EXHIBIT 10.27
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LOAN AGREEMENT
Dated as of March 5, 1997
Between
INNKEEPERS RESIDENCE DENVER-DOWNTOWN, L.P.
INNKEEPERS RESIDENCE WICHITA EAST, L.P.
INNKEEPERS RESIDENCE SILI I, L.P.
INNKEEPERS FINANCING PARTNERSHIP III, L.P.,
as Borrower
and
NOMURA ASSET CAPITAL CORPORATION,
as Lender
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TABLE OF CONTENTS
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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION .................................1
Section 1.1 Definitions .................................................1
Section 1.2 Principles of Construction .................................14
II. GENERAL ..................................................................15
Section 2.1 The Loan ...................................................15
2.1.1 Commitment ...............................................15
2.1.2 Disbursement to Borrower .................................15
2.1.3 The Note .................................................15
2.1.4 Use of Proceeds of Loan ..................................15
Section 2.2 Interest; Monthly Payments .................................15
2.2.1 Generally ................................................15
2.2.2 Accrued Interest .........................................16
2.2.3 Property Cash Flow Allocation ............................16
2.2.4 Default Rate .............................................17
Section 2.3 Loan Repayment and Defeasance ..............................17
2.3.1 Repayment.................................................17
2.3.2 Mandatory Prepayments ....................................17
2.3.3 Voluntary Defeasance of the Note .........................18
Section 2.4 Release of Property ........................................20
2.4.1 Release of All of the Properties .........................20
2.4.2 Release of Individual Properties .........................20
2.4.3 Release on Payment in Full ...............................21
Section 2.5 Payments and Computations ..................................21
2.5.1 Making of Payments .......................................21
2.5.2 Computations .............................................21
2.5.3 Late Payment Charge ......................................21
Section 2.6 Cash Management Arrangements ...............................22
III. CONDITIONS PRECEDENT ....................................................22
Section 3.1 Conditions Precedent to the Loan ...........................22
IV. REPRESENTATIONS AND WARRANTIES ...........................................25
Section 4.1 Borrower Representations ...................................25
Section 4.2 Survival of Representations ................................33
V. AFFIRMATIVE COVENANTS ....................................................33
Section 5.1 Borrower Covenants .........................................33
VI. NEGATIVE COVENANTS .......................................................42
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Section 6.1 Borrower's Negative Covenants...............................42
VII. CASUALTY; CONDEMNATION; ESCROWS .........................................44
Section 7.1 Insurance; Casualty and Condemnation........................44
7.1.1 Insurance ................................................44
7.1.2 Casualty and Application of Proceeds .....................46
7.1.3 Condemnation .............................................47
Section 7.2 Required Repair; Required Repair Funds .....................49
7.2.1 Required Repairs: Deposits ...............................49
7.2.2 Grant of Security Interest ...............................49
7.2.3 Release of Required Repair Funds .........................49
7.2.4 Failure to Perform Required Repairs ......................50
Section 7.3 Tax and Insurance Escrow Fund ..............................50
7.3.1 Tax and Insurance Escrow Fund ............................50
7.3.2 Grant of Security Interest ...............................51
7.3.3 Application of Tax and Insurance Escrow Fund .............51
Section 7.4 Capital Reserve Fund .......................................52
7.4.1 Capital Reserve Fund .....................................52
7.4.2 Additional Capital Reserve Fund ..........................52
7.4.3 Grant of Security Interest ...............................53
7.4.4 Application of Capital Reserve Fund ......................53
7.4.5 Payment of Capital Expenses ..............................53
Section 7.5 Payment of Approved Operating Expenses......................53
VIII. DEFAULTS ...............................................................54
Section 8.1 Event of Default ...........................................54
Section 8.2 Remedies ...................................................57
Section 8.3 Remedies Cumulative ........................................58
IX. SPECIAL PROVISIONS .......................................................58
Section 9.1 Sale of Note and Securitization ............................58
Section 9.2 Securitization Indemnification .............................59
Section 9.3 Rating Surveillance ........................................62
Section 9.4 Exculpation ................................................62
Section 9.5 Retention of Servicer ......................................63
X. MISCELLANEOUS ............................................................63
Section 10.1 Survival ..................................................63
Section 10.2 Lender's Discretion .......................................63
Section 10.3 Governing Law .............................................64
Section 10.4 Modification, Waiver in Writing ...........................65
Section 10.5 Delay Not a Waiver ........................................65
Section 10.6 Notices ...................................................65
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Section 10.7 Trial by Jury .............................................66
Section 10.8 Headings ..................................................67
Section 10.9 Severability ..............................................67
Section 10.10 Preferences ..............................................67
Section 10.11 Waiver of Notice .........................................67
Section 10.12 Remedies of Borrower .....................................67
Section 10.13 Expenses; Indemnity ......................................67
Section 10.14 Exhibits Incorporated ....................................69
Section 10.15 Offsets, Counterclaims and Defenses ......................69
Section 10.16 No Joint Venture or Partnership ..........................69
Section 10.17 Publicity ................................................69
Section 10.18 Waiver of Marshalling of Assets ..........................69
Section 10.19 Waiver of Counterclaim ...................................70
Section 10.20 Conflict; Construction of Documents ......................70
Section 10.21 Brokers and Financial Advisors ...........................70
Section 10.22 No Third Party Beneficiaries .............................70
Section 10.23 Cross-Default; Cross Collateralization ...................70
Section 10.24 Prior Agreements .........................................70
SCHEDULES
Schedule 1 - Properties; Allocated Loan Amounts
Schedule 2 - Matters Regarding Representations
Schedule 3 - Required Repairs
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Budget
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LOAN AGREEMENT
LOAN AGREEMENT dated as of March 5, 1997 between INNKEEPERS RESIDENCE
DENVER-DOWNTOWN, L.P., INNKEEPERS RESIDENCE WICHITA EAST, L.P., INNKEEPERS
RESIDENCE SILI I, L.P. and INNKEEPERS FINANCING PARTNERSHIP III, L.P., each a
limited partnership duly organized and validly existing under the laws of the
State of Virginia (each, an "Individual Borrower", and collectively,
"Borrower"), on a joint and several basis, and NOMURA ASSET CAPITAL CORPORATION,
a corporation organized under the laws of the State of Delaware (together with
its permitted successors and assigns, "Lender").
All capitalized terms used herein shall have the respective meanings
set forth in Section 1 hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, 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
required or unless the context clearly indicates a contrary intent:
"Accrued Interest" shall have the meaning set forth in Section 2.2.2.
"Actual Net Operating Income" shall mean, for any Properties for any
period, the actual net operating income (as opposed to the Net Operating Income)
relating to such Properties during such period, computed in accordance with GAAP
and the Uniform System of Accounts without taking into account any underwriting
adjustments of Lender.
"Additional Capital Reserve Fund" shall have the meaning set forth in
Section 7.4.2.
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, 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.
"Allocated Loan Amount" shall mean the principal portion of the Loan
attributable to each Property as set forth on Schedule 1 attached hereto.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Annual Budget" shall have the meaning set forth in Section 5.1(r).
"Approved Capital Expenses" shall mean with respect to any Property
other than a Marriott Managed Property, Capital Expenses and FF&E Expenses
incurred by Borrower which (i) are included in the approved Capital Budget for
such Property, (ii) are not included in the approved Capital Budget, but do not
cause either (A) the relevant line item for the entire year covered by the
approved Capital Budget for such Property to be exceeded by the greater of
$5,000 or more than 5% or (B) the total of the approved Capital Budget for such
Property for the Current Month and all prior months covered by such approved
Capital Budget (i.e., year to date) to be exceeded by more than 5%, or (iii)
have been approved by the Lender.
"Approved Operating Expenses" shall mean, with respect to any Property
for which there is no Operating Lease, Operating Expenses incurred by Borrower
with respect to such Property which (i) are included in the approved Operating
Budget for such Property for the Current Month, (ii) are not included in the
approved Operating Budget for such Property for the Current Month, but do not
cause the relevant line item for the Current Month or the total of such approved
Operating Budget for the Current Month to be exceeded by more than the greater
of $5,000 or 5%, (iii) are for required insurance or electric, gas, oil, water,
sewer or other utility service to such Property or (iv) have been approved by
the Lender.
"Assignment of Agreements" shall mean, with respect to each Property,
that certain first priority Assignment of Agreements, Licenses, Permits and
Contracts dated as of the date hereof, from Borrower, as assignor, to Lender, as
assignee, assigning to Lender as security for the Loan, to the extent assignable
under law, all of Borrower's interest in and to the applicable Franchise
Agreement and all other licenses, permits and contracts necessary for the use
and operation of such Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Assignment of Leases" shall mean, with respect to each Property, that
certain first priority Assignment of Leases and Rents dated as of the date
hereof, from Borrower, as assignor, to Lender, as assignee, assigning to Lender
as security for the Loan, to the extent assignable under law, all of Borrower's
interest in and to the Rents and Leases for such Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"Award" shall have the meaning set forth in Section 7.1.3.
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"Borrower" shall mean, collectively, the four Individual Borrowers, on
a joint and several basis, together with their permitted successors and assigns.
"Business Day" shall mean any day excluding a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
"Capital Budget" shall have the meaning set forth in Section 5.1(r).
"Capital Expenses" shall mean expenses that are required under GAAP to
be capitalized.
"Capital Reserve Fund" shall have the meaning set forth in Section
7.4.1.
"Casualty/Condemnation Prepayments" shall have the meaning set forth
in Section 2.3.2.
"Closing Date" shall mean the date of the funding of 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 have the meaning set forth in Section 7.1.3.
"Condemnation Restoration" shall have the meaning set forth in Section
7.1.3.
"Control" shall mean with respect to any Person either (i) ownership
directly or through other entities, of more than 50% of all beneficial equity
interest in such Person, and (ii) the power to direct the management, operation
and business of such Person.
"Current Month" shall mean, as of any date of determination, the then
current calendar month.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note, together with all interest accrued and unpaid thereon
and all other sums due to Lender in respect of the Loan, including the Yield
Maintenance Premium (if any then due) and any sums due under the Note, this
Agreement, the Mortgages, or any other Loan Document.
"Debt Service" shall mean, with respect to any particular period of
time, scheduled principal and interest payments under the Note.
"Debt Service Coverage Ratio" shall mean, as of any date, a ratio in
which (a) the numerator is the Net Operating Income for the period of 12
calendar months ending immediately preceding such date, and (b) the denominator
is the Pro-Forma Debt Service for such period.
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"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, with respect to the Loan, a rate per annum
equal to the lesser of (a) the maximum rate permitted by applicable law, or (b)
five percent (5%) above the Interest Rate.
"Defeasance" shall have the meaning set forth in Section 2.3.3 hereof.
"Defeasance Date" shall have the meaning set forth in Section 2.3.3.
hereof.
"Defeasance Deposit" shall mean an amount equal to the sum of (i) an
amount sufficient to purchase U.S. Obligations which provide payments that will
meet the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or
to be incurred in the purchase of such U.S. Obligations and (iii) any revenue,
documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, the creation of the Defeased Note and
the Undefeased Note, if applicable, any transfer of the Defeased Note or
otherwise required to accomplish the agreements of Sections 2.3 and 2.4 hereof.
"Defeased Note" shall have the meaning set forth in Section 2.3.3
hereof.
"Deposit Account" shall mean that account established and maintained
pursuant to the Deposit Account Agreement.
"Deposit Account Agreement" shall mean that certain Deposit Account
Agreement dated as of the date hereof among Borrower, Lender, Lessee and LaSalle
National Bank for collecting and retaining all the Rents from the Properties, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"Disclosure Document" shall have the meaning set forth in Section
9.2(a).
"Environmental Indemnity" shall mean that certain Environmental and
Hazardous Substance Indemnification Agreement executed by Borrower in connection
with the Loan for the benefit of Lender.
"Equipment" shall have the meaning set forth in the Mortgages.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Exchange Act" shall have the meaning set forth in Section 9.2(a).
"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.
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"FF&E Expenses" shall mean expenses on account of furniture,
furnishings and equipment for any Property.
"Franchise Agreement" shall mean any franchise or license agreement
between Borrower or Lessee and any national hotel chain approved by Lender with
respect to a Property.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
"General Partner" shall mean Innkeepers Financial Corporation III, a
Virginia corporation.
"Governmental Authority" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
▇▇▇▇ (▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ or otherwise) whether
now or hereafter in existence.
"Improvements" shall have the meaning set forth in the Mortgages.
"including" shall mean "including, without limitation".
"Independent Director" shall have the meaning set forth in Section
4.1(cc).
"Individual Borrower" shall mean each of Innkeepers Residence
Denver Downtown, L.P., Innkeepers Residence Wichita East, L.P., Innkeepers
Residence Sili I, L.P. and Innkeepers Financing Partnership III, L.P.,each of
which is a Virginia limited partnership, together with its permitted successors
and assigns.
"Initial Prepayment" shall mean the prepayment by Borrower occurring
on the date hereof of principal under the Note in the amount of $1,545,085.
"Insurance Premiums" shall have the meaning set forth in Section 7.1.1
hereof.
"Insured Casualty" shall have the meaning specified in Section
7.1.1(d).
"Interest Rate" shall mean a rate of interest equal to 8.15% per
annum.
"Lease" shall mean any lease (including the Operating Lease), or, to
the extent of the interest therein of Borrower, any sublease or sub-sublease,
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 Property, and every modification, amendment or other agreement
relating to such lease, sublease, sub-sublease, or other agreement entered into
in connection with such lease, sublease, sub-sublease, 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.
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"Legal Requirements" shall mean, with respect to each Property, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting such Property or any part thereof or the
construction, use, alteration or operation thereof, or any part thereof, whether
now or hereafter enacted and in force, 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 Property or any part
thereof, including any which may (i) require repairs, modifications or
alterations in or to such Property or any part thereof, or (ii) in any way limit
the use and enjoyment thereof.
"Lender" shall mean Nomura Asset Capital Corporation, together with
its successors and assigns.
"Lessee" shall mean collectively, JF Hotel IV, Inc., a Virginia
corporation and JF Hotel V, Inc., a Virginia corporation, or any permitted
successor lessees under the Operating Lease.
"Lessee Subordination" shall mean collectively, those certain
Subordination and Attornment Agreements dated the date hereof between Lessee and
Lender.
"Liabilities" shall have the meaning set forth in Section 9.2(b).
"Licenses" shall have the meaning set forth in Section 4.1(w).
"Lien" shall mean, with respect to each Property, any mortgage, deed
of trust, lien, pledge, hypothecation, assignment, security interest, or any
other encumbrance, charge or transfer of, on or affecting such Property or any
portion thereof or any Individual Borrower, or any interest therein, including
any conditional sale or other title retention agreement, 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.
"Loan" shall mean the loan made to Borrower by Lender pursuant hereto
in the original principal amount of $43,545,085 and evidenced by the Note and
secured by the Mortgages and the other Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
each Mortgage, each Assignment of Leases, each Assignment of Agreements, the
Environmental Indemnity, the Lessee Subordination, the Manager Subordination,
the Deposit Account Agreement and all other documents, agreements and
instruments evidencing, securing or delivered to Lender in connection with the
Loan, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"Management Agreements" shall mean those certain management agreements
between Lessee and Manager pursuant to which Manager is to provide management
and other services with respect to the Marriott Managed Properties.
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"Manager" shall mean Residence Inn by Marriott, Inc., a Delaware
corporation.
"Manager Subordination" shall mean collectively, those three certain
Subordination Nondisturbance and Attornment Agreements dated the date hereof
between Manager and Lender.
"Marriott Managed Properties" shall mean the Properties known as
Residence Inn - Denver, Residence Inn - Wichita and Residence Inn - Sili I for
so long as such Properties continue to be managed by Manager.
"Maturity Date" shall mean the date on which the final payment of
principal of the Note (or the Defeased Note, if applicable) becomes due and
payable as therein provided, whether at the Stated Maturity Date (March 11,
2019), by declaration of acceleration, or otherwise.
"Monthly Debt Service Payment Amount" shall have the meaning set forth
in Section 2.2.1.
"Mortgages" shall mean those certain documents, each entitled
Mortgage, Assignment of Leases and Rents and Security Agreement or Deed of
Trust, Assignment of Leases and Rents and Security Agreement, executed and
delivered by an Individual Borrower as security for the Loan and encumbering the
respective Properties, as the same may be amended, restated, replaced,
supplemented, consolidated or otherwise modified from time to time.
"NACC" shall mean Nomura Asset Capital Corporation, a Delaware
corporation.
"Net Operating Income" shall mean, for any Properties for any period,
the difference between all Operating Income of such Properties during such
period, minus all Operating Expenses of such Properties; subject to adjustment,
in the sole discretion of Lender, to reflect (i) supply and demand dynamics in
the specific market for each such Property and the effect of new construction on
occupancy and room rates; (ii) the growth or decline, as the case may be, in
occupancy, average daily rate, gross revenue, departmental profit and gross
operating profit for each such Property; (iii) the operating performance of such
Properties that have been recently renovated; (iv) expense and other operating
ratios of each such Property compared to those ratios achieved for a comparable
asset in the hotel industry at large; and (v) minimum standards in the hotel
industry for management and franchise fees for either full-service or
limited-service hotels that have both a national franchise and management
affiliation. Net Operating Income shall be audited, or shall be determined in
accordance with agreed-upon procedures determined by Lender.
"Nomura" shall have the meaning set forth in Section 9.2(b).
"Nomura Group" shall have the meaning set forth in Section 9.2(b).
"Note" shall mean that certain Note of even date herewith, made by
Borrower in favor of Lender, substantially in the form of Exhibit A annexed
hereto, as the same may be amended.
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restated, replaced, supplemented, consolidated or otherwise modified from time
to time, including any Undefeased Note that may exist from time to time.
"Officers' Certificate" shall mean a certificate delivered to Lender
by Borrower which is signed by a senior executive officer of General Partner
pursuant to which such Person shall make a certification that is to the best of
his knowledge after due inquiry.
"Operating Budget" shall have the meaning set forth in Section 5.1(r).
