EXHIBIT 99.01
LOAN AGREEMENT
Dated as of September 27, 2000
Between
PHOENIX ▇▇ ▇▇▇▇▇▇ LLC,
▇.▇. ▇▇▇▇▇▇, INC.,
CHICAGO HILTON LLC,
SHORT HILLS HILTON LLC, AND
▇▇▇▇▇▇ HILTON LLC,
collectively, as Borrower
and
▇▇▇▇▇▇ FINANCIAL CORPORATION,
as Lender
TABLE OF CONTENTS
PAGE
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section 1.1 Definitions...................................................................................1
Section 1.2 Principles of Construction...................................................................16
II. THE LOAN
Section 2.1 The Loan.....................................................................................17
2.1.1 Agreement to Lend and Borrow.................................................................17
2.1.2 Single Disbursement to Borrower..............................................................17
2.1.3 The Note.....................................................................................17
2.1.4 Use of Proceeds..............................................................................17
Section 2.2 Interest Rate................................................................................17
2.2.1 Initial Interest Rate........................................................................17
2.2.2 Adjusted Interest Rate.......................................................................17
2.2.3 Default Rate.................................................................................17
2.2.4 Interest Calculation.........................................................................17
2.2.5 Usury Savings................................................................................18
Section 2.3 Loan Payments................................................................................18
2.3.1 Payments Before Effective Maturity Date......................................................18
2.3.2 Payments After Effective Maturity Date.......................................................18
2.3.3 Payment on Maturity Date.....................................................................19
2.3.4 Late Payment Charge..........................................................................19
2.3.5 Method and Place of Payment..................................................................19
2.3.6 Payments After Event of Default..............................................................19
Section 2.4 Prepayments..................................................................................20
2.4.1 Voluntary Prepayments........................................................................20
2.4.2 Mandatory Prepayments........................................................................20
2.4.3 Prepayments After Default....................................................................20
Section 2.5 Defeasance...................................................................................21
2.5.1 Total Defeasance.............................................................................21
2.5.2 Partial Defeasance...........................................................................22
2.5.3 Defeasance Collateral Account................................................................24
2.5.4 Successor Borrower...........................................................................25
Section 2.6 Cash Management..............................................................................25
Section 2.7 Property Substitutions.......................................................................25
2.7.1 Conditions to Substitution...................................................................25
2.7.2 Release and Substitution.....................................................................32
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III. REPRESENTATIONS AND WARRANTIES
Section 3.1 Borrower Representations.....................................................................32
3.1.1 Organization.................................................................................32
3.1.2 Proceedings..................................................................................32
3.1.3 No Conflicts.................................................................................32
3.1.4 Litigation...................................................................................33
3.1.5 Agreements...................................................................................33
3.1.6 Consents.....................................................................................33
3.1.7 Title........................................................................................33
3.1.8 No Plan Assets...............................................................................33
3.1.9 Compliance...................................................................................34
3.1.10 Financial Information........................................................................34
3.1.11 Condemnation.................................................................................34
3.1.12 Utilities and Public Access..................................................................34
3.1.13 Separate Lots................................................................................34
3.1.14 Assessments..................................................................................34
3.1.15 Enforceability...............................................................................35
3.1.16 Assignment of Leases.........................................................................35
3.1.17 Insurance....................................................................................35
3.1.18 Licenses.....................................................................................35
3.1.19 Flood Zone...................................................................................35
3.1.20 Physical Condition...........................................................................35
3.1.21 Boundaries...................................................................................36
3.1.22 Leases.......................................................................................36
3.1.23 Taxes........................................................................................36
3.1.24 Single Purpose...............................................................................36
3.1.25 No Bankruptcy Filing.........................................................................39
3.1.26 Full and Accurate Disclosure.................................................................40
3.1.27 Federal Reserve Regulations..................................................................40
3.1.28 Foreign Person...............................................................................40
3.1.29 Fraudulent Transfer..........................................................................40
3.1.30 Investment Company Act.......................................................................40
3.1.31 No Change in Facts or Circumstances; Disclosure..............................................40
3.1.32 Management Agreements........................................................................41
3.1.33 Organizational Chart.........................................................................41
Section 3.2 Survival of Representations..................................................................41
IV. BORROWER COVENANTS
Section 4.1 Borrower Affirmative Covenants...............................................................41
4.1.1 Existence; Compliance with Legal Requirements................................................41
4.1.2 Taxes and Other Charges......................................................................41
4.1.3 Litigation...................................................................................42
4.1.4 Access to Individual Properties..............................................................42
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4.1.5 Further Assurances; Supplemental Mortgage Affidavits.........................................42
4.1.6 Financial Reporting..........................................................................42
4.1.7 Title to the Individual Properties...........................................................43
4.1.8 Estoppel Statement...........................................................................44
4.1.9 Leases.......................................................................................44
4.1.10 Alterations..................................................................................45
4.1.11 San Francisco Capital Improvements...........................................................45
4.1.12 Material Agreements..........................................................................45
4.1.13 Performance by Borrower......................................................................46
4.1.14 Costs of Enforcement.........................................................................46
4.1.15 Business and Operations......................................................................46
4.1.16 Condominium..................................................................................46
4.1.17 Loans Fees...................................................................................46
Section 4.2 Borrower Negative Covenants..................................................................46
4.2.1 Due on Sale and Encumbrance; Transfers of Interests..........................................46
4.2.2 Liens........................................................................................47
4.2.3 Dissolution..................................................................................47
4.2.4 Intentionally Omitted........................................................................47
4.2.5 Debt Cancellation............................................................................47
4.2.6 Affiliate Transactions.......................................................................47
4.2.7 Zoning.......................................................................................47
4.2.8 Assets.......................................................................................47
4.2.9 No Joint Assessment..........................................................................47
4.2.10 Principal Place of Business..................................................................48
4.2.11 ERISA........................................................................................48
4.2.12 Material Agreements..........................................................................48
4.2.13 Condominium Documents........................................................................48
V. INSURANCE, CASUALTY AND CONDEMNATION
Section 5.1 Insurance....................................................................................49
5.1.1 Insurance Policies...........................................................................49
5.1.2 Insurance Company............................................................................52
Section 5.2 Casualty and Condemnation....................................................................52
5.2.1 Casualty.....................................................................................52
5.2.2 Condemnation.................................................................................53
Section 5.3 Delivery of Net Proceeds.....................................................................53
5.3.1 Minor Casualty or Condemnation...............................................................53
5.3.2 Major Casualty or Condemnation...............................................................53
VI. RESERVE FUNDS
Section 6.1 Required Repair Funds........................................................................56
6.1.1 Deposit of Required Repair Funds.............................................................56
6.1.2 Release of Required Repair Funds.............................................................57
Section 6.2 Tax Funds....................................................................................57
6.2.1 Deposit of Tax Funds.........................................................................57
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6.2.2 Release of Tax Funds.........................................................................58
Section 6.3 Insurance Premium Funds......................................................................58
6.3.1 Deposits of Insurance Premium Funds..........................................................58
6.3.2 Release of Insurance Premium Funds...........................................................58
Section 6.4 Intentionally Omitted........................................................................59
Section 6.5 FF&E Funds...................................................................................59
6.5.1 Deposits of FF&E Funds.......................................................................59
6.5.2 Withdrawals of FF&E Funds....................................................................59
Section 6.6 Intentionally Omitted........................................................................60
Section 6.7 Provisions Regarding Funds...................................................................60
6.7.1 Grant of Security Interest...................................................................60
6.7.2 Event of Default.............................................................................60
6.7.3 Income Taxes.................................................................................60
6.7.4 Prohibition Against Further Encumbrance......................................................60
6.7.5 Release Upon Repayment.......................................................................60
6.7.6 Deposits Made Pursuant to Cash Management Agreement..........................................60
Section 6.8 Letters of Credit in Lieu of Reserves........................................................60
6.8.1 Delivery of Letters of Credit................................................................60
Section 6.9 Provisions Regarding Letters of Credit.......................................................61
6.9.1 Security for Debt............................................................................61
6.9.2 Additional Rights of Lender..................................................................61
VII. PROPERTY MANAGEMENT
Section 7.1 Management Agreements........................................................................62
Section 7.2 Replacement of Manager.......................................................................63
VIII. PERMITTED TRANSFERS
Section 8.1 Permitted Transfer of Individual Properties..................................................63
Section 8.2 Permitted Transfer of Interest in Borrower...................................................63
Section 8.3 Special Transfers............................................................................64
IX. SALE AND SECURITIZATION OF MORTGAGES
Section 9.1 Sale of Mortgage and Securitization..........................................................64
Section 9.2 Securitization Indemnification...............................................................67
X. DEFAULTS
Section 10.1 Event of Default.............................................................................70
Section 10.2 Remedies.....................................................................................72
Section 10.3 Remedies Cumulative..........................................................................73
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XI. MISCELLANEOUS
Section 11.1 Successors and Assigns.......................................................................73
Section 11.2 Lender's Discretion..........................................................................73
Section 11.3 Governing Law................................................................................74
Section 11.4 Modification, Waiver in Writing..............................................................75
Section 11.5 Delay Not a Waiver...........................................................................75
Section 11.6 Notices......................................................................................76
Section 11.7 Trial by Jury................................................................................76
Section 11.8 Headings.....................................................................................77
Section 11.9 Severability/Joint and Several Liability.....................................................77
Section 11.10 Preferences..................................................................................77
Section 11.11 Waiver of Notice.............................................................................78
Section 11.12 Remedies of Borrower.........................................................................78
Section 11.13 Expenses; Indemnity..........................................................................78
Section 11.14 Schedules Incorporated.......................................................................79
Section 11.15 Offsets, Counterclaims and Defenses..........................................................79
Section 11.16 No Joint Venture or Partnership; No Third Party Beneficiaries................................80
Section 11.17 Publicity....................................................................................80
Section 11.18 Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets......................80
Section 11.19 Waiver of Offsets/Defenses/Counterclaims.....................................................81
Section 11.20 Conflict; Construction of Documents; Reliance................................................81
Section 11.21 Brokers and Financial Advisors...............................................................82
Section 11.22 Exculpation..................................................................................82
Section 11.23 Prior Agreements.............................................................................83
Section 11.24 Servicer.....................................................................................84
Section 11.25 California Waivers...........................................................................84
11.25.1 California Provisions........................................................................84
11.25.2 Modifications to Loan and Loan Documents.....................................................84
11.25.3 Waivers......................................................................................84
11.25.4 Borrower Guarantor Informed of Borrower's Condition..........................................85
11.25.5 Waiver of Estoppel Defense...................................................................86
11.25.6 Subrogation..................................................................................86
11.25.7 Confirmation of Waivers......................................................................86
11.25.8 Exculpation..................................................................................87
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SCHEDULES
---------
Schedule I - Properties/Allocated Loan Amounts/Allocated Percentage/
Original Appraised Values
Schedule II - Required Repairs
Schedule III - Management Agreements
Schedule IV - Organizational Chart
Schedule V - Capital Expenditures for San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Schedule VI - Net Cash Flows
Schedule VII - Rent Rolls
Schedule VIII - Debt Service Payments
Schedule IX - Uniform System of Accounts for Hotels (9th Edition)
Schedule X - Form of Officer's Certificate
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of September 27, 2000 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
"AGREEMENT"), between ▇▇▇▇▇▇ FINANCIAL CORPORATION, a Pennsylvania corporation,
having an address at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("LENDER") and Phoenix ▇▇ ▇▇▇▇▇▇ LLC, a Delaware limited liability company
("ARIZONA BORROWER"); ▇.▇. ▇▇▇▇▇▇, Inc., a Delaware corporation ("CALIFORNIA
BORROWER"); Chicago Hilton LLC, a Delaware limited liability company ("ILLINOIS
BORROWER"); Short Hills Hilton LLC, a Delaware limited liability company ("NEW
JERSEY BORROWER") and ▇▇▇▇▇▇ Hilton LLC, a Delaware limited liability company
("VIRGINIA BORROWER"), each having an address at c/o Hilton Hotels Corporation,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively,
"BORROWER").
All capitalized terms used herein shall have the respective meanings set
forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender; and
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the conditions and terms of this Agreement and the other Loan
Documents.
NOW, THEREFORE, in consideration of the covenants set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree,
represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise expressly provided:
"ACCRUED INTEREST" shall have the meaning set forth in Section 2.3.2.
"ADJUSTED INTEREST RATE" shall mean a rate per annum equal to the greater
of (i) 12.954% or (ii) the Treasury Rate plus five percentage points.
"AFFILIATE" shall mean, as to any Person, any other Person that, directly
or indirectly, owns more than forty percent (40%) of, is in control of, is
controlled by or is under common control with such Person or is a director or
officer of such Person or of an Affiliate of such Person. As used in this
definition, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management, policies or
activities of a Person, whether through ownership of voting securities, by
contract or otherwise.
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"ALLOCATED LOAN AMOUNT" shall mean, for each Individual Property, the
product of (a) the Allocated Percentage for such Individual Property and (b) the
then outstanding principal balance of the Loan; provided, however, that any Net
Proceeds applied to prepay the principal balance of the Loan shall be applied
solely to reduce the Allocated Loan Amount of the Individual Property that is
the subject of the related Casualty or Condemnation.
"ALLOCATED PERCENTAGE" shall mean, for each Individual Property, the amount
set forth in SCHEDULE I for such Individual Property, provided that, if Net
Proceeds from a Casualty or Condemnation are applied to reduce the Allocated
Loan Amount of an Individual Property, the Allocated Percentage of each
Individual Property shall be recalculated to equal the Allocated Loan Amount of
such Individual Property (as adjusted to the date of such recalculation) divided
by the then outstanding principal balance of the Loan.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"ALTERATION THRESHOLD" shall mean (a) five percent (5%) of the initial
Allocated Loan Amount with respect to the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, five percent
(5%) of the initial Allocated Loan Amount with respect to the Chicago Hilton,
seven and one-half percent (7.5%) of the initial Allocated Loan Amount with
respect to the Phoenix Hilton, seven and one-half percent (7.5%) of the initial
Allocated Loan Amount with respect to the Short Hills Hilton and seven and
one-half percent (7.5%) of the initial Allocated Loan Amount with respect to the
▇▇▇▇▇▇ Hilton and (b) Twenty-Five Million and No/100 Dollars ($25,000,000) in
the aggregate for all of the Individual Properties at any one time.
"ANNUAL BUDGET" shall mean the operating and capital budget for each
Individual Property setting forth the applicable Manager's good faith estimate
of Gross Revenue, Operating Expenses, and Capital Expenditures for the
applicable Fiscal Year.
"APPLICABLE INTEREST RATE" shall mean (i) prior to the Effective Maturity
Date, the Initial Interest Rate and (ii) on and after the Effective Maturity
Date, the Adjusted Interest Rate.
"APPROVED ANNUAL BUDGET" shall have the meaning set forth in Section
4.1.6(e).
"ARIZONA BORROWER" shall mean Phoenix ▇▇ ▇▇▇▇▇▇ LLC, a Delaware limited
liability company.
"ASSIGNMENT OF LEASES" shall mean, with respect to each Individual
Property, that certain first priority Assignment of Leases and Rents, dated as
of the date hereof, from the Borrower which is the owner of such Individual
Property, as assignor, to Lender, as assignee, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean, with respect to each
Individual Property, that certain Assignment of Management Agreement and
Subordination of Management Agreement dated the date hereof among the Borrower
which is the owner of such Individual Property, Manager and Lender, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.
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"AWARD" shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation in respect of all or any part of an Individual
Property.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder,
and any comparable foreign laws relating to bankruptcy, insolvency or creditors'
rights.
"BASIC CARRYING COSTS" shall mean, with respect to an Individual Property,
the sum of the following costs associated with such Individual Property for the
relevant Fiscal Year or payment period: (i) Taxes with respect to such
Individual Property and (ii) Insurance Premiums with respect to such Individual
Property.
"BORROWER" shall mean collectively, the Arizona Borrower, the California
Borrower, the Illinois Borrower, the New Jersey Borrower and the Virginia
Borrower, together with their permitted successors and permitted assigns.
"BORROWER GUARANTOR" shall have the meaning set forth in Section 11.25.1.
"BUSINESS DAY" shall mean a day other than a Saturday, a Sunday or a legal
holiday on which national banks in the State of New York, the state where the
corporate trust office of the trustee holding the Loan in a Securitization is
located, or the state where the servicing offices of the Servicer are located,
are not open for general business.
"CALIFORNIA BORROWER" shall mean ▇.▇. ▇▇▇▇▇▇, Inc., a Delaware corporation.
"CAPITAL EXPENDITURES" for any period shall mean amounts expended for
replacements and alterations to the Individual Properties and required to be
capitalized according to GAAP.
"CAPITAL EXPENDITURES WORK" shall mean any labor performed or materials
installed in connection with any Capital Expenditure.
"CASH MANAGEMENT ACCOUNT" shall have the meaning set forth in the Cash
Management Agreement.
"CASH MANAGEMENT AGREEMENT" shall mean that certain cash management
agreement among Lender, Borrower, Manager and the Cash Management Bank relating
to funds deposited in the Cash Management Account, as the same may be amended,
modified or replaced from time to time.
"CASH MANAGEMENT BANK" shall mean ▇▇▇▇▇ Fargo Bank, National Association
and its permitted successors and assigns.
"CASUALTY" shall mean the occurrence of any casualty, damage or injury, by
war, fire, earthquake, other act of God or otherwise, to any of the Individual
Properties or any part thereof.
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"CASUALTY CONSULTANT" shall have the meaning set forth in Section 5.3.2(c).
"CASUALTY RETAINAGE" shall have the meaning set forth in Section 5.3.2(d).
"CERTIFICATES" shall have the meaning set forth in Section 9.1(a).
"CHICAGO HILTON" shall mean the Individual Property known as the Hilton
Chicago & Towers located in Chicago, Illinois.
"CLEARING ACCOUNT" shall mean an account with the Clearing Bank into which
Rents (other than security, utility and other deposits) shall be deposited
pursuant to the applicable Clearing Account Agreement.
"CLEARING ACCOUNT AGREEMENT" shall mean, with respect to each Individual
Property, that certain Clearing Account Agreement, among Lender, the Borrower
which is the owner of such Individual Property, Manager and the respective
Clearing Bank relating to funds deposited in the related Clearing Account, as
the same may be amended, modified or replaced from time to time.
"CLEARING BANK" shall mean, with respect to each Individual Property, The
Northern Trust Bank and its permitted successors and assigns.
"CLOSING DATE" shall mean September 27, 2000, which is the date of funding
the Loan.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
"CONDEMNATION" shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
any Individual Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting any
Individual Property or any part thereof.
"CONDOMINIUM" means that certain condominium regime created pursuant to the
Condominium Documents.
"CONDOMINIUM DOCUMENTS" means, collectively, (a) that certain Master Deed
for Short Hills Campus Condominium recorded with the Register's Office of Essex
County, New Jersey on March 16, 1998 in Book 5525, Page 711 and (b) that certain
related Operating Agreement referenced in the Master Deed for Short Hills Campus
Condominium.
"DEBT" shall mean the outstanding principal amount of the Loan together
with all interest accrued and unpaid thereon and all other sums (including the
Yield Maintenance Premium) due to Lender in respect of the Loan under the Note,
this Agreement, the Mortgages, the Environmental Indemnity or any other Loan
Document.
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"DEBT SERVICE" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note as set forth on
SCHEDULE VIII attached hereto.
"DEBT SERVICE COVERAGE RATIO" shall mean (a) with respect to all of the
Individual Properties, the ratio of (i) Net Cash Flow for all of the Individual
Properties for the immediately preceding twelve (12) calendar month period to
(ii) the projected Debt Service due for the next twelve (12) calendar month
period immediately following such calculation and (b) with respect to one or
more Individual Properties, the ratio of Net Cash Flow for the subject
Individual Property for the immediately preceding twelve (12) calendar month
period to (ii) the Allocated Percentage of the projected Debt Service that would
be due with respect to the subject Individual Property or Individual Properties
for the twelve (12) month period immediately following such calculation. Except
as otherwise provided herein, the term "Debt Service Coverage Ratio" shall refer
to the calculation set forth in clause (a).
"DEBT SERVICE PAYMENT DATE" shall mean the first (1st) Business Day of
every calendar month occurring during the term of the Loan, commencing November
1, 2000.
"DEFAULT" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"DEFAULT RATE" shall mean a rate per annum equal to the lesser of (i) the
maximum rate permitted by applicable law, or (ii) five percent (5%) above the
Applicable Interest Rate.
"DEFEASANCE COLLATERAL ACCOUNT" shall have the meaning set forth in Section
2.5.3.
"DEFEASANCE DATE" shall have the meaning set forth in Section 2.5.1(a)(i).
"DEFEASED NOTE" shall have the meaning set forth in Section 2.5.2(a)(iv)
hereof.
"DISCLOSURE DOCUMENT" shall have the meaning set forth in Section 9.2(a).
"DISCLOSURE DOCUMENT DATE" shall have the meaning set forth in Section
9.1(c)(iv).
"EFFECTIVE MATURITY DATE" shall mean October 1, 2010.
"ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (ii)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company is subject to regulations substantially similar to 12 C.F.R.
Section 9.10(b), having in either case a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal and state
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authority. An Eligible Account will not be evidenced by a certificate of
deposit, passbook or other instrument.
"ELIGIBLE INSTITUTION" shall mean a depository institution or trust company
insured by the Federal Deposit Insurance Corporation the short term unsecured
debt obligations or commercial paper of which are rated at least A-1 by Standard
& Poor's Ratings Group ("S&P"), P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.
("MOODY'S"), and F-1+ by Fitch IBCA, Inc. ("FITCH") in the case of accounts in
which funds are held for thirty (30) days or less or, in the case of Letters of
Credit or accounts in which funds are held for more than thirty (30) days, the
long term unsecured debt obligations of which are rated at least "AA" by Fitch
and S&P and "Aa2" by Moody's or such other institution as may be approved in
writing by Lender and each Rating Agency, as evidenced by a written confirmation
that the designation of such institution as an Eligible Institution will not
result in a downgrade, qualification or withdrawal of the ratings assigned to
the Certificates by such Rating Agency.
"ENVIRONMENTAL INDEMNITY" shall mean that certain Environmental
Indemnification Agreement dated as of the date hereof executed by Borrower in
connection with the Loan for the benefit of Lender.
"EQUIPMENT" shall have the meaning set forth in the granting clause of the
Mortgages.
"ERISA" shall have the meaning set forth in Section 4.2.11.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 10.1(a).
"EXCHANGE ACT" shall have the meaning set forth in Section 9.2(a).
"EXCHANGE ACT FILING" shall have the meaning set forth in Section
9.1(c)(vi).
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in Section
4.1.6(d).
"FF&E" shall mean furniture, fixtures and Equipment and other personal
property (other than goods held for consumption).
"FF&E EXPENDITURES" shall mean costs incurred in connection with Capital
Expenditures (other than the San Francisco Capital Improvements) and the repair
and replacement of furniture, fixtures and Equipment and other personal property
(other than goods held for consumption).
"FF&E FUNDS" shall have the meaning set forth in Section 6.5.1.
"FISCAL YEAR" shall mean each twelve month period commencing on January 1
and ending on December 31 during each year of the term of the Loan.
"FORCE MAJEURE" shall mean any delay due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws, regulations or
restrictions or any other
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cause that is beyond the control of Borrower, Guarantor or any Affiliate of
either Borrower or Guarantor.
"FUNDS" shall mean, collectively, the FF&E Funds, the Insurance Premium
Funds, the Required Repair Funds and the Tax Funds.
"GAAP" shall mean generally accepted accounting principles as set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the U.S. accounting profession.
"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever or any governmental ▇▇▇▇ (▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ or otherwise) whether now or hereafter
in existence.
"GROSS REVENUE" shall mean, without duplication, all revenue, derived from
the ownership and operation of the Individual Properties from whatever source,
including, but not limited to, Rents, but excluding sales, use and occupancy or
other taxes on receipts required to be accounted for by Borrower to any
Governmental Authority, security deposits (except to the extent determined by
Lender to be property utilized to offset a loss of Rent), refunds and
uncollectible accounts, proceeds of casualty insurance and Awards (other than
rental insurance or other loss of income insurance), income from the sale of
furniture, fixtures and Equipment and any disbursements to Borrower of the Funds
established by this Agreement.
"GUARANTOR" shall mean Hilton Hotels Corporation, a Delaware corporation.
"GUARANTY OF COMPLETION" shall mean that certain Guaranty of Completion
from Guarantor to Lender of even date herewith.
"HILTON-BRANDED HOTELS" shall mean any hotel facility which is operated
under the "Hilton Hotel" flag as a first-class full service hotel similar to the
Individual Properties, but shall not include or apply to any other products,
services or businesses under the "Hilton" brand, including, without limitation,
Hilton Suites or other all suite hotels, Hilton Garden Inn or other limited
service hotels, Homewood Suites by Hilton or any extended stay hotels, or any
other brands developed or acquired by Guarantor, Borrower, or any Affiliate of
either.
"ILLINOIS BORROWER" shall mean Chicago Hilton LLC, a Delaware limited
liability company.
"IMPROVEMENTS" shall have the meaning set forth in the granting clause of
the Mortgages.
"INDEBTEDNESS" shall mean, for any Person, without duplication: (i) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit, or for the deferred purchase price of property for which such Person
or its assets is liable, (ii) all unfunded amounts under a loan agreement,
letter of credit, or other credit facility for which such
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Person would be liable if such amounts were advanced thereunder, (iii) all
amounts required to be paid by such Person as a guaranteed payment to partners
or a preferred or special dividend, including any mandatory redemption of shares
or interests, (iv) all indebtedness guaranteed by such Person, directly or
indirectly, (v) all obligations under leases that constitute capital leases for
which such Person is liable, (vi) all indebtedness of such Person for trade
payables, and (vii) all obligations of such Person under interest rate swaps,
caps, floors, collars and other interest hedge agreements, in each case whether
such Person is liable contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person otherwise assures a
creditor against loss.
"INDEMNIFIED LIABILITIES" shall have the meaning set forth in Section
11.13(b)(ii).
"INDEPENDENT DIRECTOR" shall have the meaning set forth in Section
3.1.24(p).
"INDIVIDUAL PROPERTIES" shall mean, collectively, all of the Individual
Properties which are subject to the terms of this Agreement from time to time.
"INDIVIDUAL PROPERTY" shall mean each parcel of real property, the
improvements thereon and all personal property owned by Borrower and encumbered
by a Mortgage, together with all rights pertaining to such property and
improvements, as more particularly described in the Granting Clauses of such
Mortgages.
"INITIAL INTEREST RATE" shall mean a rate per annum equal to seven and nine
hundred fifty four thousandths percent (7.954%).
"INSOLVENCY OPINION" shall mean that certain bankruptcy nonconsolidation
opinion letter dated the date hereof delivered by ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in
connection with the Loan.
