engaged in as of the date hereof
and in activities related or incidental to such business without the Bank's
prior written consent, which consent shall not be unreasonably withheld.
4.12 MANAGEMENT. The management of Borrower includes ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and will include ▇▇▇ ▇▇▇▇▇▇▇▇ in the event of the
contemplated merger referred to in Section 4.1 ("Management Personnel").
Immediately following the merger, the HH Trust board will include ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇. Until the Term Loan Maturity Date,
at least two of such persons will continue to be on the HH Trust board unless
the Bank consents otherwise in writing, which consent shall not be unreasonably
withheld.
4.13 FEDERAL, STATE, COUNTY AND LOCAL LAWS AND REGULATIONS. The
Borrower shall comply in all respects with any and all applicable state and
federal securities laws and regulations and any and all applicable rules and
regulations of any securities exchange or the Securities and Exchange Commission
as the same relate to the issuance, purchase, sale or registration of
securities. The Borrower shall comply in all respects with any and all
applicable federal, state, county and local laws, statutes, ordinances, court
orders, rules, and regulations with respect to Borrower's businesses, fixed
assets, inventory, employees, corporate structures and properties.
4.14 NOTIFICATION OF LEGAL ACTIONS. The Borrower shall notify the Bank,
in writing, of any material legal action commenced or threatened against the
Borrower within five (5) days of receipt of such information by the Borrower.
For purposes of this Agreement, any material legal action shall be deemed one
where the amount in controversy, either directly or indirectly, exceeds the sum
of Five Hundred Thousand and No/100 Dollars ($500,000).
15
4.15 ADVERSE CHANGE. The Borrower shall immediately upon obtaining any
knowledge of any material adverse change in the financial condition or position
of the Borrower provide the Bank with written notice describing in detail the
nature of such adverse change.
4.16 CORPORATE OFFICES. The chief executive office of Borrower is in
Norfolk, Nebraska. Borrower shall not change the location of its principal place
of business unless Borrower shall give the Bank at least 60 days prior written
notice thereof and all actions necessary or advisable in the Bank's opinion to
protect the Bank's liens covered by the Security Documents shall have been
taken.
4.17 LOAN TO EMPLOYEES. Borrower shall not make any loans to any
employees, officers or shareholders of the Borrower after the date of this
Agreement, except with respect to incidental expenses related to the performance
of the duties of the employees and officers such as travel expenses.
4.18 SELL, CONVEY AND TRANSFER. Borrower shall not sell, convey,
transfer, dispose of or further encumber the Borrower's properties subject to
the liens created by the Security Documents or any part thereof or any interest
therein except as otherwise provided in the Security Documents or this Agreement
covering all or any portion thereof or an undivided interest therein, either
voluntarily, involuntarily or otherwise, or enter into an agreement to do so
without the prior written consent of the Bank, except sales and dispositions of
personal property in the ordinary course of Borrower's business.
4.19 RECORDS. Borrower shall keep and maintain full and accurate
accounts and records of Borrower's operations and businesses according to
generally accepted accounting principles and practices for Borrower's type of
business.
4.20 INDEMNIFICATION. Borrower shall, at Borrower's expense, protect,
defend, indemnify, save and hold Bank harmless against any and all claims,
demands, losses, expenses, damages, causes of action (whether legal or equitable
in nature) asserted by any person or entity arising out of, caused by or
relating to this Agreement, the Term Loan and Security Documents, and Borrower
shall pay Bank upon demand all claims, judgments, damages, losses, and expenses
(including court costs and expenses) incurred by Bank as a result of any legal
or other action arising out of this Agreement, the Term Loan or Security
Documents as aforesaid, except for costs arising out of the Bank's gross
negligence or willful misconduct.
4.21 THIRD PARTY CLAIMS. Bank shall not be liable to, and Borrower
shall save Bank harmless against the claims of, materialmen, contractors,
subcontractors, laborers and others for goods delivered by them to the Borrower
or Borrower's properties or services performed by them in or upon the Borrower's
properties or otherwise in connection with the Borrower. Borrower is not and
shall not be considered to be the agent of Bank for any purpose.
4.22 INSURANCE. Borrower shall not obtain or carry any separate
insurance whatsoever which is concurrent in form, or contributing in the event
of loss, with that required under Section 4.9 hereof unless Bank is also named
therein as an insured, with loss payable as provided in Section 4.9 hereof.