"Operating Expenses" shall mean, for any Property for any period, all
fees and expenses incurred in connection with the operation of such Property for
such period, whether incurred, paid, accrued or payable, as determined in
accordance with GAAP and the Uniform System of Accounts, by or on behalf of any
Individual Borrower or the Lessee, including the following (provided, however,
that Operating Expenses shall not include Debt Service or payments to Lender for
administration of the Loan, Capital Expenses, Rent payable under the Operating
Lease, non-cash items such as depreciation and amortization or any extraordinary
one-time expenditures not considered operating expenses):
(i) the cost of sales, including compensation, fringe benefits,
payroll taxes and other costs related to employees of the Property (the
foregoing costs shall not include salaries and other employee costs of executive
personnel of Lessee who do not work at the Property on a regular basis, except
that the foregoing costs shall include the allocable portion of the salary and
other employee costs of any "on-site" manager or other supervisory personnel
assigned to a "cluster" of hotels which includes the Property);
(ii) departmental expenses incurred at departments within the
Property, administrative and general expenses for the Property and the cost of
marketing incurred by Lessee for the Property, advertising and business
promotion incurred by Lessee, heat, light, power. computer line charges and
routine repairs, maintenance and minor alterations (excluding any amounts paid
from the Capital Reserve Fund);
(iii) the cost of inventories and fixed asset supplies consumed in the
operation of the Property;
(iv) a reasonable reserve for uncollectible accounts receivable as
determined by Lessee;
(v) all costs and fees of independent professionals or other third
parties who are retained by Lessee with respect to the Property to perform
services required or permitted hereunder;
(vi) all costs and fees of technical consultants and operational
experts who are retained or employed by Lessee and/or Affiliates of Lessee for
specialized services (including quality assurance inspectors) with respect to
the Property and the cost of attendance by employees of Lessee
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(chargeable to the Property under (i) above) at training and manpower
development programs sponsored by Lessee;
(vii) advertising or marketing expenses or commissions or association
dues paid in connection with the operation of the Property;
(viii) franchise and license fees related to the Property;
(ix) management fees, provided that, whether or not management fees
are actually payable with respect to the operation of the Property, Operating
Expenses for each month shall include an amount attributable to management fees
in the amount of the greater of four and one-half percent (4.5%) of Operating
Income of such Property for such month or the actual amount of such fees;
(x) taxes, if any, payable by or assessed against Lessee related to
this Agreement or to Lessee's operation of the Property (exclusive of income
taxes) and all Taxes, Other Charges and insurance premiums related to the
Property;
(xi) deposits to the Capital Reserve Fund (but excluding any amounts
paid from the Capital Reserve Fund) with respect to the Property;
(xii) costs and expenses incurred in making reservations at or for the
Property; and
(xiii) such other costs and expenses related to the Property incurred
by Borrower and/or Lessee as specifically provided for elsewhere in this
Agreement or are otherwise reasonably necessary for the proper and efficient
operation of the Property.
"Operating Income" shall mean, for any Property for any period, all
room rentals, together with all other rents, revenues, receipts or income
payable to Lessee or Borrower from or otherwise relating to such Property
including all rents, rent equivalents, moneys payable as damages or in lieu of
rent or rent equivalents, royalties (including all oil and gas or other mineral
royalties and bonuses), income, receivables, receipts, revenues, deposits
(including 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
from any and all sources arising from or attributable to such Property,
including all hotel receipts, revenues and credit card receipts collected from
guest rooms, mini-bars, parking, restaurants, bars, laundry, 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
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 sales, service charges,
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vending machine sales and proceeds, if any, from business interruption, rent
loss or other loss of income insurance, during such period, excluding, however,
(i) tips and gratuities (including service charges added to a customer's ▇▇▇▇ or
statement in lieu of gratuities which are payable to employees of Lessee); (ii)
sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment
taxes, tourist taxes or charges, hotel and motel taxes and any other taxes
collected directly from patrons or guests or included as part of the sales price
of any goods or services; (iii) credits, refunds, discounts or rebates made to
customers, guests or patrons; (iv) sums and credits received in settlement of
claims for loss or damage to merchandise; (v) income from the sale of
furnishings, fixtures or equipment; (vi) bad debts; (vii) net proceeds of an
Insured Casualty or a Condemnation (other than from rent loss or business
interruption insurance); (viii) interest received or accrued with respect to any
funds in the Deposit Account or any escrow or reserve account; (ix) any proceeds
from any sale of the Property or from the refinancing of any debt encumbering
the Property; and (x) any rent payable under the Operating Lease.
"Operating Lease" shall mean, collectively, the four Lease Agreements
dated as of the date hereof between Borrower and Lessee with respect to the
Properties, as modified and supplemented in accordance herewith and in effect
from time to time.
"Optional Prepayment Date" shall mean March 11, 2009.
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Properties, now or hereafter levied or assessed or imposed against the
Properties or any part thereof.
"Payment Date," shall mean the eleventh (11th) day of each calendar
month or, if in any month the eleventh (11th) day is not a Business Day, than
the Payment Date for such month shall be the first Business Day thereafter.
"Permitted Encumbrances" shall mean, with respect to each Property,
collectively, (a) the Liens and security interests created by the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy relating to such Property or any part thereof, (c) Liens, if
any, for Taxes or Other Charges not yet delinquent, and (d) such other title and
survey exceptions as Lender has approved or may approve in writing in Lender's
sole discretion.
"Permitted Indebtedness" shall mean the Debt and unsecured trade debt
customarily payable within thirty (30) days in an aggregate amount not to exceed
$750,000 at any time.
"Permitted Investments" shall have the meaning set forth in the
Deposit Account Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau,
10
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"Policies" shall have the meaning specified in Section 7.1.1(c).
"Pooling and Servicing Agreement" shall mean the Servicing Agreement
entered into with the Servicer in connection with any Securitization of the
Loan.
"Premises" shall have the meaning set forth in the Granting Clause of
the Mortgages.
"Pro-Forma Debt Service" shall mean, for any period, the interest and
principal that would have been due and payable for such period under the Note
assuming (i) an outstanding principal equal to the principal balance of the Note
outstanding on the determination date, (ii) an interest rate equal to the
Interest Rate, and (iii) an annual debt service constant equal to the actual
constant which is 10.15%.
"Properties" shall mean, collectively, the parcels of real property
and improvements thereon owned by Borrower and encumbered by the Mortgages,
together with all rights pertaining to such property and improvements, as more
particularly described in the Granting Clauses of the Mortgages and referred to
therein as the "Property" or the "Mortgaged Property", as the case may be. A
list of the Properties is set forth in Schedule 1 annexed hereto.
"Provided Information" shall have the meaning set forth in Section
9.1.
"Rating Agency" shall mean each of Standard & Poor's Ratings Group, a
division of ▇▇▇▇▇▇-▇▇▇▇, Inc., ▇▇▇▇▇'▇ Investors Service, Inc., Duff & ▇▇▇▇▇▇
Credit Rating Co. and Fitch Investors Service, Inc. or any other
nationally-recognized statistical rating agency which has been approved by
Lender.
"Registration Statement" shall have the meaning set forth in Section
9.2(b).
"REIT" shall mean Innkeepers USA Trust, a Maryland real estate
investment trust.
"Release Amount" shall mean, for any Property, the product of the
Allocated Loan Amount for such Property and one hundred twenty-five percent
(125%).
"Release Date" shall mean two (2) years from the "start-up day"
(within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust.
"REMIC" shall mean a "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Trust" shall mean a REMIC which holds the Note.
11
"Rents" shall mean all rent, rent equivalents, monies payable or
damages in lieu of rent or rent equivalents under the Operating Leases and any
other Leases directly between Borrower and a tenant, and for any Property if
there is no Operating Lease, with respect to each such Property, all rents, rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including all oil and gas or other mineral royalties and bonuses),
income, receivables, receipts, revenues, deposits (including 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 or its agents or employees from
any and all sources arising from or attributable to such Property, including all
hotel receipts, revenues and credit card receipts collected from guest rooms,
mini-bars, parking, 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 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 sales, service charges, vending machine sales and
proceeds, if any, from business interruption, rent loss or other loss of income
insurance.
"Required Records" shall have the meaning set forth in Section 9.2
hereof.
"Required Repair Account" shall have the meaning set forth in Section
7.2.1.
"Required Repair Fund" shall have the meaning set forth in Section
7.2.1.
"Required Repairs" shall have the meaning set forth in Section 7.2.1.
"Restoration" shall have the meaning set forth in Section 7.1.2(b).
"Revised Interest Rate" shall mean the per annum rate of interest
which is the greater of (i) the Interest Rate plus 5% and (ii) the Treasury Rate
on the Optional Prepayment Date plus 6.5%.
"Scheduled Defeasance Payments" shall have the meaning set forth in
Section 2.3.3.
"Secondary Market Transaction" shall mean any transaction in which
Lender (i) sells the Loan, the Note and the other Loan Documents to one or more
investors as a whole loan, (ii) participates the Loan to one or more investors,
(iii) deposits the Loan, the Mortgages, the Note and other Loan Documents with a
trust, which trust may sell certificates to investors evidencing an ownership
interest in the trust assets, or (iv) otherwise sells the Loan or an interest
therein to investors.
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"Securities" shall have the meaning set forth in Section 9.1.
"Securities Act" shall have the meaning set forth in Section 9.2(a).
"Securitization" shall have the meaning set forth in Section 9.1.
"Security Agreement" shall have the meaning set forth in Section
2.3.3(vii).
"Servicer" shall mean the entity appointed by Lender to service the
Loan or its successor in interest, or if any successor servicer is appointed
pursuant to the Pooling and Servicing Agreement, such successor servicer.
"Special Transfer" shall mean the sale by the original Borrower of all
of the Properties (excluding those previously released under Section 2.4.2) to
one purchaser pursuant to which such purchaser shall assume in writing all of
the obligations of Borrower under the Loan, provided that Lender shall have
received (i) evidence in writing from the applicable Rating Agencies to the
effect that such a sale and assumption of the Loan by such purchaser will not
result in a qualification, withdrawal or downgrading of the ratings in effect
immediately prior to such sale for the Securities issued in connection with the
Securitization which are then outstanding and (ii) an assumption fee equal to
one percent (1%) of the outstanding amount of the Loan being assumed.
"State" shall mean, for any Property, the state in which such Property
is located.
"Stated Maturity Date" shall mean March 11, 2019.
"Successor Borrower," shall have the meaning set forth in Section
2.3.3(c).
"Survey" shall mean a survey of the 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 and Insurance Escrow Fund" shall have the meaning set forth in
Section 7.3.1.
"Taxes" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against any Property or part thereof.
"Term" shall mean the entire term of this Agreement, which shall
expire upon repayment in full of the Debt and full performance of each and every
obligation to be performed by Borrower pursuant to the Loan Documents.
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"Title Insurance Policy" shall mean, with respect to each Property,
the ALTA mortgagee title insurance policy in the form (acceptable to Lender)
issued with respect to such Property and insuring the lien of the Mortgage
encumbering such Property.
"Transfer" shall have the meaning set forth in Section 6.1(j).
"Treasury Rate" shall mean, as of the Optional Prepayment Date, the
linear interpolation of the bond equivalent yields as reported in 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 Optional Prepayment Date of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly approximating the remaining term
of the Note as of the Optional Prepayment Date.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the State.
"Undefeased Note" shall have the meaning set forth in Section 2.3.3
hereof.
"Underwriter Group" shall have the meaning set forth in Section
9.2(b).
"Uniform System of Accounts" shall mean the Uniform System of Accounts
for Hotels as approved by the American Hotel and Motel Association (as in effect
from time to time) applied on a consistent basis.
"U.S, Obligation" shall mean direct non-callable obligations of the
United States of America, or such other obligations of the United States of
America or its agencies as may be permitted by Lender and the Rating Agencies at
the time of a Defeasance.
"Yield Maintenance Premium" shall mean the amount (if any) which, when
added to the remaining principal amount of the Note or the principal amount of
Defeased Note, as applicable, will be sufficient to purchase U.S. Obligations
providing the required Scheduled Defeasance Payments.
Section 1.2 Principles of Construction. All references to sections,
schedules and exhibits are to sections, schedules and exhibits 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. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, as modified herein.
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II. GENERAL
Section 2.1 The Loan.
2.1.1 Commitment. Subject to and upon the terms and conditions set
forth herein, including the conditions precedent set forth in Section 3.1,
Lender hereby agrees to make the Loan to Borrower on the Closing Date, in the
aggregate original principal amount set forth in the Note and which Loan shall
mature on the Stated Maturity Date. Borrower hereby agrees to accept the Loan on
the Closing Date, subject to and upon the terms and conditions set forth herein.
2.1.2 Disbursement to Borrower. Borrower may request and receive only
one borrowing hereunder in respect of the Loan. Borrower shall receive the Loan
upon the Closing, subject to the direction given by Borrower as to the
application of Loan proceeds for the uses set forth in Section 2.1.4. 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 the Note, in the
aggregate original principal amount of the Loan. The Note shall bear interest as
provided therein. The Note shall be subject to repayment as provided in Section
2.3, shall be entitled to the benefits of this Agreement and shall be secured by
the Mortgages and the other Loan Documents.
2.1.4 Use of Proceeds of Loan. Borrower shall use the proceeds of the
Loan first to (i) repay and discharge any existing loans relating to the
Properties, (ii) fund the Tax and Insurance Escrow Fund, the Capital Reserve
Fund and the Required Repair Fund, and (iii) pay costs and expenses incurred in
connection with the Closing of the Loan, as approved by Lender; and for general
Borrower purposes.
Section 2.2 Interest; Monthly Payments.
2.2.1 Generally. (a) From the date hereof to but not including the
Optional Prepayment Date, Borrower shall pay interest on the outstanding
principal balance of the Loan at the Interest Rate.
(b) On the Closing Date, Borrower shall (i) make the Initial
Prepayment of the Loan and (ii) pay interest on the outstanding principal
balance of the Loan after the Initial Prepayment from the Closing Date through
March 10, 1997. Commencing with the Payment Date on April 11. 1997 and on each
and every Payment Date thereafter through and including March 11, 1999, Borrower
shall make payments of interest only on the then outstanding principal balance
of the Loan at the Interest Rate. Commencing with the Payment Date on April 11,
1999 and on each and every Payment Date thereafter through and including the
Maturity Date, the principal amount of the Loan and interest thereon at the
Interest Rate shall be payable in equal monthly installments of $355,235.77 (the
"Monthly Debt Service Payment Amount"); such Monthly Debt Service Payment Amount
being based on the Interest Rate and a 264-month amortization schedule. The
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Monthly Debt Service Payment Amount due on any Payment Date shall first be
applied to the payment of interest accrued from the eleventh (11th) day of the
month preceding the Payment Date through the tenth (10th) day of the month in
which the Payment Date occurs, notwithstanding that the Payment Date may not
have been the eleventh (11th) day of such month because the eleventh (11th) day
of such month is not a Business Day. The remainder of such Monthly Debt Service
Payment Amount shall be applied to the reduction of the outstanding principal
balance of the Note.
(c) From and after the Optional Prepayment Date, interest on the Loan
shall accrue at the Revised Interest Rate and shall be payable as provided in
Sections 2.2.2 and 2.2.3.
2.2.2 Accrued Interest. From and after the Optional Prepayment Date,
all interest accruing in respect of the Note in excess of the Interest Rate
("Accrued Interest") shall, to the extent not paid, be deferred, be added to the
Debt and, to the extent permitted by applicable law, accrue interest at the
Revised Interest Rate, compounded monthly. All Accrued Interest shall be due and
payable on the Maturity Date.
2.2.3 Property Cash Flow Allocation. (a) Commencing on April 11, 1997
and continuing on each Payment Date thereafter through the Optional Prepayment
Date, except during the continuance of an Event of Default, any Rents deposited
into the Deposit Account (or otherwise received by Borrower) during the
immediately preceding calendar month shall be applied by Lender as follows in
the following order of priority:
(i) First, to make required payments to the Tax and Insurance Escrow Fund;
(ii) Second, to Lender to pay interest only on the Loan up to and
including the March 11, 1999 Payment Date, and the Monthly Debt
Service Payment Amount on each Payment Date thereafter (plus, if
applicable, interest at the Default Rate);
(iii) Third, to make required payments to the Capital Reserve Fund;
(iv) Fourth, payments for Approved Operating Expenses for any Property for
which there is no Operating Lease; and
(v) Lastly, payments to (or for the account of) Borrower of any excess
amounts.
(b) Commencing on the first Payment Date occurring after the Optional
Prepayment Date and continuing on each Payment Date thereafter until the entire
Debt has been paid in full, and at any time during the continuance of an Event
of Default, any Rents deposited into the Deposit Account (or otherwise received
by Borrower) during the immediately preceding calendar month shall be applied by
Lender as follows in the following order of priority:
(i) First to make required payments to the Tax and Insurance Escrow Fund;
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(ii) Second, to Lender to pay the Monthly Debt Service Payment Amount
(plus, if applicable, interest at the Default Rate);
(iii) Third, to make required payments to the Capital Reserve Fund;
(iv) Fourth, payments for Approved Operating Expenses for any Property for
which there is no Operating Lease;
(v) Fifth, payments to Lender to prepay the outstanding principal balance
under the Note until paid in full;
(vi) Sixth, payments to Lender to be applied against Accrued Interest and
interest accrued thereon; and
(vii) Lastly, payments to Borrower of any excess amounts.
Notwithstanding anything herein to the contrary, the failure of Borrower to make
all of the payments required under clauses (i) through (iv) above in full on
each Payment Date after the Optional Prepayment Date shall constitute a Default
under this Agreement. However, the failure of Borrower to prepay any principal
amount outstanding or to pay any Accrued Interest on a Payment Date as a result
of insufficient Rents for such payment shall not constitute a Default hereunder.
All Accrued Interest shall nonetheless be due and payable on the Maturity Date.
2.2.4 Default Rate. After the occurrence and during the continuance of
an Event of Default, the entire outstanding principal balance of the Loan shall
bear interest at the Default Rate, and shall be payable upon demand from time to
time, to the extent permitted by applicable law. Payment or acceptance of the
increased rates provided for in this subsection is not a permitted alternative
to timely payment and shall not constitute a waiver of any Default or Event of
Default or an amendment to this Agreement or any other Loan Document and shall
not otherwise prejudice or limit any rights or remedies of Lender.