"INSURANCE PREMIUM FUNDS" shall have the meaning set forth in
Section 6.3.1.
"INSURANCE PREMIUMS" shall have the meaning set forth in Section 5.1.1(b).
"LEASE" shall mean any lease, sublease or subsublease, letting, license,
concession, or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in any
Individual Property and every modification, amendment or other agreement
relating to such lease, sublease, subsublease or other agreement entered into in
connection with such lease, sublease, subsublease or other agreement and every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to a Borrower owning an
Individual Property and each such Individual Property, all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower or such Individual Property or any part thereof
or the construction, use, alteration or operation thereof, or any part thereof,
whether
-8-
now or hereafter enacted and in force, including, without limitation, the
Americans with Disabilities Act of 1990, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Individual Property or
any part thereof, including, without limitation, any which may (i) require
repairs, modifications or alterations in or to such Individual Property or any
part thereof, or (ii) in any way limit the use and enjoyment thereof.
"LENDER" shall mean ▇▇▇▇▇▇ Financial Corporation, a Pennsylvania
corporation, together with its successors and assigns.
"LETTER OF CREDIT" shall mean an irrevocable, unconditional, transferable,
clean sight draft letter of credit (either an evergreen letter of credit with a
minimum initial term of one (1) year and minimum renewal term(s) of one (1) year
each or one which does not expire until at least thirty (30) Business Days after
the Effective Maturity Date) in favor of Lender and entitling Lender to draw
thereon in New York, New York, if accompanied by a certificate executed and
delivered by a purported officer of Lender or Servicer stating that the Lender
then has the right to draw upon such letter of credit, issued by a domestic
Eligible Institution or the U.S. agency or branch of a foreign Eligible
Institution. If at any time the bank issuing any such Letter of Credit shall
cease to be an Eligible Institution and Borrower does not replace such Letter of
Credit with a Letter of Credit issued by an Eligible Institution within ten (10)
days thereafter, Lender shall have the right immediately to draw down the same
in full and hold the proceeds of such draw in accordance with the applicable
provisions hereof. Each Letter of Credit must be acceptable to Lender.
"LIABILITIES" shall have the meaning set forth in Section 9.2(b).
"LIEN" shall mean, with respect to each Individual Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting such Individual
Property or any portion thereof or any interest in such Individual Property,
including, without limitation, any conditional sale or other title retention
agreement, any sale-leaseback, any financing lease having substantially the same
economic effect as any of the foregoing, the filing of any financing statement,
and mechanic's, materialmen's and other similar liens and encumbrances.
"LIMITED GUARANTY" shall mean that certain Guaranty of Recourse Obligations
from Guarantor to Lender of even date herewith.
"LOAN" shall mean the loan in the original principal amount of Five Hundred
Million and No/100 Dollars ($500,000,000) made by Lender to Borrower pursuant to
this Agreement.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the
Mortgages, the Assignments of Leases, the Cash Management Agreement, the
Clearing Account Agreements, the Environmental Indemnity, the Assignments of
Management Agreement, the Guaranty of Completion, the Limited Guaranty and any
other document pertaining to the
-9-
Individual Properties as well as all other documents now or hereafter executed
and/or delivered by Borrower or any of its Affiliates in connection with the
Loan.
"MAJOR LEASE" shall mean any Lease which generates Rent in excess of
$1,000,000 per year.
"MANAGEMENT AGREEMENT" shall mean, with respect to each Individual
Property, the written management agreement, entered into from time to time by
and between the Borrower which is the owner of such Individual Property and
Manager pursuant to which such Manager is to provide management and other
services with respect to said Individual Property, as amended, modified or
replaced from time to time. The initial Management Agreements in effect as of
the date hereof are identified on SCHEDULE III attached hereto.
"MANAGER" means any manager of any Individual Property approved in
accordance with the terms and provisions of the Loan Documents. The initial
Manager under the Management Agreements in effect as of the date hereof is
identified on SCHEDULE III attached hereto.
"MATERIAL AGREEMENTS" means each contract and agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of any Individual Property, other than the Management Agreements
and the Leases, under which there is an obligation of Borrower to pay more than
$1,000,000 per annum.
"MATERIAL ALTERATION" shall mean any individual major repair, alteration,
improvement, renewal or replacement to mechanical, electrical, heating,
ventilating, air conditioning, plumbing, vertical transportation or life safety
building systems or to the exterior facade or structure of any Individual
Property involving construction, the cost of which exceeds Five Hundred Thousand
and No/100 Dollars ($500,000) with respect to each Individual Property other
than the Chicago Hilton and the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ where such number shall be
One Million and No/100 Dollars ($1,000,000). Material Alteration shall not
include (x) replacements and renewals to FF&E or (y) routine repairs and
maintenance, including, by way of example and not limitation, exterior and
interior painting or changes of a decorative nature.
"MATURITY DATE" shall mean October 1, 2025, or such other date on which the
final payment of principal of the Note becomes due and payable as therein or
herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.
"MAXIMUM LEGAL RATE" shall mean the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or the other Loan Documents, under the laws of such state or
states whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.
"MCLEAN HILTON" shall mean the Individual Property known as Hilton ▇▇▇▇▇▇ &
Towers located in McLean, Virginia.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean a constant monthly payment
of $3,843,857.16.
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"▇▇▇▇▇▇ ▇▇▇▇▇▇▇" shall have the meaning set forth in Section 9.2(b).
"▇▇▇▇▇▇ ▇▇▇▇▇▇▇ GROUP" shall have the meaning set forth in Section 9.2(b).
"MORTGAGE" shall mean, with respect to each Individual Property, a first
priority Mortgage (or Deed of Trust or Deed to Secure Debt, as applicable), and
Security Agreement, dated the date hereof, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, executed and
delivered by the applicable Borrower that owns such Individual Property as
security for the Loan and encumbering such Individual Property.
"NET CASH FLOW" for any period shall mean the amount obtained by
subtracting Operating Expenses for such period from Gross Revenue for such
period. A schedule of the Net Cash Flow for each Individual Property for the
trailing twelve (12) month period ended June 30, 2000 is attached hereto as
SCHEDULE VI.
"NET PROCEEDS" shall mean: (i) the net amount of all insurance proceeds
payable as a result of a Casualty to an Individual Property, after deduction of
reasonable costs and expenses (including, but not limited to, reasonable
attorneys' fees), if any, in collecting such insurance proceeds, or (ii) the net
amount of any Award, after deduction of reasonable costs and expenses
(including, but not limited to, reasonable attorneys' fees), if any, in
collecting such Award.
"NET PROCEEDS DEFICIENCY" shall have the meaning set forth in
Section 5.3.2(f).
"NEW JERSEY BORROWER" shall mean Short Hills Hilton LLC, a Delaware limited
liability company.
"NOTE" shall have the meaning set forth in Section 2.1.3.
"NOTICE" shall have the meaning set forth in Section 11.6.
"OFFICER'S CERTIFICATE" shall mean a certificate delivered to Lender by
Borrower which is signed by an authorized senior officer of Borrower.
"OPERATING EXPENSES" shall mean all "costs and expenses" as such phrase is
used on page 18 of the Ninth (9th) Edition of the Uniform System of Accounts for
the Lodging Industry attached hereto as SCHEDULE IX, and, to the extent not
included therein, without duplication, (i) management fees (excluding incentive
management fees with respect to an Individual Property which are calculated
after payments of Debt Service allocable to the Allocated Loan Amount with
respect to such Individual Property), (ii) franchise fees, (iii) deposits of
FF&E Funds and (iv) legal and accounting expenses, but excluding income taxes,
interest expense, depreciation and amortization and FF&E Expenditures in any
period.
"ORIGINAL APPRAISED VALUE" shall mean, with respect to each Individual
Property, the amount set forth on SCHEDULE I attached hereto.
-11-
"OTHER CHARGES" shall mean all ground rents, impositions other than Taxes,
condominium assessments and any other similar charges now or hereafter levied or
assessed or imposed against the Individual Properties or any part thereof.
"PARTIAL DEFEASANCE" shall have the meaning set forth in Section 2.5.2(a).
"PARTIAL DEFEASANCE DATE" shall have the meaning set forth in Section
2.5.2(a)(i).
"PARTIAL DEFEASANCE COLLATERAL" shall mean U.S. Obligations which provide
payments (i) on or prior to, but as close as possible to, all Debt Service
Payment Dates and other scheduled payment dates, if any, under the Defeased Note
after the Defeasance Date and up to and including the Effective Maturity Date,
and (ii) in amounts equal to or greater than the respective Scheduled Defeasance
Payments related to such Debt Service Payment Dates.
"PERMITTED ENCUMBRANCES" shall mean, with respect to an Individual
Property, collectively, (i) the Liens and security interests created by the Loan
Documents, (ii) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policies relating to such Individual Property or any part thereof,
(iii) Liens, if any, for Taxes imposed by any Governmental Authority not yet
delinquent, (iv) the Liens and security interests granted in connection with the
Permitted Indebtedness to the extent permitted under the definition of Permitted
Indebtedness only, (v) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar items which in each case do not
diminish in any material respect the value, use or operation of any Individual
Property or affect in any respect the validity, enforceability or priority of
the Liens created by the Loan Documents or Borrower's ability to repay the Loan,
(vi) mechanics' liens for work performed and not yet invoiced or invoiced and
not yet delinquent, and (vii) such other title and survey exceptions as Lender
has approved or may approve in writing in Lender's sole discretion, which in the
aggregate do not materially adversely affect the value, use or operation of such
Individual Property or Borrower's ability to repay the Loan.
"PERMITTED INDEBTEDNESS" shall have the meaning set forth in
Section 3.1.24(d).
"PERMITTED INVESTMENTS" shall have the meaning set forth in the Cash
Management Agreement.
"PERMITTED TRANSFEREE" shall mean a corporation, partnership or limited
liability company acceptable to Lender in its sole discretion (except that when
"Permitted Transferee" is used in Section 8.2 "sole" shall be changed to
"reasonable").
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, any
other entity, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"PHOENIX HILTON" shall mean the Individual Property known as The Pointe
Hilton Squaw Peak Resort located in Phoenix, Arizona.
-12-
"PHYSICAL CONDITIONS REPORT" shall mean, with respect to any Individual
Property, a report prepared by a company satisfactory to Lender regarding the
physical condition of such Individual Property, satisfactory in form and
substance to Lender in its sole discretion.
"POLICIES" shall have the meaning specified in Section 5.1.1(b).
"PREPAYMENT DATE" shall mean the date on which the Loan is prepaid in
accordance with the terms hereof.
"RATING AGENCIES" shall mean, prior to the final Securitization of the
Loan, each of S&P, ▇▇▇▇▇'▇ and Fitch, or any other nationally-recognized
statistical rating agency which has been approved by Lender and, after a
Securitization, shall mean any of the foregoing that have rated the
Certificates.
"RATING AGENCY CONFIRMATION" shall mean a written affirmation from each of
the Rating Agencies that the credit rating of the Certificates by such Rating
Agency immediately prior to the occurrence of the event with respect to which
such Rating Agency Confirmation is sought will not be qualified, downgraded or
withdrawn as a result of the occurrence of such event, which affirmation may be
granted or withheld in such Rating Agency's sole and absolute discretion.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 9.2(b).
"RELEASE DATE" shall mean the earlier to occur of (a) the third anniversary
of the Closing Date or (b) the date that is two (2) years from the "startup day"
(within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust
established in connection with the final Securitization involving this Loan.
"RELEASE PROPERTY" shall have the meaning set forth in Section 2.5.2(a)(i).
"REMIC TRUST" shall mean a "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code that holds the Note.
"RENTS" shall mean, with respect to each Individual Property, all rents,
moneys payable as damages or in lieu of rent, revenues, deposits (including,
without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, and other consideration of
whatever form or nature received by or paid to or for the account of or benefit
of Borrower, Manager or their respective agents or employees from any and all
sources arising from or attributable to the Individual Property, including,
without limitation, all hotel receipts, revenues and credit card receipts
collected from guest rooms, restaurants, bars, meeting rooms, banquet rooms and
recreational facilities, all receivables, customer obligations, installment
payment obligations and other obligations now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of
the right of the use and occupancy of property or rendering of services by
Borrower or any operator or manager of the hotel or the commercial space located
in the Improvements or acquired from others (including, without limitation, from
the rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space), license,
lease, sublease and concession fees and rentals, health club membership fees,
food and beverage wholesale and retail
-13-
sales, service charges, vending machine sales and proceeds, if any, from
business interruption or other loss of income insurance.
"REQUIRED REPAIR FUNDS" shall have the meaning set forth in Section 6.1.1.
"REQUIRED REPAIRS" shall have the meaning set forth in Section 6.1.1.
"RESTORATION" shall have the meaning set forth in Section 5.2.1.
"RESTORATION THRESHOLD" shall mean, with respect to each Individual
Property, an amount equal to five percent (5%) of the initial Allocated Loan
Amount.
"SAN FRANCISCO CAPITAL IMPROVEMENTS" shall have the meaning set forth in
Section 4.1.11.
"SAN ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇" shall mean the Individual Property known as the
Hilton San Francisco & Towers located in San Francisco, California.
"SCHEDULED DEFEASANCE PAYMENTS" shall mean scheduled payments of interest
and principal under the Note in the case of a Total Defeasance and under the
Defeased Note in the case of a Partial Defeasance for all Debt Service Payment
Dates occurring after the Defeasance Date and up to and including the Effective
Maturity Date (including, in the case of a Total Defeasance, the outstanding
principal balance on the Note as of the Effective Maturity Date and, in the case
of a Partial Defeasance, the outstanding principal balance on the Defeased Note
as of the Effective Maturity Date), and all payments required after the
Defeasance Date, if any, under the Loan Documents for servicing fees, and other
similar charges.
"SECONDARY MARKET TRANSACTION" shall have the meaning set forth in
Section 9.1(a).
"SECURITIES ACT" shall have the meaning set forth in Section 9.2(a).
"SECURITIZATION" shall have the meaning set forth in Section 9.1(a).
"SECURITY AGREEMENT" shall mean a security agreement in form and substance
that would be satisfactory to a prudent lender pursuant to which Borrower grants
Lender a perfected, first priority security interest in the Defeasance
Collateral Account, the Total Defeasance Collateral and the Partial Defeasance
Collateral, as applicable.
"SERVICER" shall have the meaning set forth in Section 11.24.
"SERVICING AGREEMENT" shall have the meaning set forth in Section 11.24.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
Section 10.2(c).
"SHORT HILLS HILTON" shall mean the Individual Property known as the Hilton
at Short Hills located in Short Hills, New Jersey.
"SPC PARTY" shall have the meaning set forth in Section 3.1.24(o).
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"STATE" shall mean, with respect to an Individual Property, the State or
Commonwealth in which such Individual Property or any part thereof is located.
"SUBSTITUTE PROPERTY" shall have the meaning set forth in Section 2.7.1
hereof.
"SUBSTITUTE ALLOCATED LOAN AMOUNT" shall have the meaning set forth in
Section 2.7.1(f) hereof.
"SUBSTITUTED PROPERTY" shall have the meaning set forth in Section 2.7.1
hereof.
"SUCCESSOR BORROWER" shall have the meaning set forth in Section 2.5.4.
"SURVEY" shall mean a survey of the Individual Property in question
prepared by a surveyor licensed in the State and satisfactory to Lender and the
company or companies issuing the Title Insurance Policies, and containing a
certification of such surveyor satisfactory to Lender.
"TAX FUNDS" shall have the meaning set forth in Section 6.2.1.
"TAXES" shall mean all real estate and personal property taxes,
assessments, fees, taxes on rents or rentals, water rates or sewer rents and
other governmental charges, now or hereafter levied or assessed or imposed
against any of the Individual Properties or part thereof.
"TENANT" shall mean any Person obligated under any Lease now or hereafter
affecting all or any part of any Individual Property.
"TITLE INSURANCE POLICIES" shall mean, with respect to each Individual
Property, ALTA mortgagee title insurance policies in form acceptable to Lender
issued with respect to such Individual Property and insuring the lien of the
Mortgage encumbering such Individual Property, subject only to such customary,
nonmaterial exceptions as Lender shall approve.
"TOTAL DEFEASANCE" shall have the meaning set forth in Section 2.5.1
hereof.
"TOTAL DEFEASANCE COLLATERAL" shall mean U.S. Obligations, which provide
payments (i) on or prior to, but as close as possible to, all Debt Service
Payment Dates and other scheduled payment dates, if any, under the Note after
the Defeasance Date and up to and including the Effective Maturity Date, and
(ii) in amounts equal to or greater than the respective Scheduled Defeasance
Payments related to such Debt Service Payment Dates.
"TREASURY RATE" shall mean, as of the Effective Maturity Date, the yield,
calculated by Lender by linear interpolation (rounded to the nearest
one-thousandth of one percent (I.E., 0.001%) of the yields of non-inflation
adjusted noncallable United States Treasury obligations with terms (one longer
and one shorter) most nearly approximating the period from such date of
determination to the Maturity Date, as determined by Lender on the basis of
Federal Reserve Statistical Release H.15-Selected Interest Rates under the
heading U.S. Governmental Security/Treasury Constant Maturities, or another
recognized source of financial market information selected by Lender. Lender's
determination of the Treasury Rate shall be final absent manifest error.
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"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code
as in effect in the applicable State in which an Individual Property is located.
"UNDEFEASED NOTE" shall have the meaning set forth in Section 2.5.2(a)(iv)
hereof.
"UNDERWRITER GROUP" shall have the meaning set forth in Section 9.2(b).
"UPDATED INFORMATION" shall have the meaning set forth in
Section 9.1(b)(i).
"U.S. OBLIGATIONS" shall mean direct full faith and credit obligations of
the United States of America that are not subject to prepayment, call or early
redemption.
"VIRGINIA BORROWER" shall mean McLean Hilton LLC, a Delaware limited
liability company.
"YIELD MAINTENANCE PREMIUM" shall mean an amount equal to the greater of:
(i) one percent (1%) of the principal amount of the Loan being prepaid or (ii)
the present value, as of the Prepayment Date, of the Calculated Payments from
the Prepayment Date through the Effective Maturity Date determined by
discounting such payments at the Discount Rate. As used in this definition, the
term "PREPAYMENT DATE" shall mean the date on which prepayment is made. As used
in this definition, the term "CALCULATED PAYMENTS" shall mean the monthly
payments of interest only which would be due based on the principal amount of
the Loan being prepaid on the Prepayment Date and assuming an interest rate per
annum equal to the difference (if such difference is greater than zero) between
(y) the Initial Interest Rate and (z) the Yield Maintenance Treasury Rate. As
used in this definition, the term "DISCOUNT RATE" shall mean the rate which,
when compounded monthly, is equivalent to the Yield Maintenance Treasury Rate,
when compounded semi-annually. As used in this definition, the term "YIELD
MAINTENANCE TREASURY RATE" shall mean the yield calculated by Lender by the
linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the Prepayment Date, of U.S. Treasury Constant Maturities with maturity dates
(one longer or one shorter) most nearly approximating the Effective Maturity
Date. In the event Release H.15 is no longer published, Lender shall select a
comparable publication to determine the Yield Maintenance Treasury Rate. In no
event, however, shall Lender be required to reinvest any prepayment proceeds in
U.S. Treasury obligations or otherwise.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections and schedules are to sections and schedules in
or to this Agreement unless otherwise specified. Unless otherwise specified, the
words "hereof," "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined. The words "includes",
"including" and similar terms shall be construed as if followed by the words
"without limitation".
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II. THE LOAN
SECTION 2.1 THE LOAN.
2.1.1 AGREEMENT TO LEND AND BORROW. Subject to and upon the terms and
conditions set forth herein, Lender shall make the Loan to Borrower and Borrower
shall accept the Loan from Lender in the original principal amount of Five
Hundred Million and No/100 Dollars ($500,000,000).
2.1.2 SINGLE DISBURSEMENT TO BORROWER. Borrower shall receive only one
borrowing hereunder in respect of the Loan and any amount borrowed and repaid
hereunder in respect of the Loan may not be reborrowed.
2.1.3 THE NOTE. The Loan shall be evidenced by that certain Promissory Note
of even date herewith, in the stated principal amount of Five Hundred Million
and No/100 Dollars ($500,000,000) executed by Borrower and payable to the order
of Lender in evidence of the Loan (as the same may be amended, supplemented,
restated, increased, extended and consolidated, together with any Defeased Notes
and Undefeased Note that may exist from time to time, the "NOTE") and shall be
repaid in accordance with the terms of this Agreement and the Note.
2.1.4 USE OF PROCEEDS. Borrower shall use proceeds of the Loan on the
Closing Date to (i) pay all past-due Basic Carrying Costs, if any, in respect of
the Individual Properties, (ii) deposit the required Funds, (iii) pay costs and
expenses incurred in connection with the closing of the Loan and (iv) retain the
balance, if any, for general corporate purposes, including distributions in
respect of equity interests.
SECTION 2.2 INTEREST RATE.
2.2.1 INITIAL INTEREST RATE. Interest on the outstanding principal balance
of the Loan shall accrue from the Closing Date up to but excluding the Effective
Maturity Date at the Initial Interest Rate.
2.2.2 ADJUSTED INTEREST RATE. Interest on the outstanding principal balance
of the Loan shall accrue from and including the Effective Maturity Date to and
including the Maturity Date at the Adjusted Interest Rate.
2.2.3 DEFAULT RATE. In the event that, and for so long as, any Event of
Default shall have occurred and be continuing, the outstanding principal balance
of the Loan and, to the extent permitted by law, overdue interest in respect of
the Loan, shall accrue interest at the Default Rate.
2.2.4 INTEREST CALCULATION. Interest on the outstanding principal balance
of the Loan shall be calculated by multiplying (a) the actual number of days
elapsed in the period for which the calculation is being made by (b) a daily
rate equal to the Applicable Interest Rate or the Default Rate, as the case may
be, divided by three hundred sixty (360) by (c) the outstanding principal
balance. The accrual period for calculating interest due on each Debt Service
Payment Date shall be the calendar month immediately prior to such Debt Service
Payment Date; with
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respect to a prepayment of the Loan or a payment on the Maturity Date, interest
shall also be calculated through the day prior to such prepayment or payment.
2.2.5 USURY SAVINGS. This Agreement and the other Loan Documents are
subject to the express condition that at no time shall Borrower be required to
pay interest on the principal balance of the Loan at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of
the Maximum Legal Rate. If by the terms of this Agreement or the other Loan
Documents, Borrower is at any time required or obligated to pay interest on the
principal balance due hereunder at a rate in excess of the Maximum Legal Rate,
the Applicable Interest Rate or the Default Rate, as the case may be, shall be
deemed to be immediately reduced to the Maximum Legal Rate and all previous
payments in excess of the Maximum Legal Rate shall be deemed to have been
payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Loan does not exceed the Maximum
Legal Rate from time to time in effect and applicable to the Loan for so long as
the Loan is outstanding.
SECTION 2.3 LOAN PAYMENTS.
2.3.1 PAYMENTS BEFORE EFFECTIVE MATURITY DATE. Borrower shall make a
payment to Lender of interest only on the Closing Date for the period from the
Closing Date through the last day of the month in which the Closing Date occurs
(unless the Closing Date is the first day of a calendar month, in which case no
such separate payment of interest shall be due). Borrower shall make a payment
to Lender of principal and interest in the amount of the Monthly Debt Service
Payment Amount on the Debt Service Payment Date occurring in November, 2000 and
on each Debt Service Payment Date thereafter to and including the Effective
Maturity Date. Provided no Event of Default shall have occurred, each payment
shall be applied (a) first to accrued and unpaid interest and (b) the balance to
principal. The Monthly Payment Amount required hereunder is based upon a
twenty-five (25) year amortization schedule attached as SCHEDULE VIII.
2.3.2 PAYMENTS AFTER EFFECTIVE MATURITY DATE. On each Debt Service Payment
Date occurring from and after the Effective Maturity Date Borrower shall (a)
make a payment to Lender of principal and interest in the amount of the Monthly
Debt Service Payment Amount, such payment to be applied to interest in an amount
equal to interest that would have accrued on the outstanding principal balance
of the Loan (without adjustment for Accrued Interest) at the Initial Interest
Rate and the balance applied to principal and (b) pay to Lender amounts to be
applied to principal as set forth in Section 3.3(c) of the Cash Management
Agreement. A portion of interest accrued at the Adjusted Interest Rate in an
amount equal to interest that would have accrued from the preceding Debt Service
Payment Date to such Debt Service Payment Date, at a rate equal to the
difference between the Adjusted Interest Rate and the Initial Interest Rate,
shall be added to the outstanding principal balance on the first day of the
following month and shall earn interest at the Adjusted Interest Rate to the
extent permitted by law (such accrued interest, "ACCRUED INTEREST").
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2.3.3 PAYMENT ON MATURITY DATE. Borrower shall pay to Lender on the
Maturity Date the outstanding principal balance of the Loan, all accrued and
unpaid interest (including without limitation the Accrued Interest) and all
other amounts due hereunder and under the Note, the Mortgages and the other Loan
Documents. Lender shall have the right, at any time prior to the closing of a
Securitization, to change the Maturity Date from the Maturity Date stated herein
to the date of the Effective Maturity Date stated herein upon notice to Borrower
(in which event such change shall then be deemed effective and all provisions of
the Loan Documents with respect to periods after the Effective Maturity Date
shall no longer apply). If requested by Lender, Borrower shall promptly execute
an amendment to this Agreement to evidence such change.
2.3.4 LATE PAYMENT CHARGE. If any principal, interest or any other sum due
under the Loan Documents is not paid by Borrower on the date on which it is due,
Borrower shall pay to Lender upon demand an amount equal to the lesser of three
percent (3%) of such unpaid sum or the maximum amount permitted by applicable
law in order to defray the expense incurred by Lender in handling and processing
such delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment; provided, however, that Borrower shall not be required to
pay such amount in connection with the failure to pay a monthly installment of
Debt Service on the date due if sufficient funds were on deposit in the Monthly
Debt Service Account (as defined in the Cash Management Agreement) on such date
and Lender failed to apply same to the payment of Debt Service. Any amount
payable by Borrower pursuant to this Section 2.3.4 shall be secured by the
Mortgages and the other Loan Documents.
2.3.5 METHOD AND PLACE OF PAYMENT. (a) Except as otherwise specifically
provided herein, all payments and prepayments under this Agreement and the Note
shall be made to Lender not later than 1:00 P.M., New York City time, on the
date when due and shall be made in lawful money of the United States of America
in immediately available funds at Lender's office, and any funds received by
Lender after such time shall, for all purposes hereof, be deemed to have been
paid on the next succeeding Business Day.
(b) Whenever any payment to be made hereunder or under any other Loan
Document shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal due on the Maturity Date, interest shall be
payable at the Applicable Interest Rate or the Default Rate, as the case may be,
during such extension.
(c) All payments required to be made by Borrower hereunder or under the
Note or the other Loan Documents shall be made irrespective of, and without
deduction for, any setoff, claim or counterclaim and shall be made irrespective
of any defense thereto.