Borrower shall notify Bank at least 30 days before any such separate insurance
16
is obtained and shall deliver to the Bank the policy or policies or certificates
evidencing such insurance immediately after such policy or policies or such
certificates are issued.
4.23 SUBSIDIARIES. Borrower shall not assign, pledge or grant a
security interest in the stock of any of its subsidiaries.
4.24 CAPITAL EXPENDITURE ACCOUNT. Borrower shall establish a Capital
Expenditure Account with the Bank upon the execution of this Agreement, and
shall maintain the account until all amounts owed to the Bank have been repaid
and the Bank shall have no remaining obligation to make further advances to the
Borrower. Borrower shall deposit, or shall direct any tenant, lessor or manager
to deposit, 4% of the total revenue from the Term Loan Properties into the
Capital Reserve Account to be used solely for the purpose of maintenance and
capital expenditures relating to properties owned by the Borrower. Until the
occurrence of an Event of Default, or until otherwise notified by the Bank,
Borrower may use the funds in the Capital Expenditure Account at its discretion
for the purposes set forth herein.
4.25 FRANCHISOR PERFORMANCE REPORTS. Borrower shall comply, and shall
cause any tenant to comply, with all recommendations of its franchisors or
licensors in any performance reports for the operation and maintenance of the
Term Loan Properties within the time frames required or recommended by the
respective franchisors or licensors.
4.26 HOTEL OPERATOR. Borrower acknowledges that the Bank has agreed to
make this loan in reliance on the expertise of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ in operating properties such as the
Term Loan Properties. Borrower agrees that unless the Bank otherwise consents in
writing (which consent shall not be unreasonably withheld), one or more of the
individuals listed in the preceding sentence shall be actively involved in the
operation and management of the Term Loan Properties throughout the term of this
Agreement.
4.27 ADDITIONAL COLLATERAL. In the event the merger described in the
Disclosure Schedule does not occur on or before October 31, 1999, Borrower shall
provide the Bank with such additional documents as is required by the Bank to
perfect a lien on all personal property, grant an assignment of all rents and
leases, provide a collateral assignment of all franchise rights and provide
agreements from franchisors all relating to or pertaining to the Term Loan
Properties, or assign or transfer interests in the franchises for the Term Loan
Properties. Borrower further covenants and agrees that it shall not transfer or
grant any liens on any of Borrower's personal property relating to or pertaining
to the Term Loan Properties, or assign any of the rents and leases relating to
or pertaining to the Term Loan Properties after the execution of this Agreement
unless the merger described in the Disclosure Schedule occurs on or before
October 31, 1999, and then only as provided in the Disclosure Schedule.
17
SECTION 5. DEFAULT
5.1 EVENTS OF DEFAULT. Each of the following occurrences is hereby
defined as an "Event of Default."
(a) Nonpayment. The Borrower shall fail to make any payment of
principal or interest on the Term Loan Note or shall fail to make
payment of other amounts payable by the Borrower hereunder or under the
Security Documents when and as due and such failure shall continue for
a period of three (3) Banking Days after Borrower's receipt of written
notice that the same is due (for the purposes of this Section 5.1(a)
only, and notwithstanding anything to the contrary contained in Section
7.2 below, the Borrower shall be deemed to have received the Bank's
notice of a payment default on the same day such notice is sent to
Borrower via telecopier, provided that the Bank receives a confirmation
upon completion of the Bank's telecopier transmission that the
respective notice has been successfully transmitted to the Borrower at
the telecopier number provided in Section 7.2 below, unless the
transmission cannot be completed because the Borrower has not
maintained the ability to receive telecopier transmissions at the
telecopier number set forth in Section 7.2); or
(b) Nonperformance. There shall occur any default or event of
default, (subject to curative rights, if any) or any event which
requires the prepayment of borrowed money or the acceleration of the
maturity thereof, under the terms of any other evidence of indebtedness
or any other agreement for borrowed money issued or assumed or entered
into by the Borrower with this Bank or with any other bank or third
party, or under the terms of any indenture agreement or instrument
under which any such evidence of indebtedness or other agreement is
issued, assumed, secured or guaranteed, and such event shall continue
beyond any applicable period of grace; or
(c) Dissolutions, etc. The Borrower shall fail to comply with
any prohibition against dissolution, liquidation, merger, consolidation
or sale of assets; or
(d) Warranties. Any representation, warranty, schedule,
certificate, financial statement, report, notice or other writing
furnished by or on behalf of the Borrower to the Bank or any
representation, warranty or covenant contained in this Agreement, the