Section 2.3 Loan Repayment and Defeasance.
2.3.1 Repayment. Borrower shall repay any outstanding principal
indebtedness of the Loan in full on the Maturity Date of the Loan, together with
interest thereon to (but excluding) the date of repayment. Other than the
Initial Prepayment and as set forth in Sections 2.3.2 and 2.3.3 below, Borrower
shall have no right to prepay all or any portion of Loan during the period
commencing on the Closing Date to but not including the third Payment Date prior
to the Optional Prepayment Date. From and after the third Payment Date prior to
the Optional Prepayment Date, the Loan may be prepaid in whole or in part
without penalty or premium.
2.3.2 Mandatory Prepayments. The Loan is subject to mandatory
prepayment without premium or penalty, in certain instances of Insured Casualty
or Condemnation (each a "Casualty/Condemnation Prepayment"), in the manner and
to the extent set forth in Sections
17
7.1.2 and Section 7.1.3 hereof. Each Casualty/Condemnation Prepayment shall be
made on a Payment Date and include all accrued and unpaid interest on the amount
prepaid up to but not including such Payment Date or, if not paid on a Payment
Date, include interest that would have accrued on the amount prepaid to but not
including the next Payment Date.
2.3.3 Voluntary Defeasance of the Note. (a) Subject to the terms and
conditions set forth in this Section 2.3.3, Borrower may defease all or any
portion of the Loan evidenced by the Note (hereinafter, a "Defeasance");
provided, that no such Defeasance may occur prior to the Release Date. Each
Defeasance shall be subject, in each case, to the satisfaction of the following
conditions precedent:
(i) Borrower shall provide not less than thirty (30) days prior written
notice to Lender specifying a Payment Date (the "Defeasance Date") on
which the Defeasance is to occur. Such notice shall indicate the
principal amount of the Note to be defeased.
(ii) Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Note to but not including the Defeasance
Date. If for any reason the Defeasance Date is not a Payment Date,
Borrower shall also pay interest that would have accrued on the Note
to but not including the next Payment Date.
(iii) Borrower shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this
Agreement, the Mortgages and the other Loan Documents.
(iv) No Event of Default shall exist.
(v) Borrower shall pay to Lender the required Defeasance Deposit for the
Defeasance.
(vi) In the event only a portion of the Loan evidenced by the Note is the
subject of the Defeasance, Borrower shall execute and deliver all
necessary documents to amend and restate the Note and issue two
substitute notes: one having a principal balance equal to the defeased
portion of the original Note (the "Defeased Note") and one note having
a principal balance equal to the undefeased portion of the original
Note (the "Undefeased Note"). The Defeased Note and Undefeased Note
shall have identical terms as the Note, except for the principal
balance. A Defeased Note cannot be the subject of any further
Defeasance.
(vii) Borrower shall execute and deliver a security agreement, in form and
substance satisfactory to Lender, creating a first priority lien on
the Defeasance Deposit and the U.S. Obligations purchased with the
Defeasance Deposit in accordance with this provision of this Section
2.3.3 (the "Security Agreement").
(viii) Borrower shall deliver an opinion of counsel for Borrower in form
satisfactory to Lender in its reasonable discretion stating, among
other things, that (A) Lender has a perfected first
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priority security interest in the Defeasance Deposit and the U.S.
Obligations delivered by Borrower and (B) said U.S. Obligations have
been validly assigned to the REMIC Trust.
(ix) Lender shall receive evidence in writing from the applicable Rating
Agencies to the effect that such Defeasance will not result in a
reduction, withdrawal or requalification of the ratings in effect
immediately prior to such Defeasance for the Securities issued in
connection with the Securitization which are then outstanding.
(x) If required by the applicable Rating Agencies, Borrower shall also
deliver or cause to be delivered a non-consolidation opinion with
respect to the Successor Borrower in form and substance satisfactory
to Lender and the applicable Rating Agencies.
(xi) Borrower shall deliver an Officer's Certificate certifying that the
requirements set forth in this Section 2.3.3(a) have been satisfied.
(xii) Borrower shall deliver a certificate from an independent certified
public accountant certifying that the amounts of the U.S. Obligations
comply with all of the requirements of this Agreement.
(xiii) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request.
(xiv) Borrower shall pay all reasonable costs and expenses of Lender
incurred in the Defeasance, including any costs and expenses
associated with a release of Lien as provided in Section 2.4 hereof
and reasonable attorney's fees and expenses.
(b) In connection with each Defeasance of all or any portion of the
Note, Borrower hereby appoints Lender as its agent and attorney-in-fact for the
purpose of using the Defeasance Deposit to purchase U.S. Obligations (which
purchases, if made by Lender, shall be made by Lender on an arms-length basis at
then prevailing market rates) which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
through and including the Optional Prepayment Date, in the case of a Defeasance
for the entire outstanding principal balance of the Note, or the Defeased Note,
in the case of a Defeasance for only a portion of the outstanding principal
balance of the Loan, as applicable (including, on the Optional Prepayment Date,
the outstanding principal balance of either the Note or the Defeased Note), and
in amounts equal to the scheduled payments due on such dates under the Note or
the Defeased Note, as applicable (the "Scheduled Defeasance Payments").
Borrower, pursuant to the Security Agreement or other appropriate document,
shall irrevocably authorize and direct that the payments received from the U.S.
Obligations may be made directly to Lender and applied to satisfy the
obligations of Borrower under the Note or the Defeased Note, as applicable. Any
portion of the Defeasance Deposit in excess of the amount necessary to purchase
the U.S. Obligations required by this Section 2.3(b) and satisfy Borrower's
obligations under Sections 2.3 or 2.4 shall be remitted to Borrower. Any amounts
received in respect of the U.S. Obligations in excess of the amounts necessary
to make monthly payments pursuant to Section 2.2 shall be retained by Lender
until
19
payment in full of the Loan. Semi-annual payments in respect of U.S. Obligations
shall be applied to payments under the Note or the Defeased Note, as applicable,
as the same become due thereunder.
(c) If requested by Borrower in connection with any Defeasance under
this Section 2.3.3, NACC shall establish or designate a successor entity (the
"Successor Borrower") and Borrower shall transfer and assign all obligations,
rights and duties under and to the Note or the Defeased Note, as applicable,
together with the pledged U.S. Obligations to such Successor Borrower. The
obligation of NACC to establish or designate a Successor Borrower shall be
retained by NACC notwithstanding the sale or transfer of this Agreement unless
such obligation is specifically assumed by the transferee. 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 thereunder. 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. Notwithstanding anything in
this Agreement to the contrary, no other assumption fee shall be payable upon a
transfer of the Note or the Defeased Note in accordance with this Section 2.3.3,
but Borrower shall pay all costs and expenses incurred by Lender, including
Lender's reasonable attorneys' fees and expenses, incurred in connection
therewith.
Section 2.4 Release of Property. Except as set forth in this Section
2.4, 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 the Lien of the Mortgage on any Property.
2.4.1 Release of All of the Properties. (a) If Borrower has elected to
defease the Note in its entirety, and the requirements of Section 2.3 have been
satisfied, the Properties shall be released from the Lien of the Mortgages and
the U.S. Obligations, pledged pursuant to the Security Agreement, shall be the
sole source of collateral securing the Note.
(b) In connection with the release of the Lien, Borrower shall submit
to Lender, not less than twenty (20) days prior to the Defeasance Date, a
release of Lien (and related Loan Documents) for each Property (for execution by
Lender) in a form appropriate in the State satisfactory to Lender in its
reasonable discretion and all other documentation Lender 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 release in accordance
with the terms of this Agreement.
2.4.2 Release of Individual Properties. Borrower on one or more
occasions may obtain (i) the release of an individual Property from the Lien of
the Mortgage thereon (and related Loan Documents) and (ii) the release of
Borrower's obligations under the Loan Documents with respect to such Property
(other than those expressly stated to survive), upon satisfaction of each of the
following conditions:
(a) In connection with a Defeasance of the Note under Section 2.3.3,
the principal balance of the Defeased Note shall equal or exceed the Release
Amount and the requirements of Section 2.3.3. shall have been satisfied.
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(b) Borrower shall submit to Lender, not less than twenty (20) days
prior to the date of such release, a release of Lien (and related Loan
Documents) for such Property (for execution by Lender) in a form appropriate in
each jurisdiction in which the Property is located satisfactory to Lender in its
reasonable discretion and 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, (ii) will effect such release in accordance with
the terms of this Agreement, and (iii) will not impair or otherwise adversely
affect the Liens, security interests and other rights of Lender under the Loan
Documents not being released (or as to the parties to the Loan Documents and
Properties subject to the Loan Documents not being released).
(c) With respect to any release of an individual Property, after
giving effect to such release and the Defeasance of the Note, the Debt Service
Coverage Ratio for all of the Properties then remaining subject to the Liens of
the Mortgages shall be equal to the greater of (i) the Debt Service Coverage
Ratio on the Closing Date and (ii) the Debt Service Coverage Ratio on the date
of the release of such Property.
2.4.3 Release on Payment in Full. Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of all principal
and interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms thereof, release the Lien of the
Mortgages if not theretofore released.
Section 2.5 Payments and Computations.
2.5.1 Making of Payments. Each payment by Borrower hereunder or under
the Note shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender by
11:00 a.m., New York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice to Borrower.
Whenever any payment hereunder or under the Note shall be stated to be due on a
day which is not a Business Day, such payment shall be made on the first
Business Day thereafter.
2.5.2 Computations. Interest payable hereunder or under the Note by
Borrower shall be computed on the basis of the actual number of days elapsed and
a 360-day year.
2.5.3 Late Payment Charge. If any principal, interest or any other
sums due under the Loan Documents (other than any principal that is not part of
scheduled debt service) is not paid by Borrower on the date on which it is due
(unless sufficient funds are available in the Deposit Account on the applicable
date), Borrower shall pay to Lender upon demand an amount equal to the lesser of
five percent (5%) 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. Any such amount shall be secured by the
Mortgages and the other Loan Documents.
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Section 2.6 Cash Management Arrangements. All Rents payable by Lessee
under the Operating Lease will be transmitted directly by Lessee into the
Deposit Account. All other Rents and security deposits from the Properties
received by Borrower will be transmitted directly into the Deposit Account, or
at Borrower's option, into one or more accounts maintained by Borrower but
controlled by Lender at one or more local banks selected by Borrower which shall
be swept into the Deposit Account on a daily basis. All other income or revenue
received by Borrower in connection with the Properties will be deposited into
the Deposit Account within one Business Day of receipt. Any amounts so deposited
into the Deposit Account shall be applied and disbursed in accordance with the
terms and provisions of this Agreement and the Deposit Account Agreement.
III. CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to the Loan. The obligation of Lender
to make the Loan hereunder is subject to the fulfillment by Borrower or waiver
by Lender of the following conditions precedent no later than the Closing Date:
(a) Representation and Warranties; Compliance with Conditions. The
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of such date,
and 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 other Loan Document on its
part to be observed or performed.
(b) Loan Agreement and Note. Lender shall have received a copy of this
Agreement and the Note, in each case, duly executed and delivered on behalf of
Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports; Etc.
(i) Mortgages; Assignments. Lender shall have received from
Borrower fully executed and acknowledged counterparts of the Mortgage,
Assignment of Leases, Assignment of Agreements and Manager Subordination
relating to each Property and evidence that counterparts of each Mortgage and
Assignment of Leases have been delivered to the title company for recording, so
as to effectively create upon such recording valid and enforceable Liens upon
such Property, of the requisite priority, in favor of Lender (or such trustee as
may be required or desired under local law), subject only to the Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents. Lender shall have also received from Borrower a fully executed
counterpart of the Environmental Indemnity, the Manager Subordination and the
Lessee Subordination.
(ii) Title Insurance. Lender shall have received, for each
Property, a Title Insurance Policy issued by Chicago Title Insurance Company or
another title company acceptable to Lender, with reinsurance and direct access
agreements acceptable to Lender, and evidence that the premium in respect of
such Title Insurance Policy has been paid. Each Title Insurance Policy shall (A)
provide coverage in amounts satisfactory to Lender, (B) insure Lender that each
Mortgage
22
creates a valid lien on the Property encumbered thereby of the requisite
priority, free and clear of all exceptions from coverage other than Permitted
Encumbrances and standard exceptions and exclusions from coverage (as modified
by the terms of any endorsements), (C) contain such endorsements and affirmative
coverages as Lender may reasonably request, (D) name Lender as the insured and
(E) be assignable.
(iii) Survey. Lender shall have received, for each Property, a
current title survey, certified to the title company and Lender and their
successors and assigns, that (A) is in form and content satisfactory to Lender,
(B) is prepared by a professional and properly licensed land surveyor
satisfactory to Lender in accordance with the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, (c) meets the classification of
an "Urban Survey" and the following additional items from the list of "Optional
Survey Responsibilities and Specifications" (Table A) should be added to each
survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13, (D) reflects the same legal description
contained in the Title Insurance Policy relating to the applicable Property, (E)
includes, among other things, a metes and bounds description of the real
property comprising part of such Property reasonably satisfactory to Lender and
(F) contains a certification in form and substance acceptable to Lender.
(iv) Insurance. Lender shall have received valid certificates of
insurance for the policies of insurance required hereunder, satisfactory to
Lender in its sole discretion, and evidence of the payment of all premiums
payable for the existing policy period which period shall not be less than one
year in advance.
(v) Environmental Reports. Lender shall have received an
environmental report in respect of each Property satisfactory to Lender.
(vi) Engineering Reports. Lender shall have received an
engineering report in respect of each Property satisfactory to Lender,
identifying, among other things, (A) deferred maintenance for such Property and
the cost thereof, (B) a ten-year schedule of anticipated capital expenditures
and the annual cost thereof and (C) a probable maximum loss study identifying
the seismic risks of any Property in a known earthquake zone.
(vii) Compliance: Zoning. With respect to each Property, Lender
shall have received, at Borrower's option, (A) letters or other evidence with
respect to such Property from the appropriate municipal authorities (or other
Persons) concerning applicable zoning and building laws, or (B) an ALTA 3.1
zoning endorsement for the Title Insurance Policy, or (C) a zoning opinion
letter, in substance reasonably satisfactory to Lender.
(viii) Encumbrances. Borrower shall have taken or caused to be
taken such actions in such a manner so that Lender has a valid and perfected
Lien of the requisite priority as of the Closing Date with respect to the
Mortgage on each Property, subject only to applicable Permitted Encumbrances and
such other Liens as are permitted pursuant to the Loan Documents, and Lender
shall have received satisfactory evidence thereof.
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(d) Related Documents. Each additional document not specifically
referenced herein, but relating to the transactions contemplated herein, shall
have been duly authorized, executed and delivered by all parties thereto and
Lender shall have received and approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the Closing
Date, Borrower shall deliver or cause to be delivered to Lender (i) copies
certified by Borrower of all organizational documentation related to each
Individual Borrower and/or the formation, structure, existence, good standing
and/or qualification to do business, as Lender may request in its reasonable
discretion, including good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the entering into of
the Loan and incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have received
opinions of Borrower's counsel (i) with respect to non-consolidation, true sale
or true contribution, and fraudulent transfer issues, and (ii) with respect to
due execution, authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope and substance
satisfactory to Lender and Lender's counsel in their reasonable discretion.
(g) Budgets. Borrower shall have delivered, and Lender shall have
approved, the Annual Budget for the Properties for the balance of the current
Fiscal Year.
(h) Basic Carrying Costs. Borrower shall have paid or deposited into
an applicable reserve fund all (i) accrued but unpaid Insurance Premiums, (ii)
currently due Taxes (including any in arrears) as required by Section 7.3, and
(iii) currently due Other Charges, which amounts shall be funded with proceeds
of the Loan.
(i) Completion of Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated by this
Agreement and other Loan Documents and all documents incidental thereto shall be
satisfactory in form and substance to Lender, and Lender shall have received all
such counterpart originals or certified copies of such documents as Lender may
reasonably request.
(j) Financial Statements. Borrower shall have provided historical
financial statements for the Properties for 1994, 1995 and 1996 and an agreed
upon procedures report on the historical 1996 financial statements by an
independent accounting firm.
(k) Loan to Value Ratio: Appraisals. Lender shall have received
appraisals for the Properties satisfactory to Lender indicating that the
original principal balance of the Loan is not more then sixty percent (60%) of
the aggregate fair market value of the Properties as of the date hereof.
(l) Licenses: Leases: Material Contracts. Borrower shall have provided
Lender with copies of all Licenses. Leases and material contracts affecting the
Properties.
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(m) Utilities: Separate Assessment. Borrower shall have provided
Lender with evidence satisfactory to Lender that all utility services required
for the Properties are available and that each Property is subject to assessment
for Taxes separate from any other property.
(n) Occupancy Statistics and Room Rates. Borrower shall have provided
Lender with a copy of the current occupancy statistics and room rates for the
Properties.
(o) Franchise Agreements. Borrower shall have provided Lender with a
copy of the Franchise Agreement for each Property (other than those managed by
Manager for which there is no Franchise Agreement), together with a "comfort"
letter from the franchisor thereunder to Lender, in form and substance
satisfactory to Lender.
(p) Fees and Expenses. Borrower shall have paid (i) to Lender (A) a
structuring fee equal to one percent of the principal amount of the Note, (B)
all expenses of Lender then due and payable by Borrower hereunder, and (C) the
deposit in respect of securitization costs required pursuant to Section 9.1,
(ii) all mortgage, mortgage recording and intangible taxes and recording charges
required to be paid in connection with the execution, delivery and recording of
any of the Loan Documents, and (iii) all title insurance premiums and other
title and survey charges.
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations. Borrower represents and warrants
as of the date hereof and as of the Closing Date that:
(a) Organization. Each Individual Borrower has been duly organized and
is validly existing and in good standing with requisite power and authority to
own its properties and to transact the businesses in which it is now engaged.