2.3.6 PAYMENTS AFTER EVENT OF DEFAULT. Any amounts received by Lender
following the occurrence of an Event of Default may be applied by Lender toward
the payment of interest and/or principal of the Loan and/or any other amounts
due under the Loan Documents in such order, priority and proportions as Lender
in its sole discretion shall determine.
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SECTION 2.4 PREPAYMENTS.
2.4.1 VOLUNTARY PREPAYMENTS. Except as otherwise provided herein with
respect to Casualty and Condemnation, Borrower shall not have the right to
prepay the Loan in whole or in part. On or after the Effective Maturity Date,
Borrower may, at its option and upon fifteen (15) days prior notice to Lender,
prepay the Debt in whole, but not in part, at any time without payment of the
Yield Maintenance Premium or any other premium or penalty. Any prepayment
received by Lender on a date other than a Debt Service Payment Date shall
include interest which would have accrued thereon to the next Debt Service
Payment Date. Any partial prepayment shall be applied to the last payments of
principal due under the Loan.
2.4.2 MANDATORY PREPAYMENTS. On each date on which Lender actually receives
a distribution of Net Proceeds with respect to any Individual Property, and if
Lender is not required to make such Net Proceeds available to Borrower for the
restoration of such Individual Property as set forth herein, Borrower shall, at
Lender's option, prepay the outstanding principal balance of the Note in an
amount equal to one hundred percent (100%) of such Net Proceeds together with
interest that would have accrued on such amount through the next Debt Service
Payment Date. No Yield Maintenance Premium shall be due in connection with any
prepayment made pursuant to this Section 2.4.2. Any prepayment received by
Lender pursuant to this Section 2.4.2 on a date other than a Debt Service
Payment Date shall be held by Lender as collateral security for the Loan and
shall be applied by Lender on the next Debt Service Payment Date. The Allocated
Loan Amount with respect to such Individual Property will be reduced in an
amount equal to such prepayment of principal.
2.4.3 PREPAYMENTS AFTER DEFAULT. If after an Event of Default, payment of
all or any part of the principal of the Loan that is not due and payable in
accordance with the terms hereof absent an acceleration is tendered by Borrower,
a purchaser at foreclosure or any other Person, such tender shall be deemed an
attempt to circumvent the prohibition against prepayment set forth in Section
2.4.1 and Borrower, such purchaser at foreclosure or other Person shall pay the
Yield Maintenance Premium, in addition to the outstanding principal balance, all
accrued and unpaid interest and other amounts payable under the Loan Documents.
SECTION 2.4.3 SPECIFICALLY ACKNOWLEDGED AND AGREED TO BY:
PHOENIX ▇▇ ▇▇▇▇▇▇ LLC, CHICAGO HILTON LLC
SHORT HILLS HILTON LLC and
▇▇▇▇▇▇ HILTON LLC,
each a Delaware limited liability company
By: Hilton Spring Corporation, ▇.▇. ▇▇▇▇▇▇, INC.,
a Delaware corporation, a Delaware corporation
its Manager
By: __________________________ By: __________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President Title: Vice President
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SECTION 2.5 DEFEASANCE.
2.5.1 TOTAL DEFEASANCE. (a) Provided no Event of Default shall have
occurred and be continuing, Borrower shall have the right at any time after the
Release Date and prior to the Effective Maturity Date to obtain a release of the
Lien of the Mortgages encumbering all Individual Properties (a "TOTAL
DEFEASANCE") upon satisfaction of the following conditions:
(i) Borrower shall provide Lender thirty (30) days prior written notice
(or such shorter period of time if permitted by Lender in its sole discretion)
specifying a date (the "DEFEASANCE DATE") on which Borrower shall have satisfied
the conditions in this Section 2.5.1 and on which it shall effect the
defeasance;
(ii) Borrower shall pay to Lender (A) all payments of principal and
interest due on the Loan to and including the Defeasance Date and (B) all other
sums, then due under the Note, this Agreement, the Mortgages and the other Loan
Documents;
(iii) Borrower shall deposit the Total Defeasance Collateral into the
Defeasance Collateral Account and otherwise comply with the provisions of
Sections 2.5.3 and 2.5.4 hereof;
(iv) Borrower shall execute and deliver to Lender a Security Agreement in
respect of the Defeasance Collateral Account and the Total Defeasance
Collateral;
(v) Borrower shall deliver to Lender an opinion of counsel for Borrower
that is standard in commercial lending transactions and subject only to normal
qualifications, assumptions and exceptions opining, among other things, that (A)
Lender has a legal and valid perfected first priority security interest in the
Defeasance Collateral Account and the Total Defeasance Collateral, (B) if a
Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a "real estate mortgage
investment conduit" within the meaning of Section 860D of the Code as a result
of the defeasance pursuant to this Section 2.5.1, (C) a defeasance pursuant to
this Section 2.5.1 will not result in a deemed exchange for purposes of the Code
and will not adversely affect the status of the Note as indebtedness for federal
income tax purposes, (D) delivery of the Total Defeasance Collateral and the
grant of a security interest therein to Lender shall not constitute an avoidable
preference under Section 547 of the Bankruptcy Code or applicable state law and
(E) if and to the extent required by the Rating Agencies, a non-consolidation
opinion with respect to the Successor Borrower;
(vi) Borrower shall deliver to Lender a confirmation in writing from the
applicable Rating Agencies to the effect that the release of the Individual
Properties from the Lien of the Mortgage as contemplated by this Section 2.5.1
and the substitution of the Total Defeasance Collateral will not result in a
downgrading, withdrawal or qualification of the respective ratings in effect
immediately prior to such defeasance for the Certificates issued in connection
with the Securitization which are then outstanding;
(vii) Borrower shall deliver an Officer's Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
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(viii) Borrower shall deliver a certificate of a "big five" or other
nationally recognized public accounting firm acceptable to Lender certifying
that the Total Defeasance Collateral will generate monthly amounts equal to or
greater than the Scheduled Defeasance Payments;
(ix) Borrower shall deliver such other certificates, opinions, documents
and instruments as Lender may reasonably request; and
(x) Borrower shall pay all costs and expenses of Lender incurred in
connection with the defeasance, including Lender's reasonable attorneys' fees
and expenses and Rating Agency fees and expenses.
(b) If Borrower has elected to defease the entire Note and the
requirements of this Section 2.5 have been satisfied, all of the Individual
Properties shall be released from the Liens of their respective Mortgages and
the Total Defeasance Collateral, pledged pursuant to the Security Agreement,
shall be the sole source of collateral securing the Note. In connection with the
release of the Liens, Borrower shall submit to Lender, not less than thirty (30)
days prior to the Defeasance Date (or such shorter time as permitted by Lender
in its sole discretion), a release of Lien (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which an Individual Property is located and that contains
standard provisions protecting the rights of a releasing lender. In addition,
Borrower shall provide all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release, together with an
Officer's Certificate certifying that such documentation (i) is in compliance
with all Legal Requirements, and (ii) will effect such releases in accordance
with the terms of this Agreement. Borrower shall pay all costs, taxes and
expenses associated with the release of the Lien of the Mortgages, including
Lender's reasonable attorneys' fees. Except as set forth in this Section 2.5, no
repayment, prepayment or defeasance of all or any portion of the Note shall
cause, give rise to a right to require, or otherwise result in, the release of
any Lien of any Mortgage on any of the Individual Properties.
2.5.2 PARTIAL DEFEASANCE. (a) Provided no Event of Default shall have
occurred and be continuing, Borrower shall have the right at any time after the
Release Date and prior to the Effective Maturity Date to obtain a release of the
Lien of the Mortgages encumbering one or more Individual Properties other than
the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Chicago Hilton (a "PARTIAL DEFEASANCE") upon
satisfaction of the following conditions:
(i) Borrower shall provide Lender thirty (30) days prior written notice
(or such shorter period of time if permitted by Lender in its sole discretion)
specifying (A) a date (the "PARTIAL DEFEASANCE DATE") on which Borrower shall
have satisfied the conditions in this Section 2.5.2 and shall effect the
defeasance and (B) the Individual Property or Properties proposed to be released
from the Lien of the Mortgages (individually a "RELEASE PROPERTY" and
collectively the "RELEASE PROPERTIES");
(ii) Borrower shall pay to Lender (A) all payments of principal and
interest due on the Loan to and including the Partial Defeasance Date and (B)
all other sums, then due under the Note, this Agreement, the Mortgages and the
other Loan Documents;
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(iii) Borrower shall deposit the Partial Defeasance Collateral into the
Defeasance Collateral Account and otherwise comply with the provisions of
Sections 2.5.3 and 2.5.4 hereof;
(iv) Borrower shall prepare all necessary documents to modify this
Agreement and to amend and restate the Note and issue two substitute notes, one
note having a principal balance equal to one hundred twenty percent (120%) of
the Allocated Loan Amount for the Release Property or Release Properties, as the
case may be (the "DEFEASED NOTE"), and the other note having a principal balance
equal to the excess of (A) the original principal amount of the Loan, over (B)
the amount of the Defeased Note (the "UNDEFEASED NOTE"). The Defeased Note and
Undefeased Note shall have identical terms as the Note except for the principal
balance. The Defeased Note and the Undefeased Note shall be cross defaulted and
cross collateralized unless the Rating Agencies shall require otherwise or
unless a Successor Borrower that is not an Affiliate of Borrower is established
pursuant to Section 2.5.4. A Defeased Note may not be the subject of any further
defeasance;
(v) Borrower shall execute and deliver to Lender a Security Agreement in
respect of the Defeasance Collateral Account and the Partial Defeasance
Collateral;
(vi) After giving effect to the release of the Lien of the Mortgages
encumbering the Individual Property or Individual Properties proposed by
Borrower to be released, the Debt Service Coverage Ratio with respect to the
remaining Individual Properties is not less than the greater of (A) the Debt
Service Coverage Ratio of all Individual Properties encumbered by the Mortgages
prior to the release and (B) 2.26x;
(vii) Borrower shall have delivered to Lender and the Rating Agencies shall
have received from Borrower with respect to the matters referred to in clause
(vi), (A) statements of the Net Cash Flow and Debt Service (both on a combined
basis and separately for the applicable Individual Property or Individual
Properties to be released) for the applicable measuring period and (B) based on
the foregoing statements of Net Cash Flow and Debt Service, calculations of the
Debt Service Coverage Ratio both with and without giving effect to the proposed
release, and (C) calculations of the ratios referred to in such clause (vi),
accompanied by an Officer's Certificate stating that such statements,
calculations and information are true, correct and complete in all material
respects;
(viii) Borrower shall deliver to Lender an opinion of counsel for Borrower
that is standard in commercial lending transactions and subject only to normal
qualifications, assumptions and exceptions opining, among other things, that (A)
Lender has a legal and valid perfected first priority security interest in the
Defeasance Collateral Account and the Partial Defeasance Collateral, (B) if a
Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a "real estate mortgage
investment conduit" within the meaning of Section 860D of the Code as a result
of the defeasance pursuant to this Section 2.5.2, (C) a defeasance pursuant to
this Section 2.5.2 will not result in a deemed exchange for purposes of the Code
and will not adversely affect the status of the Defeased Note and the Undefeased
Note as indebtedness for federal income tax purposes, (D) delivery of the
Partial Defeasance Collateral and the grant of a security interest therein to
Lender shall not constitute an avoidable preference under Section 547 of the
Bankruptcy Code or applicable state
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law and (E) if required by the Rating Agencies, a non-consolidation opinion with
respect to the Successor Borrower;
(ix) Borrower shall deliver to Lender evidence in writing from the
applicable Rating Agencies to the effect that the release of the Individual
Property or Individual Properties from the Lien of the Mortgage as contemplated
by this Section 2.5.2 and the substitution of the Partial Defeasance Collateral
will not result in a downgrading, withdrawal or qualification of the respective
ratings in effect immediately prior to such defeasance for the Certificates
issued in connection with the Securitization which are then outstanding;
(x) Borrower shall deliver a certificate of a "big five" or other
nationally recognized public accounting firm acceptable to Lender certifying
that the Partial Defeasance Collateral will generate monthly amounts equal to or
greater than the Scheduled Defeasance Payments;
(xi) Borrower shall deliver to Lender an Officer's Certificate certifying
that the requirements set forth in this Section 2.5.2(a) have been satisfied;
(xii) Borrower shall deliver to Lender such other certificates, documents
or instruments as Lender may reasonably request; and
(xiii) Borrower shall pay all costs and expenses of Lender incurred in
connection with the defeasance, including Lender's reasonable attorneys' fees
and expenses and Rating Agency expenses.
(b) If Borrower has elected to make a Partial Defeasance and the
requirements of this Section 2.5 have been satisfied, the Release Property or
Release Properties shall be released from the Lien of their Mortgage. In
connection with the release of the Lien, Borrower shall submit to Lender, not
less than thirty (30) days prior to the Partial Defeasance Date (or such shorter
time as permitted by Lender in its sole discretion), a release of Lien (and
related Loan Documents) for execution by Lender. Such release shall be in a form
appropriate in the jurisdiction in which such Individual Property is located and
that contains standard provisions protecting the rights of a releasing lender.
In addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all Legal Requirements, and (ii) will effect such releases in
accordance with the terms of this Agreement. Borrower shall pay all costs, taxes
and expenses associated with the release of the Lien of the Mortgages, including
Lender's reasonable attorneys' fees. Borrower shall cause title to the
Individual Property so released from the Lien of the Mortgage to be transferred
to and held by a Person other than Borrower. Except as set forth in this Section
2.5, no repayment, prepayment or defeasance of all or any portion of the Note
shall cause, give rise to a right to require, or otherwise result in, the
release of any Lien of any Mortgage on any of the Individual Properties.
2.5.3 DEFEASANCE COLLATERAL ACCOUNT. On or before the date on which
Borrower delivers the Total Defeasance Collateral or Partial Defeasance
Collateral, Successor Borrower shall open at any Eligible Institution the
defeasance collateral account (the
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"DEFEASANCE COLLATERAL ACCOUNT") which shall at all times be an Eligible
Account. The Defeasance Collateral Account shall contain only (i) Total
Defeasance Collateral or Partial Defeasance Collateral, as applicable, and (ii)
cash from interest and principal paid on the Total Defeasance Collateral or
Partial Defeasance Collateral. All cash from interest and principal payments
paid on the Total Defeasance Collateral or Partial Defeasance Collateral shall
be paid over to Lender on each Debt Service Payment Date and applied first to
accrued and unpaid interest and then to principal. Any cash from interest and
principal paid on the Total Defeasance Collateral or the Partial Defeasance
Collateral not needed to pay accrued and unpaid interest or principal shall be
retained in the Defeasance Collateral Account as additional collateral for the
Loan. Borrower shall cause the Eligible Institution at which the Total
Defeasance Collateral and Partial Defeasance Collateral are deposited to enter
an agreement with Borrower and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Institution shall agree to hold and
distribute the Total Defeasance Collateral or Partial Defeasance Collateral, as
applicable, in accordance with this Agreement. The Successor Borrower shall be
the owner of the Defeasance Collateral Account and shall report all income
accrued on Total Defeasance Collateral and Partial Defeasance Collateral for
federal, state and local income tax purposes in its income tax return. Borrower
shall prepay all costs and expenses associated with opening and maintaining the
Defeasance Collateral Account. Lender shall not in any way be liable by reason
of any insufficiency in the Defeasance Collateral Account.
2.5.4 SUCCESSOR BORROWER. In connection with a Total Defeasance or Partial
Defeasance under this Section 2.5, Borrower shall, if required by the Rating
Agencies or if Borrower so elects, establish or designate a successor entity
(the "SUCCESSOR BORROWER") which shall be a single purpose bankruptcy remote
entity and which shall be approved by the Rating Agencies. Any such Successor
Borrower may, at Borrower's option, be an Affiliate of Borrower unless the
Rating Agencies shall require otherwise. Borrower shall transfer and assign all
obligations, rights and duties under and to the Note or the Defeased Note, as
applicable, together with the Total Defeasance Collateral or the Partial
Defeasance Collateral, as applicable, to such Successor Borrower. Such Successor
Borrower shall assume the obligations under the Note or the Defeased Note, as
applicable, and the Security Agreement and Borrower shall be relieved of its
obligations under such documents except to the extent of any cross
collateralization required hereunder and except for property-related obligations
which survive the payment of the Debt. Borrower shall pay $1,000 to any such
Successor Borrower as consideration for assuming the obligations under the Note
or the Defeased Note, as applicable, and the Security Agreement. Borrower shall
pay all costs and expenses incurred by Lender, including Lender's attorney's
fees and expenses, incurred in connection therewith.
SECTION 2.6 CASH MANAGEMENT.
Borrower shall direct the Manager to deposit all Rents (excluding security,
utility and other deposits) in accordance with the Clearing Account Agreements
and the Cash Management Agreement.
SECTION 2.7 PROPERTY SUBSTITUTIONS.
2.7.1 CONDITIONS TO SUBSTITUTION. Subject to the terms and conditions set
forth in this Section 2.7, Borrower may obtain a release of the Lien of a
Mortgage and the related Loan
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Documents encumbering an Individual Property (each, a "SUBSTITUTED PROPERTY" and
collectively, the "SUBSTITUTED PROPERTIES") by substituting therefor one or more
full service hotel properties (collectively, a "SUBSTITUTE PROPERTY") of
comparable or better quality and physical condition to that of the Substituted
Property on the Closing Date, provided that (a) no such substitution may occur
after the Effective Maturity Date, (b) such substitution shall not be allowed
for the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or the Chicago Hilton at any time and (c) no such
substitution shall be permitted prior to the earlier of (x) the second (2nd)
anniversary of the Closing Date or (y) the final Securitization of the Loan. In
addition, any such substitution shall be subject, in each case, to the
satisfaction of the following conditions precedent:
(a) Simultaneously with the substitution, Borrower shall convey fee simple
title to the Substituted Property to a Person other than Borrower.
(b) Lender shall have received an appraisal of the Substitute Property
dated no more than sixty (60) days prior to the substitution by an appraiser
acceptable to the Rating Agencies, indicating an appraised value of the
Substitute Property that is equal to or greater than the value of the
Substituted Property determined by Lender at or about the Closing Date.
(c) Immediately after giving effect to the substitution, the Debt Service
Coverage Ratio for the Loan for all of the Individual Properties (including the
Substitute Property but excluding the Substituted Property) is not less than the
greater of (i) 2.26x and (ii) the Debt Service Coverage Ratio for the Loan for
all of the Individual Properties (including the Substituted Property but
excluding the Substitute Property) as of the date immediately preceding the
substitution.
(d) Lender shall have received confirmation in writing from the Rating
Agencies to the effect that such substitution will not result in a withdrawal,
qualification or downgrade of the respective ratings in effect immediately prior
to such substitution for the Certificates issued in connection with the
Securitization that are then outstanding. If a Securitization has not occurred,
Lender shall have approved the Substitute Property in its reasonable discretion.
(e) No Default or Event of Default shall have occurred and be continuing
and Borrower shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each Loan Document on Borrower's
part to be observed or performed. Lender shall have received an Officer's
Certificate in form and substance satisfactory to the Rating Agencies confirming
the foregoing, stating that the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents including, without
limitation, the representations and warranties set forth in Section 3.1 of this
Agreement, are true and correct in all material respects on and as of the date
of the substitution with respect to Borrower, the Individual Properties and the
Substitute Property and containing any other representations and warranties with
respect to Borrower, the Individual Properties, the Substitute Property or the
Loan as the Rating Agencies may require and as are customary in property
substitutions similar to the substitution of the Substitute Property for the
Substituted Property in connection with lending transactions similar to the Loan
and as are consistent with the facts covered by such representations and
warranties as they exist as of the date thereof, which representations and
warranties shall survive for so long as any amount remains payable to Lender
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under this Agreement or any of the other Loan Documents, it being understood,
however, that such representations and warranties shall have been made only as
of the date of the substitution.
(f) Borrower shall have executed, acknowledged and delivered to Lender
(i) a Mortgage, an Assignment of Leases and two UCC Financing Statements for
jurisdictions requested by Lender with respect to the Substitute Property,
together with a letter from Borrower countersigned by a title insurance company
acknowledging receipt of such Mortgage, Assignment of Leases and UCC-1 Financing
Statements and agreeing to record or file, as applicable, such Mortgage,
Assignment of Leases and Rents and one of the UCC-1 Financing Statements in the
real estate records for the county in which the Substitute Property is located
and to file one of the UCC-1 Financing Statements in the office of the Secretary
of State of the state in which the Substitute Property is located, so as to
effectively create upon such recording and filing valid and enforceable Liens
upon the Substitute Property, of the requisite priority, in favor of Lender (or
such other trustee as may be desired under local law), subject only to the
Permitted Encumbrances and such other Liens as are permitted pursuant to the
Loan Documents, (ii) an Environmental Indemnity with respect to the Substitute
Property, and (iii) such amendments to the Loan Documents as may be required in
order to evidence the substitution. The Mortgage, Assignment of Leases, UCC-1
Financing Statements and Environmental Indemnity shall be the same in form and
substance as the counterparts of such documents executed and delivered with
respect to the related Substituted Property subject to modifications reflecting
the Substitute Property as the Individual Property that is the subject of such
documents and such modifications reflecting the laws of the state in which the
Substitute Property is located as shall be recommended by the counsel admitted
to practice in such state and delivering the opinion as to the enforceability of
such documents required pursuant to clause (n) below. The Mortgage encumbering
the Substitute Property shall secure all amounts evidenced by the Note, provided
that in the event that the jurisdiction in which the Substitute Property is
located imposes a mortgage recording, intangibles or similar tax and does not
permit the allocation of indebtedness for the purpose of determining the amount
of such tax payable, the principal amount secured by such Mortgage shall be
equal to one hundred fifty percent (150%) of the amount of the Loan allocated to
the Substitute Property. The amount of the Loan allocated to, and the Allocated
Loan Amount of, the Substitute Property (such amount being hereinafter referred
to as the "SUBSTITUTE ALLOCATED LOAN AMOUNT") shall equal the Allocated Loan
Amount of the related Substituted Property. In the event that the Substitute
Property is owned by a Person that is not a Borrower prior to such substitution,
such Person shall execute and deliver an agreement pursuant to which such Person
shall assume all of Borrower's obligations under the Loan Documents.
(g) Lender shall have received (i) a "tie-in" or similar endorsement to
each Title Insurance Policy insuring the Lien of an existing Mortgage evidencing
the substitution of the Substitute Property for the Substituted Property, to the
extent such endorsements are available in the related jurisdictions, and (ii) a
Title Insurance Policy (or a marked, signed and redated commitment to issue such
Title Insurance Policy) insuring the Lien of the Mortgage encumbering the
Substitute Property, issued by one or more of the title companies that issued
the Title Insurance Policies insuring the Lien of the existing Mortgages and
dated as of the date of the substitution, with reinsurance and direct access
agreements that replace such agreements issued in connection with the Title
Insurance Policy insuring the Lien of the Mortgage encumbering the Substituted
Property. The Title Insurance Policy issued with respect to the
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Substitute Property shall (A) provide coverage in the amount of the Substitute
Allocated Loan Amount if the "tie-in" or similar endorsement described above is
available or, if such endorsement is not available, in an amount equal to one
hundred fifty percent (150%) of the Substitute Allocated Loan Amount, (B) insure
Lender that the relevant Mortgage creates a valid first lien on fee estate of
the Substitute Property, free and clear of all exceptions from coverage other
than Permitted Encumbrances (other than clause (ii) of the definition of such
term herein) and standard exceptions and exclusions from coverage (as modified
by the terms of any endorsements), (C) contain such endorsements and affirmative
coverages as are contained in the Title Insurance Policies insuring the Liens of
the existing Mortgages, and (D) name Lender as the insured. Lender also shall
have received copies of paid receipts or other evidence acceptable to Lender
showing that all premiums in respect of such endorsements and Title Insurance
Policies have been paid. In no event shall Substitute Property be an interest in
a ground lease in connection with any substitution prior to a Securitization.
Subsequent to a Securitization, a Substitute Property affected by a ground lease
shall be permitted only if such ground lease satisfies the then-current criteria
of the Rating Agencies, as evidenced by written confirmation from the Rating
Agencies that such ground lease will not result in the qualification, downgrade
or withdrawal of the then current ratings assigned to the Certificates, Lender
shall have received an estoppel certificate from the ground lessor that
satisfies the then-current criteria of the Rating Agencies and Lender shall have
received an opinion of Borrower's counsel stating that such ground lease
satisfies all applicable ERISA requirements.
(h) Lender shall have received (i) an endorsement to the Title Insurance
Policy insuring the Lien of the Mortgage encumbering the Substitute Property
insuring that the Substitute Property constitutes a separate tax lot or, if such
an endorsement is not available in the state in which the Substitute Property is
located, a letter from the title insurance company issuing such Title Insurance
Policy stating that the Substitute Property constitutes a separate tax lot, (ii)
a letter from the appropriate Governmental Authority stating that the Substitute
Property constitutes a separate tax lot or (iii) copies of tax assessments from
the appropriate taxing authority demonstrating that the Substitute Property
constitutes a separate tax lot.
(i) Lender shall have received a current title survey for each Substitute
Property, certified to the title company and Lender and their successors and
assigns, in the same form and having the same content as the certification of
the Survey of the Substituted Property prepared by a professional land surveyor
licensed in the state in which the Substitute Property is located and acceptable
to the Rating Agencies in accordance with the 1997 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys. Such survey shall reflect the
same legal description contained in the Title Insurance Policy relating to such
Substitute Property and shall include, among other things, a metes and bounds
description of the real property comprising part of such Substitute Property or
other type of real property description (e.g., block and lot) that is
customarily used in the jurisdiction in which the Substitute Property is
located. The surveyor's seal shall be affixed to each survey and each survey
shall certify that the surveyed property is not located in a "one-hundred-year
flood hazard area" (or, if it is so located, such property shall be covered by
flood insurance meeting the requirements set forth in Section 5.1.1(a)(i)
hereof).
(j) Lender shall have received valid certificates of insurance indicating
that the requirements for the Policies required for an Individual Property
hereunder have been satisfied
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with respect to the Substitute Property and evidence of the payment of all
premiums payable for the existing policy period.