Term Loan Note or Security Documents, is false or misleading in any
material respect on the date as of which the facts therein set forth
are stated certified or reaffirmed; or
(e) ERISA. Any reportable event shall occur under the Employee
Retirement Income Security Act of 1974, as amended, in respect of any
employee benefit plan maintained for employees of the Borrower or its
subsidiaries; or
18
(f) Litigation. Any financial judgment, resulting from
judicial or administrative action, shall be entered against the
Borrower, or with respect to any assets of the Borrower, in which the
amount of such judgment exceeds One Hundred Thousand and No/100 Dollars
($100,000), if such judgment remains undischarged for a period of sixty
(60) days or more after the date on which such judgment becomes final,
without regard to any right of appeal to a higher court of law, unless
Borrower shall have taken whatever action is required, including,
without limitation, posting a supersedeas bond, to stay proceedings to
enforce any such judgment; or any proceeding (judicial or
administrative) could have a material and adverse effect on the future
operations of the Borrower; or
(g) Noncompliance with this Agreement, Term Loan Note or
Security Documents. The Borrower shall fail to comply with any
provision hereof or any provision of the Term Loan Note or any Security
Documents, which failure does not otherwise constitute an Event of
Default under Section 5.1(a), and such failure shall continue for
thirty (30) days after written notice thereof to the Borrower by the
Bank or any other holder, beneficiary, or secured party of the Term
Loan Note or Security Documents; or
(h) Bankruptcy - Filing of Petition. The Borrower shall file a
petition seeking relief, or consent or answer consenting to a petition
seeking relief against Borrower under the federal Bankruptcy Code, as
now constituted or hereafter amended, or any other applicable federal,
state or foreign bankruptcy law or other similar law, or the Borrower
shall consent to the institution of proceedings thereunder or the
filing of any such petition or to the appointment or taking possession
of a receiver, liquidator, assignee, trustee, custodian, sequestrator
or similar official of the Borrower or any subsidiary; or
(i) Bankruptcy - Entry of Order for Relief. There shall be
entered a decree or order by a court constituting an order for relief
in respect of the Borrower, under the federal Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal,
state or foreign bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official of the Borrower or of any substantial part of their
properties, or ordering the winding-up of or liquidation of the affairs
of the Borrower and any such decree or order shall continue unstayed
and in effect for a period of sixty (60) consecutive days; or
(j) Insolvency. The Borrower shall become insolvent or shall
fail or be unable to pay its debts as they mature, or shall admit in
writing its inability to pay its debts as they mature, or shall make a
general assignment for the benefit of its creditors, or shall enter
into any composition or similar agreement, or shall suspend the
transaction of all or a substantial portion of its usual business; or
19
(k) Environmental Noncompliance. Notice shall be given of any
alleged violation of environmental laws relating to the present or
previously-owned or leased real properties of the Borrower or any of
its subsidiaries, the effect of which could be reasonably expected to
have a material adverse effect on the Borrower; or
(l) E&P Financing Default. E&P Financing Limited Partnership,
a Maryland limited partnership, shall fail to make any payment of
principal or interest due or otherwise default on any other obligations
to the Bank beyond any applicable grace or cure period; or
(m) Franchise Agreement Default. Borrower or any tenant of
Borrower shall default on any franchise or license agreement relating
to any of the Term Loan Properties, and such default shall continue
beyond any applicable grace or cure period provided in the franchise or
license agreement.
5.2 REMEDIES. Time is of the essence. Upon the occurrence of any such
Event of Default and during the continuance thereof, any obligation of the Bank,
or any other holders of the Term Loan Note, with respect to the Term Loan shall
automatically terminate, and the Bank or any other holders of the Term Loan Note
may declare the Term Loan Note to be immediately due and payable, whereupon the
Term Loan Note and any other amounts at the time accrued or payable hereunder
but unpaid, shall immediately become due and payable, which acceleration shall
occur automatically upon the occurrence of the Events of Default provided in
Sections 5.1(h) and (i), without presentment, demand, notice or protest of any
kind, all of which are hereby expressly waived by the Borrower. No delay or
omission on the part of the Bank or any holder of the Term Loan Note in
exercising any power or right hereunder or under the Term Loan Note or Security
Documents shall impair such right or power or be construed to be a waiver of any
Event of Default or any acquiescence therein, nor shall any single or partial
exercise of any power or right hereunder preclude other or further exercise
thereof, or the exercise of any other power or right.