Each Individual Borrower is duly qualified to do business and is in good
standing in each jurisdiction where it is required to be so qualified in
connection with its properties, businesses and operations. Each Individual
Borrower possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its Properties and to
transact the businesses in which it is now engaged, and the sole business of
each Individual Borrower is the ownership, management and operation of its
individual Properties.
(b) Proceedings. Each Individual Borrower has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
and the other Loan Documents. This Agreement and such other Loan Documents to
which an Individual Borrower is a party have been duly executed and delivered by
or on behalf of such Individual Borrower and constitute legal, valid and binding
obligations of such Individual Borrower enforceable against such Individual
Borrower in accordance with their respective terms, subject to applicable
bankruptcy. insolvency and similar laws affecting rights of creditors generally,
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower will not conflict with or
result in a breach of any of the
25
terms or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance (other than pursuant to the
Loan Documents) upon any of the property or assets of any Individual Borrower
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement or other agreement or instrument to which any Individual
Borrower is a party or by which any Individual Borrower's property or assets is
subject, nor will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over any Individual Borrower or any of its properties
or assets, and any consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory authority or other
governmental agency or body required for the execution, delivery and performance
by any Individual Borrower of this Agreement or any other Loan Documents has
been obtained and is in full force and effect.
(d) Litigation. Except as set forth on Schedule 2, there are no
actions, suits or proceedings at law or in equity by or before any Governmental
Authority or other agency now pending or threatened against or affecting any
Individual Borrower or any Property, which actions, suits or proceedings, if
determined against any Individual Borrower or any Property, might materially
adversely affect the condition (financial or otherwise) or business of any
Individual Borrower or the condition or ownership of such Property.
(e) Agreements. No Individual Borrower is a party to any agreement or
instrument or subject to any restriction which might material adversely affect
any Individual Borrower or any Property, or any Individual Borrower's business,
properties or assets, operations or condition, financial or otherwise. No
Individual Borrower is in default in any material respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Permitted Encumbrance or any other agreement or instrument to
which it is a party or by which it or any Property is bound.
(f) Title. Each Individual Borrower has good and indefeasible title in
fee to the real property comprising part of each Property, and good title to the
balance of each such Property, free and clear of all Liens whatsoever except the
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. The Mortgage intended to
encumber each Property, 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, perfected first priority
lien on such Property, subject only to Permitted Encumbrances and the Liens
created by the Loan Documents and (ii) perfected security interests in and to,
and perfected collateral assignments of, all personalty (including the Leases),
all in accordance with the terms thereof, in each case subject only to any
applicable Permitted Encumbrances, such other Liens as are permitted pursuant to
the Loan Documents and the Liens created or permitted by the Loan Documents. The
Permitted Encumbrances do not materially adversely affect the value or use of
any Property, or any Individual Borrower's ability to repay the Loan. There are
no claims for payment for work, labor or materials affecting any Property which
are or may become a lien prior to, or of equal priority with, the Liens created
by the Loan Documents.
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(g) No Bankruptcy Filing. No Individual Borrower is contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and no Individual Borrower has knowledge of any Person contemplating
the filing of any such petition against it.
(h) Full and Accurate Disclosure. To the best of Borrower's knowledge,
no statement of fact made by Borrower in this Agreement or in any of the other
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or therein
not misleading. There is no material fact presently known to Borrower which has
not been disclosed to Lender which materially adversely affects, nor as far as
Borrower can foresee, might materially adversely affect, the Properties or the
business, operations or condition (financial or otherwise) of any Individual
Borrower.
(i) No Plan Assets. No Individual Borrower is an "employee benefit
plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and
none of the assets of any Individual 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.
(j) Compliance. Each Individual Borrower and each Property and the use
thereof comply in all material respects with all applicable Legal Requirements,
including building and zoning ordinances and codes. No Individual Borrower is in
default or violation of any order, writ, injunction, decree or demand of any
Governmental Authority, the violation of which might materially adversely affect
the condition (financial or otherwise) or business of an Individual Borrower.
There has not been and shall never be committed by any Individual Borrower,
Lessee or any other person in occupancy of or involved with the operation or use
of any Property any act or omission affording the federal government or any
state or local government the right of forfeiture as against any Property or any
part thereof or any monies paid in performance of Borrower's obligations under
any of the Loan Documents. Borrower hereby covenants and agrees not to commit,
permit or suffer to exist any act or omission affording such right of
forfeiture.
(k) Survey. The survey for each Property delivered to Lender in
connection with this Agreement does not fail to reflect any material matter
affecting such Property or the title thereto.
(l) Financial Information. All financial data, including the
statements of cash flow and income and operating expense, that have been
delivered to Lender in respect of the Properties (i) are true, complete and
correct in all material respects, (ii) accurately represent the financial
condition of the Properties as of the date of such reports, and (iii) to the
extent prepared by an independent certified public accounting firm, have been
prepared in accordance with GAAP consistently applied throughout the periods
covered, except as disclosed therein. No Individual Borrower has any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are known
to Borrower and reasonably likely to have a materially adverse effect on any
Property or the operation thereof, except as referred to or reflected in said
financial statements. Since the date of
27
such financial statements, there has been no materially adverse change in the
financial condition, operations or business of any Individual Borrower from that
set forth in said financial statements.
(m) 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 Property or for the relocation of roadways providing
access to any Property.
(n) 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.
(o) Utilities and Public Access. Each Property has rights of access to
public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service such Property for its respective intended uses.
All public utilities presently servicing the Properties enter the Properties
through public rights-of-way abutting the Properties or through valid easements
insured by the Title Insurance Policy. All roads necessary for the use of each
Property for its current purpose have been completed and dedicated to public use
and accepted by all Governmental Authorities or valid easements insured by the
Title Insurance Policy for such roads or access easements have been obtained.
(p) Not a Foreign Person. No Individual Borrower is a "foreign person"
within the meaning of (S) 1445(f)(3) of the Code.
(q) Separate Lots. Each 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 Property.
(r) Assessments. To the best of Borrower's knowledge, there are no
pending or proposed special or other assessments for public improvements or
otherwise affecting any Property, nor are there any contemplated improvements to
any Property that may result in such special or other assessments.
(s) Enforceability. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by any Individual Borrower,
including the defense of usury, nor would the exercise 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.
(t) No Prior Assignment. There are no prior assignments of the Leases
by Borrower or Lessee or any portion of the Rents due and payable or to become
due and payable which are presently outstanding.
28
(u) Insurance. Borrower has obtained and has delivered to Lender
insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement.
(v) Use of Properties. Each Property is used exclusively for hotel and
other appurtenant and related uses.
(w) Certificate of Occupancy: Licenses. All certifications, permits,
licenses and approvals, including certificates of completion and occupancy
permits and any applicable liquor licenses required for the legal use, occupancy
and operation of each Property as presently being used (collectively, the
"Licenses"), have been obtained and are in full force and effect. Borrower shall
keep and maintain or cause to be kept and maintained all licenses necessary for
the operation of each Property. The use being made of each Property is in
conformity with the certificate of occupancy issued for such Property.
(x) Flood Zone. Except as identified on Schedule 2, none of the
Improvements on any Property are located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards.
(y) Physical Condition. Each Property, including 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, are in good condition, order and repair
in all material respects; there exists no structural or other material defects
or damages in any Property, whether latent or otherwise. Borrower has not
received notice from any insurance company or bonding company of any defects or
inadequacies in any Property, 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.
(z) Appraised Value. Except as shown on the surveys for the Properties
delivered to Lender, all of the improvements which were included in determining
the appraised value of any Property lie wholly within the boundaries and
building restriction lines of such Property, and no improvements on adjoining
properties encroach upon any Property, and no easements or other encumbrances
upon any Property encroach upon any of the improvements, so as to affect the
value or marketability of any Property except those which are insured against by
title insurance.
(aa) Leases. The only Leases affecting the Properties are the
Operating Leases.
(bb) Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements currently in effect in
connection with the transfer of the Properties to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid by any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of am of the Loan
29
Documents, including the Mortgages, have been paid and, under current Legal
Requirements, each Mortgage is enforceable against Borrower in accordance with
its respective terms by Lender (or any subsequent holder thereof), except as
such enforceability may be limited by insolvency, bankruptcy, moratorium or
other laws affecting creditor's remedies in general and principles of equity.
(cc) Single-Purpose. Borrower hereby represents and warrants to Lender
as of the date hereof and covenants with Lender that until such time as the Debt
shall be paid in full:
(i) Each Individual Borrower does not and will not own any encumbered
asset or property other than (A) the Properties, and (B) incidental
personal property necessary for the ownership or operation of the
Properties.
(ii) No Individual Borrower will engage in any business other than the
ownership, management and operation of the Properties and will conduct
and operate its business as presently conducted and operated.
(iii) No Individual Borrower will enter into any contract or agreement with
any of its Affiliates or constituent parties, any guarantor (a
"Guarantor") of the Debt or any part thereof or any Affiliate of any
constituent party or Guarantor, 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.
(iv) No Individual Borrower has incurred, and no Individual Borrower will
incur, any indebtedness, secured or unsecured, direct or indirect,
absolute or contingent (including guaranteeing any obligation), other
than the Permitted Indebtedness. Except as set forth in the
immediately preceding sentence, no indebtedness other than the Debt
may be secured (subordinate or pari passu) by the Properties.
(v) No Individual Borrower has made and no Individual Borrower will make
any loans or advances to any third party (including any affiliate or
constituent party, any Guarantor or any affiliate of any constituent
party or Guarantor).
(vi) Each Individual Borrower is and will remain solvent and will pay its
debts and liabilities (including employment and overhead expenses)
from its assets as the same shall become due.
(vii) Each Individual Borrower has done or caused to be done and will do
all things necessary to observe corporate or partnership formalities,
as the case may be, and preserve its existence.
(viii) No Individual Borrower will, nor will any Individual Borrower,
permit any constituent party or Guarantor to amend, modify or
otherwise change the partnership certificate, partnership agreement,
articles of incorporation and bylaws, trust or other organizational
documents of an Individual Borrower or such constituent party or
Guarantor in a manner which would adversely affect an Individual
Borrower's existence as a single purpose entity.
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(ix) Each Individual Borrower will maintain books and records and bank
accounts separate from those of its Affiliates and any constituent
party and each Individual Borrower will file its own tax returns.
(x) Each Individual 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, any constituent party, any
Guarantor or any Affiliate of any constituent party or Guarantor),
shall conduct business in its own name and shall maintain and utilize
separate stationery, invoices and checks.
(xi) Each Individual 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.
(xii) No Individual Borrower nor any constituent party will seek the
dissolution or winding up, in whole or in part, of any Individual
Borrower.
(xiii) No Individual Borrower will commingle its funds and other assets
with those of any Affiliate or constituent party, any Guarantor, or
any Affiliate of any constituent party or Guarantor, or any other
person.
(xiv) Each Individual 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, any Guarantor, or any Affiliate of any constituent
party or Guarantor, or any other person.
(xv) No Individual Borrower does and no Individual Borrower will hold
itself out to be responsible for the debts or obligations of any other
person.
(xvi) The General Partner will at all times comply with each of the
representations, warranties, and covenants contained in this Section
4.1 as if such representation, warranty or covenant was made directly
by the General Partner.
(xvii) The charter of the General Partner shall at all times have at least
one duly appointed member of its board of directors (an "Independent
Director") reasonably satisfactory to Lender who shall not have been
at the time of such individual's appointment, and may not have been at
any time during the preceding two years (i) a shareholder of, or an
officer or employee of, any Individual Borrower or any of its
shareholders, subsidiaries or affiliates, (ii) a customer of, or
supplier to, any Individual Borrower or any of its shareholders,
subsidiaries or affiliates, (iii) a person or other entity controlling
any such shareholder, supplier or customer. or (iv) a member of the
immediate family of any such shareholder, officer, employee, supplier
or customer of any other director of the General Partner. As used in
this Section 4.l (cc)(xvii), the term "control" means the possession,
directly or indirectly, of the power
31
to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by
contract or otherwise.
(xviii) The board of directors of the General Partner shall not 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 the vote of the board of directors of the General
Partner unless at the time of such action there shall be at least one
member who is an Independent Director.
(xix) Each Individual Borrower shall conduct its business so that the
assumptions made with respect to such Individual Borrower in that
certain opinion letter dated as of the date hereof delivered by
Borrower's counsel in connection with the Loan shall be true and
correct in all respects.
(dd) Investment Company Act. No Individual Borrower is (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (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; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
(ee) Fraudulent Transfer. No Individual Borrower has entered into
the Loan or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor, and each Individual Borrower has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.
Giving effect to the transactions contemplated by the Loan Documents, the fair
saleable value of Borrower's assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, exceed Borrower's total
liabilities, including subordinated, unliquidated, disputed or contingent
liabilities. The fair saleable value of Borrower's assets is and will,
immediately following the execution and delivery of the Loan Documents, be
greater than Borrower's probable liabilities, including the maximum amount of
its contingent liabilities or its debts as such debts become absolute and
matured. Each Individual Borrower's assets 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 to be payable on or in respect of obligations of Borrower).
(ff) Partners. The sole general partner of each Individual
Borrower is the General Partner. The REIT is the owner of all of the issued and
outstanding capital stock of the General Partner, all of which capital stock has
been validly issued, is fully paid and nonassessable. Such stock is owned by the
REIT free and clear of all mortgages, assignments, pledges and security
interests and free and clear of all warrants, options and rights to purchase.
Borrower has no obligation to any Person to purchase, repurchase or issue any
ownership interest in it.
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(gg) Management Agreements. Borrower has made available to Lender
correct and complete copies of the Management Agreements. As of the Closing
Date, the Management Agreements are unmodified and in full force and effect and
Lessee is not, and, to Borrower's best knowledge, Manager is not, in default
under any of the Management Agreements.
(hh) Operating Lease. Borrower has made available to Lender a
correct and complete copy of each Operating Lease. As of the Closing Date each
Operating Lease is unmodified and in full force and effect and Borrower is not,
and, to Borrower's knowledge, Lessee is not, in default under any Operating
Lease.
(ii) Franchise Agreements. Borrower has made available to Lender
a correct and complete copy of each Franchise Agreement and all amendments
thereto. As of the Closing Date, each Franchise Agreement has not been further
amended and is in full force and effect and Borrower is not, and, to Borrower's
knowledge, no franchisor is, in default under any such Franchise Agreement.
(jj) Contracts. Schedule 2 sets forth a description of each
contract or other agreement and management agreement (including all amendments
thereto) to which the Borrower or any Affiliate thereof or Lessee is a party
which is material to the value, utility, operation or legality of any Property,
other than Franchise Agreements, Management Agreements, Leases and any such
contract or agreement which may be terminated on thirty days' or less notice and
without any material penalty. The information set forth in such Schedule is
correct and complete in all material respects as of the date hereof. A correct
and complete copy of each contract or other agreement and management agreement
(including all such amendments) specified on Schedule 2, has been provided to
the Lender and each thereof is unmodified (except as set forth on Schedule 2)
and in full force and effect and no Individual Borrower nor, to Borrower's
knowledge, any other party to any thereof is in default thereunder.
Section 4.2 Survival of Representations. Borrower agrees that all of
the representations and warranties of Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount remains owing to Lender under this Agreement or any of the
other Loan Documents by Borrower. All representations, warranties, covenants and
agreements made in this Agreement or in the other Loan Documents by Borrower
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
Section 5.1 Borrower Covenants. From the date hereof and until payment
and performance in full of all obligations of Borrower under the Loan Documents
or the earlier release of the Lien of the Mortgages (and all related
obligations) in accordance with the terms of this Agreement and the other Loan
Documents, Borrower hereby covenants and agrees with Lender that:
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(a) Existence: Compliance with Legal Requirements: Insurance. Each
Individual 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 with all Legal Requirements
applicable to it and each Property. Each Individual Borrower shall at all times
maintain, preserve and protect all franchises and trade names and preserve all
the remainder of its property used or useful in the conduct of its business and
shall keep or cause to be kept each Property in good working order and repair,
and from time to time make, or cause to be made, all reasonably necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
more fully provided in the Mortgages. Borrower shall keep or cause to be kept
each Property insured at all times by financially sound and reputable insurers,
to such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrower shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against each Property or
any part thereof before they become delinquent. Borrower will deliver to Lender
receipts for payment or other evidence satisfactory to Lender that the Taxes and
Other Charges have been so paid or are not then delinquent no later than thirty
(30) days prior to the date on which the Taxes and/or Other Charges would
otherwise be delinquent if not paid (provided, however, that Borrower is not
required to furnish such receipts for payment of Taxes in the event that such
Taxes have been paid by Lender pursuant to Section 7.3 hereof). Borrower shall
not suffer and shall promptly cause to be paid and disc harged any lien or
charge whatsoever which may be or become a lien or charge against any Property,
and shall promptly pay for all utility services provided to any Property. After
prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith and
with due diligence, the amount or validity or application in whole or in part of
any Taxes or Other Charges, provided that (i) no Default or Event of Default has
occurred and remains uncured, (ii) such proceeding shall suspend the collection
of the Taxes or Other Charges from the applicable Property, (iii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which an Individual Borrower is subject
and shall not constitute a default thereunder, (iv) neither such Property nor
any part thereof or interest therein will be in danger of being sold, forfeited,
terminated, canceled or lost, (v) Borrower shall have furnished such security as
may be required in the proceeding, or as may be requested by Lender, to insure
the payment of any such Taxes or Other Charges, together with all interest and
penalties thereon; and (vi) 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.
Lender may pay over any such cash deposit or part thereof held by Lender to the
claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the entitlement of such claimant is established.
(c) Litigation. Borrower shall give prompt written notice to Lender of
any litigation or governmental proceedings pending or threatened in writing
against any Individual Borrower which might materially adversely affect any
Individual Borrower's condition (financial or otherwise) or business or any
Property.
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(d) Premises. Borrower shall permit agents, representatives and
employees of Lender to inspect the Properties or any part thereof at reasonable
hours upon reasonable advance notice.
(e) Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in any Individual Borrower's condition, financial or
otherwise, or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.