(k) Lender shall have received a Phase I environmental report and, if
recommended under the Phase I environmental report, a Phase II environmental
report, which conclude that the Substitute Property does not contain any
Hazardous Substance (as defined in the Environmental Indemnity) and is not
subject to any risk of contamination from any off-site Hazardous Substance. If
any such report discloses the presence of any Hazardous Substance or the risk of
contamination from any off-site Hazardous Substance, a substitution shall not be
allowed with respect to such proposed Substitute Property at any time prior to a
Securitization. If, subsequent to a Securitization, any such report discloses
the presence of any Hazardous Substance or the risk of contamination from any
off-site Hazardous Substance, such report shall include an estimate of the cost
of any related remediation required to be undertaken by an environmental
consultant selected by Lender and Borrower shall deposit with Lender an amount
equal to one hundred twenty-five percent (125%) of such estimated cost, which
deposit shall constitute additional security for the Loan and shall be released
to Borrower upon the delivery to Lender of (i) an update to such report
indicating that there is no longer any Hazardous Substance on the Substitute
Property or any danger of contamination from any off-site Hazardous Substance
that has not been fully remediated and (ii) a certificate from Borrower stating
that all such remediation work has been paid in full. As used in this paragraph,
Hazardous Substance shall not include any cleaning or other products generally
used in connection with, and necessary and appropriate for, the routine
maintenance or repair of the Substitute Property or the operation thereof in
accordance herewith, which are used, stored and disposed of in compliance with
Environmental Law (as defined in the Environmental Indemnity).
(l) Lender shall have received a Physical Conditions Report with respect
to the Substitute Property stating that the Substitute Property and its use
comply in all material respects with all applicable Legal Requirements
(including, without limitation, zoning, subdivision and building laws) and that
the Substitute Property is in good condition and repair and free of material
damage or waste. If compliance with any Legal Requirements are not addressed by
the Physical Conditions Report, such compliance shall be confirmed by delivery
to Lender of a letter from the municipality in which such Property is located,
or a certificate of a surveyor that is licensed in the state in which the
Substitute Property is located (with respect to zoning and subdivision laws, if
offered in the jurisdiction in which the Substitute Property is located), or an
ALTA 3.1 zoning endorsement to the Title Insurance Policy delivered pursuant to
clause above (with respect to zoning laws) or a subdivision endorsement to the
Title Insurance Policy delivered pursuant to clause (i) above (with respect to
subdivision laws). If the Physical Conditions Report recommends that any
immediate repairs be made with respect to the Substitute Property, a
substitution shall not be allowed with respect to such proposed Substitute
Property at any time prior to a Securitization. If, subsequent to a
Securitization, any such Physical Conditions Report recommends that any
immediate repairs be made with respect to the Substitute Property, such report
shall include an estimate of the cost of such recommended repairs and Borrower
shall deposit with Lender an amount equal to one hundred twenty-five percent
(125%) of such estimated cost (less the amount of FF&E Funds deposited for such
immediate repairs, provided such repairs are included in a capital expenditures
program for such Substitute Property), which deposit shall constitute additional
security for the Loan and shall be released to Borrower upon the delivery to
Lender of (i) an update to such Physical Conditions Report or a letter from the
engineer that prepared such Physical Conditions
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Report indicating that the recommended repairs were completed in good and
workmanlike manner and (ii) paid receipts indicating that the costs of all such
repairs have been paid.
(m) Borrower shall deliver or cause to be delivered to Lender (i) updates
certified by Borrower of all organizational documentation related to Borrower
and/or the formation, structure, existence, good standing and/or qualification
to do business delivered to Lender in connection with the Closing Date; (ii)
good standing certificates, certificates of qualification to do business in the
jurisdiction in which the Substitute Property is located (if required in such
jurisdiction) and (iii) resolutions of the Borrower authorizing the substitution
and any actions taken in connection with such substitution.
(n) Lender shall have received the following opinions of Borrower's
counsel: (i) an opinion or opinions of counsel admitted to practice under the
laws of the state in which the Substitute Property is located stating that the
Loan Documents delivered with respect to the Substitute Property pursuant to
clause (f) above are valid and enforceable in accordance with their terms,
subject to the laws applicable to creditors' rights and equitable principles,
and that Borrower is qualified to do business and in good standing under the
laws of the jurisdiction where the Substitute Property is located or that
Borrower is not required by applicable law to qualify to do business in such
jurisdiction; (ii) an opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP or such other
counsel acceptable to the Rating Agencies stating that the Loan Documents
delivered with respect to the Substitute Property pursuant to clause (f) above
were duly authorized, executed and delivered by Borrower and that the execution
and delivery of such Loan Documents and the performance by Borrower of its
obligations thereunder will not cause a breach of, or a default under, any
agreement, document or instrument to which Borrower is a party or to which it or
its properties are bound; (iii) an opinion of Borrower's counsel acceptable to
the Rating Agencies stating that subjecting the Substitute Property to the Lien
of the related Mortgage and the execution and delivery of the related Loan
Documents does not and will not affect or impair the ability of Lender to
enforce its remedies under all of the Loan Documents or to realize the benefits
of the cross-collateralization provided for thereunder; (iv) an update of the
Insolvency Opinion indicating that the substitution does not affect the opinions
set forth therein or, if the Substitute Property is owned by a Person that is
not a Borrower as of the Closing Date, a replacement Insolvency Opinion and (v)
an opinion of counsel acceptable to the Rating Agencies that the substitution
does not constitute a "significant modification" of the Loan under Section 1001
of the Code or otherwise cause a tax to be imposed on a "prohibited transaction"
by any REMIC Trust.
(o) Borrower shall have paid or created adequate reserves for payment of
all Basic Carrying Costs relating to the Individual Properties and the
Substitute Property through the date of substitution, including without
limitation, (i) accrued but unpaid insurance premiums relating to the Individual
Properties and the Substitute Property, (ii) currently due Taxes (including any
in arrears) relating to the Individual Properties and the Substitute Property
and (iii) currently due Other Charges relating to the Individual Properties and
Substitute Property.
(p) Borrower shall have paid to Lender a substitution fee of $25,000 for
each Substituted Property and shall have paid or reimbursed Lender for all
reasonable out-of-pocket costs and expenses incurred by Lender (including,
without limitation, reasonable attorneys fees
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and disbursements) in connection with the substitution and Borrower shall have
paid all recording charges, filing fees, taxes or other expenses (including,
without limitation, mortgage and intangibles taxes and documentary stamp taxes)
payable in connection with the substitution. Borrower shall have paid all costs
and expenses of the Rating Agencies incurred in connection with the
substitution.
(q) Lender shall have received annual operating statements and occupancy
statements for the Substitute Property for the three (3) years immediately prior
to the date of substitution (or such lesser time as the Substitute Property has
had operations under the management of the Borrower or an Affiliate of the
Borrower except to the extent such statements for prior periods have been made
available to Borrower or an Affiliate of Borrower), and audited financial
statements for the most current completed Fiscal Year and a current operating
statement for the Substituted Property, each certified to Lender as being true
and correct and a certificate from Borrower certifying that there has been no
material adverse change in the financial condition of the Substitute Property
since the date of such operating statements.
(r) Borrower shall have delivered to Lender estoppel certificates in a
form reasonably acceptable to Lender from tenants under Major Leases at the
Substitute Property to which Borrower will be a party. If an estoppel
certificate indicates that all tenant improvement work required under the
subject lease has not yet been completed, Borrower shall, if required by the
Rating Agencies, deliver to Lender financial statements indicating that Borrower
has adequate funds to pay all costs related to such tenant improvement work as
required under such lease.
(s) Lender shall have received copies of all Major Leases and Material
Agreements relating to the leasing and operation of the Substitute Property to
which Borrower will be a party together with a certification of Borrower
attached to each such Major Lease and Material Agreements certifying that the
attached copy is a true and correct copy of such Major Lease and Material
Agreement and all amendments thereto.
(t) Lender shall have received a subordination, nondisturbance and
attornment agreement with respect to each Major Lease affecting the Substitute
Property other than any Lease that is, by its terms, subordinate to the Mortgage
with respect to the Substitute Property and, if the law of the State where the
Substitute Property is located allows the tenant under the Lease in question to
treat such Major Lease as terminated in the event of sale by foreclosure or
power of sale, provides for attornment to a subsequent owner in the case of sale
by foreclosure or power of sale.
(u) Lender shall have received a certified copy of the Management
Agreement for the Substitute Property and the Manager shall have executed and
delivered to Lender an Assignment of Management Agreement for such Management
Agreement. Each new Manager shall execute and deliver to Lender a Clearing
Account Agreement and such other documents as may be required in order to
confirm such Manager's compliance with the cash management procedures set forth
in the Loan Documents. Each new Manager or Management Agreement shall be subject
to written confirmation from the Rating Agencies that such Manager or Management
Agreement will not result in the qualification, downgrade or withdrawal of the
then current ratings assigned to the Certificates.
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(v) Lender shall have received such other and further approvals, opinions,
documents and information in connection with the substitution as the Rating
Agencies may have requested.
(w) Upon satisfaction of the foregoing, but not less than thirty (30) days
prior to the date of such substitution (or such shorter period as is approved by
Lender in its sole discretion), Borrower shall submit to Lender a release of
Lien (and related Loan Documents) for the Substituted Property for execution by
Lender. Such release shall be in a form appropriate for the jurisdiction in
which the Substituted Property is located and satisfactory to Lender in its sole
discretion. Borrower shall deliver an Officer's Certificate certifying that the
requirements set forth in this Section 2.7.1 have been satisfied.
2.7.2 RELEASE AND SUBSTITUTION. Upon the satisfaction of the foregoing
conditions precedent, Lender will release its Lien from the Substituted Property
to be released and the Substitute Property shall be deemed to be an Individual
Property for purposes of this Agreement and the Substitute Allocated Loan Amount
with respect to such Substitute Property shall be deemed to be the Allocated
Loan Amount with respect to such Substitute Property for all purposes hereunder.
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1 BORROWER REPRESENTATIONS.
Borrower represents and warrants that:
3.1.1 ORGANIZATION. Each of Borrower and SPC Party is duly organized,
validly existing and in good standing with full power and authority to own its
assets and conduct its business, is duly qualified in all jurisdictions in which
the ownership or lease of its property or the conduct of its business requires
such qualification and Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents by it, and has the power and authority to execute, deliver and perform
under this Agreement and the other Loan Documents and all the transactions
contemplated hereby.
3.1.2 PROCEEDINGS. This Agreement and the other Loan Documents have been
duly authorized, executed and delivered by Borrower and constitute a legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.1.3 NO CONFLICTS. The execution and delivery of this Agreement and the
other Loan Documents by Borrower and the performance of its obligations
hereunder and thereunder will not conflict with any provision of any law or
regulation to which Borrower is subject, or conflict with, result in a breach
of, or constitute a default under, any of the terms, conditions or provisions of
any of Borrower's organizational documents or any agreement or instrument to
which Borrower is a party or by which it is bound, or any order or decree
applicable to Borrower,
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or result in the creation or imposition of any lien on any of Borrower's assets
or property (other than pursuant to the Loan Documents).
3.1.4 LITIGATION. There is no action, suit, proceeding or investigation
pending or, to the best of Borrower's knowledge, threatened against Borrower or
any Individual Property in any court or by or before any other Governmental
Authority which would materially and adversely affect the ability of Borrower to
carry out the transactions contemplated by this Agreement.
3.1.5 AGREEMENTS. Borrower is not in default with respect to any Material
Agreement or any order or decree of any court or any order, regulation or demand
of any Governmental Authority, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of Borrower or the Individual Properties or might have consequences that would
materially and adversely affect its performance hereunder.
3.1.6 CONSENTS. No consent, approval, authorization or order of any
Governmental Authority is required for the execution, delivery and performance
by Borrower of, or compliance by Borrower with, this Agreement or the
consummation of the transactions contemplated hereby, other than those which
have been obtained by Borrower.
3.1.7 TITLE. Borrower has good, marketable and insurable title in fee
simple to the real property comprising part of the Individual Properties owned
by it and good title to the balance of such Individual Properties, free and
clear of all Liens whatsoever except the Permitted Encumbrances. Borrower also
represents that there are no matters in the Title Insurance Policies which would
constitute monetary liens on the Individual Properties other than items (i),
(iii), (iv) and (vi) in the definition of "Permitted Encumbrances" herein. Each
Mortgage, when properly recorded in the appropriate records, together with any
Uniform Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, first priority, perfected lien on all of
Borrower's right, title and interest in and to the applicable Individual
Property, subject only to Permitted Encumbrances and (ii) perfected security
interests in and to, and perfected collateral assignments of, all of Borrower's
right, title and interest in and to personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances. There are no mechanics', materialman's or other similar
liens or claims which have been filed for work, labor or materials affecting any
Individual Property which are or may be liens prior to, or equal or coordinate
with, the lien of the related Mortgage, unless such lien is insured against
under the related title insurance policy or is a Permitted Encumbrance. The
Permitted Encumbrances do not and will not materially and adversely affect (a)
the ability of Borrower to pay the Loan or (b) the use or operation of any
Individual Property or the value thereof.
3.1.8 NO PLAN ASSETS. Borrower is not an "employee benefit plan," as
defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the
assets of Borrower constitutes or will constitute "plan assets" of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (i)
Borrower is not a "governmental plan" within the meaning of Section 3(32) of
ERISA and (ii) transactions by or with Borrower are not subject to
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state statutes regulating investment of, and fiduciary obligations with respect
to, governmental plans.
3.1.9 COMPLIANCE. Borrower and each of the Individual Properties and the
use thereof comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances and
codes. Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the violation of which would
reasonably be expected to materially and adversely affect the condition
(financial or otherwise) or business of Borrower. Borrower has not received
notice that it has committed any act which would reasonably be expected to give
any Governmental Authority the right to cause Borrower to forfeit any of the
Individual Properties or any part thereof or any monies paid in performance of
Borrower's obligations under any of the Loan Documents.
3.1.10 FINANCIAL INFORMATION. The historical financial data delivered to
the Lender on or prior to the Closing Date, including, without limitation, the
statements of cash flow and income and operating expense, that have been
prepared by Borrower or any other Affiliate of Borrower and delivered to Lender
in respect of the Individual Properties (i) are true, complete and correct in
all material respects, (ii) accurately represent the financial condition of the
Individual Properties as of the date of such reports, and (iii) with respect to
annual audited financial statements, have been prepared in accordance with GAAP
throughout the periods covered. To Borrower's knowledge, all historical
financial data, including, without limitation, the statements of cash flow and
income and operating expense, that have been prepared by any other Person and
delivered to Lender by Borrower in respect of the Individual Properties (i) are
true, complete and correct in all material respects, and (ii) accurately
represent the financial condition of the Individual Properties as of the date of
such reports. Except as referred to or reflected in said financial data,
Borrower does not have any material contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments in each case that are material and known
to Borrower. Since December 31, 1999, there has been no material adverse change
in the financial condition, operations or business of Borrower or the Individual
Properties from that set forth in said financial statements.
3.1.11 CONDEMNATION. No Condemnation or other proceeding has been commenced
or, to Borrower's best knowledge, is contemplated with respect to all or any
portion of any of the Individual Properties or for the relocation of roadways
providing access to any of the Individual Properties.
3.1.12 UTILITIES AND PUBLIC ACCESS. Each of the Individual Properties has
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service such Individual Property for its
respective intended uses.
3.1.13 SEPARATE LOTS. Each Individual Property is comprised of one (1) or
more parcels which constitutes a separate tax lot and does not constitute a
portion of any other tax lot not a part of such Individual Property.
3.1.14 ASSESSMENTS. There are no pending or, to the best of Borrower's
knowledge, proposed special or other assessments for public improvements or
otherwise
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affecting any of the Individual Properties, nor are there, to the best of
Borrower's knowledge, any contemplated improvements to any of the Individual
Properties that may result in such special or other assessments.
3.1.15 ENFORCEABILITY. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the defense
of usury, nor would the operation of any of the terms of the Loan Documents, or
the exercise of any right thereunder, render the Loan Documents unenforceable,
and Borrower has not asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.
3.1.16 ASSIGNMENT OF LEASES. Each Assignment of Leases creates a valid
assignment of, or a valid security interest in, certain rights under the related
Leases, subject only to a license granted to Borrower to exercise certain rights
and to perform certain obligations of the lessor thereunder, including the right
to operate the related Individual Property. No Person other than Lender has any
interest in or assignment of Borrower's interest in the Leases or any portion of
the Rents due and payable thereunder.
3.1.17 INSURANCE. Each building or other improvement located on each
Individual Property is insured in accordance with the requirements of this
Agreement; all premiums on such insurance policies required to be paid as of the
date hereof have been paid; such insurance policies require thirty (30) days
prior notice to the insured of termination or cancellation, and no such notice
has been received. Neither Borrower nor, to the best of Borrower's knowledge,
any other Person, has done, by act or omission, anything which would impair the
coverage of any such policy.
3.1.18 LICENSES. All material certifications, permits, licenses and
approvals, including without limitation, liquor licenses and certificates of
occupancy required by any Governmental Authority for the use, occupancy and
operation of each of the Individual Properties in the manner in which such
Individual Property is currently being used, occupied and operated have been
obtained and are in full force and effect. Each Individual Property has a
certificate of occupancy or other local equivalent (where required by applicable
Legal Requirements) and the use being made of each Individual Property is in
material conformity with such certificate of occupancy
3.1.19 FLOOD ZONE. Except as shown on the Surveys, none of the Improvements
on any of the Individual Properties are located in an area identified by the
Federal Emergency Management Agency as a special flood hazard area and, to the
extent that any part of any Individual Property is located in an area identified
by the Federal Emergency Management Agency as an area federally designated a
"100 year flood plain," such Individual Property is covered by flood insurance
meeting the requirements set forth in Section 5.1.1(a)(i) hereof.
3.1.20 PHYSICAL CONDITION. Each of the Individual Properties, including,
without limitation, all buildings, improvements, parking facilities, sidewalks,
storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, is in good
condition, order and repair in all material respects; there exists no material
structural or other defects or damages in any of the Individual Properties,
whether latent
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or otherwise, and Borrower has not received notice from any insurance company or
bonding company of any defects or inadequacies in any of the Individual
Properties, or any part thereof, which would adversely affect the insurability
of the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or
bond.
3.1.21 BOUNDARIES. All of the improvements which were included in
determining the appraised value of each Individual Property lie wholly within
the boundaries and building restriction lines of such Individual Property, and
no improvements on adjoining properties encroach upon such Individual Property,
and no easements or other encumbrances affecting the applicable Individual
Property encroach upon any of the improvements, so as to affect the value or
marketability of the applicable Individual Property except those which are
insured against by title insurance.
3.1.22 LEASES. The Individual Properties are not subject to any Leases
other than the Leases described in SCHEDULE VII attached hereto and made a part
hereof. The Leases identified on SCHEDULE VII are in full force and effect and
there are no defaults thereunder by either party. No Rent in excess of one
million dollars ($1,000,000) in the aggregate for all the Individual Properties
has been paid more than one (1) month in advance of its due date. All work to be
performed by Borrower under each Lease has been performed as required and has
been accepted by the applicable tenant, and any payments, free rent, partial
rent, rebate of rent or other payments, credits, allowances or abatements
required to be given by Borrower to any tenant has already been received by such
tenant.
3.1.23 TAXES. All transfer taxes, deed stamps, intangible taxes or other
amounts in the nature of transfer taxes required to be paid under applicable
Legal Requirements in connection with the transfer of the Individual Properties
to Borrower have been paid. All mortgage, mortgage recording, stamp, intangible
or other similar tax required to be paid under applicable Legal Requirements in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including, without
limitation, the Mortgages, have been paid or will be paid by Borrower upon
recordation of the Mortgages. All taxes and governmental assessments due and
owing by Borrower in respect of each Individual Property have been paid, or an
escrow of funds in an amount sufficient to cover such payments has been
established hereunder or are insured against by the title insurance policy to be
issued in connection with the Mortgages.
3.1.24 SINGLE PURPOSE. Borrower hereby represents and warrants to, and
covenants with, Lender that as of the date hereof and until such time as the
Debt shall be paid in full:
(a) Borrower does not own and will not own any asset or property other
than (i) the Individual Properties, and (ii) incidental personal property
necessary for the ownership or operation of the Individual Properties.
(b) Borrower will not engage in any business other than the ownership,
management and operation of the Individual Properties.
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(c) Borrower will not enter into any contract or agreement with any
Affiliate of Borrower, any constituent party of Borrower or any Affiliate of any
constituent party, except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an arms-length
basis with third parties other than any such party.
(d) Borrower has not incurred any Indebtedness outstanding on the date
0hereof, and will not hereafter incur any Indebtedness, in each case, secured or
unsecured, direct or indirect, absolute or contingent (including guaranteeing
any obligation) other than (i) the Debt, (ii) unsecured trade payables incurred
in the ordinary course of business, (iii) debt incurred in connection with
capital lease obligations and purchase money financing with respect to equipment
and other personal property used on the Individual Properties, provided, however
with respect to the Indebtedness referred to in subclauses (ii) and (iii), (A)
the same is not secured by a lien or security interest in the Individual
Properties (other than the personal property so financed) and (B) the amount of
all Indebtedness in the aggregate incurred pursuant to subclauses (ii) and
(iii), shall not exceed $20,000,000 in the aggregate at any one time outstanding
(the Indebtedness referred to in clauses (i), (ii) and (iii), the "PERMITTED
INDEBTEDNESS"). No Indebtedness other than the Debt may be secured (subordinate
or PARI PASSU) by the Individual Properties.
(e) Borrower has not made and will not make any loans or advances to any
third party (including any Affiliate or constituent party), and shall not
acquire obligations or securities of its Affiliates.
(f) Borrower is and will remain solvent and Borrower will pay its debts
and liabilities (including, as applicable, shared personnel and overhead
expenses of which Borrower will pay its allocated share) from its assets as the
same shall become due.
(g) Borrower has done or caused to be done and will do all things
necessary to observe organizational formalities and preserve its existence, and
Borrower will not, nor will Borrower permit any constituent party to amend,
modify or otherwise change the partnership certificate, partnership agreement,
articles of incorporation and bylaws, operating agreement, trust or other
organizational documents of Borrower or such constituent party without the prior
consent of Lender.
(h) Except to the extent permitted under the Loan Documents, Borrower will
maintain all of its books, records, financial statements and bank accounts
separate from those of its Affiliates and any constituent party. Borrower will
prepare separate financial statements, showing its assets and liabilities
separate and apart from those of any other Person, and not have its assets
listed on the financial statement of any other Person, provided, however, that
Borrower's assets may be included in a consolidated financial statement of its
Affiliates provided that (i) appropriate notation shall be made on such
consolidated financial statements to indicate the separateness of Borrower and
such Affiliates and to indicate that Borrower's assets and credit are not
available to satisfy the debts and other obligations of such Affiliates or any
other Person and (ii) such assets shall be listed on Borrower's own separate
balance sheet. Borrower will file its own tax returns (to the extent Borrower is
required to file any such tax returns) and will not file a consolidated federal
income tax return with any other Person unless required by applicable
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law. Borrower shall maintain its books, records, resolutions and agreements as
official records. Borrower shall file separate federal or state income tax
returns, if required by applicable law.
(i) Borrower will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other entity (including any
Affiliate of Borrower or any constituent party of Borrower), shall correct any
known misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates as
a division or part of the other and shall maintain and utilize a separate
telephone number and separate stationery, invoices and checks bearing its own
name.
(j) Borrower will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations.
(k) Neither Borrower nor any constituent party will seek or effect the
liquidation, dissolution, winding up, liquidation, consolidation or merger, in
whole or in part, of Borrower.
(l) Borrower will not commingle the funds and other assets of Borrower
with those of any Affiliate or constituent party or any other Person, and will
hold all of its assets in its own name.
(m) Borrower has and will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party or any other
Person.
(n) Borrower will not guarantee or become obligated for the debts of any
other Person and does not and will not hold itself out to be responsible for or
have its credit available to satisfy the debts or obligations of any other
Person.
(o) If Borrower is a limited liability company, (i) its sole member shall
be a Delaware corporation whose sole asset is its interest in Borrower and (ii)
it shall have a non-member manager which shall be a Delaware corporation whose
sole asset is its interest in Borrower and whose consent is necessary with
respect to the filing of any bankruptcy or insolvency proceeding of Borrower and
with respect to the dissolution, liquidation, winding up, consolidation or
merger, in whole or in part, of Borrower and which will become a member of
Borrower upon the dissolution, liquidation, winding up, consolidation or merger,
in whole or in part, of Borrower's sole member. If Borrower is a corporation,
its shareholder shall be a Delaware corporation whose sole asset is its interest
in Borrower. (Each such sole member, non-member manager and shareholder are
called an "SPC PARTY"). Each SPC Party will at all times comply, and will cause
Borrower to comply, with each of the representations, warranties, and covenants
contained in this Section 3.1.24 as if such representation, warranty or covenant
was made directly by such SPC Party. Upon the withdrawal or the disassociation
of the SPC Party from Borrower, Borrower shall immediately appoint a new SPC
Party whose articles or certificate of incorporation are substantially similar
to those of such SPC Party and deliver a new non-consolidation opinion to Lender
and the Rating Agency or Rating Agencies, as applicable, with respect to
Borrower, the new SPC Party and its equity owners.
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(p) Borrower shall at all times cause there to be at least two duly
appointed members of the board of directors (each, an "INDEPENDENT DIRECTOR") of
Borrower (if Borrower is a corporation) and of each SPC Party reasonably
satisfactory to Lender who shall not have been at the time of such individual's
appointment or at any time while serving as a director of such SPC Party, and
may not have been at any time during the preceding five years (i) a stockholder,
director (other than as an Independent Director), officer, employee, partner,
attorney or counsel of such corporation, Borrower or any Affiliate of either of
them, (ii) a customer, supplier or other Person who derives any of its purchases
or revenues from its activities with such corporation, Borrower or any Affiliate
of either of them, (iii) a Person or other entity controlling or under common
control with any such stockholder, partner, customer, supplier or other Person,
or (iv) a member of the immediate family of any such stockholder, director,
officer, employee, partner, customer, supplier or other Person. As used in this
definition, the term "CONTROL" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management, policies or
activities of a Person, whether through ownership of voting securities, by
contract or otherwise.
(q) Borrower shall not cause or permit the board of directors of Borrower
(if Borrower is a corporation) or any SPC Party to take any action which, under
the terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, requires a vote of the board of
directors of Borrower (if Borrower is a corporation) or of any SPC Party that
requires the affirmative vote of the Independent Directors unless at the time of
such action there shall be at least two members who are each an Independent
Director.
(r) Borrower shall conduct its business so that the assumptions made with
respect to Borrower in the Insolvency Opinion shall be true and correct in all
respects. In connection with the foregoing, Borrower hereby covenants and agrees
that it will comply with or cause the compliance with, (i) all of the facts and
assumptions (whether regarding the Borrower or any other Person) set forth in
the Insolvency Opinion, (ii) all the representations, warranties and covenants
in this Section 3.1.24, and (iii) all the organizational documents of the
Borrower and the SPC Party.
(s) Borrower will not permit any Affiliate or constituent party
independent access to its bank accounts other than pursuant to, and in
accordance with, the Management Agreements.
(t) Borrower shall pay the salaries of its own employees (if any) from its
own funds and maintain a sufficient number of employees (if any) in light of its
contemplated business operations.
(u) Borrower shall compensate each of its consultants and agents from its
funds for services provided to it and pay from its own assets all obligations of
any kind incurred.