SECTION 6. CONDITIONS OF LENDING
The obligation of the Bank to make the Term Loan is subject to the
following conditions:
6.1 DOCUMENTATION. In addition to the conditions precedent set forth in
Section 6.2, the obligation of the Bank to make the Term Loan is subject to the
conditions precedent that the Bank shall have received all of the following,
each duly executed and dated the date of the Term Loan in form and substance
satisfactory to the Bank and its counsel, at the expense of the Borrower, and in
such number of signed counterparts as the Bank may request (except for the Term
Loan Note, of which only the original of each shall be signed):
(a) Notes. The duly executed Term Loan Note;
20
(b) Security Documents. The duly executed or endorsed Deeds of
Trust, Mortgages, Assignments of Leases and Rents, Subordination,
Nondisturbance and Attornment Agreements, Security Agreement(s) and
Financing Statements;
(c) Insurance. Original insurance policies or certificates
thereof for the insurance required by Section 4.9 hereof;
(d) Taxes. Evidence satisfactory to Bank that all taxes are
fully paid and not delinquent;
(e) Resolution. A certified copy of the resolution of the
Board of Directors of the Borrower authorizing or ratifying the
execution, delivery and performance, respectively, of this Agreement,
the Term Loan Note, Security Documents, and the other agreements,
documents and instruments provided for in this Agreement, certified by
the Secretary of the Borrower;
(f) Articles of Incorporation and Bylaws. A certified copy of
the articles of incorporation and bylaws of the Borrower certified by
the Secretary and a certificate of good standing issued by the
Secretary of State of the states of Delaware;
(g) Certificate of Incumbency. A certificate of the Secretary
of the Borrower certifying the names of the officer or officers of the
Borrower authorized to sign this Agreement, Term Loan Note and Security
Documents and the other agreements, documents, and instruments provided
for in this Agreement, together with a sample of the true signature of
each such officer (the Bank may conclusively rely on such certificate);
(h) Certificate of No Default. A certificate signed by the
Chief Financial Officer of the Borrower to the effect that (i) no Event
of Default has occurred and is continuing or will result from the
making of the Term Loan; and (ii) the representations and warranties of
the Borrower contained herein are true and correct as at the date of
the Term Loan as though made on that date;
(i) Opinion of Counsel for the Borrower. A written opinion of
counsel to the Borrower in form and substance acceptable to the Bank
confirming to Bank the accuracy of the representations and warranties
of Borrower set forth in this Agreement and other matters and things as
Bank shall request;
(j) Collateral Documents.
U.C.C. searches with respect to the Borrower.
Phase I Environmental Reports.
21
Lender's Title Policies.
Surveys.
Appraisals.
Comfort Letters or Agreements.
(k) Miscellaneous. Such other documents and certificates as
the Bank may reasonably request.
6.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
(a) Representations and Warranties. At the date of this
Agreement and any advance under the Term Loan, the Borrower's
representations and warranties set forth herein shall be true and
correct as at such date with the same effect as though those
representations and warranties had been made on and as at such date.
(b) No Default. At the time of this Agreement and any advance
under the Term Loan, and immediately after giving effect to the Term
Loan, the Borrower shall be in compliance with all the terms and
provisions set forth herein on its part to be observed or performed,
and no Event of Default shall have occurred and be continuing at the
time of the Term Loan or would result from the making of the Term Loan
or any subsequent advances thereunder.
6.3 SUCCEEDING LOANS. The application or request by the Borrower for
any loan other than the Term Loan, including requests for advances thereunder,
shall be deemed a representation and warranty by the Borrower that the
statements in Sections 3 and 4 are true and correct on and as of the date of
each such loan except with respect to any changes in those statements permitted
by this Agreement, changes of which Borrower has given written notice to Bank
pursuant to the terms of this Agreement and changes agreed upon by the Bank in
writing subsequent to the date of this Agreement.
SECTION 7. MISCELLANEOUS
7.1 WAIVER OF DEFAULT. The Bank may, by written notice to the Borrower,
at any time and from time to time, waive any default in the performance or
observance of any condition, covenant or other term hereof, which shall be for
such period and subject to such conditions as shall be specified in any such
notice. In the case of any such waiver, the Bank and the Borrower shall be
restored to their former position and rights hereunder and under the Term Loan
Note, and any Event of Default so waived shall be deemed to be cured and not
continuing; but no such waiver shall affect, extend or impair any rights of the
Bank with respect to any default, except as specifically set forth in the Bank's
written notice, nor shall it affect Bank's rights with respect to any subsequent
or other Event of Default.