(f) Cooperate in Legal Proceedings. Borrower shall cooperate fully
with Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.
(g) Perform Loan Documents. Each Individual Borrower shall observe,
perform and satisfy all the terms, provisions, covenants and conditions of, and
shall pay when due all costs, fees and expenses to the extent required under the
Loan Documents executed and delivered by, or applicable to, such Individual
Borrower.
(h) Insurance Benefits. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable in connection with any Property, and Lender shall be
reimbursed for any reasonable expenses incurred in connection therewith
(including attorneys' fees and disbursements, and the reasonable expense of an
appraisal on behalf of Lender in case of a fire or other casualty affecting any
Property or any part thereof) out of such Insurance Proceeds.
(i) Further Assurances. Each Individual Borrower shall, at Borrower's
sole cost and expense:
(A) furnish to Lender all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document, certificate, agreement and instrument required to be furnished
by it pursuant to the terms of the Loan Documents or reasonably requested by
Lender in connection therewith;
(B) 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 its obligations under the Loan Documents, all as
Lender may reasonably require; and
(C) 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.
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(j) Supplemental Mortgages Affidavits. As of the date hereof, Borrower
represents that it has paid all state, county and municipal recording and all
other taxes imposed upon the execution and recordation of the Mortgages. If at
any time Lender determines, based on applicable law, that Lender is not being
afforded the maximum amount of security available from any one or more of the
Properties as a direct or indirect result of applicable taxes not having been
paid with respect to any such Properties, Borrower agrees that Borrower will
execute, acknowledge and deliver to Lender, immediately upon Lender's request,
supplemental affidavits increasing the amount of the Debt attributable to any
such Property (as set forth on Schedule 1 annexed hereto) for which all
applicable taxes have been paid to an amount determined by Lender to be equal to
the lesser of (a) the greater of the fair market value of the applicable
Property (i) as of the date hereof and (ii) as of the date such supplemental
affidavits are to be delivered to Lender, and (b) the amount of the Debt
attributable to any such Property (as set forth on Schedule 1 annexed hereto),
and Borrower shall, on demand, pay any additional taxes.
(k) Financial Reporting.
(i) Borrower will keep and maintain or will cause to be kept and
maintained on a Fiscal Year basis, in accordance with GAAP, proper and accurate
books, records and accounts reflecting all of the financial affairs of Borrower
and all items of income and expense in connection with the operation on an
individual basis of each of the Properties and in connection with any services,
equipment or furnishings provided in connection with the operation of each of
the Properties, whether such income or expense be realized by Borrower or by any
other Person whatsoever, excepting lessees unrelated to and not an Affiliate of
Borrower who have leased from Borrower or Lessee portions of any of the
Properties for the purpose of occupying the same. Lender shall have the right
from time to time at all times during normal business hours upon reasonable
notice to examine such books, records and accounts at the office of Borrower or
other Person maintaining such books, records and accounts and to make such
copies or extracts thereof as Lender shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by Lender
to examine Borrower's accounting records with respect to the Properties, as
Lender shall determine to be necessary or appropriate in the protection of
Lender's interest.
(ii) Borrower will furnish to Lender annually, (A) within
forty-five (45) days following the end of each Fiscal Year of Borrower,
unaudited financial statements of Borrower, and (B) within ninety (90) days
following the end of each Fiscal Year of Borrower, a complete copy of Borrower's
annual financial statements, audited by a "big six" accounting firm or another
independent certified public accountant reasonably acceptable to Lender, in
accordance with GAAP, covering the Properties on a combined basis as well as
each individual Property for such Fiscal Year, and containing statements of
profit and loss for Borrower and the Properties in such detail as Lender may
request; provided, however, that separate financial statements for each
individual Property need not be audited so long as such statements are
accompanied by a report of such accountant, based upon procedures satisfactory
to Lender, tying such statements into the audited statements of Borrower. Such
statements shall set forth the income and expenses for the Properties for the
immediately preceding calendar year, including statements of annual Actual Net
Operating Income. Borrower's audited annual financial statements shall be
accompanied by an unqualified opinion of
36
such accountant. Borrower's annual financial statements (audited and unaudited)
shall be accompanied by an Officer's Certificate certifying that each such
annual financial statement presents fairly the financial condition of the
Properties being reported upon and has been prepared in accordance with GAAP.
Together with Borrower's annual financial statements, Borrower shall furnish to
Lender an Officer's Certificate certifying as of the date thereof whether there
exists an event or circumstance which constitutes a Default or Event of Default
under the Loan Documents executed and delivered by, or applicable to, Borrower,
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.
(iii) Borrower will furnish, or cause to be furnished, to Lender
on or before thirty-five (35) days after the end of each calendar month the
following items, accompanied by an Officer's Certificate certifying that such
items are true, correct, accurate, and complete and fairly present the financial
condition and results of the operations of Borrower and the Properties in
accordance with GAAP (subject to normal year end adjustments) as applicable: (A)
monthly and year to date operating statements prepared for each calendar month
(on an aggregate and Property by Property basis), noting Actual Net Operating
Income and other information necessary and sufficient under GAAP to fairly
represent results of operation of the Properties during such calendar month, all
in form satisfactory to Lender; (B) a comparison of the budgeted income and
expenses and the actual income and expenses for each month and year to date for
the Properties on an aggregate basis together with a detailed explanation of any
variances of ten percent (10%) or more between budgeted and actual amounts for
such period and year to date; (C) a statement of the actual capital expenditures
made by Borrower during each calendar quarter as of the last day of such
calendar quarter; (D) a calculation reflecting the annual Actual Debt Service
Coverage Ratio as of the last day of each calendar month; and (F) a statement
that the representations and warranties of Borrower set forth in Section
4.1(cc)(iv) are true and correct as of the date of such certificate.
(iv) Borrower will furnish, or cause to be furnished, to Lender
as soon as available and in any event on or before thirty-five (35) days after
the end of each calendar month occupancy rates, room rate statistics, and for
any Property which has Leases other than an Operating Lease, rent rolls
(identifying the leased premises, names of all tenants, units leased, monthly
rental and all other charges payable under each lease, date to which paid, term
of lease, date of occupancy, date of expiration, any and every material special
provision, concession or inducement granted to tenants) and a delinquency report
for the Properties, and such other relevant information with respect to the
Properties as requested by Lender, in each case accompanied by an Officer's
Certificate certifying that such items are true, correct, accurate, and
complete.
(v) Borrower shall furnish to Lender, within ten (10) Business
Days after request, such further detailed information with respect to the
operation of any of the Properties and the financial affairs of Borrower as may
be reasonably requested by Lender or any applicable Rating Agency.
(l) Business and Operations. Each Individual Borrower will continue to
engage in the businesses presently conducted by it as and to the extent the same
are necessary for the
37
ownership, maintenance, management and operation of the Properties. Each
Individual 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, maintenance, management and operation of the Properties.
(m) Title to the Properties. Borrower will warrant and defend (i) the
title to each Property and every part thereof, subject only to Liens permitted
under the Loan Documents (including Permitted Encumbrances), and (ii) the
validity and priority of the Lien of each Mortgage, subject only to Liens
permitted under the Loan Documents (including Permitted Encumbrances), in each
case against the claims of all Persons whomsoever. Borrower shall reimburse
Lender for any losses, costs, damages or expenses (including reasonable
attorneys' fees and court costs) incurred by Lender if an interest in any
Property, other than as permitted hereunder, is claimed by another Person.
(n) Costs of Enforcement. In the event (i) that any Mortgage is
foreclosed in whole or in part is put into the hands of an attorney for
collection, suit, action or foreclosure, (ii) of the foreclosure of any mortgage
prior to or subsequent to the Mortgage encumbering any Property in which
proceeding Lender is made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of any Individual Borrower
or an assignment by any Individual Borrower for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay
all costs of collection and defense, including attorneys' fees 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.
(o) Estoppel Statement.
(i) After request by Lender, Borrower shall within ten (10) days
furnish Lender with a statement, duly acknowledged and certified, setting forth
(A) the unpaid principal amount of the Note. (B) the Interest Rate of the Note.
(C) the date installments of interest and/or principal were last paid. (D) any
offsets or defenses to the payment of the Debt, if any, and (E) that the Note,
this Agreement, the Mortgages and the other Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification.
(ii) After request by Lender (but no more frequently than twice
in any year). Borrower shall within ten (10) days furnish Lender with a
certificate reaffirming all representations and warranties of Borrower set forth
herein and in the other Loan Documents as of the date requested by Lender or,
to the extent of any changes to any such representations and warranties, so
stating such changes.
(iii) Borrower shall deliver to Lender upon request, tenant
estoppel certificates from Lessee and each tenant of Borrower or Lessee at the
Properties in form and substance reasonably satisfactory to Lender provided that
Borrower shall not be required to deliver such certificates more frequently than
two (2) times in am calendar year.
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(p) Loan Proceeds. Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in Section
2.1.4.
(q) Performance by Borrower. Each Individual 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, or applicable to,
such Individual 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, or applicable to, such Individual Borrower
without the prior written consent of Lender.
(r) Annual Budget. Prior to the Optional Prepayment Date, Borrower
shall prepare and submit (or shall cause Lessee to prepare and submit) to Lender
by December 1 of each year during the Term, for approval by Lender, which
approval shall not be unreasonably withheld or delayed, a proposed pro forma
budget for each Property during the succeeding fiscal year commencing January 1
and ending December 31 (the "Annual Budget") and, promptly after preparation
thereof, any subsequent revisions to such Annual Budget and the final Annual
Budget by January 31 of such year. After the Optional Prepayment Date, Borrower
shall prepare and submit such Annual Budget by November 15 of each remaining
year of the Term. Lender's failure to approve or disapprove any Annual Budget
within thirty (30) days after Lender's receipt thereof shall be deemed to
constitute Lender's approval thereof. The Annual Budget shall consist of (a) for
any Property for which there is no Operating Lease, an operating expense budget
(the "Operating Budget") showing, on a month-by-month basis, in reasonable
detail, each line item of the Borrower's anticipated income and Operating
Expenses (on a cash and accrual basis), including amounts required to establish,
maintain and/or increase reserves for such Property, (b) for each Property other
than a Marriott Managed Property, a Capital Expense budget (the "Capital
Budget") showing, on a Property-by-Property basis, in reasonable detail, each
line item of anticipated Capital Expenses and FF&E Expenses. A copy of the
approved Budget for the period commencing on the date hereof and ending on
December 31, 1997 is annexed hereto as Exhibit B.
(s) Confirmation of Representations. In addition to and not in
limitation of the covenants and agreements of Borrower contained in Section 7.1,
Borrower shall deliver, in connection with any Secondary Market Transaction, (i)
one or more Officer's Certificates certifying as to the accuracy of all
representations made by Borrower in the Loan Documents as of the date of the
closing of such Secondary Market Transaction in all relevant jurisdictions or,
to the extent of any changes to any such representations and warranties, so
stating such changes, and (ii) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good standing and
qualification of Borrower as of the date of the Secondary Market Transaction.
(t) No Joint Assessment. Borrower shall not suffer, permit or initiate
the joint assessment of any Property (i) with any other real property
constituting a tax lot separate from such Property, and (ii) with any portion of
such 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 Property.
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(u) Leasing Matters. No Individual Borrower shall, without Lender's
prior written consent, enter into, modify, amend or renew any Lease for space
over 1,500 square feet. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. All renewals of Leases and all proposed Leases
shall provide for rental rates that are at or greater than existing local market
rates for space at hotel properties similar to the applicable Property. All
proposed Leases shall be on commercially reasonable terms and shall not contain
any terms which would materially adversely affect Lender's rights under the Loan
Documents. All Leases shall provide (either by the terms of the Lease or
pursuant to a subordination and non-disturbance agreement with Lender) that
they are subordinate to the Mortgage encumbering the applicable Property and
that the lessee agrees to attorn to Lender Borrower (i) shall observe and
perform or cause to be performed the obligations imposed upon the lessor under
the Leases; (ii) shall enforce the terms, covenants and conditions contained in
the Leases upon the part of the lessee thereunder to be observed or performed;
(iii) shall not collect any of the rents more than one (1) month in advance
(other than security deposits); (iv) shall not execute any other assignment of
lessor's interest in the Leases or the Rents (except as contemplated by the Loan
Documents); (v) shall not alter, modify or change the terms of the Leases in a
manner inconsistent within the provisions of the Loan Documents; and (vi) shall
execute and deliver at the request of Lender all such further assurances,
confirmations and assignments in connection with the Leases as Lender shall from
time to time reasonably require.
(v) Operation of the Properties. Borrower shall cause each of the
Properties to be leased to the Lessee pursuant to the Operating Lease and
managed by Lessee or by Manager pursuant to the Management Agreements (or such
other third-party managers approved by Lender pursuant to management agreements
approved as to form and substance by and in all respects acceptable to Lender).
Notwithstanding the foregoing, in the event that (A) there shall have occurred
and be continuing an Event of Default or (B) on the last day of any calendar
quarter, the Debt Service Coverage Ratio (using Actual Net Operating Income) is
less than 1.40 to 1.00, then, except as hereinafter provided, Lender may
instruct Borrower to (i) terminate the Operating Lease with respect to any or
all of the Properties and/or (ii) except as otherwise provided in the Management
Agreements, cause Lessee to terminate the Management Agreement with respect to
any or all of the Marriott Managed Properties, and may designate either a
replacement lessee or a hotel manager, as the case may be, acceptable to Lender
and willing to operate the Properties pursuant to terms and conditions and
pursuant to an Operating Lease or management agreement approved by Lender, and
except as hereinafter otherwise provided, Borrower shall so terminate the
Operating Lease and/or cause Lessee to terminate the Management Agreement(s) and
appoint or cause the appointment of such replacement lessee or manager. No
Individual Borrower shall (and no Individual Borrower shall permit Lessee to)
enter into any operating lease or property management agreement in respect of
any Property without Lender's prior written consent and unless any such
agreement contains a provision permitting such agreement to be terminated as
contemplated above and unless such replacement operator or manager executes an
agreement substantially similar (and otherwise in form and substance
satisfactory to Lender) to the Lessee Subordination or the Manager
Subordination, as the case may be. Lender shall not have the right to require
the termination of the Operating Lease or any Management Agreement under the
circumstances described in the foregoing clause (B) if (x) no Event of Default
shall have occurred or be continuing and (y) within ten Business Days after the
end of the calendar quarter for which such circumstances have arisen. Borrower
shall defease a
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portion of the Loan in accordance with Section 2.3.3 sufficient to produce a
Debt Service Coverage Ratio (using Actual Net Operating Income) on the
undefeased portion of the Loan equal to at least 1.40 to 1.00.
(w) 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 written notice.
(x) Franchise Agreements. Borrower shall cause the Properties (other
than the Marriott Managed Properties) to be operated pursuant to the Franchise
Agreements. Borrower shall:
(i) promptly perform and/or observe (or cause to be performed
and/or observed) all of the covenants and agreements required to be performed
and observed by it under the Franchise Agreements and do all things necessary to
preserve and to keep unimpaired its material rights thereunder;
(ii) promptly notify Lender of any default under the any
Franchise Agreement of which it is aware;
(iii) promptly deliver to Lender a copy of each financial
statement, business plan, capital expenditures plan, property improvement plan
and any other notice, report and estimate received by it under any of the
Franchise Agreements; and
(iv) promptly enforce or cause to be enforced the performance and
observance of all of the covenants and agreements required to be performed
and/or observed by the Franchisor under each Franchise Agreement.
(y) Management Agreements. With respect to the Marriott Managed
Properties, Borrower shall:
(i) promptly perform and/or observe (or cause to be performed
and/or observed) all of the covenants and agreements required to be performed
and observed by it under the Management Agreements and do all things necessary
to preserve and to keep unimpaired its material rights thereunder;
(ii) promptly notify Lender of any default under the any
Management Agreement of which it is aware;
(iii) promptly deliver to Lender a copy of each financial
statement, business plan, capital expenditures plan, property improvement plan
and any other notice, report and estimate received by it under any of the
Management Agreements; and
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(iv) promptly enforce or cause to be enforced the performance and
observance of all of the covenants and agreements required to be performed
and/or observed by the Manager under each Management Agreement.
VI. NEGATIVE COVENANTS
Section 6.1 Borrower's Negative Covenants. From the date hereof until
payment and performance in full of all obligations of Borrower under the Loan
Documents or the earlier release of the Lien of the Mortgages in accordance with
the terms of this Agreement and the other Loan Documents, each Individual
Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
(a) Operation of Properties. No Individual Borrower shall, without
Lender's prior consent: (i) surrender, terminate or cancel the Operating Lease
or any of the Franchise Agreements or Management Agreements or otherwise replace
Lessee or the franchisor or the Manager of any Property or enter into any other
operating lease or franchise or management agreements with respect to any
Property (except pursuant to Section 5.1(v)), (ii) reduce or consent to the
reduction of the term of the Operating Lease or any of the Management Agreements
or Franchise Agreements; (iii) increase or consent to the increase by any
material amount of the amount of any charges under any of the Management
Agreements or Franchise Agreements; or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under the Operating Lease or any of the Management Agreements or Franchise
Agreements in any material respect.
(b) Liens. No Individual Borrower shall, without the prior written
consent of Lender, create, incur, assume or suffer to exist any Lien on any
portion of any of the Properties or permit any such action to be taken, except
(i) Permitted Encumbrances, (ii) Liens created by or permitted pursuant to the
Loan Documents and (iii) Liens for Taxes or Other Charges not yet delinquent,
unless any such Lien is bonded or discharged within thirty (30) days after
Borrower first receives notice thereof. No Individual Borrower shall permit any
partner in such Individual Borrower to pledge or otherwise encumber its interest
in such Individual Borrower.
(c) Dissolution. No Individual Borrower shall dissolve, terminate,
liquidate, merge with or consolidate into another Person.
(d) Change In Business. No Individual Borrower shall enter into any
line of business other than the ownership and operation of the Properties, or
make any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other than the
continuance of its present business.
(e) Debt Cancellation. No Individual Borrower shall cancel or
otherwise forgive or release any claim or debt owed to such Individual Borrower
by any Person, except for adequate consideration and in the ordinary course of
such Individual Borrower's business in its reasonable judgment.