(v) Borrower shall not have or create any subsidiaries or hold any equity
interest in any other Person (except for Permitted Investments).
3.1.25 NO BANKRUPTCY FILING. Borrower is not contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
laws or the liquidation of its
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assets or property, and Borrower does not have any knowledge of any Person
contemplating the filing of any such petition against it.
3.1.26 FULL AND ACCURATE DISCLOSURE. To the best of Borrower's knowledge,
no information contained in this Agreement, the other Loan Documents, or any
written statement furnished by or on behalf of Borrower pursuant to the terms of
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
There is no fact or circumstance presently known to Borrower which has not been
disclosed to Lender and which materially adversely affects, or is reasonably
likely to materially adversely affect, any Individual Property, Borrower or its
business, operations or condition (financial or otherwise).
3.1.27 FEDERAL RESERVE REGULATIONS. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this
Agreement or the other Loan Documents.
3.1.28 FOREIGN PERSON. Borrower is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
3.1.29 FRAUDULENT TRANSFER Borrower (a) has not entered into the Loan or
any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. The assets of Borrower do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such debts as they mature (taking
into account the timing and amounts reasonably expected to be payable on or in
respect of its obligations).
3.1.30 INVESTMENT COMPANY ACT. Borrower is not (i) an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; or (ii) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
3.1.31 NO CHANGE IN FACTS OR CIRCUMSTANCES; DISCLOSURE. To the best of
Borrower's knowledge, there has been no material adverse change in any
condition, fact, circumstance or event that would make the financial statements,
rent rolls, reports, certificates or other documents submitted in connection
with the Loan inaccurate, incomplete or otherwise misleading in any material
respect or that otherwise materially and adversely affects the business
operations or the financial condition of Borrower or any Individual Property.
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3.1.32 MANAGEMENT AGREEMENTS. All of the representations and warranties
with respect to the Management Agreements set forth in Article VII of this
Agreement are true and correct in all respects.
3.1.33 ORGANIZATIONAL CHART. The organizational chart attached as
SCHEDULE IV hereto, relating to Borrower and certain affiliates and other
parties, is true, complete and correct on and as of the date hereof.
SECTION 3.2 SURVIVAL OF REPRESENTATIONS.
The representations and warranties set forth in Section 3.1 shall survive
for so long as any amount remains payable to Lender under this Agreement or any
of the other Loan Documents, it being understood, however, that such
representations and warranties have been made only as of the Closing Date.
IV. BORROWER COVENANTS
SECTION 4.1 BORROWER AFFIRMATIVE COVENANTS.
Borrower hereby covenants and agrees with Lender that:
4.1.1 EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS. Borrower shall do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its existence, rights, licenses, permits and franchises and comply,
in all material respects, with all Legal Requirements applicable to it and its
ownership of the Individual Properties.
4.1.2 TAXES AND OTHER CHARGES. Borrower shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the Individual
Properties or any part thereof prior to the time the same become delinquent;
provided, however, Borrower's obligation to directly pay Taxes shall be
suspended for so long as Borrower complies with the terms and provisions of
Section 6.2 hereof and is escrowing for Taxes and has not delivered a Letter of
Credit in lieu of such escrows pursuant to Section 6.9 hereof. Borrower shall
furnish to Lender receipts for the payment of the Taxes and the Other Charges
prior to the date the same shall become delinquent; provided, however, that
Borrower is not required to furnish such receipts for payment of Taxes in the
event that such Taxes are to be paid by Lender pursuant to Section 6.2 hereof.
Except as hereinafter provided, Borrower shall not permit or suffer and shall
promptly discharge any lien or charge against the Individual Properties.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, after prior notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, conducted in good faith and with due
diligence, the amount or validity of any Taxes or Other Charges, provided that
(i) no Default or Event of Default has occurred and is continuing ; (ii) such
proceeding shall be permitted under and be conducted in accordance with all
applicable statutes, laws and ordinances; (iii) no Individual Property nor any
part thereof or interest therein will be in imminent danger of being sold,
forfeited, terminated, canceled or lost; (iv) Borrower shall promptly upon final
determination thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith; (v) such proceeding shall suspend the collection of Taxes
or Other Charges from the
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applicable Individual Property; and (vi) Borrower shall deposit with Lender
cash, or other security as may be approved by Lender, in an amount equal to 100%
of (y) any unpaid contested amount, to insure the payment of any such Taxes or
Other Charges, and (z) all interest and penalties that may be assessed thereon
during such contest as reasonably determined by Lender.
4.1.3 LITIGATION. Borrower shall give prompt notice to Lender of any
litigation or governmental proceedings pending or, to the best of Borrower's
knowledge, threatened against Borrower or against any Individual Property which
would reasonably be expected to materially adversely affect any of the
Individual Properties or Borrower's ability to perform its obligations hereunder
or under the other Loan Documents.
4.1.4 ACCESS TO INDIVIDUAL PROPERTIES. Borrower shall permit agents,
representatives and employees of Lender to inspect the Individual Properties or
any part thereof at reasonable hours upon reasonable advance notice and in a
reasonable manner that does not unreasonably disrupt Borrower's business
operations.
4.1.5 FURTHER ASSURANCES; SUPPLEMENTAL MORTGAGE AFFIDAVITS. Borrower shall,
at Borrower's sole cost and expense:
(a) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the obligations of Borrower under the Loan
Documents, as Lender may reasonably require; and
(b) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as Lender
shall reasonably require from time to time.
4.1.6 FINANCIAL REPORTING.
(a) The Borrower shall keep and maintain or will cause to be kept and
maintained proper and accurate books and records, in accordance with GAAP,
reflecting the financial affairs of Borrower. Lender shall have the right from
time to time during normal business hours upon reasonable notice to each
Borrower to examine such books and records at the office of such Borrower or
other Person maintaining such books and records and to make such copies or
extracts thereof as Lender shall desire. After the occurrence of an Event of
Default, each Borrower shall pay all costs and expenses incurred by Lender to
examine such Borrower's books and records.
(b) The Borrower shall furnish Lender annually, within one hundred five
(105) days following the end of each Fiscal Year of such Borrower, a complete
copy of Borrower's annual combined financial statements audited by a "Big Five"
accounting firm or other independent certified public accountant acceptable to
Lender prepared in accordance with GAAP. Such financial statements shall be
accompanied by an unaudited combining balance sheet and income statement of
Borrower with detail for each Individual Property.
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(c) The Borrower will furnish Lender on or before the forty-fifth (45th)
day after the end of each fiscal quarter (based on Borrower's Fiscal Year), the
following items:
(i) quarterly and year-to-date unaudited statement of income and
expense and year-to-date unaudited statement of cash flow on a combined
basis for Borrower with detail for each Individual Property, with a balance
sheet for such quarter for Borrower;
(ii) occupancy reports, room rate reports, RevPAR calculations, Star
reports (if available to Borrower) and capital expenditure/FF&E reports.
(d) Borrowers' financial statements delivered pursuant to Section 4.1.6
(b) and (c) shall be accompanied by (i) a certificate executed by an officer of
Borrower in substantially the form attached as SCHEDULE X stating that such
annual financial statements present fairly the financial condition and the
results of operations of Borrower and certifying as of the date thereof whether
to the best of such Borrower's knowledge there exists an event or circumstance
which constitutes a Default or Event of Default by Borrower under the Loan
Documents and if such Default or Event of Default exists, the nature thereof,
the period of time it has existed and the action then being taken to remedy the
same and (ii) an explanation reconciling the discrepancies, if any, between
unaudited financial statements and audited financial statements.
(e) Each Borrower shall submit the Annual Budget to Lender not later than
thirty (30) days prior to the commencement of each Fiscal Year. Lender shall
have the right to approve each Annual Budget (i) covering any period during
which a Cash Trap Period (as defined in the Cash Management Agreement) exists
and the Net Cash Flow for the Individual Properties in the aggregate is equal to
or less than $57,000,000 (as reduced by the product of the Allocated Percentage
and $57,000,000 with respect to any Individual Property that has been the
subject of a Partial Defeasance) or (ii) covering any period after the Effective
Maturity Date, provided that, with respect to any Annual Budget submitted for a
period prior to the Effective Maturity Date, Lender shall not unreasonably
withhold its approval and shall be deemed to have approved such Annual Budget if
the items contained in such Annual Budget on a line item basis do not exceed the
greater of five percent (5%) of the previous Annual Budget or $100,000. (Annual
Budgets approved or deemed approved by Lender shall hereinafter be referred to
as an "APPROVED ANNUAL BUDGET"). In the event that, prior to the Effective
Maturity Date, a Cash Trap Period shall occur after an Annual Budget has been
submitted, such Annual Budget shall then be subject to Lender's approval. In the
event that, after the Effective Maturity Date, Borrower incurs an extraordinary
operating expense or extraordinary capital expenditure not set forth in the
Annual Budget (each an "EXTRAORDINARY EXPENSE"), then Borrower shall promptly
deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender's approval.
(f) Borrower shall furnish to Lender, within five (5) Business Days after
request (or as soon thereafter as may be reasonably possible), such further
detailed information with respect to the operation of any of the Individual
Properties and the financial affairs of Borrower as may be reasonably requested
by Lender.
4.1.7 TITLE TO THE INDIVIDUAL PROPERTIES. Borrower will warrant and defend
the validity and priority of the Liens of the Mortgages and the Assignments of
Leases
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on the Individual Properties against the claims of all Persons whomsoever,
subject only to Permitted Encumbrances.
4.1.8 ESTOPPEL STATEMENT.
(a) After request by Lender, Borrower shall within five (5) Business Days
furnish Lender with a statement, duly acknowledged and certified, stating (i)
the unpaid principal amount of the Note, (ii) the Applicable Interest Rate of
the Note, (iii) the date installments of interest and/or principal were last
paid, (iv) any offsets or defenses to the payment of the Debt, if any, and (v)
that this Agreement and the other Loan Documents have not been modified or if
modified, giving particulars of such modification.
(b) After request by Borrower, Lender shall within five (5) Business Days
furnish Borrower with a statement, duly acknowledged and certified, stating (i)
the unpaid principal amount of the Note, (ii) the Applicable Interest Rate of
the Note, and (iii) the date installments of interest and/or principal were last
paid.
(c) Borrower shall deliver to Lender, upon request made no more frequently
than twice in any twelve (12) month period, an estoppel certificate from each
tenant under any Major Lease and each Manager under a Management Agreement;
provided that such certificate as to Major Leases, (i) is available to Borrower
pursuant to the terms of such Lease, and (ii) may be in the form required under
such Lease.
4.1.9 LEASES.
(a) All Leases and all renewals of Leases executed after the date hereof
shall (i) provide for rental rates comparable, in the good faith judgment of
Borrower, to existing local market rates for similar properties, (ii) be on
commercially reasonable terms, and (iii) provide that such Lease is subordinate
to the Mortgage encumbering the applicable Individual Property and that the
lessee will attorn to Lender.
(b) All Major Leases and all renewals, amendments and modifications
thereof executed after the date hereof shall be subject to Lender's prior
approval, which shall not unreasonably be withheld. All Leases and renewals of
Leases executed after the Effective Maturity Date shall be subject to Lender's
prior approval.
(c) Borrower shall not terminate or accept a surrender of any Major Lease
without Lender's prior approval, except upon the expiration of the Lease term.
(d) Borrower (i) shall observe and perform the obligations imposed upon
the lessor under the Leases in a commercially reasonable manner; (ii) shall
enforce the material terms, covenants and conditions contained in the Leases
upon the part of the lessee thereunder to be observed or performed in a
commercially reasonable manner, provided, however, Borrower shall not terminate
or accept a surrender of a Major Lease without Lender's prior approval; (iii)
shall not collect any of the rents more than one (1) month in advance (other
than security deposits); and (iv) shall not execute any assignment of lessor's
interest in the Leases or the Rents (except as contemplated by the Loan
Documents).
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(e) Upon request, Borrower shall furnish Lender with executed copies of
all Leases.
4.1.10 ALTERATIONS. Except with respect to emergency repairs which require
immediate attention and except for the San Francisco Capital Improvements,
Lender's prior approval shall be required in connection with alterations (a)
that are Material Alterations that would reasonably be expected to have a
material adverse impact on the use or operation of such Individual Property or
on Borrower's ability to make Debt Service payments at any time during the
duration of the work constituting such Material Alteration, (b) that are
Material Alterations and the cost of which are reasonably anticipated to exceed
the Alteration Threshold or (c) made after the Effective Maturity Date. Except
with respect to the San Francisco Capital Improvements, if the total unpaid
contract cost or, if not pursuant to a contract, the anticipated cost, with
respect to all Material Alterations to the Improvements that are either under
contract or have commenced shall at any time exceed $20,000,000 in the aggregate
at any one time, Borrower shall promptly deliver to Lender as security for the
payment of such amounts and as additional security for Borrower's obligations
under the Loan Documents any of the following: (i) cash, (ii) U.S. Obligations,
(iii) other securities acceptable to Lender, provided that Lender shall have
received a Rating Agency Confirmation as to the form and issuer of same, or (iv)
a completion bond provided that Lender shall have received a Rating Agency
Confirmation as to the form and issuer of same. Such security shall be in an
amount equal to the excess of the total unpaid amounts with respect to all
Material Alterations under contract or commenced (other than such amounts to be
paid or reimbursed by amounts in any Fund allocated to such alteration) over the
$20,000,000. At such time as the amount of any security so deposited exceeds the
remaining cost to complete the Material Alteration for which such security was
deposited, as determined by Lender in its reasonable discretion, Lender shall
disburse such excess amounts to Borrower upon Borrower's satisfaction of the
conditions set forth in Section 5.3.2(b) - (g) as if such disbursement was a
disbursement of Net Proceeds. Borrower shall deliver such evidence as Lender may
reasonably require that any Material Alterations are in compliance with all
applicable Legal Requirements.
4.1.11 SAN FRANCISCO CAPITAL IMPROVEMENTS. Borrower shall promptly perform
the Capital Expenditures in connection with the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "SAN
FRANCISCO CAPITAL IMPROVEMENTS") set forth on the Capital Expenditures Schedule
annexed hereto as SCHEDULE V such that the same are substantially completed on
or before December 31, 2002, subject to any Force Majeure. Borrower shall
complete the San Francisco Capital Improvements in a good and workmanlike manner
in compliance with all applicable Legal Requirements. Borrower shall pay for the
San Francisco Capital Improvements and shall keep the San Francisco Capital
Improvements free and clear of all Liens.
4.1.12 MATERIAL AGREEMENTS. Borrower shall (a) promptly perform and/or
observe all of the material covenants and agreements required to be performed
and observed by it under each Material Agreement to which it is a party, and do
all things necessary to preserve and to keep unimpaired its rights thereunder,
(b) promptly notify Lender in writing of the giving of any notice of any default
by any party under any Material Agreement of which it is aware and (c) promptly
enforce the performance and observance of all of the material covenants and
agreements required to be performed and/or observed by the other party under
each Material Agreement to which it is a party in a commercially reasonable
manner.
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4.1.13 PERFORMANCE BY BORROWER. Borrower shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document executed and delivered by Borrower, and shall not enter into or
otherwise suffer or permit any amendment, waiver, supplement, termination or
other modification of any Loan Document executed and delivered by Borrower
without the prior consent of Lender.
4.1.14 COSTS OF ENFORCEMENT. In the event (a) that any Mortgage is
foreclosed in whole or in part or the Note or any other Loan Document is put
into the hands of an attorney for collection, suit, action or foreclosure, (b)
of the foreclosure of any Lien or Mortgage prior to or subsequent to any
Mortgage in which proceeding Lender is made a party, (c) of the bankruptcy,
insolvency, rehabilitation or other similar proceeding in respect of Borrower or
an assignment by Borrower for the benefit of its creditors, or (d) Lender shall
attempt to remedy any Event of Default hereunder, Borrower shall be chargeable
with and agrees to pay all reasonable costs incurred by Lender as a result
thereof, including costs of collection and defense (including reasonable
attorneys', experts', consultants' and witnesses' fees and disbursements) in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
4.1.15 BUSINESS AND OPERATIONS. Borrower will continue to engage in the
businesses currently conducted by it as and to the extent the same are necessary
for the ownership and leasing of the Individual Properties. Borrower will
qualify to do business and will remain in good standing under the laws of each
jurisdiction as and to the extent the same are required for the ownership and
leasing of the related Individual Properties. Borrower shall at all times cause
the Individual Properties to be maintained as first class full service hotels.
4.1.16 CONDOMINIUM.
(a) New Jersey Borrower shall comply with all of the terms, covenants and
conditions of the Condominium Documents and any rules and regulations that may
be adopted for the Condominium, as the same shall be in force and effect from
time to time; and
(b) New Jersey Borrower shall pay, or cause to be paid, all assessments
for common charges and expenses made against the Condominium owned by New Jersey
Borrower pursuant to the Condominium Documents as the same shall become due and
payable.
4.1.17 LOANS FEES.
Borrower shall pay all fees and costs (including, without limitation, all
origination and commitment fees) required of Borrower pursuant to the terms of
that certain commitment letter between Guarantor and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
dated July 31, 2000.
SECTION 4.2 BORROWER NEGATIVE COVENANTS.
Borrower covenants and agrees with Lender that:
4.2.1 DUE ON SALE AND ENCUMBRANCE; TRANSFERS OF INTERESTS. Without the
prior consent of Lender, neither Borrower nor any other Person having a direct
or indirect ownership or beneficial interest in Borrower shall sell, convey,
mortgage, grant, bargain,
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encumber, pledge, assign or transfer any interest, direct or indirect, in the
Borrower, the Individual Properties or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in the
Mortgage and this Agreement, other than as permitted pursuant to Article VIII.
4.2.2 LIENS. Borrower shall not create, incur, assume or suffer to exist
any Lien on any portion of any of the Individual Properties except for Permitted
Encumbrances.
4.2.3 DISSOLUTION. Borrower shall not (i) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity,
(ii) engage in any business activity not related to the ownership, operation and
leasing of the Individual Properties, (iii) transfer, lease or sell, in one
transaction or any combination of transactions, all or substantially all of the
properties or assets of Borrower except to the extent expressly permitted by the
Loan Documents, or (iv) suffer any SPC Party to (A) dissolve, wind up or
liquidate or take any action, or omit to take an action, as a result of which
any SPC Party would be dissolved, wound up or liquidated in whole or in part, or
(B) amend, modify, waive or terminate the certificate of incorporation or bylaws
of any SPC Party, in each case, without obtaining the consent of Lender if a
Securitization has not occurred or Rating Agency Confirmation if a
Securitization has occurred.
4.2.4 INTENTIONALLY OMITTED.
4.2.5 DEBT CANCELLATION. Borrower shall not cancel or otherwise forgive or
release any material claim or debt (other than termination of Leases in
accordance herewith) owed to Borrower by any Person, except in the ordinary
course of Borrower's business.
4.2.6 AFFILIATE TRANSACTIONS. Borrower shall not enter into, or be a party
to, any transaction with an Affiliate of Borrower or any of the partners of
Borrower except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arm's-length basis
with third parties, if such a transaction is available to Borrower.
4.2.7 ZONING. Borrower shall not initiate or consent to any zoning
reclassification of any portion of any of the Individual Properties or seek any
variance under any existing zoning ordinance or use or permit the use of any
portion of any of the Individual Properties in any manner that could result in
such use becoming a non-conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation, without the prior consent of
Lender.
4.2.8 ASSETS. Borrower shall not purchase or own any properties other than
the Individual Properties.
4.2.9 NO JOINT ASSESSMENT. Borrower shall not suffer, permit or initiate
the joint assessment of any Individual Property (i) with any other real property
constituting a tax lot separate from such Individual Property, and (ii) with any
portion of such Individual Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to
such Individual Property.
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4.2.10 PRINCIPAL PLACE OF BUSINESS. Borrower shall not change its principal
place of business set forth on the first page of this Agreement without first
giving Lender thirty (30) days prior notice.
4.2.11 ERISA. (a) Borrower shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Agreement or the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its sole discretion, that (A) Borrower is not
and does not maintain an "employee benefit plan" as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (B) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (C) one or more of the following circumstances is true:
(i) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(iii) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e).
4.2.12 MATERIAL AGREEMENTS. Borrower shall not, without Lender's prior
written consent: (a) enter into, surrender or terminate any Material Agreement
to which it is a party (unless the other party thereto is in material default
and the termination of such agreement would be commercially reasonable), (b)
increase or consent to the increase of the amount of any charges under any
Material Agreement to which it is a party, except as provided therein or on an
arms'-length basis and commercially reasonable terms; or (c) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under any Material Agreement to which it is a party in any material
respect, except on an arms'-length basis and commercially reasonable terms.
4.2.13 CONDOMINIUM DOCUMENTS. New Jersey Borrower shall not, without
Lender's prior written consent, amend, modify, supplement or terminate, or
consent to or suffer the amendment, modification, supplementation or termination
of any of the Condominium Documents.
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V. INSURANCE, CASUALTY AND CONDEMNATION
SECTION 5.1 INSURANCE.
5.1.1 INSURANCE POLICIES. (a) Borrower shall obtain and maintain, or cause
to be maintained, insurance for Borrower and each of the Individual Properties
providing at least the following coverages:
(i) comprehensive all risk insurance on the Improvements and the personal
property at the Individual Properties, including contingent liability from
Operation of Building Laws, Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to one hundred percent (100%)
of the "Full Replacement Cost," which for purposes of this Agreement shall mean
actual replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding principal balance of the
Loan; (B) containing an agreed amount endorsement with respect to the
Improvements and personal property at the Individual Properties waiving all
co-insurance provisions; (C) providing for no deductible in excess of the
following: (1) Twenty-Five Thousand and No/100 Dollars ($25,000) for any one
accident with respect to boiler and machinery insurance, (2) with respect to
earthquake insurance, 5% of the replacement cost of the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
subject to a $250,000 minimum and (3) $100,000 for any other loss, provided that
maintenance of such deductibles shall be commercially reasonable and shall be
maintained by owners of properties similar in type, location and quality as the
Individual Properties but, in the case of clause (3), shall not be in excess of
$500,000. In addition, Borrower shall obtain: (y) if any portion of the
Improvements is currently or at any time in the future located in a federally
designated "special flood hazard area", flood hazard insurance in an amount
equal to the lesser of (1) the Allocated Loan Amount of the relevant Individual
Property or (2) the maximum amount of such insurance available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Reform Act of 1994, as each may be amended or
such greater amount as Lender shall reasonably require; and (z) earthquake
insurance in amounts and in form and substance reasonably satisfactory to Lender
in the event an Individual Property is located in an area with a high degree of
seismic activity, provided that the insurance pursuant to clauses (y) and (z)
hereof shall be on terms consistent with the comprehensive all risk insurance
policy required under this subsection (i).
(ii) commercial general liability insurance against claims for personal
injury, bodily injury, death or property damage occurring upon, in or about the
Individual Property, such insurance (A) to be on "occurrence" form with a
combined limit, of not less than One Million and No/100 Dollars ($1,000,000);
(B) to continue at not less than the aforesaid limit until required to be
changed by Lender in writing by reason of changed economic conditions making
such protection inadequate; and (C) to cover at least the following hazards: (1)
premises and operations; (2) products and completed operations on an "if any"
basis; (3) independent contractors; (4) blanket contractual liability for all
legal contracts; and (5) contractual liability covering the indemnities
contained in Article 9 of the Mortgages to the extent the same is available;
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(iii) business income insurance (A) with loss payable to Lender;
(B) covering all risks required to be covered by the insurance provided for in
subsection (i) above; (C) containing an extended period of indemnity endorsement
which provides that after the physical loss to the Improvements and Personal
Property has been repaired, the continued loss of income will be insured until
such income either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the Individual Property is
repaired or replaced and operations are resumed, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such period; and
(D) in an amount equal to one hundred percent (100%) of the net income and
continuing expenses from the Individual Property. The amount of such business
income insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable estimate of the gross income
from the Individual Property for the succeeding twelve (12) month period. All
proceeds payable to Lender pursuant to this subsection shall be deposited in the
Cash Management Account and shall be applied to the obligations secured by the
Loan Documents from time to time due and payable hereunder and under the Note in
the manner and priority set forth in the Cash Management Agreement with respect
to Rents; provided, however, that nothing herein contained shall be deemed to
relieve Borrower of its obligations to pay the obligations secured by the Loan
Documents on the respective dates of payment provided for in the Note and the
other Loan Documents except to the extent such amounts are actually paid out of
the proceeds of such business income insurance;
(iv) at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements, and only if the
Individual Property coverage form does not otherwise apply, Borrower shall
maintain or cause to be maintained (A) owner's contingent or protective
liability insurance covering claims not covered by or under the terms or
provisions of the above mentioned commercial general liability insurance policy;
and (B) the insurance provided for in subsection (i) above written in a
so-called builder's risk completed value form (1) on a non-reporting basis, (2)
against all risks insured against pursuant to subsection (i) above, (3)
including permission to occupy the Individual Property, and (4) with an agreed
amount endorsement waiving co-insurance provisions;
(v) workers' compensation, subject to the statutory limits of the state in
which the Individual Property is located, and employer's liability insurance
with a limit of at least One Million and No/100 Dollars ($1,000,000) per
accident and per disease per employee, and One Million and No/100 Dollars
($1,000,000) for disease aggregate in respect of any work or operations on or
about the Individual Property, or in connection with the Individual Property or
its operation (if applicable);
(vi) comprehensive boiler and machinery insurance and accompanying business
interruption insurance, if applicable, in the amount of Twenty-Five Million and
No/100 Dollars ($25,000,000) for any one accident on terms consistent with the
commercial property insurance policy required under subsection (i) above;
(vii) umbrella liability insurance in addition to primary coverage in an
amount not less than One Hundred Million and No/100 Dollars ($100,000,000) per
occurrence on terms consistent with the commercial general liability insurance
policy required under subsection (ii) above;
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(viii) motor vehicle liability coverage for all owned and non-owned
vehicles, including rented and leased vehicles containing minimum limits per
occurrence, including umbrella coverage, of One Million and No/100 Dollars
($1,000,000); and
(ix) so-called "dramshop" insurance or other liability insurance required
in connection with the sale of alcoholic beverages;
(x) insurance against employee dishonesty in an amount not less than Ten
Million and No/100 Dollars ($10,000,000) from the Property and with a deductible
not greater than Fifty Thousand and No/100 Dollars ($50,000), provided that
maintenance of such deductible shall be commercially reasonable and shall be
maintained by owners of properties similar in type, location and quality as the
Individual Properties; and
(xi) upon sixty (60) days' written notice, such other reasonable insurance
as is commercially available and in such reasonable amounts as Lender from time
to time may reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Individual
Property located in or around the region in which the Individual Property is
located.