22
7.2 NOTICES. All notices, communications and distributions hereunder
shall be given or made to the following parties at the following addresses:
(a) if to the Borrower:
E&P FINANCING LIMITED PARTNERSHIP
Pre-Merger:
c/o SUPERTEL HOSPITALITY, INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy thereof to:
▇▇▇▇▇▇▇, NORTH, MULLIN, KRATZ, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Comes
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Post-Merger:
c/▇ ▇▇▇▇▇▇▇▇ HOSPITALITY TRUST, INC.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy thereof to:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Bank:
U.S. BANK NATIONAL ASSOCIATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President
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with a copy thereof to:
CLINE, WILLIAMS, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
1900 U.S. Bank Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or in any of the foregoing cases at such other addresses as the addressee may
hereafter specify for such purpose by written notice to the parties. Such
notices and other communications will be effectively given only if and when
given in writing and delivered at the address set forth herein duly deposited in
the mails with first-class postage prepaid, or delivered to a telegraph company
with all charges prepaid, addressed as aforesaid.
7.3 WAIVERS. If the Bank does not require certain conditions precedent
to closing of the Term Loan as described in Section 6, such act shall be
construed only as a conditional waiver of those conditions as to closing on the
Term Loan on the date hereof and shall not be a general waiver of the compliance
with those conditions by the Borrower, and the Borrower shall comply with those
conditions hereafter on demand by the Bank. Any condition precedent to closing
of the Term Loan waived by the Bank under this paragraph shall automatically be
a condition precedent to all other future corresponding loans and disbursements
of the Term Loan.
7.4 NONWAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no
delay in exercising, on the part of the Bank of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies of the Bank
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
7.5 SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement, the Term
Loan Note and the Security Documents and the making of any loans or advances.
7.6 SUCCESSORS. This Agreement shall, upon execution and delivery by
the Borrower, become effective and shall be binding upon and inure to the
benefit of the Borrower and the Bank, and their respective successors and
assigns, except that the Borrower may not transfer or assign any of its rights
or interest hereunder without the prior written consent of the Bank.
7.7 CAPTIONS. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. Reference herein to Sections without reference to the document in which
they are contained are references to this Agreement.
7.8 SINGULAR AND PLURAL. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa.
7.9 COUNTERPARTS. This Agreement may be executed by the parties on any
number of separate counterparts, and by each party on separate counterparts,
each counterpart shall be deemed an original instrument; and all of the
24
counterparts taken together shall be deemed to constitute one and the same
instrument.
7.10 FEES. The Borrower agrees, upon written request of the Bank, to
pay or reimburse the Bank for all costs and expenses incurred by the Bank
relating to this Agreement, including, without limitation, the costs and
expenses of seeking advice in regard to preparing and enforcing this Agreement
or the Term Loan Note or Security Documents, or preserving its rights hereunder
or under any document or instrument executed in connection herewith (including
legal fees and reasonable time charges of attorneys who may be employees of the
Bank, whether in or out of court, in original or appellate proceedings or in
bankruptcy), together with all expenses of record searches, environmental
studies, surveys, title insurance policies, appraisals, and filing and closing
fees paid by the Bank with respect to this Agreement and the perfection of the
Bank's liens.
7.11 FURTHER ASSURANCES. From time to time, the Borrower will execute
and deliver to the Bank such additional documents, and will provide such
additional information as the Bank may reasonably require to carry out the terms
of this Agreement and be informed of the Borrower's status and affairs.
7.12 CONSTRUCTION. This Agreement, the Term Loan Note and Security
Documents and any document or instrument or other agreement executed in
connection herewith and except as otherwise specifically provided therein shall
be governed by, and construed and interpreted in accordance with, the internal
laws of the State of Nebraska, and shall be deemed to have been executed in the
State of Nebraska.
7.13 ENTIRE AGREEMENT. This Agreement may not be assigned by Borrower
without the prior written consent of Bank which consent may be withheld. This
Agreement constitutes the entire understanding between the parties hereto with
respect to the subject matter hereof, superseding all prior written or oral
understandings, and may not be modified, amended or terminated except by a
written agreement signed by each of the parties hereto or thereto.