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(f) Affiliate Transactions. No Individual Borrower shall enter into,
or be a party to, any transaction with an Affiliate of such Individual Borrower
or any of the partners of such Individual Borrower except in the ordinary course
of business and on terms which are fully disclosed to Lender in advance and are
no less favorable to such Individual Borrower or such Affiliate than would be
obtained in a comparable arm's-length transaction with an unrelated third party.
(g) Zoning. No Individual Borrower shall initiate or consent to any
zoning reclassification of any portion of any of any Property or seek any
variance under any existing zoning ordinance or use or permit the use of any
portion of any of the 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.
(h) Assets. No Individual Borrower shall purchase or own any
properties other than its own individual Property.
(i) Debt. No Individual Borrower shall create, incur or assume any
debt other than the Debt and other Permitted Indebtedness.
(j) Transfers. No Individual Borrower shall, without the prior written
consent of Lender, suffer or permit the sale, assignment or transfer
(collectively, "Transfer") of (i) all or any part of any Property or portion
thereof, (ii) any direct interest in any Individual Borrower or (iii) any direct
or indirect interest in any partner of any Individual Borrower, except for:
(A) a Special Transfer;
(B) the Transfer of a Property in connection with the release
thereof from the Lien of the Mortgage thereon pursuant to Section 2.4.2;
(C) Transfers of publicly-traded interests in the REIT; and
(D) Transfers of limited partnership interests in any Individual
Borrower (or Transfers of interests in any such limited partner); provided that
any Transfers aggregating more than 49% of the interests (direct or indirect) in
any Individual Borrower, or which result in any limited partner (other than a
limited partner currently owning more than a 49% interest) owning more than 49%
of the interests (direct or indirect) in any Individual Borrower, shall require
(1) written confirmation from the applicable Rating Agencies that such Transfers
will not cause a qualification, withdrawal or downgrading of the ratings in
effect immediately prior to such Transfer for the Securities issued in
connection with the Securitization which are then outstanding and (2) a
substantive non-consolidation opinion with respect to such Individual Borrower
in form satisfactory to Lender and the applicable Rating Agencies. Borrower
shall pay all reasonable expenses in connection with a Transfer permitted
hereunder.
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VII. CASUALTY; CONDEMNATION; ESCROWS
Section 7.1 Insurance; Casualty and Condemnation.
7.1.1 Insurance. (a) Borrower, at its sole cost and expense, for the
mutual benefit of Borrower and Lender, shall keep the Properties insured and
obtain and maintain during the Term policies of insurance insuring against loss
or damage by a "Special Form" policy. Such insurance (i) shall be in an amount
equal to the greatest of (A) the then full replacement cost of each Property
without deduction for physical depreciation, (B) the outstanding principal
balance of the Loan, and (c) such amount that the insurer would not deem
Borrower a co-insurer under said policies, and (ii) and shall have deductibles
no greater than five percent (5%) of such replacement cost. The policies of
insurance carried in accordance with this paragraph shall be paid annually in
advance and shall contain a "Replacement Cost Endorsement" with a waiver of
depreciation.
(b) Borrower, at its sole cost and expense, for the mutual benefit of
Borrower and Lender, shall also obtain and maintain during the Term the
following policies of insurance:
(i) Flood insurance if any part of any Property is located in an
area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Program in an amount at least equal to the
Allocated Loan Amount for the applicable Property or the maximum limit of
coverage available with respect to such Property under said program, whichever
is less.
(ii) Comprehensive public liability insurance, including broad
form property damage, blanket contractual and personal injuries (including death
resulting therefrom) coverages and containing minimum limits per occurrence of
$1,000,000 and $2,000,000 in the aggregate for any policy year. In addition, at
least $10,000,000 excess and/or umbrella liability insurance shall be obtained
and maintained for any and all claims, including all legal liability imposed
upon Borrower and all court costs and attorneys' fees incurred in connection
with the ownership, operation and maintenance of the Properties.
(iii) Rental loss and/or business interruption insurance in an
amount equal to the greater of (A) the estimated gross revenues from the
operations of the Properties for the next succeeding 18-month period or (B) the
projected operating expenses (including debt service) for the maintenance and
operation of the Properties for the next succeeding 18-month period. The amount
of such insurance shall be increased from time to time during the Term as and
when the Rents increase or the estimate of (or the actual) gross revenue, as may
be applicable, increases.
(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in any of the Improvements (without
exclusion for explosions), in an amount at least equal to $2,000,000 for each
Property.
44
(v) Worker's compensation insurance with respect to any employees
of Borrower or Lessee, as required by any governmental authority or legal
requirement.
(vi) During any period wherein any Property is subject to a
material repair or restoration, builder's "all risk" insurance in an amount
equal to not less than the full insurable value of the applicable Property
against such risks (including fire and extended coverage and collapse of the
Improvements to agreed limits) as Lender may request, in form and substance
acceptable to Lender.
(vii) Coverage to compensate for the cost of demolition and the
increased cost of construction for each Property in an amount satisfactory to
Lender.
(viii) Such other insurance, including earthquake insurance, as
may from time to time be reasonably required by Lender in order to protect its
interests.
(c) All policies of insurance (the "Policies") required pursuant to
this Section 7.1.1 (i) shall be issued by companies approved by Lender and
licensed to do business in the State, with a claims paying ability rating of
"AA" or better by Standard & Poor's Ratings Group; (ii) shall name Lender and
its successors and/or assigns as their interest may appear as the mortgagee;
(iii) shall contain a Non-Contributory Standard Lender Clause and a Lender's
Loss Payable Endorsement, or their equivalents, naming Lender as the person to
which all payments made by such insurance company shall be paid; (iv) shall
contain a waiver of subrogation against Lender; (v) shall be maintained
throughout the Term without cost to Lender; (vi) shall be assigned and the
originals thereof delivered to Lender; (vii) shall contain such provisions as
Lender deems reasonably necessary or desirable to protect its interest including
endorsements providing that neither Borrower, Lender nor any other party shall
be a co-insurer under said Policies and that Lender shall receive at least
thirty (30) days prior written notice of any modification, reduction or
cancellation of any of the Policies; and (viii) shall be satisfactory in form
and substance to Lender and shall be approved by Lender as to amounts, form,
risk coverage, deductibles, loss payees and insureds. Borrower shall pay the
premiums for such Policies (the "Insurance Premiums") as the same become due and
payable and shall furnish to Lender evidence of the renewal of each of the
Policies with receipts for the payment of the Insurance Premiums or other
evidence of such payment reasonably satisfactory to Lender (provided, however,
that Borrower is not required to furnish such evidence of payment to Lender if
such Insurance Premiums have been paid by Lender pursuant to Section 7.3
hereof). If Borrower does not furnish such evidence and receipts at least thirty
(30) days prior to the expiration of any expiring Policy, then Lender may
procure, but shall not be obligated to procure, such insurance and pay the
Insurance Premiums therefor, and Borrower agrees to reimburse Lender for the
cost of such Insurance Premiums promptly on demand. Within thirty (30) days
after request by Lender, Borrower shall obtain such increases in the amounts of
coverage required hereunder as may be reasonably requested by Lender, taking
into consideration changes in the value of money over time, changes in liability
laws, changes in prudent customs and practices, and the like.
(d) If any Property is damaged or destroyed, in whole or in part, by
fire or other casualty (an "Insured Casualty"), Borrower shall give prompt
notice thereof to Lender. Following the occurrence of an Insured Casualty,
Borrower, regardless of whether insurance proceeds are available, shall promptly
proceed to restore, repair, replace or rebuild the affected Property to be of
45
at least equal value and of substantially the same character as prior to such
damage or destruction, all to be effected in accordance with Legal Requirements.
The expenses incurred by Lender in the adjustment and collection of insurance
proceeds shall become part of the Debt and be secured hereby and shall be
reimbursed by Borrower to Lender upon demand.
7.1.2 Casualty and Application of Proceeds. (a) In case of loss or
damages covered by any of the Policies, the following provisions shall apply:
(i) In the event of an Insured Casualty that does not exceed
$250,000, Borrower may settle and adjust any claim without the consent of
Lender; provided that such adjustment is carried out in a competent and timely
manner. In such case, Borrower is hereby authorized to collect and receipt for
any such insurance proceeds.
(ii) In the event of an Insured Casualty that equals or exceeds
$250,000, Lender may settle and adjust any claim without the consent of Borrower
and agree with the insurance company or companies on the amount to be paid on
the loss and the proceeds of any such policy shall be due and payable solely to
Lender and held in escrow by Lender in accordance with the terms hereof.
(b) In the event of an Insured Casualty where the loss is in an
aggregate amount less than sixty percent (60%) of the Allocated Loan Amount for
any individual Property, and if, in the reasonable judgment of Lender, the
Property can be restored within six (6) months and prior to the maturity of the
Note (and prior to the expiration of the business interruption insurance) to an
economic unit not materially less valuable and not less useful than the same was
prior to the Insured Casualty, and after such restoration will adequately secure
the outstanding balance of the Allocated Loan Amount, then, if no Default or
Event of Default shall have occurred and be then continuing, the proceeds of
insurance (after reimbursement of any expenses incurred by Lender) shall be
applied to reimburse Borrower for the cost of restoring, repairing, replacing or
rebuilding the Property or part thereof subject to the Insured Casualty (the
"Restoration"), in the manner set forth herein. Borrower hereby covenants and
agrees to commence and diligently to prosecute such Restoration; provided that
(i) Borrower shall pay all costs (and if required by Lender, Borrower shall
deposit the total thereof with Lender in advance) of such Restoration in excess
of the net proceeds of insurance made available pursuant to the terms hereof;
(ii) the Restoration shall be done in compliance with all Legal Requirements;
and (iii) Lender shall have received evidence reasonably satisfactory to it
that, during the period of the Restoration, the sum of (A) income derived from
the applicable Property, as reasonably determined by Lender, plus (B) proceeds
of rent loss insurance or business interruption insurance, if any, to be paid,
plus (C) any amounts otherwise deposited by Borrower with Lender, will equal or
exceed the sum of (I) expenses in connection with the operation of such Property
and (II) the debt service under the portion of the Loan attributable to such
Property.
(c) Except as provided above, the proceeds of insurance collected upon
any Insured Casualty may, at the option of Lender in its sole discretion, be
applied to the payment of the Debt (up to the Release Amount for the Property so
affected together with any Yield Maintenance Premium applicable thereto to the
extent provided under Section 2.3.3) or applied to reimburse Borrower for the
cost of any Restoration, in the manner set forth below. Any such application to
the Debt shall be without any prepayment consideration except that if an Event
of Default has occurred
46
and is continuing at the time the insurance proceeds are received from the
insurance company, then Borrower shall pay to Lender an additional amount equal
to the Yield Maintenance Premium, if any, that would be required under Section
2.3.3 hereof if a Defeasance Deposit was to be made by Borrower in the case of a
Defeased Note equal to the amount of the insurance proceeds applied to the Debt.
After any such application to the Debt, the remaining principal balance
outstanding under the Note shall be reamortized over the remaining term thereof,
and the Allocated Loan Amount for the affected Property shall be reduced by the
principal reduction resulting from such application.
(d) If Borrower is entitled to reimbursement out of insurance proceeds
held by Lender, such proceeds shall be deposited by Lender into the
Casualty/Condemnation Subaccount and disbursed from time to time from the
Casualty/Condemnation Subaccount upon Lender being furnished with (1) evidence
satisfactory to it of the estimated cost of completion of the Restoration, (2)
funds or, at Lender's option, assurances satisfactory to Lender that such funds
are available, sufficient in addition to the proceeds of insurance to complete
the proposed Restoration, (3) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as Lender may
reasonably require and approve, and (4) all plans and specifications for such
Restoration, such plans and specifications to be approved by Lender prior to
commencement of any work. In addition, no payment made prior to the final
completion of the Restoration shall exceed ninety percent (90%) of the value of
the work performed from time to time; funds other than proceeds of insurance
shall be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at
least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all liens or claims for lien.
Any surplus which may remain out of insurance proceeds held by Lender after
payment of such costs of Restoration shall be paid to Borrower.
7.1.3 Condemnation. (a) Borrower shall promptly give Lender written
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding affecting a Property (a "Condemnation") and shall deliver to
Lender copies of any and all papers served in connection with such Condemnation.
Following the occurrence of a Condemnation, Borrower, regardless of whether an
Award is available, shall promptly proceed to restore, repair, replace or
rebuild the affected Property to the extent practicable to be of at least equal
value and of substantially the same character as prior to such Condemnation, all
to be effected in accordance with Legal Requirements.
(b) Lender is hereby irrevocably appointed as Borrower's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any award or payment in respect of a Condemnation (an
"Award") and to make any compromise or settlement in connection with such
Condemnation, subject to the provisions of this Section. Notwithstanding any
Condemnation by any public or quasi-public authority (including any transfer
made in lieu of or in anticipation of such a Condemnation), Borrower shall
continue to pay the Debt at the time and in the manner provided for in the Note,
in this Agreement and the other Loan Documents and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to expenses of collecting the Award and to discharge of the Debt (up to
the Release Amount for the
47
Property so affected together with any Yield Maintenance Premium applicable
thereto to the extent provided under Section 2.3.3). Lender shall not be limited
to the interest paid on the Award by the condemning authority but shall be
entitled to receive out of the Award interest at the rate or rates provided in
the Note. Borrower shall cause any Award that is payable to Borrower to be paid
directly to Lender.
(c) In the event of any Condemnation where the Award is in an
aggregate amount less than sixty (60%) of the Allocated Loan Amount for any
Property, and if, in the reasonable judgment of Lender, the Property can be
restored within six (6) months and prior to maturity of the Note (and prior to
expiration of the business interruption insurance) to an economic unit not less
valuable and not less useful than the same was prior to the Condemnation, and
after such restoration will adequately secure the outstanding balance of the
Allocated Loan Amount, then, if no Default or Event of Default shall have
occurred and be then continuing, the proceeds of the Award (after reimbursement
of any expenses incurred by Lender) shall be applied to reimburse Borrower for
the cost of restoring, repairing, replacing or rebuilding the Property or part
thereof subject to Condemnation (the "Condemnation Restoration") in the manner
set forth below. Borrower hereby covenants and agrees to commence and diligently
to prosecute such Condemnation Restoration; provided that (i) Borrower shall pay
all costs (and if required by Lender, Borrower shall deposit the total thereof
with Lender in advance) of such Condemnation Restoration in excess of the Award
made available pursuant to the terms hereof; (ii) the Condemnation Restoration
shall be done in compliance with all Legal Requirements; and (iii) Lender shall
have received evidence reasonably satisfactory to it that, during the period of
the Condemnation Restoration, the sum of (A) income derived from the applicable
Property, as reasonably determined by Lender, plus (B) proceeds of rent loss
insurance or business interruption insurance, if any, to be paid, plus (C) any
amounts otherwise deposited by Borrower with Lender, will equal or exceed the
sum of (I) expenses in connection with the operation of such Property and (II)
the debt service under the portion of the Loan attributable to such Property.
(d) Except as provided above, the Award collected upon any
Condemnation shall, at the option of Lender in its sole discretion, be applied
to the payment of the Debt (up to the Release Amount for the Property so
affected together with any Yield Maintenance Premium applicable thereto to the
extent provided under Section 2.3.3) or applied to reimburse Borrower for the
cost of the Condemnation Restoration in the manner set forth below. Any such
application to the Debt shall be without any prepayment consideration except
that if an Event of Default has occurred and is continuing at the time the Award
is received, then Borrower shall pay to Lender an additional amount equal to the
Yield Maintenance Premium, if any, that would be required under Section 2.3.3
hereof if a Defeasance Deposit was to be made by Borrower in the case of a
Defeased Note equal to the amount of the condemnation proceeds applied to the
Debt. After any such application to the Debt, the remaining principal balance
outstanding under the Note shall be reamortized over the remaining term thereof.
If the related Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of such Award, Lender shall have the right, whether or not a
deficiency judgment on the Note shall be recoverable or shall have been sought,
recovered or denied, to receive all or a portion of said Award sufficient to pay
the Allocated Loan Amount and interest thereon.
(e) In the event Borrower is entitled to reimbursement out of the
Award received by Lender, such proceeds shall be disbursed from time to time
upon Lender being furnished with (1)
48
evidence satisfactory to it of the estimated cost of completion of the
Condemnation Restoration, (2) funds or, at Lender's option, assurances
satisfactory to Lender that such funds are available, sufficient in addition to
the proceeds of the Award to complete the Condemnation Restoration, (3) such
architect's certificates, waivers of lien, contractor's sworn statements, title
insurance endorsements, bonds, plats of survey and such other evidences of
costs, payment and performance as Lender may reasonably require and approve; and
(4) all plans and specifications for such Condemnation Restoration, such plans
and specifications to be approved by Lender prior to commencement of work. In
addition, no payment made prior to the final completion of the restoration,
repair, replacement and rebuilding shall exceed ninety percent (90%) of the
value of the work performed from time to time; (5) funds other than proceeds of
the Award shall be disbursed prior to disbursement of such proceeds; and (6) at
all times, the undisbursed balance of such proceeds remaining in the hands of
Lender, together with funds deposited for that purpose or irrevocably committed
to the satisfaction of Lender by or on behalf of Borrower for that purpose,
shall be at least sufficient in the reasonable judgment of Lender to pay for the
costs of completion of the Condemnation Restoration free and clear of all liens
or claims for lien. Any surplus which may remain out of the Award received by
Lender after payment of such costs of restoration, repair, replacement or
rebuilding shall, in the sole and absolute discretion of Lender, be retained by
Lender and applied to payment of the Debt or returned to Borrower.
Section 7.2 Required Repair; Required Repair Funds.
7.2.1 Required Repairs; Deposits. Borrower shall perform the deferred
maintenance and PIP work required under the Franchise Agreements at the
Properties set forth on Schedule 4 annexed hereto (the "Required Repairs").