(b) All insurance provided for in Section 5.1.1(a) shall be obtained under
valid and enforceable policies (collectively, the "POLICIES" or in the singular,
the "POLICY"), and shall be subject to the reasonable approval of Lender as to
deductibles, loss payees and insureds. Not less than three (3) days prior to the
expiration dates of the Policies theretofore furnished to Lender, certificates
of insurance evidencing the Policies shall be delivered to Lender. Evidence of
payment of the premiums due under the Policies (the "INSURANCE PREMIUMS") shall
be supplied, to Lender as soon as is reasonably practical. Upon renewal of the
Policies, evidence of such renewal shall be delivered no later than five (5)
days thereafter.
(c) If any Individual Property is insured under a blanket policy, such
coverage shall provide equivalent coverage for such Individual Property had it
been insured under a separate policy.
(d) All Policies of insurance provided for or contemplated by
Section 5.1.1(a), except for the Policy referenced in Section 5.1.1(a)(v), shall
name Borrower as the insured and Lender and its successors and/or assigns as the
additional insured, as its interests may appear, and in the case of property
damage, boiler and machinery, flood and earthquake insurance, shall contain a
lender's loss payable clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in Section 5.1.1(a)(i), (iii)
and (vi) shall contain clauses or endorsements to the effect that no act or
negligence of Borrower, or anyone acting for Borrower, or of any tenant or other
occupant, or failure to comply with the provisions of any Policy, which might
otherwise result in a forfeiture of the insurance or any part thereof, shall in
any way affect the validity or enforceability of the insurance insofar as Lender
is concerned.
(f) All Policies of insurance provided for in Section 5.1.1(a) shall
contain clauses or endorsements to the effect that:
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(i) the Policy shall not be materially changed (other than to increase the
coverage provided thereby) or canceled without at least thirty (30) days'
written notice to Lender and any other party named therein as an additional
insured; and
(ii) Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder.
(g) If at any time Lender is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, Lender shall have the
right, without notice to Borrower, to take such action as Lender deems necessary
to protect its interest in the Individual Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate and all premiums incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and until paid shall be secured by the
Mortgages and shall bear interest at the Default Rate.
(h) In the event of foreclosure of the Mortgage with respect to the
Individual Property, or other transfer of title to the Individual Property in
extinguishment in whole or in part of the Debt all right, title and interest of
Borrower in and to the Policies that are not blanket Policies then in force
concerning the Individual Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or Lender or other
transferee in the event of such other transfer of title.
5.1.2 INSURANCE COMPANY. The Policies shall be issued by financially sound
and responsible insurance companies authorized to do business in the state in
which each Individual Property is located. Each of such insurance companies
shall have a claims paying ability rating by S&P of (i) "A" or better for at
least seventy-five percent (75%) of each type of insurance coverage and (ii)
"BBB" or better for the remaining twenty-five percent (25%). Each of such
insurance companies shall also have a claims paying ability rating of (i) "A" or
better by Fitch and "A2" or better by ▇▇▇▇▇'▇ for at least seventy-five percent
(75%) of each type of insurance coverage and (ii) "BBB" or better by Fitch and
"Baa2" or better by ▇▇▇▇▇'▇ for the remaining twenty-five percent (25%);
provided, however, if Fitch or ▇▇▇▇▇'▇ shall not provide a rating for such
insurance companies, then the ratings of S&P for such insurance companies shall
be substituted therefor. Notwithstanding anything to the contrary contained in
this Section 5.1.2, if any Rating Agency shall not rate the Certificates in
connection with a Securitization, its rating requirements shall be disregarded
unless the proviso in the immediately preceding sentence shall apply, in which
case S&P's rating requirements shall not be disregarded.
SECTION 5.2 CASUALTY AND CONDEMNATION.
5.2.1 CASUALTY. If an Individual Property shall sustain a Casualty,
Borrower shall give prompt notice of such Casualty to Lender and shall
reasonably promptly commence and diligently prosecute to completion of the
repair and restoration of the Individual Property as nearly as possible to the
condition the Individual Property was in immediately prior to such Casualty (a
"RESTORATION") and otherwise in accordance with and subject to Section 5.3.
Borrower shall pay all costs of such Restoration whether or not such costs are
covered by
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insurance. Lender may, but shall not be obligated to, make proof of loss if not
made promptly by Borrower.
5.2.2 CONDEMNATION. Borrower shall give Lender prompt notice of any actual
or threatened Condemnation by any Governmental Authority of all or any part of
any Individual Property and shall deliver to Lender a copy of any and all papers
served in connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by Lender to permit such participation. Borrower shall, at
its expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Notwithstanding any Condemnation, Borrower
shall continue to pay the Debt at the time and in the manner provided for its
payment in the Note and in this Agreement. Lender shall not be limited to the
interest paid on the Award by any Governmental Authority but shall be entitled
to receive out of the Award interest at the rate or rates provided herein or in
the Note. If an Individual Property is taken in part by any Governmental
Authority, Borrower shall reasonably promptly commence and diligently prosecute
the Restoration of the Individual Property and otherwise comply with the
provisions of Section 5.3. If the Individual Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender
shall have the right to receive the Award, or a portion thereof sufficient to
pay the Debt.
SECTION 5.3 DELIVERY OF NET PROCEEDS.
5.3.1 MINOR CASUALTY OR CONDEMNATION. If a Casualty or Condemnation has
occurred to an Individual Property and the Net Proceeds shall be less than the
Restoration Threshold and the costs of completing the Restoration shall be less
than the Restoration Threshold, and provided no Event of Default shall have
occurred and remain uncured, the Net Proceeds will be disbursed by Lender to
Borrower. Promptly after receipt of the Net Proceeds, Borrower shall commence
and satisfactorily complete with due diligence the Restoration in accordance
with the terms of this Agreement.
5.3.2 MAJOR CASUALTY OR CONDEMNATION. (a) If a Casualty or Condemnation has
occurred to an Individual Property and the Net Proceeds are equal to or greater
than the Restoration Threshold or the costs of completing the Restoration is
equal to or greater than the Restoration Threshold, Lender shall make the Net
Proceeds available for the Restoration, in the manner and subject to the
fulfillment of the conditions set forth below:
(i) no Event of Default shall have occurred and be continuing;
(ii) (A) in the event the Net Proceeds are insurance proceeds, less than
twenty-five percent (25%) of the total floor area of the Improvements at the
Property has been damaged, destroyed or rendered unusable as a result of such
Casualty or (B) in the event the Net Proceeds are an Award, no portion of the
Improvements constituting the hotel located on the related Individual Property
and no material portion of the other Improvements is the subject of the
Condemnation nor is access thereto materially impaired as a result of such
Condemnation and provided sufficient parking remains after the Condemnation to
comply with Legal Requirements and for the proper operation of the Individual
Property in question;
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(iii) Borrower shall commence the Restoration as soon as reasonably
practicable and shall diligently pursue completion of the same;
(iv) Lender shall be satisfied that any operating deficits and all payments
of principal and interest under the Note will be paid during the period required
for Restoration from (A) the Net Proceeds, or (B) other funds of Borrower;
(v) Lender shall be reasonably satisfied that the Restoration will be
completed on or before the earliest to occur of (A) the date six (6) months
prior to the Effective Maturity Date, (B) the earliest date required for such
completion under the terms of any Major Lease, (C) such time as may be required
under applicable Legal Requirements in order to repair and restore the
applicable Individual Property to the condition it was in immediately prior to
such Casualty or to as nearly as possible the condition it was in immediately
prior to such Condemnation, as applicable or (D) the expiration of the insurance
coverage referred to in Section 5.1.1(a)(iii); provided that if such insurance
coverage will expire in the opinion of Lender prior to the anticipated
completion date of such Restoration, Borrower may deposit collateral reasonably
acceptable to Lender in an amount sufficient to pay the Debt Service, make the
required deposits of Funds for such Individual Property and pay all other costs
in connection with the operation, use and maintenance of the Individual Property
in question until the completion of such Restoration, in which case the
condition set forth in this Section 5.3.2(a)(v)(D) shall be deemed satisfied;
(vi) the Individual Property and the use thereof after the Restoration will
be in compliance with and permitted under all applicable Legal Requirements;
(vii) the Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements; and
(viii) such Casualty or Condemnation, as applicable, does not result in the
loss of legal access to a publicly-dedicated right-of-way or unreasonably
interfere with pedestrian access to the Individual Property or the related
Improvements, except pending completion of the Restoration, or have an adverse
effect on the ingress or egress to the Individual Property or the related
Improvements, except pending completion of the Restoration.
(b) The Net Proceeds shall be paid directly to Lender and held by Lender
in an interest-bearing Eligible Account and, until disbursed in accordance with
the provisions of this Section 5.3.2, shall constitute additional security for
the Debt. The Net Proceeds shall be disbursed by Lender to, or as directed by,
Borrower from time to time during the course of the Restoration, upon receipt of
evidence satisfactory to Lender that (A) all requirements set forth in Section
5.3.2(a) have been satisfied, (B) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the Restoration have been paid for in
full, and (C) there exist no notices of pendency, stop orders, mechanic's or
materialman's liens or notices of intention to file same (other than notices to
the owner which do not constitute a Lien and which are given as a matter of
preserving a right to claim a Lien), or any other liens or encumbrances of any
nature whatsoever on the Individual Property arising out of the Restoration
which have not either been fully bonded to the
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satisfaction of Lender and discharged of record or in the alternative fully
insured to the satisfaction of Lender by the title company issuing the Title
Insurance Policy.
(c) All plans and specifications required in connection with the
Restoration shall be subject to prior approval by Lender and by an independent
architect selected by Lender (the "CASUALTY CONSULTANT"); provided, however, no
such approvals shall be required if (i) the architect or professional engineer
who prepared the plans and specifications shall provide Lender with a
certificate stating that all plans and specifications are in compliance with all
Legal Requirements, and (ii) such architect or professional engineer shall have
been reasonably approved by Lender. The identity of any Person who provides a
certification to Lender upon which Lender will rely and any general contractors
engaged in the Restoration, together with the contracts under which they have
been engaged, shall be subject to approval by Lender and the Casualty
Consultant, which approval with respect to the contractor shall not be
unreasonably withheld and with respect to the contracts shall be given if the
contracts are reasonably similar to the industry standard. All costs and
expenses incurred by Lender in connection with recovering, holding and advancing
the Net Proceeds for the Restoration including, without limitation, reasonable
attorneys' fees and disbursements and the Casualty Consultant's fees and
disbursements, shall be paid by Borrower.
(d) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, less the Casualty Retainage. The term "CASUALTY RETAINAGE"
shall mean an amount equal to ten percent (10%) of the costs actually incurred
for work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the contrary set forth above
in this Section 5.3.2(d), be less than the amount actually held back by Borrower
from contractors, subcontractors and materialmen engaged in the Restoration. The
Casualty Retainage shall not be released until the Casualty Consultant certifies
to Lender that the Restoration has been completed in accordance with the
provisions of this Section 5.3.2(d) and that all approvals necessary for the
re-occupancy and use of the Individual Property have been obtained from all
appropriate Governmental Authorities, and Lender receives evidence satisfactory
to Lender that the costs of the Restoration have been paid in full or will be
paid in full out of the Casualty Retainage; provided, however, that Lender will
release the portion of the Casualty Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of the
date upon which the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor's,
subcontractor's or materialman's contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company issuing the Title Insurance Policy,
and Lender receives an endorsement to the Title Insurance Policy insuring the
continued priority of the lien of the related Mortgage and evidence of payment
of any premium payable for such endorsement. If required by Lender, the release
of any such portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with respect to
the contractor, subcontractor or materialman.
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(e) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
(f) If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Borrower and the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "NET PROCEEDS DEFICIENCY") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Section 5.3.2 shall constitute additional security for the
Debt.
(g) In the case of a Casualty, the excess, if any, of the Net Proceeds and
the remaining balance, if any, of the Net Proceeds Deficiency deposited with
Lender after the Casualty Consultant certifies to Lender that the Restoration
has been completed in accordance with the provisions of this Section 5.3.2, and
the receipt by Lender of evidence satisfactory to Lender that all costs incurred
in connection with the Restoration have been paid in full, shall be remitted by
Lender to Borrower, provided no Event of Default shall have occurred and shall
be continuing under any of the Loan Documents. In the case of a Condemnation,
the excess, if any, referred to in the immediately preceding sentence hereof
which is to be remitted to Borrower shall be limited to the amount of Net
Proceeds Deficiency deposited with Lender by Borrower, provided no Event of
Default shall have occurred and shall be continuing under any of the Loan
Documents.
(h) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 5.3.2(g) may be retained and applied by Lender toward the payment of
the Debt whether or not then due and payable in such order, priority and
proportions as Lender in its sole discretion shall deem proper, or, at the
discretion of Lender, the same may be paid, either in whole or in part, to
Borrower for such purposes as Lender shall designate.
(i) Notwithstanding anything to the contrary contained in this
Section 5.3.2, subsections (b) through (f) shall only apply in the event that
the Net Proceeds are equal to or greater than the Restoration Threshold or the
costs of completing the Restoration is equal to or greater than the Restoration
Threshold.
VI. RESERVE FUNDS
SECTION 6.1 REQUIRED REPAIR FUNDS.
6.1.1 DEPOSIT OF REQUIRED REPAIR FUNDS. Borrower shall perform the repairs
at the Individual Properties as set forth on SCHEDULE II hereto (such repairs
hereinafter referred to as "REQUIRED REPAIRS") within one (1) year of the
Closing Date. On the Closing Date, Borrower shall deposit with Cash Management
Bank One Million Two Hundred Twenty Eight Thousand Eight Hundred Seventy Five
and No/100 Dollars ($1,228,875.00) to perform the
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Required Repairs (such amount so deposited shall hereinafter be referred to as
the "REQUIRED REPAIR FUNDS").
6.1.2 RELEASE OF REQUIRED REPAIR FUNDS. Lender shall disburse to Borrower
the Required Repair Funds upon satisfaction by Borrower of each of the following
conditions: (a) Borrower shall submit a written request for payment to Lender at
least ten (10) days prior to the date on which Borrower requests such payment be
made and specifies the Required Repairs to be paid, (b) on the date such request
is received by Lender and on the date such payment is to be made, no Event of
Default shall exist and remain uncured, (c) Lender shall have received a
certificate from Borrower (i) stating that all Required Repairs at the
applicable Individual Property to be funded by the requested disbursement have
been completed in a good and workmanlike manner and in accordance with all
applicable Legal Requirements, such certificate to be accompanied by a copy of
any license, permit or other approval by any Governmental Authority required in
connection with the Required Repairs, (ii) identifying each Person that supplied
materials or labor in connection with the Required Repairs performed at such
Individual Property to be funded by the requested disbursement, and (iii)
stating that each such Person has been paid in full or will be paid in full upon
such disbursement, such certificate to be accompanied by lien waivers or other
evidence of payment satisfactory to Lender, (d) at Lender's option, a title
search for such Individual Property indicating that such Individual Property is
free from all liens, claims and other encumbrances not previously approved by
Lender, (e) at Lender's option, if the cost of the Required Repairs exceeds
$250,000, Lender shall have received a report satisfactory to Lender in its
reasonable discretion from an architect or engineer approved by Lender in
respect of such architect or engineer's inspection of the Required Repairs, and
(f) Lender shall have received such other evidence as Lender shall reasonably
request that the Required Repairs at such Individual Property to be funded by
the requested disbursement have been completed and are paid for or will be paid
upon such disbursement to Borrower. Lender shall not be required to disburse
Required Repair Funds more frequently than once each calendar month, or with
respect to any Individual Property unless such requested disbursement is in an
amount greater than $25,000 (or a lesser amount if the total Required Repair
Funds is less than $25,000, in which case only one disbursement of the amount
remaining in the account shall be made).
SECTION 6.2 TAX FUNDS.
6.2.1 DEPOSIT OF TAX FUNDS. On the Closing Date, Borrower shall deposit
with Cash Management Bank the amount of Three Million Four Hundred Sixty Three
Thousand Seven Hundred Seventy and 55/100 Dollars ($3,463,770.55) and on each
Debt Service Payment Date Borrower shall deposit with Cash Management Bank an
amount equal to one-twelfth of the Taxes that Lender reasonably estimates will
be payable during the next ensuing twelve (12) months in order to accumulate
with Lender sufficient funds to pay all such Taxes at least ten (10) days prior
to their respective due dates (such amounts so deposited shall hereinafter be
referred to as the "TAX FUNDS"). If at any time Lender reasonably determines
that the Tax Funds will not be sufficient to pay the Taxes, Lender shall notify
Borrower of such determination and the monthly deposits for Taxes shall be
increased by the amount that Lender estimates is sufficient to make up the
deficiency at least ten (10) days prior to the respective due dates for the
Taxes; provided that if Borrower receives notice of any deficiency after the
date that is ten (10) days prior to the date that Taxes are due, Borrower will
deposit such amount within three (3) Business
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Days after its receipt of such notice but in no event later than the date prior
to the day when Taxes are due.
6.2.2 RELEASE OF TAX FUNDS. Unless Borrower shall have delivered a Letter
of Credit pursuant to Section 6.8.1 hereof, Lender shall apply the Tax Funds to
payments of Taxes. In making any payment relating to Taxes, Lender shall do so
according to any ▇▇▇▇ or statement furnished by the Borrower and certified by
the Borrower to be a true, correct and complete copy of its tax ▇▇▇▇, or if no
such copy is furnished by the Borrower, procured from the appropriate public
office (with respect to Taxes) without inquiry into the accuracy of such ▇▇▇▇,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amounts of the Tax Funds
shall exceed the amounts due for Taxes, Lender shall, at Borrower's option and
after notice to Lender, return any excess to Borrower or credit such excess
against future payments to be made to the Tax Funds. Any Tax Funds remaining
after the Debt has been paid in full shall be returned to Borrower.
SECTION 6.3 INSURANCE PREMIUM FUNDS.
6.3.1 DEPOSITS OF INSURANCE PREMIUM FUNDS. On the Closing Date, Borrower
shall deposit with Cash Management Bank the amount of One Million Seven Hundred
Ninety Eight Thousand One Hundred Eighty Nine and 98/100 Dollars ($1,798,189.98)
and on each Debt Service Payment Date Borrower shall deposit with Cash
Management Bank an amount equal to one-twelfth of the Insurance Premiums that
Lender reasonably estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate with
Lender sufficient funds to pay all such Insurance Premiums at least thirty (30)
days prior to the expiration of the Policies (such amounts so deposited shall
hereinafter be referred to as the "INSURANCE PREMIUM FUNDS"). If at any time
Lender reasonably determines that the Insurance Premium Funds will not be
sufficient to pay the Insurance Premiums, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by the
amount that Lender estimates is sufficient to make up the deficiency at least
thirty (30) days prior to expiration of the Policies.
6.3.2 RELEASE OF INSURANCE PREMIUM FUNDS. Unless Borrower shall have
delivered a Letter of Credit pursuant to Section 6.8.1 hereof, Lender shall
apply the Insurance Premium Funds to payment of Insurance Premiums. In making
any payment relating to Insurance Premiums, Lender shall do so according to any
▇▇▇▇ or statement furnished by the Borrower and certified by the Borrower to be
a true, correct an complete copy of the ▇▇▇▇ or statement in respect of
Insurance Premiums due and payable, or, if no such copy is furnished by the
Borrower, procured from the insurer or its agent, without inquiry into the
accuracy of such ▇▇▇▇, statement or estimate. If the amounts of the Insurance
Premium Funds shall exceed the amounts due for Insurance Premiums, Lender shall,
at Borrower's option and after notice to Lender, return any excess to Borrower
or credit such excess against future payments to be made to the Insurance
Premiums. Any Insurance Premium Funds remaining after the Debt has been paid in
full shall be returned to Borrower.
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SECTION 6.4 INTENTIONALLY OMITTED.
SECTION 6.5 FF&E FUNDS.
6.5.1 DEPOSITS OF FF&E FUNDS. On each Debt Service Payment Date Borrower
shall deposit, or shall cause the Manager to deposit, with Lender reserves for
FF&E Expenditures in an amount equal to five percent (5%) of the Gross Revenues
for the second full calendar month prior to the Debt Service Payment Date in
question (e.g., 5% of Gross Revenues for September, 2000 will be deposited
during the month of November, 2000 in accordance with the Cash Management
Agreement)(such amounts so deposited shall hereinafter be referred to as the
"FF&E FUNDS").
6.5.2 WITHDRAWALS OF FF&E FUNDS. (a) Lender shall disburse FF&E Funds to
the Manager provided that the conditions to disbursement set forth in the Cash
Management Agreement have been satisfied. Lender shall disburse FF&E Funds only
for the payment of FF&E Expenditures.
(b) Borrower shall permit Lender and Lender's agents and representatives
(including, without limitation, Lender's engineer, architect, or inspector) or
third parties to enter onto each Individual Property during normal business
hours (subject to the rights of tenants under their Leases) to inspect the
progress of any Capital Expenditures Work and all materials being used in
connection therewith and to examine all plans and shop drawings relating to such
Capital Expenditures Work. Borrower shall cause all contractors and
subcontractors to cooperate with Lender or Lender's representatives or such
other Persons described above in connection with inspections described in this
Section 6.5.2(b).
(c) If a disbursement of FF&E Funds is for Capital Expenditures Work that
is structural in nature and the cost of which will exceed $1,000,000 with
respect to the San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Chicago Hilton or $500,000, with
respect to the other Individual Properties, Lender may require an inspection of
the Individual Property at Borrower's expense in order to verify completion of
the Capital Expenditures Work for which reimbursement is sought. Lender may
require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and may require a certificate of
completion by an independent qualified professional architect acceptable to
Lender prior to the disbursement of FF&E Funds. Borrower shall pay the expense
of the inspection as required hereunder, whether such inspection is conducted by
Lender or by an independent qualified professional architect.
(d) In addition to any insurance required under the Loan Documents,
Borrower shall provide or cause to be provided workmen's compensation insurance,
builder's risk, and public liability insurance and other insurance to the extent
required under applicable law in connection with FF&E Expenditures that involve
Capital Expenditures Work. Evidence of such insurance shall be promptly provided
by Borrower upon request by Lender.
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SECTION 6.6 INTENTIONALLY OMITTED.
SECTION 6.7 PROVISIONS REGARDING FUNDS.
6.7.1 GRANT OF SECURITY INTEREST. Borrower shall be the owner of the Funds.
Pursuant to the Cash Management Agreement, Borrower has pledged, assigned and
granted a security interest to Lender, as security for payment of the Debt and
the performance of all other terms, conditions and covenants of the Loan
Documents on Borrower's part to be paid and performed, in all of Borrower's
right, title and interest in and to the Funds. The Funds shall be under the sole
dominion and control of Lender.
6.7.2 EVENT OF DEFAULT. Upon the occurrence of an Event of Default, Lender,
at its option, may withdraw any or all of the Funds and apply such Funds to the
payment of the items for which such Funds were established or to payment of the
Debt in such order, proportion and priority as Lender may determine in its sole
discretion. Lender's right to so withdraw and apply the Funds shall be in
addition to all other rights and remedies provided to Lender under the Loan
Documents.
6.7.3 INCOME TAXES. Borrower shall report on its federal, state and local
income tax returns all interest or income accrued on the Funds.
6.7.4 PROHIBITION AGAINST FURTHER ENCUMBRANCE. Borrower shall not, without
the prior consent of Lender, further pledge, assign or grant any security
interest in the Funds or permit any lien or encumbrance to attach thereto, or
any levy to be made thereon, or any UCC-1 Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.
6.7.5 RELEASE UPON REPAYMENT. Any Funds remaining after the Debt has been
paid in full shall be returned promptly to Borrower.
6.7.6 DEPOSITS MADE PURSUANT TO CASH MANAGEMENT AGREEMENT. To the extent
deposits of the Funds are made in accordance with the terms and conditions of
the Cash Management Agreement, such deposits shall satisfy Borrower's
obligations pursuant to this Article VI.
SECTION 6.8 LETTERS OF CREDIT IN LIEU OF RESERVES.
6.8.1 DELIVERY OF LETTERS OF CREDIT. (a) In lieu of making the payments to
any of the Funds, Borrower may deliver to Lender a Letter of Credit in
accordance with the provisions of this Section 6.8. The amount of any Letter of
Credit delivered in lieu of monthly payments of Tax Funds or Insurance Funds
shall be equal to the amount which Borrower would reasonably be estimated to be
required to deposit in such Fund in the next related one (1) year period, as
determined by Lender. The amount of any Letter of Credit delivered in lieu of
deposits required with respect to Required Repair Funds shall equal the amount
of the total deposits required herein.
(b) Borrower shall give Lender no less than thirty (30) days notice of
Borrower's election to deliver a Letter of Credit and Borrower shall pay to
Lender all of
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Lender's reasonable out-of-pocket costs and expenses in connection therewith.
Borrower shall not be entitled to draw from any such Letter of Credit. Borrower
may resume its monthly escrow requirements if a Letter of Credit has been
outstanding for more than six (6) months upon thirty (30) days notice to Lender
(or such shorter notice period as may be approved by Lender in its sole
discretion). Prior to the return of a Letter of Credit, Borrower shall deposit
an amount equal to the amount that would have accumulated in the applicable Fund
and not been disbursed in accordance with this Agreement if such Letter of
Credit had not been delivered.
(c) Borrower shall provide Lender with notice of any increases in the
annual payments for Taxes and Insurance Premiums thirty (30) days prior to the
effective date of any such increase and any applicable Letter of Credit shall be
increased by such increased amount at least ten (10) days prior to the effective
date of such increase.
SECTION 6.9 PROVISIONS REGARDING LETTERS OF CREDIT.
6.9.1 SECURITY FOR DEBT. Each Letter of Credit delivered under this
Agreement shall be additional security for the payment of the Debt. Upon the
occurrence of an Event of Default, Lender shall have the right, at its option,
to draw on any Letter of Credit and to apply all or any part thereof to the
payment of the items for which such Letter of Credit was established or to apply
each such Letter of Credit to payment of the Debt in such order, proportion or
priority as Lender may determine. Any such application to the Debt shall be
subject to the Yield Maintenance Premium. On the Effective Maturity Date, any
such Letter of Credit may be applied to reduce the Debt
6.9.2 ADDITIONAL RIGHTS OF LENDER. In addition to any other right Lender
may have to draw upon a Letter of Credit pursuant to the terms and conditions of
this Agreement, Lender shall have the additional rights to draw in full any
Letter of Credit: (a) with respect to any evergreen Letter of Credit, if Lender
has received a notice from the issuing bank that the Letter of Credit will not
be renewed and a substitute Letter of Credit is not provided at least thirty
(30) days prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (b) with respect to any Letter of Credit with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed the Letter of Credit at least thirty (30) days prior to the date
on which such Letter of Credit is scheduled to expire and a substitute Letter of
Credit is not provided at least thirty (30) days prior to the date on which the
outstanding Letter of Credit is scheduled to expire; (c) upon receipt of notice
from the issuing bank that the Letter of Credit will be terminated (except if
the termination of such Letter of Credit is permitted pursuant to the terms and
conditions of this Agreement or a substitute Letter of Credit is provided); or
(d) if Lender has received notice that the bank issuing the Letter of Credit
shall cease to be an Eligible Institution and a substitute Letter of Credit is
not provided within thirty (30) days of such notice. Notwithstanding anything to
the contrary contained in the above, Lender is not obligated to draw any Letter
of Credit upon the happening of an event specified in (a), (b), (c) or (d) above
and shall not be liable for any losses sustained by Borrower due to the
insolvency of the bank issuing the Letter of Credit if Lender has not drawn the
Letter of Credit.