Notwithstanding the foregoing, the provisions of this Agreement are not intended
to supersede the provisions of the Term Loan Note or Security Documents, but
shall be construed as supplemental thereto.
7.14 SEVERABILITY. If any term or provision of this Agreement, or the
Term Loan Note or Security Documents, or any document or instrument executed in
connection therewith, including amendments and modifications or the application
thereof to any person or circumstance shall to any extent be invalid or
unenforceable, the terms and provisions or the application of such term or
provision to person or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each form and
provision shall be valid or enforced to the fullest extent possible by law.
7.15 SUBMISSION TO JURISDICTION; VENUE. To induce the Bank to make the
Term Loan, as evidenced by the Term Loan Note and Security Documents and this
Agreement, the Borrower irrevocably agrees that, subject to the Bank's sole and
absolute election, all suits, actions or other proceedings in any way, manner or
respect, arising out of or from or related to this Agreement, the Term Loan Note
and Security Documents, or any document executed in connection herewith, shall
25
be subject to litigation in courts having situs within Nebraska. The Borrower
hereby consents and submits to the jurisdiction of any local, state or federal
court located within Nebraska. The Borrower hereby waives any right it may have
to transfer or change the venue of any suit, action or other proceeding brought
against the Borrower by the Bank in accordance with this section.
7.16 WAIVER OF TRIAL BY JURY. BANK BY ITS ACCEPTANCE HEREOF AND
BORROWER HEREBY VOLUNTARILY, KNOWINGLY AND INTENTIONALLY WAIVE ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING UNDER THIS
AGREEMENT OR CONCERNING THE OBLIGATIONS OR ANY REAL OR PERSONAL PROPERTY PLEDGED
AS COLLATERAL UNDER THE SECURITY DOCUMENTS, REGARDLESS OF WHETHER SUCH ACTIONS
OR PROCEEDINGS CONCERN ANY CONTRACTUAL OR TORTIOUS OR OTHER CLAIM. BORROWER
ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL TO BANK IN EXTENDING
CREDIT TO BORROWER, THAT BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS
JURY TRIAL WAIVER, AND THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS
HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY
TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
7.17 CREDIT AGREEMENT NOTICE. A credit agreement must be in writing to
be enforceable under Nebraska law. To protect you and us from any
misunderstandings or disappointments, any contract, promise, undertaking, or
offer to forebear repayment of money or to make any other financial
accommodation in connection with this loan of money or grant or extension of
credit, or any amendment of, cancellation of, waiver of, or substitution for any
or all of the terms or provisions of any instrument or document executed in
connection with this loan of money or grant or extension of credit, must be in
writing to be effective.
7.18 APPLICATION OF PROCEEDS. The Bank shall have sole discretion
regarding the application of any payments or proceeds received from the
Borrower, voluntary or involuntary, including, without limitation, any proceeds
from the sale or other disposition of any of the collateral or security
described in Section 2.
7.19 CONSENT TO TRANSACTIONS. Notwithstanding any provisions of this
Agreement or the Security Documents to the contrary, the Bank hereby consents to
the transactions described in the Disclosure Schedule attached hereto as Exhibit
"I", provided that the transactions are consummated on or before October 31,
1999 and strictly in accordance with the Disclosure Schedule. The Disclosure
Schedule was prepared by the Borrower, and the Borrower represents and warrants
the truth and accuracy of information provided in the Disclosure Schedule, which
representation and warranty shall survive the execution of this Agreement.
"BORROWER"
SUPERTEL HOSPITALITY, INC.
26
By:__________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
"BANK"
U.S. BANK NATIONAL ASSOCIATION
By:__________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ___ day of
October, 1999, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of Supertel Hospitality, Inc., a
Delaware corporation, on behalf of said corporation.
-----------------------
Notary Public
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ___ day of
October, 1999, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President of U. S. Bank National
Association, a national banking association, on behalf of said Association.
----------------------------
Notary Public
27
EXHIBITS
Exhibit A Term Loan Note
Exhibit B Real Estate Descriptions and Recording Offices
Exhibit C Assignment of Leases and Rents
Exhibit D Lease Subordination Agreement
Exhibit E Collateral Assignment of Franchise Agreement
Exhibit F Agreement with Franchisors
Exhibit G Security Agreement
Exhibit H Financing Statement
Exhibit I Disclosure Schedule
Exhibit J Subsidiaries
28