Borrower shall complete each of the Required Repairs on or before the deadline
for same set forth on schedule 4. On the Closing Date, Borrower shall deposit
with Lender the amount for each Property set forth on such Schedule 4 hereto to
perform the Required Repairs for such Property. Amounts so deposited with Lender
(the "Required Repair Fund") shall be held by Lender in an account (the
"Required Repair Account") in Lender's name at a financial institution selected
by Lender in its sole discretion and shall be invested in Permitted Investments.
7.2.2 Grant of Security Interest. Borrower hereby pledges, assigns and
grants a security interest to Lender, as security for payment of all sums due in
respect of the Loan and the performance of all other terms, conditions and
covenants of the Loan Documents and this Agreement on Borrower's part to be paid
and performed, all of Borrower's right, title and interest in and to the
Required Repair Fund and the Required Repair Account. Borrower shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Required Repair Fund or the Required Repair
Account 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.
7.2.3 Release of Required Repair Funds. Lender shall disburse to
Borrower all Required Repair Funds in the Required Repair Account with respect
to any individual Property upon satisfaction by Borrower of each of the
following conditions: (a) Borrower shall submit a written request for payment to
Lender at least fifteen (15) Business Days prior to the date on which Borrower
requests such payment be made (except in the case of an emergency repair which
requires
49
immediate attention, in which event Borrower may submit such payment request
within ten (10) days), (b) on the date such request is received by Lender and on
the date such payment is to be made, no Default or Event of Default shall exist
and remain uncured, (c) Lender shall have received an Officer's Certificate from
Borrower certifying that all Required Repairs at the applicable Property have
been completed (i) in a good and workmanlike manner, and (ii) in accordance with
all applicable Legal Requirements, such certificate to be accompanied by a copy
of each license, permit or other approval required by any Governmental Authority
for the use or occupancy of the applicable Property, (d) Lender shall have
received an Officer's Certificate from Borrower (i) identifying each Person that
supplied materials or labor in connection with the Required Repairs performed at
such Property and (ii) stating that each such Person has been or, upon receipt
of the requested disbursement, will be paid in full, such certificate to be
accompanied by a copy of appropriate lien waivers or other evidence of payment
satisfactory to Lender, (e) at Lender's option, a title search for such Property
indicating that such Property is free from all liens, claims and other
encumbrances not previously approved by Lender, and (f) Lender shall have
received such other evidence as Lender shall reasonably request that the
Required Repairs at such Property have been completed and paid for. Lender shall
be required to make only one disbursement per month from the Required Repair
Account with respect to each Property and such disbursement shall be made only
upon satisfaction of each condition contained in this Section 7.2.3. Upon
completion of all Required Repairs in accordance with the terms hereof, Lender
shall disburse to Borrower any amounts then remaining in the Required Repair
Account.
7.2.4 Failure to Perform Required Repairs. It shall be a Default under
this Agreement if (a) Borrower does not complete the Required Repairs at each
Property by the required deadline for each repair as set forth on Schedule 4, or
(b) Borrower does not satisfy each condition contained in Section 7.2.3 hereof.
Upon the occurrence and during the continuance of an Event of Default, Lender,
at its option, may withdraw all Required Repair Funds from the Required Repair
Account and Lender may apply such funds either to completion of the Required
Repairs at one or more of the Properties or toward payment of the Debt in such
order, proportion and priority as Lender may determine in its sole discretion.
Lender's right to withdraw and apply Required Repair Funds shall be in addition
to all other rights and remedies provided to Lender under this Agreement and the
other Loan Documents.
Section 7.3 Tax and Insurance Escrow Fund.
7.3.1 Tax and Insurance Escrow Fund. Borrower shall pay to Lender on
each Payment Date (a) one-twelfth of the Taxes that Lender 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 thirty (30) days prior to
the respective dates they become delinquent, and (b) 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 (said
amounts in (a) and (b) above hereinafter called the "Tax and Insurance Escrow
Fund"). The Tax and Insurance Escrow Fund and the payments of interest or
principal or both, payable pursuant to the Note, shall be added together and
shall be paid as an aggregate sum by Borrower to Lender. Lender will apply the
Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums
required to be made by Borrower pursuant to Sec-
50
Section 5.1 hereof and under the Mortgages, or to reimburse Borrower for such
amounts upon presentation of evidence of payment and an Officer's Certificate in
form and substance satisfactory to Lender; subject, however, to Borrower's right
to contest Taxes in accordance with Section 5.1(b) hereof. In making any payment
relating to the Tax and Insurance Escrow Fund, Lender may do so according to any
▇▇▇▇, statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
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. Borrower shall furnish to Lender all bills and statements of the
applicable taxing authority with respect to Taxes no later than five (5)
Business Days before the same becomes due and payable. If the amount of the Tax
and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.1 hereof, Lender shall, in its sole discretion,
return any excess to Borrower or credit such excess against future payments to
be made to the Tax and Insurance Escrow Fund. In allocating such excess, Lender
may deal with the Person shown on the records of Lender to be the owner of the
Properties. If at any time Lender determines that the Tax and Insurance Escrow
Fund is not or will not be sufficient to pay the items set forth in (a) and (b)
above, 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
delinquency of the Taxes and/or expiration of the Policies, as the case may be.
7.3.2 Grant of Security Interest. Borrower hereby pledges, assigns and
grants a security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and provisions
of the Loan Documents and this Agreement on Borrower's part to be paid and
performed, of all Borrower's right, title and interest in and to the Tax and
Insurance Escrow Fund. Borrower shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Tax and Insurance Escrow Fund, 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.
7.3.3 Application of Tax and Insurance Escrow Fund. Upon the
occurrence and during the continuance of an Event of Default, Lender may apply
any sums then present in the Tax and Insurance Escrow Fund to the payment of the
following items in any order in its sole discretion: (a) Taxes and Other
Charges; (b) Insurance Premiums; (c) interest on the unpaid principal balance of
the Note; (d) amortization of the unpaid principal balance of the Note; or (e)
all other sums payable pursuant to this Agreement and the other Loan Documents.
The Tax and Insurance Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Lender. Sums in the Tax and Insurance
Escrow Fund shall be held by Lender in an account in Lender's name at a
financial institution selected by Lender in its sole discretion and shall be
invested in Permitted Investments. Earnings or interest, if any, thereon shall
be retained as part of such funds and applied in accordance with this Section
7.3. Lender shall not be liable for any loss sustained on the investment of any
funds constituting the Tax and Insurance Escrow Fund.
51
Section 7.4 Capital Reserve Fund.
7.4.1 Capital Reserve Fund. Borrower shall pay to Lender on each
Payment Date an amount equal to five percent (5%) of the gross revenues of the
Properties for the second calendar month preceding such Payment Date (said
amounts hereinafter called the "Capital Reserve Fund"). Lender will apply the
Capital Reserve Fund to payment of Approved Capital Expenses pursuant to the
terms hereof; provided, however, if the Loan shall have been accelerated or if
there is an Event of Default which is continuing, then Lender may credit such
Capital Reserve Fund against the Debt in such priority and proportions as Lender
in its sole and absolute discretion shall deem proper. If the amount of the
Capital Reserve Fund shall exceed the amounts due for Approved Capital Expenses
pursuant to the terms hereof, Lender shall, in its discretion, return any excess
to Borrower or, if future Capital Reserve Fund payments are then required,
credit such excess against such future payments; provided, however, if the Loan
shall have been accelerated or if there is an Event of Default which is
continuing, then Lender may credit such excess against the Debt in such priority
and proportions as Lender in its sole and absolute discretion shall deem proper.
7.4.2 Additional Capital Reserve Fund. (a) Notwithstanding anything to
the contrary contained in Section 7.4.1, Lender will waive its right to require
monthly deposits into the Capital Reserve Fund for the Marriott Managed
Properties so long as (i) there is held in an escrow in all respects
satisfactory to Lender (the "Additional Capital Reserve Fund") an amount equal
to $604,362 and (ii) within 30 days after the end of each calendar year during
the Term, Borrower shall provide the Lender an Officer's Certificate and
evidence satisfactory to Lender in all respects certifying (A) that Borrower
made payments into an escrow reserve account established by Manager for each of
the Marriott Managed Properties in an amount equal to five percent (5%) of the
Gross Revenues for such Marriott Managed Properties during such calendar year
and (B) the actual amount spent by Manager on Capital Expenditures and FF&E
Expenditures at each of the Marriott Managed Properties during such calendar
year, together with reasonable detail as to the actual expenditures made. If at
any time Borrower fails to satisfy the requirements of clauses (i) or (ii) above
or if there is an Event of Default which is continuing, then (x) Lender may
credit such Alternative Capital Reserve Fund against the Debt in such priority
and proportions as Lender in its sole and absolute discretion shall deem proper,
and (y) Borrower's rights under this Section 7.4.2 shall terminate and Borrower
shall be required to commence making monthly deposits into the Capital Reserve
Fund for the Marriott Managed Properties pursuant to Section 7.4.1 on the next
Payment Date which shall be in addition to any payments Borrower is required to
make on account of Capital Expenditures and FF&E Expenditures under the
Management Agreements.
(b) Notwithstanding anything to the contrary contained in this Section
7.4.2, in lieu of making a cash deposit for the Additional Capital Reserve Fund,
Borrower may, at its option, deposit with Lender an unconditional, irrevocable,
stand-by letter of credit for the benefit of Lender issued by a commercial bank
having a rating of "AA-" or better by Standard & Poor's Ratings Group in the
amount of $604,362 for a term of not less than one year, which letter of credit
shall otherwise be in form acceptable to Lender in all respects. Lender shall
have the right to draw down such letter of credit (i) if Borrower fails to
extend or replace such letter of credit no later than 30 days prior to the
expiration date thereof and (ii) at any time Lender is entitled to apply the
Additional Capital Reserve Fund pursuant to Section 7.4.4.
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7.4.3 Grant of Security Interest. Borrower hereby pledges, assigns and
grants a security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and provisions
of the Loan Documents and this Agreement on Borrower's part to be paid and
performed, of all Borrower's right, title and interest in and to the Capital
Reserve Fund, the Additional Capital Reserve Fund and any letter of credit
deposited by Borrower in lieu of a cash deposit for the Additional Capital
Reserve Fund. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Capital
Reserve Fund, the Additional Capital Reserve Fund or any such letter of credit,
or permit any lien or encumbrance to attach thereto, or any levy to be made
thereon, or any UCC-l Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto. This Agreement is, among other
things, intended by the parties to be a security agreement for purposes of the
New York Uniform Commercial Code.
7.4.4 Application of Capital Reserve Fund. Upon the occurrence of an
Event of Default, Lender may apply any sums then present in the Capital Reserve
Fund and/or the Additional Capital Reserve Fund (and, if applicable, draw down
any letter of credit being held in connection therewith for application
hereunder) to the payment of the following items in any order in its sole
discretion: (a) Capital Expenses; (b) interest on the unpaid principal balance
of the Note; (c) amortization of the unpaid principal balance of the Note; or
(d) all other sums payable pursuant to this Agreement and the other Loan
Documents. The Capital Reserve Fund and the Additional Capital Reserve Fund
shall not constitute a trust fund and may be commingled with other monies held
by Lender. Sums in the Capital Reserve Fund and the Additional Capital Reserve
Fund shall be held by Lender in an account in Lender's name at a financial
institution selected by Lender in its sole discretion and shall be invested in
Permitted Investments. Earnings or interest, if any, thereon shall become part
of the Capital Reserve Fund or the Additional Capital Reserve Fund and shall be
disbursed as provided in this Section 7.4.4. Lender shall not be liable for any
loss sustained on the investment of any funds constituting the Capital Reserve
Fund or the Additional Capital Reserve Fund.
7.4.5 Payment of Capital Expenses. Funds held in the Capital Reserve
Fund may be used for Approved Capital Expenses. From time to time, Borrower may
send a request for disbursement of funds in the Capital Reserve Fund, but not
more than two (2) times per month and, to the extent there are sufficient funds
available in the Capital Reserve Fund, such disbursements shall be made by
Lender so long as (A) no Event of Default shall have occurred and be continuing;
(B) such expenditure is for an Approved Capital Expense; and (C) the request for
disbursement is accompanied by (1) an Officer's Certificate certifying (v) the
amount of funds to be disbursed, (w) that such funds will be used to pay
Approved Capital Expenses and a description thereof, (x) that all outstanding
trade payables (other than those to be paid from the requested disbursement or
those otherwise permitted to be outstanding under Section 6.1(i) hereof) have
been paid in full, (y) that the same has not been the subject of a previous
disbursement, and (z) that all previous disbursements have been used to pay the
previously identified Approved Capital Expenses, (2) at Lender's option, copies
of appropriate lien waivers or other evidence of payment satisfactory to Lender,
and (3) reasonably detailed documentation as to the amount, necessity and
purpose therefor.
Section 7.5 Payment of Approved Operating Expenses. Funds held in the
Deposit Account with respect to any Property for which there is no Operating
Lease may be used for
53
Approved Operating Expenses. From time to time, Borrower may send a request for
disbursement of funds in the Deposit Account for payment of Approved Operating
Expenses, but not more than two (2) times per month. To the extent there are
funds available in the Deposit Account in excess of the amounts required to fund
the Tax and Insurance Escrow Fund, the Capital Reserve Fund and to pay the
Monthly Debt Service Payment Amount due in respect of the Loan on the next
Payment Date, such disbursements for Approved Operating Expenses shall be made
by the Lender so long as (A) no Event of Default shall have occurred and be
continuing; (B) such expenditure is for an Approved Operating Expense; and (C)
the request for disbursement is accompanied by (1) an Officer's Certificate
certifying (v) the amount of funds to be disbursed, (w) that such funds will be
used to pay Approved Operating Expenses and a description thereof, (x) that all
outstanding trade payables (other than those to be paid from the requested
disbursement or those otherwise permitted to be outstanding under Section 6.1(i)
hereof) have been paid in full, (y) that the same has not been the subject of a
previous disbursement, and (z) that all previous disbursements have been or will
be used to pay the previously identified Approved Operating Expenses, and (2)
reasonably detailed documentation as to the amount, necessity and purpose
therefor. Subject to satisfaction of the preceding conditions, if the Lender
receives from the Borrower a valid request for a disbursement for payment of
Approved Operating Expenses with respect to any Property for which there is no
Operating Lease for the then Current Month at least five (5) Business Days prior
to the Payment Date occurring in such Current Month, then the disbursement in
respect of such Approved Operating Expenses shall be made to Borrower on such
Payment Date. If the Borrower shall fail to validly request a disbursement for
payment of Approved Operating Expenses for such Property for the then Current
Month at least five (5) Business Days prior to the Payment Date in such Current
Month, then the Lender shall retain in the Deposit Account an amount equal to
the anticipated Operating Expenses for the then Current Month as set forth in
the approved Operating Budget for such Property for such month, and the Lender
shall, subject to satisfaction of the preceding conditions, disburse same to the
Borrower five (5) Business Days after the Lender receives a valid request
therefor. Amounts disbursed to the Borrower under this Section 7.5 shall be used
by the Borrower to pay current Approved Operating Expenses for any Property for
which there is no Operating Lease and for no other purpose. The Borrower shall
furnish the Lender with copies of bills, statements, invoices, receipts or other
evidence as the Lender may reasonably request in connection with a request for
disbursement.
VIII. DEFAULTS
Section 8.1 Event of Default. (a) Each of the following events shall
constitute an event of default hereunder (each, an "Event of Default"):
(i) if any portion of the Debt is not paid when due (unless
sufficient funds are available in the Deposit Account on the applicable date);
(ii) if any of the Taxes or Other Charges are not paid when the
same are due and payable (unless sufficient funds are available in the Tax and
Insurance Escrow Fund on the applicable date), subject to Borrower's right to
contest Taxes in accordance with Section 5.1(b) hereof;
54
(iii) if the Policies are not kept in full force and effect, or
if the Policies are not delivered to Lender within five (5) days after written
request from Lender to Borrower;
(iv) if, without Lender's prior written consent, (A) any
Individual Borrower transfers or encumbers all or any portion of the Properties
other than in connection with a Special Transfer or (B) any direct or indirect
interest in any Individual Borrower is transferred or assigned except as
expressly permitted under Section 6.1(j) hereof;
(v) 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 by Borrower in connection
with this Agreement or any other Loan Document, shall be false or misleading in
any material respect as of the date the representation or warranty was made;
(vi) if any Individual Borrower or Lessee shall make an
assignment for the benefit of creditors, or if Borrower shall generally not be
paying its debts as they become due;
(vii) if a receiver, liquidator or trustee shall be appointed for
any Individual Borrower or Lessee or if any Individual Borrower or Lessee shall
be adjudicated a 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, any Individual Borrower or Lessee, or if any proceeding for the
dissolution or liquidation of any Individual Borrower or Lessee shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower or Lessee, as the
case may be, upon the same not being discharged, stayed or dismissed within
sixty (60) days;
(viii) if any Individual Borrower attempts to assign its
respective rights under this Agreement in contravention of the Loan Documents or
any of the other Loan Documents or any interest herein or therein;
(ix) if any Individual Borrower breaches any of its respective
negative covenants contained in Section 6.1 or any covenant contained in Section
4.1(cc) hereof;
(x) if any Property becomes subject to any mechanic's,
materialman's or other lien and such lien is not bonded or discharged within
thirty (30) days after Borrower first receives notice of any such lien except a
lien for local real estate taxes and assessments not then due and payable;
(xi) if Borrower fails to cure properly any violations of laws or
ordinances affecting or which may be interpreted to affect any Property within
thirty (30) days after Borrower first receives notice of any such violations;
(xii) except as permitted under the Mortgages, the actual or
threatened alteration, improvement, demolition or removal of any of the
Improvements without the prior consent of Lender;
55
(xiii) if an Event of Default as defined or described in any of
the other Loan Documents occurs, whether as to any Individual Borrower or any
Property, or if any other such event shall occur or condition shall exist, if
the effect of such event or condition is to accelerate the maturity of any
portion of the Debt or to permit Lender to accelerate the maturity of all or any
portion of the Debt;
(xiv) if Borrower shall be in default of its obligations to make
deposits into the Tax and Insurance Escrow Fund or the Capital Reserve Fund;
(xv) if Borrower shall be in default under any term, covenant or
provision set forth herein which specifically contains a notice requirement or
grace period after the giving of such notice or the expiration of such grace
period;
(xvi) if Borrower shall continue to be in Default under any of
the other terms, covenants or conditions of this Agreement not specified in
subsections (i) to (xii) 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 an additional period of time as
is reasonably necessary for Borrower in the exercise of due diligence to cure
such Default, such additional period not to exceed sixty (60) days;
(xvii) if, without Lender's prior consent, (a) the Operating
Lease is amended, modified or terminated or (b) the ownership, management or
Control of the Lessee is Transferred to a Person other than Borrower or an
Affiliate of Borrower;
(xviii) if, so long as Lessee is an Affiliate of any Individual
Borrower, an Event of Default as defined in the Operating Lease occurs
thereunder;
(xix) if Lessee shall default in the performance or observance of
any of the obligations under the Lessee Subordination beyond any applicable
period of notice and grace thereunder;
(xx) if, without Lender's prior consent, there is any material
change in any Franchise Agreement or Management Agreement or any Franchise
Agreement or Management Agreement is terminated;
(xxi) if a default has occurred and for so long as it continues
beyond any applicable cure period under any Franchise Agreement or Management
Agreement if such default permits the franchisor or Manager to terminate or
cancel such Franchise Agreement or Management Agreement; or
56
(xxii) if and so long as Borrower ceases to do business as a
hotel on any Property or terminates such business for any reason whatsoever
(other than temporary cessation in connection with any renovations to a
Property).