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VII. PROPERTY MANAGEMENT
SECTION 7.1 MANAGEMENT AGREEMENTS.
(a) Borrower shall diligently perform and observe all of the terms,
covenants and conditions of the Management Agreements on the part of Borrower to
be performed and observed and shall promptly notify Lender of any notice
received by Borrower of any default in the performance or observance of any of
the terms, covenants or conditions of the Management Agreements on the part of
Borrower or Manager to be performed and observed. If Borrower shall default in
the performance or observance of any material term, covenant or condition of any
Management Agreement on the part of Borrower to be performed or observed, then,
without limiting Lender's other rights or remedies under this Agreement or the
other Loan Documents, and without waiving or releasing Borrower from any of its
obligations hereunder or under the Management Agreements, Lender shall have the
right, but shall be under no obligation, to pay any sums and to perform any act
as may be appropriate to cause all the material terms, covenants and conditions
of the Management Agreements on the part of Borrower to be performed or
observed.
(b) Each Management Agreement shall be subordinate to the related Mortgage
and shall provide that it may be terminated at Lender's option upon the
occurrence of any of the following: (i) an Event of Default (or, in the case of
the Management Agreement with respect to the Phoenix Hilton, upon foreclosure of
the Mortgage thereon), or (ii) a Manager's fraud, gross negligence or willful
misconduct. Each Management Agreement shall provide that such Management
Agreement will not be amended, modified or terminated without the consent of
Lender.
(c) Except as expressly provided below, Borrower shall not consent to or
enter into any of the following transactions, or any combination thereof, unless
it has received the prior consent of Lender, which consent shall not be
unreasonably withheld and after a Securitization, Rating Agency Confirmation:
(i) the surrender of any Management Agreement, (ii) the assignment by Manager of
its interest under a Management Agreement, (iii) the termination or cancellation
of a Management Agreement, (iv) the modification, change, supplement, alteration
or amendment of a Management Agreement, (v) the change, replacement or
termination of Manager or (vi) the entering into of any new Management
Agreement. Notwithstanding anything to the contrary contained herein, Borrower
shall be permitted, without any such written confirmation from the Rating
Agencies or the approval of Lender, to make any non-material modification,
change, supplement, alteration or amendment to any Management Agreement and to
waive any non material rights thereunder (provided that (y) no such
modification, change, supplement, alteration, amendment or waiver shall affect
Lender's rights and remedies thereunder, affect the cash management procedures
set forth in the Management Agreement or the Loan Documents, decrease the cash
flow of the subject Individual Property, adversely affect the marketability of
the subject Individual Property, change the definitions of "default" or "event
of default", change the definition of "operating expense" to exclude additional
items to such definition, change the definition of "gross revenues" to add
additional amounts thereto, change the term of such Management Agreement or
increase the management fees payable under such Management Agreement and (z)
Lender shall have the right to approve any replacement Manager). Notwithstanding
the foregoing, neither Lender's consent nor Rating
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Agency Confirmation shall be required in connection with any change in the
initial Manager by reason of any transfer of the capital stock in the initial
Manager or any merger or consolidation of the initial Manager with any other
person or entity, provided all or a substantial majority of the Hilton-branded
Hotels currently managed by the initial Manager are managed by the newly merged
or consolidated entity.
(d) Borrower hereby represents that each Management Agreement is in full
force and effect and, to the best of Borrower's knowledge (i) there is no
default, breach or violation existing thereunder by any party thereto and (ii)
no event has occurred that, with the passage of time or the giving of notice, or
both, would constitute a default, breach or violation by any party thereunder.
SECTION 7.2 REPLACEMENT OF MANAGER.
Lender shall have the right to require Borrower to replace the Manager with
a Person chosen by Borrower and approved by Lender upon the occurrence of any
one or more of the following events: (i) from and after the Effective Maturity
Date, (ii) at any time following the occurrence and during the continuation of
an Event of Default (or, in the case of the Management Agreement with respect to
the Phoenix Hilton, upon foreclosure of the Mortgage thereon), or (iii) if at
any time the Manager has engaged in (x) gross negligence, (y) fraud or (z)
willful misconduct.
VIII. PERMITTED TRANSFERS
SECTION 8.1 PERMITTED TRANSFER OF INDIVIDUAL PROPERTIES.
Lender shall not withhold its consent to a conveyance of all Individual
Properties to a Permitted Transferee (which is a newly formed, single purpose
bankruptcy remote entity acceptable to the Rating Agencies) provided that (a)
Lender has received (i) a confirmation in writing from the applicable Rating
Agencies that the conveyance of the Individual Properties to the Permitted
Transferee will not result in a downgrading, withdrawal or qualification of the
respective rating in effect immediately prior to such sale for the Certificates
issued in connection with a Securitization and (ii) if required by such Rating
Agencies (or Lender, if a Securitization has not occurred), a non-consolidation
opinion acceptable to such Rating Agencies in their sole discretion, (b) Lender
has received an agreement, acceptable to it in its sole discretion, pursuant to
which Permitted Transferee assumes all of Borrower's obligations under the Loan
Documents, (c) Lender receives a transfer fee equal to $25,000 and all of its
costs and expenses incurred in connection therewith and (d) Lender shall have
received such documents, certificates and legal opinions as it may reasonably
request.
SECTION 8.2 PERMITTED TRANSFER OF INTEREST IN BORROWER.
Notwithstanding the restrictions on transfers of interests in Article VI of
the Mortgage or Section 4.2.1 of this Agreement or in any other provision of any
Loan Document, the following transfers may be made without the consent of
Lender: (a) any transfers of the direct or indirect ownership interests in
Borrower to Hilton Hotels Corporation or a wholly owned subsidiary of Hilton
Hotels Corporation, provided that, if as a result of any such transfer,
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any Person shall own in the aggregate with the ownership interests of its
Affiliates, directly or indirectly, more than a 49% interest in the Property,
the Borrower or the SPC Party, any such transfer shall be made only upon the
delivery of non-consolidation opinions to Lender and the Rating Agencies,
acceptable to the Rating Agencies, (b) any transfers of the direct ownership
interests in Borrower to a Permitted Transferee (which is a newly formed, single
purpose bankruptcy remote entity acceptable to the Rating Agencies), provided
that, any such transfer shall be made only upon the delivery of confirmation
from the Rating Agencies that such a transfer will not result in the
qualification, withdrawal or downgrade of any Certificates, and if required by
the Rating Agencies, the delivery of non-consolidation opinions to Lender and
the Rating Agencies, acceptable to the Rating Agencies or (c) any transfers of
the indirect ownership interests in Hilton SPE Holding Inc. to a Permitted
Transferee, provided that, any such transfer shall be made only upon the
delivery of confirmation from the Rating Agencies that such a transfer will not
result in the qualification, withdrawal or downgrade of any Certificates, and if
required by the Rating Agencies, the delivery of non-consolidation opinions to
Lender and the Rating Agencies, acceptable to the Rating Agencies; provided,
however, that the restrictions on indirect transfers of ownership interests, or
on transfers of indirect ownership interests, in the Borrower contained in
Article VI of the Mortgages or Section 4.2.1 hereof and requirements in this
subparagraph (c) that relate to Lender's approval of the transferee and Rating
Agency Confirmation shall not apply to any transfer of shares of the capital
stock of Hilton Hotels Corporation (NYSE:HLT) or to any merger or consolidation
of Hilton Hotels Corporation with any other person or entity.
SECTION 8.3 SPECIAL TRANSFERS
Notwithstanding the restrictions on Transfers described in Article VI of
the Mortgage or any limitations on the Transfers permitted by Sections 8.1 and
8.2 above, the transfer of title to all (but not less than all) of the
Individual Properties or all (but not less than all) of the ownership interests
directly or indirectly in the Borrower and its 100% economic owner to a group
controlled by the senior management of Hilton Hotels Corporation (as of the date
hereof) in connection with a "privatization" or de-listing of Hilton Hotels
Corporation shall be permitted; provided, however, that (a) in connection with a
transfer of title to the Individual Properties, the transferee shall be a newly
formed, single purpose bankruptcy remote entity acceptable to the Rating
Agencies, and the requirements of Section 8.1(a)(ii), (b), (c) and (d) shall be
satisfied, (b) in connection with the transfer of ownership interests, if
required by the Rating Agencies (or Lender, if a Securitization has not
occurred) a nonconsolidation opinion addressed to Lender and the Rating
Agencies, in form reasonably acceptable to Lender and the Rating Agencies, shall
be delivered to Lender and (c) in connection with either such transfer, each
Rating Agency shall have confirmed that it does not require any further
documentation, certificates, legal opinions, searches and similar items and that
all such items it has received are satisfactory to it.
IX. SALE AND SECURITIZATION OF MORTGAGES
SECTION 9.1 SALE OF MORTGAGE AND SECURITIZATION.
(a) Lender shall have the right (i) to sell or otherwise transfer the Loan
or any portion thereof as a whole loan, (ii) to sell participation interests in
the Loan or (iii) to securitize
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the Loan or any portion thereof in a single asset securitization or a pooled
loan securitization. (The transaction referred to in clauses (i), (ii) and (iii)
shall hereinafter be referred to collectively as "SECONDARY MARKET TRANSACTIONS"
and the transactions referred to in clause (iii) shall hereinafter be referred
to as a "SECURITIZATION". Any certificates, notes or other securities issued in
connection with a Securitization are hereinafter referred to as "CERTIFICATES").
(b) If requested by Lender, Borrower shall, at Borrower's sole cost and
expense (except as specifically set forth herein), assist Lender in satisfying
the market standards to which Lender customarily adheres or which may be
reasonably required in the marketplace or by the Rating Agencies in connection
with any Secondary Market Transactions, including, without limitation, to:
(i) (A) provide updated financial and other information with respect to
the Individual Properties, the business operated at the Individual Properties,
Borrower and the Manager, (B) provide updated budgets relating to the Individual
Properties and (C) provide updated appraisals, market studies, environmental
reviews (Phase I's and, if appropriate, Phase II's), property condition reports
and other due diligence investigations of the Individual Properties (the
"UPDATED INFORMATION"), together, if customary, with appropriate verification of
the Updated Information through letters of auditors or opinions of counsel
acceptable to Lender and the Rating Agencies, provided that the cost and expense
of furnishing any of the foregoing which is duplicative of the deliveries
provided to Lender as of the Closing Date (or is duplicative of deliveries
provided to Lender pursuant to any previous Secondary Market Transaction) shall
be borne by Lender;
(ii) provide opinions of counsel, which may be relied upon by Lender, the
Rating Agencies and their respective counsel, agents and representatives, as to
non-consolidation, fraudulent conveyance, and true sale or any other opinion
customary in Secondary Market Transactions or required by the Rating Agencies
with respect to the Individual Properties and Borrower and Affiliates, which
counsel and opinions shall be satisfactory to Lender and the Rating Agencies,
provided that the cost and expense of furnishing any of the foregoing which is
duplicative of the deliveries provided to Lender as of the Closing Date (or is
duplicative of deliveries provided to Lender pursuant to any previous Secondary
Market Transaction) shall be borne by Lender;
(iii) provide updated, as of the closing date of the Secondary Market
Transaction, representations and warranties made in the Loan Documents and such
additional representations and warranties as the Rating Agencies may require;
and
(iv) execute amendments to the Loan Documents and Borrower's organizational
documents reasonably requested by Lender; provided, however, that Borrower shall
not be required to modify or amend any Loan Document if such modification or
amendment would (A) change the interest rate, the stated maturity or the
amortization of principal as set forth herein or in the Note, or (B) modify or
amend any other material economic term of the Loan or any other terms in a
manner that is materially less favorable to Borrower.
(c) If requested by Lender, Borrower shall provide Lender with the
following financial statements (it being understood that Lender shall request
(i) full financial statements if
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it anticipates that the principal amount of the Loan at the time of
Securitization may, or if the principal amount of the Loan at any time during
which the Loan is included in a Securitization does, equals or exceeds 20% of
the aggregate principal amount of all mortgage loans included in the
Securitization and (ii) summaries of such financial statements if the principal
amount of the Loan at any such time equals or exceeds 10% of such aggregate
principal amount):
(i) As of the Closing Date, a balance sheet with respect to the Individual
Properties on a combined basis for the two most recent Fiscal Years, meeting the
requirements of Section 210.3-01 of Regulation S-X of the Securities Act and
statements of income and statements of cash flows with respect to the Individual
Properties for the three most recent Fiscal Years, meeting the requirements of
Section 210.3-02 of Regulation S-X, and, to the extent that such balance sheet
is more than 135 days old as of the Closing Date, interim financial statements
of the Individual Properties meeting the requirements of Section 210.3-01 and
210.3-02 of Regulation S-X (all of such financial statements, collectively, the
"STANDARD STATEMENTS"); PROVIDED, HOWEVER, that with respect to any of the
Individual Properties that would be deemed to constitute a business and not real
estate under Regulation S-X that have been acquired by Borrower from an
unaffiliated third party (such Individual Properties, "ACQUIRED INDIVIDUAL
PROPERTIES"), as to which the other conditions set forth in Section 210.3-05 of
Regulation S-X for provision of financial statements in accordance with such
Section have been met, at Lender's election in lieu of or in addition to the
Standard Statements otherwise required by this Section 9.1(c)(i), Borrower shall
instead provide the financial statements required by such Section 210.3-05 of
Regulation S-X ("ACQUIRED PROPERTY STATEMENTS").
(ii) Not later than 30 days after the end of each fiscal quarter following
the Closing Date, a balance sheet of the Individual Properties as of the end of
such fiscal quarter, meeting the requirements of Section 210.3-01 of Regulation
S-X, and statements of income and statements of cash flows of the Individual
Properties for the period commencing on the day following the last day of the
most recent Fiscal Year and ending on the date of such balance sheet and for the
corresponding period of the most recent Fiscal Year, meeting the requirements of
Section 210.3-02 of Regulation S-X (provided, that if for such corresponding
period of the most recent Fiscal Year Acquired Property Statements were
permitted to be provided hereunder pursuant to paragraph (i) above, Borrower
shall instead provide Acquired Property Statements for such corresponding
period). If requested by Lender, Borrower shall also provide "summarized
financial information," as defined in Section 210.1-02(bb) of Regulation S-X,
with respect to such quarterly financial statements.
(iii) Not later than 60 days after the end of each Fiscal Year following
the Closing Date, a balance sheet of the Individual Properties as of the end of
such Fiscal Year, meeting the requirements of Section 210.3-01 of Regulation
S-X, and statements of income and statements of cash flows of the Individual
Properties for such Fiscal Year, meeting the requirements of Section 210.3-02 of
Regulation S-X. If requested by Lender, Borrower shall provide summarized
financial information with respect to such annual financial statements.
(iv) Upon ten (10) Business Days after notice from Lender in connection
with the Securitization of this Loan, such additional financial statements, such
that, as of the date (each a "DISCLOSURE DOCUMENT DATE") of each Disclosure
Document, Borrower shall have provided Lender with all financial statements as
described in paragraph (i) above; provided that
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the Fiscal Year and interim periods for which such financial statements shall be
provided shall be determined as of such Disclosure Document Date.
(v) In the event Lender determines, in connection with a Securitization,
that the financial statements required in order to comply with Regulation S-X or
Legal Requirements are other than as provided herein, then notwithstanding the
provisions of this Section, Lender may request, and Borrower shall promptly
provide, such combination of Acquired Property Statements and/or Standard
Statements as may be necessary for such compliance.
(vi) Any other or additional financial statements, or financial,
statistical or operating information, as shall be required pursuant to
Regulation S-X or other Legal Requirements in connection with any Disclosure
Document or any filing under or pursuant to the Exchange Act in connection with
or relating to a Securitization (hereinafter an "EXCHANGE ACT FILING") or as
shall otherwise be reasonably requested by Lender to meet disclosure, rating
agency or marketing requirements.
All financial statements provided by Borrower pursuant to this Section 9.1(c)
shall be prepared in accordance with GAAP, and shall meet the requirements of
Regulation S-X and other applicable Legal Requirements. All financial statements
relating to a Fiscal Year shall be audited by the independent accountants in
accordance with generally accepted auditing standards, Regulation S-X and all
other applicable Legal Requirements, shall be accompanied by the manually
executed report of the independent accountants thereon, which report shall meet
the requirements of Regulation S-X and all other applicable Legal Requirements,
and shall be further accompanied by a manually executed written consent of the
independent accountants, in form and substance acceptable to Lender, to the
inclusion of such financial statements in any Disclosure Document and any
Exchange Act Filing and to the use of the name of such independent accountants
and the reference to such independent accountants as "experts" in any Disclosure
Document and Exchange Act Filing, all of which shall be provided at the same
time as the related financial statements are required to be provided. All other
financial statements shall be certified by the chief financial officer of
Borrower, which certification shall state that such financial statements meet
the requirements set forth in the first sentence of this paragraph.
Notwithstanding the foregoing provisions of this Section 9.1(c), if the entire
Loan is included in a Securitization in which no classes of Certificates are
offered in a transaction registered with the Securities and Exchange Commission,
Borrower may disregard the requirements set forth in this Section 9.1(c).
SECTION 9.2 SECURITIZATION INDEMNIFICATION.
(a) Borrower understands that information provided to Lender by Borrower
and its agents, counsel and representatives may be included in disclosure
documents in connection with the Securitization, including, without limitation,
an offering circular, a prospectus, prospectus supplement, private placement
memorandum or other offering document (each, a "DISCLOSURE DOCUMENT") and may
also be included in filings with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended (the "SECURITIES ACT"), or the
Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and may
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be made available to investors or prospective investors in the Certificates, the
Rating Agencies, and service providers relating to the Securitization.
(b) Borrower agrees to provide in connection with each of (i) a
preliminary and a final private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, an agreement (A)
certifying that Borrower has examined such Disclosure Documents specified by
Lender and that each such Disclosure Document, as it relates to Borrower,
Borrower Affiliates, Individual Properties, Manager and all other aspects of the
Loan, does not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading, (B) indemnifying
Lender (and for purposes of this Section 9.2, Lender hereunder shall include its
officers and directors), the Affiliate of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ & Co.
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") that has filed the registration statement relating to the
Securitization (the "REGISTRATION STATEMENT"), each of its directors, each of
its officers who have signed the Registration Statement and each Person that
controls the Affiliate within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ GROUP"), and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and any other placement agent or underwriter with respect to the
Securitization, each of their respective directors and each Person who controls
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or any other placement agent or underwriter within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act
(collectively, the "UNDERWRITER GROUP") for any losses, claims, damages or
liabilities (collectively, the "LIABILITIES") to which Lender, the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such sections or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated in such sections or necessary in order to make the
statements in such sections, in light of the circumstances under which they were
made, not misleading and (C) agreeing to reimburse Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Group and/or the Underwriter Group for any legal or other expenses reasonably
incurred by Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group and the Underwriter Group in
connection with investigating or defending the Liabilities; provided, however,
that Borrower will be liable in any such case under clauses (B) or (C) above
only to the extent that any such loss claim, damage or liability arises out of
or is based upon any such untrue statement or omission made therein in reliance
upon and in conformity with information furnished to Lender by or on behalf of
Borrower in connection with the preparation of the Disclosure Document or in
connection with the underwriting or closing of the Loan, including, without
limitation, financial statements of Borrower, operating statements, rent rolls,
appraisals, market studies, environmental site assessment reports and property
condition reports with respect to the Individual Properties. This indemnity
agreement will be in addition to any liability which Borrower may otherwise
have.
(c) In connection with Exchange Act Filings, Borrower shall (i) indemnify
Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group and the Underwriter Group for Liabilities to
which Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group or the Underwriter Group may become
subject insofar as the Liabilities arise out of or are based upon the omission
or alleged omission to state in the Disclosure Document (as it relates to
Borrower, Borrower Affiliates, the Individual Properties, Manager and other
aspects of the Loan) a material fact required to be stated in the Disclosure
Document in order to make the statements in the Disclosure Document, in light of
the circumstances under which they were made, not misleading; provided, however,
Borrower shall
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be liable only to the extent such Liabilities arise out of or are based upon any
information furnished to Lender by or on behalf of Borrower and (ii) reimburse
Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group or the Underwriter Group for any legal or other
expenses reasonably incurred by Lender, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Group or the
Underwriter Group in connection with defending or investigating the Liabilities.
(d) Promptly after receipt by an indemnified party under this Agreement or
under the agreement referred to in Section 9.2(b) above of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Agreement or
under the agreement referred to in Section 9.2(b) above, notify the indemnifying
party in writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to any indemnified party hereunder except
to the extent that failure to notify causes prejudice to the indemnifying party.
In the event that any action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled, jointly with any other indemnifying party, to
participate therein and, to the extent that it (or they) may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party under this Agreement or under the agreement referred
to in Section 9.2(b) above, such indemnified party shall pay for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there are any legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party at
the cost of the indemnifying party. The indemnifying party shall not be liable
for the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to it
that are different from or additional to those available to another indemnified
party.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 9.2(b) or
(c) is for any reason held to be unenforceable as to an indemnified party in
respect of any losses, claims, damages or liabilities (or action in respect
thereof) referred to therein which would otherwise be indemnifiable under
Section 9.2(b) or (c), the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages or liabilities (or action in respect thereof); PROVIDED, HOWEVER, that
no Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are entitled, the
following factors shall be considered: (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ and Borrower's
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations appropriate
in
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the circumstances. Lender and Borrower hereby agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation.
(f) The liabilities and obligations of both Borrower and Lender under this
Section 9.2 shall survive the termination of this Agreement and the satisfaction
and discharge of the Debt.
X. DEFAULTS
SECTION 10.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an event of default
hereunder (an "EVENT OF DEFAULT"):
(i) if any payment of principal or interest is not paid when due; provided
that it shall not be an Event of Default if a Monthly Debt Service Payment
Amount is not paid on a Debt Service Payment Date if sufficient funds are in the
Monthly Debt Service Account (as defined in the Cash Management Agreement) to
make such payment on the Debt Service Payment Date in question;
(ii) if any other portion of the Debt is not paid when due and five (5)
days have passed after notice thereof;
(iii) if any of the Taxes or Other Charges are not paid when due; provided
that with respect to Taxes it shall not be an Event of Default if sufficient Tax
Funds for the payment of such Taxes were on deposit pursuant to Section 6.2
hereof on the date such Taxes were due;
(iv) if the Policies are not kept in full force and effect;
(v) if Borrower breaches or permits or suffers a breach of Article 6 of
the Mortgage, any covenant contained in Section 3.1.24, Section 4.2.12 or
Section 8.1 of this Agreement, or if Borrower applies any Rent in a manner
inconsistent with the Cash Management Agreement or the Clearing Account
Agreements;
(vi) if any representation or warranty made by Borrower herein or in any
other Loan Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender shall have been false or
misleading in any material respect as of the date the representation or warranty
was made;
(vii) if Borrower or Guarantor shall make an assignment for the benefit of
creditors;
(viii) if a receiver, liquidator or trustee shall be appointed for Borrower
or any SPC Party or any Guarantor or if Borrower or any SPC Party or any
Guarantor shall be adjudicated bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or
any similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower or any SPC Party or any Guarantor, or if any
proceeding for the dissolution or liquidation of Borrower or any SPC Party or
any
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Guarantor shall be instituted; PROVIDED, HOWEVER, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower or such SPC Party or Guarantor, upon the same not being discharged,
stayed or dismissed within sixty (60) days;
(ix) if Borrower attempts to assign its rights under this Agreement or any
of the other Loan Documents or any interest herein or therein in contravention
of the Loan Documents;
(x) if any of the assumptions contained in the Insolvency Opinion, or in
any other non-consolidation opinion delivered to Lender in connection with the
Loan, or in any other non-consolidation delivered subsequent to the closing of
the Loan, is or shall become untrue in any material respect;
(xi) if (A) New Jersey Borrower shall fail to pay any assessments for
common charges and expenses or any other amounts due under the Condominium
Documents as and when the same shall be due and payable, (B) there shall occur
any default by New Jersey Borrower beyond the expiration of any applicable
notice and cure periods in the observance or performance of any term, covenant
or condition of the Condominium Documents on the part of New Jersey Borrower, to
be observed or performed, and (C) New Jersey Borrower shall amend, modify,
supplement or terminate, or consent to or suffer the amendment, modification,
supplementation or termination of any of the Condominium Documents without
Lender's prior written consent;
(xii) if Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement or any other Loan Document not
specified in subsections (i) to (xi) above, for ten (10) days after notice to
Borrower from Lender, in the case of any Default which can be cured by the
payment of a sum of money, or for thirty (30) days after notice from Lender in
the case of any other Default; PROVIDED, however, that if such non-monetary
Default is susceptible of cure but cannot reasonably be cured within such 30-day
period and provided further that Borrower shall have commenced to cure such
Default within such 30-day period and thereafter diligently and expeditiously
proceeds to cure the same, such 30-day period shall be extended for such time as
is reasonably necessary for Borrower in the exercise of due diligence to cure
such Default, such additional period not to exceed ninety (90) days;
(b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vii) or (viii) above) and at any time thereafter
while such Event of Default continues to exist, Lender may, in addition to any
other rights or remedies available to it pursuant to this Agreement and the
other Loan Documents or at law or in equity, take such lawful action, without
notice or demand, that Lender deems advisable to protect and enforce its rights
against Borrower and in and to all or any of the Individual Properties,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower and any or all of the Individual
Properties, including, without limitation, all rights or remedies available at
law or in equity; and upon any Event of Default described in clauses (vii) or
(viii) above, the Debt and all other obligations of Borrower hereunder and under
the other Loan Documents shall immediately and automatically become due and
payable, without notice or demand, and
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Borrower hereby expressly waives any such notice or demand, anything contained
herein or in any other Loan Document to the contrary notwithstanding.
SECTION 10.2 REMEDIES.
(a) Upon the occurrence and during the continuation of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this Agreement or any of the
other Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to all or any of the Individual Properties. Any such
actions taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Without limiting the generality of the
foregoing, Borrower (to the extent permitted by applicable law) agrees that if
an Event of Default is continuing (i) Lender is not subject to any "one action"
or "election of remedies" law or rule, and (ii) all liens and other rights,
remedies or privileges provided to Lender shall remain in full force and effect
until Lender has exhausted all of its remedies against the Individual Properties
and each Mortgage has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.