(b) Upon the occurrence and during the continuance of an Event of
Default (other than an Event of Default described in clauses (vi), (vii) or
(viii) above) and at any time thereafter 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, Lender may take such action, without notice or
demand, that Lender deems advisable to protect and enforce its rights against
Borrower and in and to the Properties, including 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 any or all of the
Individual Borrowers and any or all of the Properties, including all rights or
remedies available at law or in equity; and upon any Event of Default described
in clauses (vi), (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 each
Individual Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
Section 8.2 Remedies. (a) Upon the occurrence and during the
continuance 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
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 agrees that if an Event of Default is
continuing (i) to the extent permitted by applicable law, 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
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 Properties, and to the extent
permitted by applicable law, nothing contained herein or in any other Loan
Document shall be construed as requiring Lender to resort to any Individual
Borrower or any Property for the satisfaction of any of the Debt in preference
or priority to any Individual Borrower or any other Properties, and Lender may
seek satisfaction out of all of the 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 in the payment of one or more
scheduled payments
57
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 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 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 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. 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.
Section 8.3 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.
IX. SPECIAL PROVISIONS
Section 9.1 Sale of Note and Securitization. At the request of the
holder of the Note and, to the extent not already required to be provided by
Borrower under this Agreement. Borrower shall use reasonable efforts to satisfy
the market standards to which the holder of the Note customarily adheres or
which may be reasonably required in the marketplace or by the Rating Agencies in
connection with the sale of the Note or participation therein or the first
successful securitization (such sale and/or securitization, the
"Securitization") of rated single or multi-class securities (the "Securities")
secured by or evidencing ownership interests in the Note and the Mortgages,
including:
(a) (1) provide such financial and other information with respect to
the Properties, Borrower and its affiliates, Manager and any tenants of the
Properties, (ii) provide business plans and budgets relating to the Properties
and (iii) to perform or permit or cause to be performed or permitted such site
inspection, appraisals, market studies, environmental reviews and reports (Phase
58
I's and, if appropriate, Phase II's), engineering reports and other due
diligence investigations of the Properties, as may be reasonably requested by
the holder of the Note or the Rating Agencies or as may be reasonably necessary
or appropriate in connection with the Securitization (the "Provided
Information"), together, if customary, with appropriate verification and/or
consents of the Provided Information through letters of auditors or opinions of
counsel of independent attorneys acceptable to Lender and the Rating Agencies;
(b) at Borrower's expense, cause counsel to render opinions as to
non-consolidation, fraudulent conveyance, and true sale, true contribution or
any other opinion customary in securitization transactions with respect to the
Properties and Borrower and its affiliates, which counsel and opinions shall be
reasonably satisfactory to the holder of the Note and the Rating Agencies;
(c) make such representations and warranties as of the closing date of
the Securitization with respect to the Properties, Borrower, and the Loan
Documents as are customarily provided in securitization transactions and as may
be reasonably requested by the holder of the Note or the Rating Agencies and
consistent with the facts covered by such representations and warranties as they
exist on the date thereof, including the representations and warranties made in
the Loan Documents; and
(d) execute such amendments to the Loan Documents and Borrower's
organizational documents, enter into a lock-box or similar arrangement with
respect to the Rents and establish and fund such reserve funds (including
reserve funds for deferred maintenance and capital improvements) as may be
requested by the holder of the Note or the Rating Agencies or otherwise to
effect the Securitization, provided, that nothing contained in this subsection
(d) shall result in a material change in the transaction.
In connection with only the initial Securitization, all reasonable third party
costs and expenses incurred by Lender in connection with Borrower's complying
with requests made under this Section 9.1 shall be paid by Borrower up to a
maximum amount equal to $147,000, which Borrower will deposit with Lender on the
Closing Date.
Section 9.2 Securitization Indemnification. (a) Borrower understands
that certain of the Provided Information and the Required Records may be
included in disclosure documents in connection with the Securitization,
including a prospectus or private placement memorandum (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"), or provided or made available to investors or prospective investors in
the Securities, the Rating Agencies, and service providers relating to the
Securitization. In the event that the Disclosure Document is required to be
revised prior to the sale of all Securities, Borrower will cooperate with the
holder of the Note in updating the Provided Information or Required Reports for
inclusion or summary in the Disclosure Document by providing all current
information pertaining to Borrower and the Properties necessary to keep the
Disclosure Document accurate and complete in all material respects with respect
to such matters.
59
(b) In connection with each of (i) a preliminary and a private
placement memorandum or (ii) a preliminary and final prospectus, as applicable,
Borrower agrees to provide an indemnification certificate:
(A) certifying that Borrower has carefully examined those
portions of such memorandum or prospectus, as applicable, pertaining to
Borrower, the Properties and the Loan including applicable portions of the
sections entitled "Special Considerations", "Description of the Mortgages",
"Description of the Mortgage Loans and Mortgaged Properties", "The Manager",
"The Borrower" and "Certain Legal Aspects of the Mortgage Loan", and such
sections (and any other sections reasonably requested and pertaining to
Borrower, the Properties or the Loan) to the best of Borrower's knowledge, do
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 the affiliates of Nomura Securities
International, Inc. (" Nomura"), 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 or entity who controls Nomura within the meaning of Section 15 of
the Securities Act or Section 30 of the Exchange Act of 1933, as amended
(collectively, the "Nomura Group"), and Nomura, each of its directors and each
person who controls Nomura, 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 to which Lender, the Nomura 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 the applicable portions of such sections applicable
to Borrower, the Properties or the Loan, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in the applicable portions of such sections or necessary in order to make
the statements in the applicable portions of such sections or in light of the
circumstances under which they were made, not misleading (the "Liabilities");
and
(C) agreeing to reimburse Lender and Nomura for any reasonable
legal or other expenses reasonably incurred by Lender and Nomura in connection
with investigating or defending the Liabilities. Borrower's Liability under
clauses (A), (B) and this (C) shall be limited to Liabilities arising out of or
based upon any such untrue statement or omission made therein in reliance upon
and in conformity with information furnished to Lender by Borrower, its
accountants, officers and employees in writing in connection with the
preparation of those portions of the memorandum or prospectus pertaining to
Borrower, the Properties or the Loan or in connection with the underwriting of
the debt, including financial statements of Borrower, operating statements,
occupancy statistics and room rates, rent rolls, environmental site assessment
reports and property condition reports with respect to the Properties. This
indemnity agreement will be in addition to any liability which Borrower may
otherwise have.
(c) In connection with filings under the Exchange Act, Borrower agrees
to (i) indemnify Lender, the Nomura Group and the Underwriter Group for any
Liabilities to which Lender, the Nomura 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 Provided Information
60
or Required Records a material fact required to be stated in the Provided
Information or Required Records in order to make the statements in the Provided
Information or Required Records, in light of the circumstances under which they
were made not misleading and (ii) reimburse Lender or Nomura for any legal or
other expenses reasonably incurred by Lender and Nomura in connection with
defending or investigating the Liabilities; provided that Borrower shall not be
required to indemnify Lender or Nomura in connection with any Liability arising
from the gross negligence or willful misconduct of Lender or Nomura.
(d) Promptly after receipt by an indemnified party under this Section
9.2 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 Section 9.2, 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
Section 9.2 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 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 or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel unless there are legal defenses
available to it that are materially 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 by 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 9.2(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) the Nomura Group's and Borrower's
relative knowledge and access to information concerning the matter with respect
to which claim was asserted; (ii) the opportunity to correct and prevent any
statement or omission; and (iii) any other equitable considerations appropriate
in the circumstances. Lender and Borrower hereby agree that it may not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation.
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Section 9.3 Rating Surveillance. Lender will retain the Rating
Agencies to provide rating surveillance services on any certificates issued in a
Securitization. The pro rata share of such rating surveillance will be at the
expense of Borrower.
Section 9.4 Exculpation. Notwithstanding anything to the contrary in
any of the Loan Documents, 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 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 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 deficiency judgment 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 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 commence any
other appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgages or to exercise its remedies against the
Properties; 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 reasonable attorneys' fees and costs) arising out
of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower or any guarantor in
connection with the Loan;
(ii) the gross negligence or willful misconduct of Borrower;
(iii) the breach of any provision in that certain Environmental and
Hazardous Substance Indemnification Agreement of even date herewith given by
Borrower to Lender 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 any Property after an Event
of Default (excluding any items which are replaced with items of reasonably
equivalent value);
62
(v) the misapplication or conversion by Borrower of (A) any insurance
proceeds paid by reason of any loss, damage or destruction to any Property, (B)
any awards or other amounts received in connection with the condemnation of all
or a portion of any Property, or (C) any Rents following an Event of Default
(prior to any cure of such Event of Default); provided that Borrower shall not
be liable for any amounts applied to Debt Service, Approved Operating Expenses
or Approved Capital Expenses;
(vi) failure to pay charges for labor or materials or other charges that
can create liens on any portion of any Property unless such charges are the
subject of a bona fide dispute in which Borrower is contesting the amount or
validity thereof;
(vii) any security deposits collected with respect to the Properties which
are not delivered to Lender upon a foreclosure of 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.
Notwithstanding anything to the contrary in this Agreement or any of the Loan
Documents, 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 U.S.
Bankruptcy Code to file a claim for the full amount of the Debt secured by the
Mortgages or to require that all collateral shall continue to secure all of the
Debt owing to Lender in accordance with the Loan Documents.
Section 9.5 Retention of Servicer. Lender reserves the right to retain
the Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, the Pooling and Servicing Agreement or the Deposit Account Agreement
or otherwise, together with such other powers as are reasonably incidental
thereto. Borrower shall pay any reasonable fees and expenses of the Servicer in
connection with a Defeasance of the Note, release of Property, assumption or
modification of the Loan or enforcement of the Loan Documents.
X. MISCELLANEOUS
Section 10.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid (but the accuracy
thereof shall be determined as of the Closing Date). Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement contained, by or on behalf
of Borrower, shall inure to the benefit of the respective legal representatives,
successors and assigns of Lender.
Section 10.2 Lender's Discretion. Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be
63
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.
Section 10.3 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 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 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 OF NEW YORK, 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 VALIDITY AND THE
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR 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 (S) 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 SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO (S) 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE 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
HUNTON & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ATTN: ▇▇▇▇▇▇
▇▇▇▇▇▇, ESQ., 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 OF BORROWER MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED
HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
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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 OFFICE SHALL BE DESIGNATED AS THE 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 10.4 Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by any Individual 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 any Individual
Borrower, shall entitle Borrower to any other or future notice or demand in the
same, similar or other circumstances.
Section 10.5 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 the Note or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, 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, the Note 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, the Note
or the other Loan Documents, or to declare a default for failure to effect
prompt payment of any such other amount.
Section 10.6 Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answer back
acknowledged), addressed as follows (or at such other address and person as
shall be designated from time to time by any party hereto, as the case may be,
in a written notice to the other parties hereto in the manner provided for in
this Section):
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If to Lender:
Nomura Asset Capital Corporation
Two World ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Nomura Asset Capital Corporation
Two World ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telecopier: 212-667-1567
If to Borrower:
c/o Innkeepers USA Trust
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Hunton & ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day.
Section 10.7 Trial by Jury. BORROWER HEREBY AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES 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 IS INTENDED TO ENCOMPASS
INDIVIDUALLY
66
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH
IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 10.8 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 10.9 Severability. 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.
Section 10.10 Preferences. 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.
Section 10.11 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 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 10.12 Remedies of Borrower. In the event that a claim or
adjudication is made that Lender or its agents, including Servicer, 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, including Servicer, shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited to commencing an
action seeking injunctive relief or declaratory judgment plus reasonable costs
thereof (including, without limitation, reasonable attorneys' fees). 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.
Section 10.13 Expenses; Indemnity. (a) Borrower covenants and agrees
to reimburse Lender (or the holder of the Loan, as applicable) upon receipt of
written notice from such
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holder for all reasonable costs and expenses (including reasonable attorneys'
fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
(including any opinions requested by Lender as to any legal matters arising
under this Agreement or the other Loan Documents with respect to the
Properties); (ii) Borrower's ongoing performance of and compliance with
Borrower's respective 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 confirming compliance with environmental and insurance
requirements; (iii) Lender's ongoing performance and compliance with all
agreements and conditions 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 Lender; (v)
Borrower complying with any requests made pursuant to Section 9.1 hereof
(subject to the limitations contained in such section); (vi) 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; (vii) enforcing or
preserving any rights, in response to third party claims or the prosecuting or
defending of any action or proceeding or other litigation, in each case against,
under or affecting Borrower, this Agreement, the other Loan Documents, the
Properties, or any other security given for the Loan; and (viii) enforcing any
obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the 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 or its employees or agents. Any costs and expenses due and payable to
Lender hereunder which are not paid by Borrower within ten (10) days after
demand may be paid from any amounts in the Deposit Account, with notice thereof
to Borrower.
(b) Borrower shall indemnify and hold harmless Lender from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including 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, (ii) the use or intended use of the
proceeds of the Loan, or (iii) any information provided in writing by or on
behalf of Borrower, or contained in any documentation approved by Borrower in
writing and in any way relating to the issuance, offering and sale of the
Securities (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 and hold harmless set forth in the preceding
68
sentence may be unenforceable because it violates any law or public policy,
Borrower shall contribute 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 10.14 Exhibits Incorporated. The Exhibits 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 10.15 Offsets, Counterclaims and Defenses. Any assignee of
Lender's interest in and to this Agreement, the Note 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.
Section 10.16 No Joint Venture or Partnership. 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 Properties other than that of mortgagee or lender.
Section 10.17 Publicity. All news releases, publicity or advertising
by Borrower or their Affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to Lender, Nomura, the Loan purchaser, the Servicer or the trustee in
a Securitization shall be subject to the prior written approval of Lender.
Section 10.18 Waiver of Marshalling of Assets. To the fullest extent
Borrower may legally do so, Borrower waives all rights to a marshalling of the
assets of Borrower, Borrower's partners, if any, and others with interests in
Borrower, and of Borrower's Properties, or to a sale in inverse order of
alienation in the event of foreclosure of the interests hereby created, and
agrees 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 applicable Properties for the collection of the related Indebtedness
without any prior or different resort for collection, of the right of Lender or
any deed of trust trustee to the payment of the related Indebtedness out of the
net proceeds of a Property in preference to every other claimant whatsoever. In
addition, Borrower, for itself and its successors and assigns, waives in the
event of foreclosure of any or all of the Mortgages, any equitable right
otherwise available to the Borrower which would require the separate sale of the
Properties or require Lender to exhaust its remedies against any Property or any
combination of the Properties before proceeding against any other Property or
combination of Properties; and further in the event of such foreclosure the
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 Properties.
69
Section 10.19 Waiver of Counterclaim. 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, including Servicer.
Section 10.20 Conflict; Construction of Documents. 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 counsel in connection with the
negotiation and drafting 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.
Section 10.21 Brokers and Financial Advisors. Borrower 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 and Lender hereby agree to indemnify
and hold the other harmless from and against any and all claims, liabilities,
costs and expenses of any kind in any way relating to or arising from a claim by
any Person that such Person acted on behalf of the indemnifying party in
connection with the transactions contemplated herein. The provisions of this
Section 10.21 shall survive the expiration and termination of this Agreement and
the repayment of the Debt.
Section 10.22 No Third Party Beneficiaries. This Agreement and the
other Loan Documents are solely for the benefit of Lender and the Borrower and
nothing contained in this Agreement or the other Loan Documents shall be deemed
to confer upon anyone other than the Lender and the Borrower 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 10.23 Cross-Default; Cross Collateralization. Borrower
acknowledges that Lender has made the Loan to Borrower upon the security of its
collective interest in the Properties and in reliance upon the aggregate of the
Properties taken together being of greater value as collateral security than the
sum of the 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 Properties as
security for the Note.
Section 10.24 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 are
superseded by the terms of this Agreement and the other Loan Documents.
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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.
INNKEEPERS RESIDENCE DENVER-
DOWNTOWN, L.P., a Virginia limited partnership
By: Innkeepers Financial Corporation III, a Virginia
corporation, its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
INNKEEPERS RESIDENCE WICHITA EAST, L.P., a
Virginia limited partnership
By: Innkeepers Financial Corporation III, a Virginia
corporation, its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
INNKEEPERS RESIDENCE SILI I, L.P., a Virginia
limited partnership
By: Innkeepers Financial Corporation III, a Virginia
corporation, its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
INNKEEPERS FINANCING PARTNERSHIP III, L.P.,
a Virginia limited partnership
By: Innkeepers Financial Corporation III, a Virginia
corporation, its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
71
NORMURA ASSET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
72