(b) With respect to Borrower and the Individual Properties, nothing
contained herein or in any other Loan Document shall be construed as requiring
Lender to resort to any Individual Property for the satisfaction of any of the
Debt in preference or priority to any other Individual Property, and Lender may
seek satisfaction out of all of the Individual Properties or any part thereof,
in its absolute discretion in respect of the Debt. In addition, Lender shall
have the right from time to time to partially foreclose the Mortgages in any
manner and for any amounts secured by the Mortgages then due and payable as
determined by Lender in its sole discretion including, without limitation, the
following circumstances: (i) in the event Borrower defaults beyond any
applicable grace period in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose one or more of the Mortgages to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose one or more of the Mortgages to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by one or more of the Mortgages as Lender may elect. Notwithstanding one
or more partial foreclosures, the Individual Properties shall remain subject to
the Mortgages to secure payment of sums secured by the Mortgages and not
previously recovered.
(c) Lender shall have the right from time to time to sever the Note and
the other Loan Documents into one or more separate notes, mortgages and other
security documents (the "SEVERED LOAN DOCUMENTS") in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time, promptly after the request of
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Lender, a severance agreement and such other documents as Lender shall request
in order to effect the severance described in the preceding sentence, all in
form and substance reasonably satisfactory to Lender and Borrower. Borrower
hereby absolutely and irrevocably appoints Lender as its true and lawful
attorney, coupled with an interest, in its name and stead to make and execute
all documents necessary or desirable to effect the aforesaid severance, Borrower
ratifying all that its said attorney shall do by virtue thereof; provided,
however, Lender shall not make or execute any such documents under such power
until three (3) Business Days after notice has been given to Borrower by Lender
of Lender's intent to exercise its rights under such power. Except as may be
required in connection with a securitization pursuant to Section 9.1 hereof, (i)
Borrower shall not be obligated to pay any costs or expenses incurred in
connection with the preparation, execution, recording or filing of the Severed
Loan Documents, and (ii) the Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the Loan Documents and
any such representations and warranties contained in the Severed Loan Documents
will be given by Borrower only as of the Closing Date.
(d) Any amounts recovered from any Individual Property or any other
collateral for the Loan after an Event of Default may be applied by Lender
toward the payment of any interest and/or principal of the Loan and/or any other
amounts due under the Loan Documents in such order, priority and proportions as
Lender in its sole discretion shall determine.
SECTION 10.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender's rights, powers
and remedies may be pursued singly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of one Default or
Event of Default with respect to Borrower shall not be construed to be a waiver
of any subsequent Default or Event of Default by Borrower or to impair any
remedy, right or power consequent thereon.
XI. MISCELLANEOUS
SECTION 11.1 SUCCESSORS AND ASSIGNS.
All covenants, promises and agreements in this Agreement, by or on behalf
of Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
SECTION 11.2 LENDER'S DISCRETION.
Whenever pursuant to this Agreement or any other Loan Document Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be
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satisfactory to Lender, the decision of Lender to approve or disapprove or to
decide whether arrangements or terms are satisfactory or not satisfactory shall
(except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive. Whenever pursuant to this Agreement
or any other Loan Document (a) the Rating Agencies are given any right to
approve or disapprove, (b) confirmation is required from the Rating Agencies
that an action will not result in the downgrade, qualification or withdrawal of
the ratings in a Securitization or (c) any arrangement or term is to be
satisfactory to the Rating Agencies, the approval of Lender shall be substituted
therefore prior to a Securitization and may be based upon, among other things,
Lender's determination of Rating Agency criteria.
SECTION 11.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY
LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF
THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT
HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE
OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND
THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS
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LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED
ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:
HILTON HOTELS COPORATION
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
SECTION 11.4 MODIFICATION, WAIVER IN WRITING.
No modification, amendment, extension, discharge, termination or waiver of
any provision of this Agreement or of any other Loan Document, nor consent to
any departure by Borrower therefrom, shall in any event be effective unless the
same shall be in a writing signed by the party against whom enforcement is
sought, and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
SECTION 11.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of Lender in insisting upon
strict performance of any term, condition, covenant or agreement, or exercising
any right, power, remedy or privilege hereunder, or under any other Loan
Document, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise,
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or the exercise of any other right, power, remedy or privilege. In particular,
and not by way of limitation, by accepting payment after the due date of any
amount payable under this Agreement or any other Loan Document, Lender shall not
be deemed to have waived any right either to require prompt payment when due of
all other amounts due under this Agreement or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.
SECTION 11.6 NOTICES.
All notices, demands, requests, consents, approvals or other communications
(any of the foregoing, a "NOTICE") required, permitted, or desired to be given
hereunder shall be in writing sent by telefax (with answer back acknowledged) or
by registered or certified mail, postage prepaid, return receipt requested or
delivered by hand or reputable overnight courier addressed to the party to be so
notified at its address hereinafter set forth, or to such other address as such
party may hereafter specify in accordance with the provisions of this Section
11.6. Any Notice shall be deemed to have been received three (3) days after the
date such Notice is mailed or on the date of sending by telefax or delivery by
hand or the next Business Day if sent by an overnight commercial courier
addressed to the parties as follows:
If to Lender: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: c/o Hilton Hotels Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 11.7 TRIAL BY JURY.
BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES
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ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED
TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO
A TRIAL BY JURY WOULD OTHERWISE ACCRUE. BORROWER AND LENDER ARE EACH HEREBY
AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY THE OTHER.
SECTION 11.8 HEADINGS.
The Article and/or Section headings and the Table of Contents in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 11.9 SEVERABILITY/JOINT AND SEVERAL LIABILITY.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
All representations, warranties, covenants (both affirmative and negative)
and all other obligations hereunder shall be the joint and several obligation of
each entity making up Borrower and a Default or Event of Default by any such
entity shall be deemed a Default or Event of Default by all such entities and
Borrower. The representations, covenants and warranties contained herein or in
any other Loan Document shall be read to apply to the individual entities
comprising Borrower when the context so requires but a breach of any such
representation, covenant or warranty or a breach of any obligation under the
Loan Documents shall be deemed a breach by all such entities and Borrower,
entitling Lender to exercise all of its rights and remedies under all the Loan
Documents and under applicable law.
SECTION 11.10 PREFERENCES.
Subject to Section 2.3 hereof, Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.
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SECTION 11.11 WAIVER OF NOTICE.
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to Borrower and except with respect to other matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from
Lender with respect to any matter for which this Agreement or the other Loan
Documents do not specifically and expressly provide for the giving of notice by
Lender to Borrower.
SECTION 11.12 REMEDIES OF BORROWER.
In the event that a claim or adjudication is made that Lender or its agents
have acted unreasonably or unreasonably delayed acting in any case where, by law
or under this Agreement or the other Loan Documents, Lender or such agent, as
the case may be, has an obligation to act reasonably or promptly, Borrower
agrees that neither Lender nor its agents shall be liable for any monetary
damages, and Borrower's sole remedy shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. Any expedited procedure
legally available with such a declaratory judgment action or action for
injunction relief may be utilized to the extent possible. The parties hereto
agree that any action or proceeding to determine whether Lender has acted
reasonably shall be determined by an action seeking declaratory judgment. Lender
shall reimburse Borrower for any reasonable legal fees and costs incurred in the
event Borrower shall prevail in any such action.
SECTION 11.13 EXPENSES; INDEMNITY.
(a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to
reimburse Lender upon receipt of written notice from Lender, for all reasonable
out of pocket costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Lender in connection with (i) processing,
underwriting, closing the Loan including, but not limited to, fees and
disbursements of Lender's counsel, costs of third party studies (including,
without limitation, accounting, environmental, engineering, appraisal and
insurance review), title insurance, mortgage tax and recordation and, master and
special servicer and Trustee expenses; (ii) confirming Borrower's ongoing
performance of and compliance with Borrower's agreements and covenants contained
in this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date, including, without limitation, confirming
compliance with environmental and insurance requirements; (iii) Lender's ongoing
performance of and compliance with all agreements and covenants contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date; (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by Borrower; (v) the filing and recording fees
and expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or
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proceeding or other litigation against a third party, in each case against,
under or affecting Borrower, this Agreement, the other Loan Documents, the
Individual Properties, or any other security given for the Loan; and (vii)
enforcing any obligations of or collecting any payments due from Borrower under
this Agreement, the other Loan Documents or with respect to the Individual
Properties or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided, however, that Borrower shall
not be liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender. Any costs due and payable to Lender may be paid from the
Cash Management Account. Notwithstanding anything to the contrary contained in
this paragraph, Borrower shall not be responsible for any costs related to the
Updated Information to the extent such Updated Information is duplicative of the
deliveries provided to Lender on the Closing Date.
(b) Borrower shall indemnify, defend and hold harmless Lender from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of (i)
any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement or the other Loan
Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, HOWEVER, that Borrower
shall not have any obligation to Lender hereunder to the extent that such
Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or
willful misconduct of Lender. To the extent that the undertaking to indemnify,
defend and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
SECTION 11.14 SCHEDULES INCORPORATED.
The Schedules annexed hereto are hereby incorporated herein as a part of
this Agreement with the same effect as if set forth in the body hereof.
SECTION 11.15 OFFSETS, COUNTERCLAIMS AND DEFENSES.
Any assignee of Lender's interest in and to this Agreement and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to such documents which Borrower may otherwise
have against any assignor of such documents, and no such unrelated counterclaim
or defense shall be interposed or asserted by Borrower in any action or
proceeding brought by any such assignee upon such documents and any such right
to interpose or assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by Borrower.
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SECTION 11.16 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES.
(a) Borrower and Lender intend that the relationships created hereunder
and under the other Loan Documents be solely that of borrower and lender.
Nothing herein or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor
to grant Lender any interest in the Individual Properties other than that of
mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the benefit
of Lender and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lender any right to insist upon
or to enforce the performance or observance of any of the obligations contained
herein or therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender's sole discretion, Lender deems it advisable or desirable
to do so.
SECTION 11.17 PUBLICITY.
All news releases, publicity or advertising by Borrower or its Affiliates
through any media (excluding any earnings releases, periodic financial reports
and registration statements) intended to reach the general public which refers
to the Loan Documents or the financing evidenced by the Loan Documents, to
Lender, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc. or any of their
Affiliates shall be subject to the prior approval of Lender.
SECTION 11.18 CROSS-DEFAULT; CROSS-COLLATERALIZATION; WAIVER OF MARSHALLING
OF ASSETS.
(a) Borrower acknowledges that Lender has made the Loan to Borrower upon
the security of its collective interest in the Individual Properties and in
reliance upon the aggregate of the Individual Properties taken together being of
greater value as collateral security than the sum of the Individual Properties
taken separately. Borrower agrees that the Mortgages are and will be
cross-collateralized and cross-defaulted with each other so that (i) an Event of
Default under any of the Mortgages shall constitute an Event of Default under
each of the other Mortgages which secure the Note; (ii) an Event of Default
under the Note or this Agreement shall constitute an Event of Default under each
Mortgage; and (iii) each Mortgage shall constitute security for the Note as if a
single blanket lien were placed on all of the Individual Properties as security
for the Note.
(b) To the fullest extent permitted by law, Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Borrower, Borrower's partners and others with interests in Borrower, and of the
Individual Properties, or to a sale in inverse order of alienation in the event
of foreclosure of all or any of the Mortgages, and agrees
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not to assert any right under any laws pertaining to the marshalling of assets,
the sale in inverse order of alienation, homestead exemption, the administration
of estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the Individual
Properties for the collection of the Debt without any prior or different resort
for collection or of the right of Lender to the payment of the Debt out of the
net proceeds of the Individual Properties in preference to every other claimant
whatsoever. In addition, Borrower, for itself and its successors and assigns, to
the extent permitted by applicable law, waives in the event of foreclosure of
any or all of the Mortgages, any equitable right otherwise available to Borrower
which would require the separate sale of the Individual Properties or require
Lender to exhaust its remedies against any Individual Property or any
combination of the Individual Properties before proceeding against any other
Individual Property or combination of Individual Properties; and further in the
event of such foreclosure Borrower does hereby expressly consent to and
authorize, at the option of Lender, the foreclosure and sale either separately
or together of any combination of the Individual Properties.
SECTION 11.19 WAIVER OF OFFSETS/DEFENSES/COUNTERCLAIMS.
Borrower hereby waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents or otherwise to offset any obligations to make the payments
required by the Loan Documents. No failure by Lender to perform any of its
obligations hereunder shall be valid defense to, or result in any offset
against, any payments which Borrower is obligated to make under any of the Loan
Documents.
SECTION 11.20 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this Agreement and
any of the other Loan Documents, the provisions of this Agreement shall control.
The parties hereto acknowledge that they were represented by competent counsel
in connection with the negotiation, drafting and execution of the Loan Documents
and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.
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SECTION 11.21 BROKERS AND FINANCIAL ADVISORS.
Borrower and Lender each hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the transactions contemplated by this Agreement. Borrower
hereby agrees to indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities, costs and expenses of any kind (including Lender's
reasonable attorneys' fees and expenses) in any way relating to or arising from
a claim by any Person that such Person acted on behalf of Borrower in connection
with the transactions contemplated herein. The provisions of this Section 11.21
shall survive the expiration and termination of this Agreement and the payment
of the Debt.
SECTION 11.22 EXCULPATION.
Subject to the qualifications below, Lender shall not enforce
the liability and obligation of Borrower to perform and observe the obligations
contained in the Note, this Agreement, the Mortgages or the other Loan Documents
by any action or proceeding wherein a money judgment shall be sought against
Borrower, except that Lender may bring a foreclosure action, an action for
specific performance or any other appropriate action or proceeding to enable
Lender to enforce and realize upon its interest under the Note, this Agreement,
the Mortgages and the other Loan Documents, or in the Individual Properties, the
Rents, or any other collateral given to Lender pursuant to the Loan Documents;
PROVIDED, HOWEVER, that, except as specifically provided herein, any judgment in
any such action or proceeding shall be enforceable against Borrower only to the
extent of Borrower's interest in the Individual Properties, in the Rents and in
any other collateral given to Lender, and Lender, by accepting the Note, this
Agreement, the Mortgages and the other Loan Documents, agrees that it shall not
▇▇▇ for, seek or demand any judgment for the payment of money, deficiency
judgment or otherwise against Borrower in any such action or proceeding under or
by reason of or under or in connection with the Note, this Agreement, the
Mortgages or the other Loan Documents. The provisions of this Section shall not,
however, (a) constitute a waiver, release or impairment of any obligation
evidenced or secured by any of the Loan Documents; (b) impair the right of
Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under any of the Mortgages; (c) affect the validity or
enforceability of or any guaranty made in connection with the Loan or any of the
rights and remedies of Lender thereunder; (d) impair the right of Lender to
obtain the appointment of a receiver; (e) impair the enforcement of any of the
Assignments of Leases; (f) constitute a prohibition against Lender to seek a
deficiency judgment against Borrower in order to fully realize the security
granted by each of the Mortgages or to commence any other appropriate action or
proceeding in order for Lender to exercise its remedies against all of the
Individual Properties (but not to seek any personal liability against Borrower
except to realize upon the collateral for the Loan); or (g) constitute a waiver
of the right of Lender to enforce the liability and obligation of Borrower, by
money judgment or otherwise, to the extent of any loss, damage, cost, expense,
liability, claim or other obligation incurred by Lender (including attorneys'
fees and costs reasonably incurred) arising out of or in connection with the
following:
(i) fraud or intentional misrepresentation by Borrower;
(ii) willful misconduct of Borrower;
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(iii) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity or in the Mortgages
concerning environmental laws, hazardous substances and asbestos and any
indemnification of Lender with respect thereto in either document;
(iv) the removal or disposal of any portion of the Individual Properties
after an Event of Default;
(v) the misapplication or conversion by Borrower of (A) any insurance
proceeds paid by reason of any loss, damage or destruction to the Individual
Properties, (B) any Awards or other amounts received in connection with the
Condemnation of all or a portion of the Individual Properties, or (C) any Rents
following an Event of Default;
(vi) failure to permit on-site inspections of the Individual Properties,
failure to provide financial information, failure to maintain status as a single
purpose entity or failure to appoint a new property manager upon the request of
Lender after an Event of Default, each as required by, and in accordance with
the terms and provisions of, this Agreement and the Mortgages;
(vii) any security deposits, advance deposits or any other deposits
collected with respect to the Individual Properties which are not delivered to
Lender upon a foreclosure of the Individual Properties or action in lieu
thereof, except to the extent any such security deposits were applied in
accordance with the terms and conditions of any of the Leases prior to the
occurrence of the Event of Default that gave rise to such foreclosure or action
in lieu thereof; and
(viii) Borrower's indemnification of Lender set forth in Section 9.2
hereof.
Notwithstanding anything to the contrary in this Agreement, the Note or any
of the Loan Documents, (A) Lender shall not be deemed to have waived any right
which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be
fully recourse to Borrower in the event that: (i) Borrower fails to obtain
Lender's prior written consent to any subordinate financing or other voluntary
lien encumbering the Individual Properties; or (ii) Borrower fails to obtain
Lender's prior written consent to any assignment, transfer, or conveyance of the
Individual Properties or any interest therein as required by the Mortgages or
this Agreement.
SECTION 11.23 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire agreement of
the parties hereto and thereto in respect of the transactions contemplated
hereby and thereby, and all prior agreements among or between such parties,
whether oral or written, including, without limitation, the Commitment Letter
dated July 31, 2000 between Guarantor and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, are
superseded by the terms of this Agreement and the other Loan Documents.
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SECTION 11.24 SERVICER.
At the option of Lender, the Loan may be serviced by not more than two
servicers (each, a "SERVICER") selected by Lender and Lender may delegate all or
any portion of its responsibilities under this Agreement and the other Loan
Documents to such Servicers pursuant to servicing agreements (each, a "SERVICING
AGREEMENT") between Lender and such Servicer. If a Secondary Market Transaction
occurs, Lender may select a Trustee to act as Lender hereunder. Borrower shall
be responsible for any set-up fees or any other initial costs relating to or
arising under any Servicing Agreement and all initial Trustees fees and costs
and Borrower shall be responsible for the monthly servicing fee due to a
Servicer or a Trustee under the related Servicing Agreement and trust indenture
or agreement. Borrower shall be responsible for the costs of any special
servicer under the Loan. Lender will consult with Borrower prior to selecting a
Servicer and a Trustee and will take into account any objections of Borrower,
provided, however, that Borrower shall have no right to approve such Servicer.
From and after the effective date of any Securitization, (a) the Servicer shall
have all the rights of Lender herein with respect to the servicing of the Loan
and (b) Borrower shall indemnify the Servicer upon the same terms that it is
required to indemnify Lender herein.
SECTION 11.25 CALIFORNIA WAIVERS.
11.25.1 CALIFORNIA PROVISIONS. Borrower agrees that if, and to the extent,
any of the entities comprising Borrower are deemed to be a guarantor or surety
for any of the other entities comprising Borrower, the following shall apply
(for purposes of the following paragraphs of this Section 11.25, such a
guarantor or surety shall be called a "BORROWER GUARANTOR"):
11.25.2 MODIFICATIONS TO LOAN AND LOAN DOCUMENTS. Each Borrower Guarantor
agrees that Lender may do any of the following without affecting the
enforceability of this Agreement or the other Loan Documents: take or release
additional security for any obligation in connection with the Loan Documents;
discharge or release (by judicial or nonjudicial foreclosure, acceptance of a
deed in lieu of foreclosure or otherwise) any party or parties liable under the
Loan Documents; accept or make compositions or other arrangements or file or
refrain from filing a claim in any bankruptcy proceeding of Borrower, any
guarantor of Borrower's obligations under the Loan Documents or any pledgor of
collateral for any person's obligations to Lender; and credit payments in such
manner and order of priority to principal, interest or other obligations as
Lender may determine.
11.25.3 WAIVERS.
(a) Each Borrower Guarantor agrees that Lender's right to enforce this
Agreement is absolute and is not contingent upon the genuineness, validity or
enforceability of any of the Loan Documents. Each Borrower Guarantor waives all
benefits and defenses it may have under California Civil Code Section 2810 and
agrees that Lender's rights under this Agreement shall be enforceable even if
any of the entities comprising Borrower had no liability at the time of
execution of the Loan Documents or later ceases to be liable.
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(b) Each Borrower Guarantor waives all benefits and defenses it may have
under California Civil Code Section 2809 and agrees that Lender's rights under
the Loan Documents will remain enforceable even if the amount secured by the
Loan Documents is larger in amount and more burdensome than that for which each
of the entities comprising Borrower is responsible. The enforceability of the
Loan Documents against any Borrower Guarantor shall continue until all sums due
under the Loan Documents have been paid in full and shall not be limited or
affected in any way by any impairment or any diminution or loss of value of any
security or collateral for Borrower's obligations under the Loan Documents, from
whatever cause, the failure of any security interest in any such security or
collateral or any disability or other defense of Borrower, any guarantor of
Borrower's obligations under the Loan Documents, any other pledgor of collateral
for any person's obligations to Lender or any other person in connection with
Borrower's loan.
(c) Each Borrower Guarantor waives all benefits and defenses it may have
under California Civil Code Sections 2845, 2849 and 2850, including, without
limitation, the right to require Lender to (A) proceed against Borrower, any
guarantor of Borrower's obligations under the Loan Documents, any other pledgor
of collateral for any person's obligations to Lender or any other person in
connection with Borrower's loan, (B) proceed against or exhaust any other
security or collateral Lender may hold, or (C) pursue any other right or remedy
for Borrower's benefit, and agree that Lender may exercise its rights under this
Agreement or may foreclose against any of the Individual Properties without
taking any action against Borrower, any guarantor of Borrower's obligations
under the Loan Documents, any pledgor of collateral for any person's obligations
to Lender or any other person in connection with Borrower's loan, and without
proceeding against or exhausting any security or collateral Lender holds.
(d) Each Borrower Guarantor waives any rights or benefits it may have by
reason of California Code of Civil Procedure Section 580a which could limit the
amount which Lender could recover in a foreclosure of the Individual Properties
to the difference between the amount owing under the Loan Documents and the fair
value of the property or interests sold at a nonjudicial foreclosure sale or
sales of any other real property held by Lender as security for the obligations
under the Loan Documents.
(e) Each Borrower Guarantor, as a guarantor or surety, waives diligence
and all demands, protests, presentments and notices of protest, dishonor,
nonpayment and acceptance of the Loan Documents.
(f) Each Borrower Guarantor waives all rights and defenses that are or may
become available to the guarantor or other surety by reason of California Civil
Code Sections 2787 to 2855, inclusive.
11.25.4 BORROWER GUARANTOR INFORMED OF BORROWER'S CONDITION. Each Borrower
Guarantor acknowledges that it has had an opportunity to review the Loan
Documents, the value of the security for each of the other entities comprising
Borrower under the Loan Documents and the financial condition of each of the
other entities comprising Borrower and the ability of such entity to satisfy its
obligations to Lender. Each Borrower Guarantor agrees to keep itself fully
informed of all aspects of the financial condition of each of the other entities
comprising Borrower and of the performance of the obligations of each of the
other entities
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comprising Borrower to Lender and agrees that Lender has no duty to disclose to
any Borrower Guarantor any information pertaining to the other entities
comprising Borrower or any security for the obligations of the other entities
comprising Borrower under the Loan Documents.
11.25.5 WAIVER OF ESTOPPEL DEFENSE. Upon Borrower's default under the Loan
Documents, Lender may elect to foreclose nonjudicially on real property given by
Borrower or others as security under the Loan Documents and also to exercise its
rights under this Agreement. Each Borrower Guarantor acknowledges that its right
to seek reimbursement from the other entities comprising Borrower for any
amounts paid by it to Lender under this Agreement will be eliminated if Lender
elects to so foreclose on such Borrower Guarantor's property. Nevertheless, each
Borrower Guarantor waives any such right to reimbursement and agrees that a
nonjudicial foreclosure by Lender against any real property security owned by
such Borrower Guarantor or others will not affect the enforceability of the Loan
Documents on such Borrower Guarantor's interest in the property. In order to
further effectuate such waiver, each Borrower Guarantor hereby agrees as
follows:
(a) it waives all rights and defenses arising out of an election of
remedies by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to the Individual Properties, has destroyed its rights
of subrogation and reimbursement against the other entities comprising Borrower
by the operation of Section 580d of the Code of Civil Procedure or otherwise.
11.25.6 SUBROGATION. Each Borrower Guarantor agrees that its rights of
subrogation and reimbursement against any of the other entities comprising
Borrower, its right of subrogation against the Individual Properties or any
other collateral or security for Lender's loan to Borrower or the pledgor of
such collateral or security and its right of contribution from any guarantor or
surety of Borrower's obligation under the Loan Documents shall be subordinate to
Lender's rights against each of the entities comprising Borrower, in such
collateral or security, against any such pledgor and against any such guarantor
or surety. Each Borrower Guarantor shall have no such rights of subrogation,
reimbursement or contribution until all amounts due under the Note, the Mortgage
and the other Loan Documents have been paid in full and Lender has released,
transferred or disposed of all of its rights in any collateral or security. Each
Borrower Guarantor waives its rights under California Civil Code Sections 2847,
2848 and 2849 to the extent inconsistent with the foregoing.
11.25.7 CONFIRMATION OF WAIVERS. In accordance with California Civil Code
Section 2856(c), each Borrower Guarantor, as guarantor, hereby makes the
following waivers:
(a) The guarantor waives all rights and defenses that the guarantor may
have because the debtor's debt is secured by real property. This means, among
other things:
(i) The creditor may collect from the guarantor without first foreclosing
on any other real or personal property collateral pledged by the debtor or any
other person.
(ii) If the creditor forecloses on any real property collateral pledged by
the debtor:
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(1) The amount of the debt may be reduced only by the price for
which the collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(2) The creditor may collect from the guarantor even if the
creditor, by foreclosing on the real property collateral, has
destroyed any right the guarantor may have to collect from the debtor.
(iii) This is an unconditional and irrevocable waiver of any rights and
defenses the guarantor may have because the debtor's debt is secured by real
property. These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedures.
11.25.8 EXCULPATION. Nothing contained in this Section 11.25 shall be
deemed to expand the personal liability of any Borrower Guarantor beyond that
provided in Section 11.22 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
LENDER:
▇▇▇▇▇▇ FINANCIAL CORPORATION,
a Pennsylvania corporation
By:
-----------------------------------
Name:
Title:
BORROWER:
PHOENIX ▇▇ ▇▇▇▇▇▇ LLC,
a Delaware limited liability company
By: Hilton Spring Corporation,
a Delaware corporation,
its Manager
By:
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
▇.▇. ▇▇▇▇▇▇, INC.,
a Delaware corporation
By:
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
[Signatures continue on the following page.]
CHICAGO HILTON LLC,
a Delaware limited liability company
By: Hilton Spring Corporation,
a Delaware corporation,
its Manager
By:
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
SHORT HILLS HILTON LLC,
a Delaware limited liability company
By: Hilton Spring Corporation,
a Delaware corporation,
its Manager
By:
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ HILTON LLC,
a Delaware limited liability company
By: Hilton Spring Corporation,
a Delaware corporation,
its Manager
By:
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President