EXHIBIT 10.34
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LOAN AGREEMENT
Dated as of _____, 2004
Between
_____________,
as Borrower
and
JPMORGAN CHASE BANK,
as Lender
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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION...................................................... 1
Section 1.1 Definitions............................................................ 1
Section 1.2 Principles of Construction............................................. 21
II. GENERAL TERMS................................................................................ 22
Section 2.1 Loan Commitment; Disbursement to Borrower.............................. 22
2.1.1 Agreement to Lend and Borrow............................................... 22
2.1.2 Single Disbursement to Borrower............................................ 22
2.1.3 The Note, Security Instrument and Loan Documents........................... 22
2.1.4 Intentionally Deleted...................................................... 22
Section 2.2 Interest; Loan Payments; Late Payment Charge........................... 22
2.2.1 Payments................................................................... 22
2.2.2 Interest Calculation....................................................... 22
2.2.3 Payment on Maturity Date................................................... 22
2.2.4 Payments after Default..................................................... 23
2.2.5 Late Payment Charge........................................................ 23
2.2.6 Usury Savings.............................................................. 23
Section 2.3 Prepayments............................................................ 24
2.3.1 Voluntary Prepayments...................................................... 24
2.3.2 Mandatory Prepayments...................................................... 24
2.3.3 Prepayments After Default.................................................. 24
2.3.4 Making of Payments......................................................... 24
2.3.5 Application of Principal Prepayments....................................... 25
Section 2.4 Defeasance............................................................. 25
2.4.1 Voluntary Defeasance....................................................... 25
2.4.2 Successor Borrower......................................................... 26
2.4.3 Release of Property........................................................ 27
Section 2.5 Release on Payment in Full............................................. 27
III. CASH MANAGEMENT.............................................................................. 27
Section 3.1 Establishment of Accounts.............................................. 27
Section 3.2 Deposits into Lockbox Account.......................................... 28
Section 3.3 Account Name........................................................... 29
Section 3.4 Eligible Accounts...................................................... 29
Section 3.5 Permitted Investments.................................................. 29
Section 3.6 The Initial Deposits................................................... 30
Section 3.7 Transfer To and Disbursements from the Lockbox Account................. 30
Section 3.8 Withdrawals From the Tax Account and the Insurance Premium Account..... 31
Section 3.9 Withdrawals from the Replacement Reserve Account....................... 31
Section 3.10 Withdrawals from the Required Repair Account........................... 31
Section 3.11 Withdrawals from the Debt Service Account.............................. 31
Section 3.12 Intentionally Deleted.................................................. 31
Section 3.13 Intentionally Deleted.................................................. 31
Section 3.14 Sole Dominion and Control.............................................. 31
Section 3.15 Security Interest...................................................... 31
Section 3.16 Rights on Default...................................................... 31
Section 3.17 Financing Statement; Further Assurances................................ 32
Section 3.18 Borrower's Obligation Not Affected..................................... 32
Section 3.19 Payments Received Under this Agreement................................. 32
IV. REPRESENTATIONS AND WARRANTIES............................................................... 33
Section 4.1 Borrower Representations............................................... 33
4.1.1 Organization............................................................... 33
4.1.2 Proceedings................................................................ 33
4.1.3 No Conflicts............................................................... 34
4.1.4 Litigation................................................................. 34
4.1.5 Agreements................................................................. 34
4.1.6 Solvency................................................................... 35
4.1.7 Full and Accurate Disclosure............................................... 35
4.1.8 No Plan Assets............................................................. 36
4.1.9 Compliance................................................................. 36
4.1.10 Financial Information...................................................... 36
4.1.11 Condemnation............................................................... 37
4.1.12 Federal Reserve Regulations................................................ 37
4.1.13 Utilities and Public Access................................................ 37
4.1.14 Not a Foreign Person....................................................... 37
4.1.15 Separate Lots.............................................................. 37
4.1.16 Assessments................................................................ 37
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4.1.17 Enforceability............................................................. 37
4.1.18 No Prior Assignment........................................................ 38
4.1.19 Insurance.................................................................. 38
4.1.20 Use of Property............................................................ 38
4.1.21 Certificate of Occupancy; Licenses......................................... 38
4.1.22 Flood Zone................................................................. 38
4.1.23 Physical Condition......................................................... 38
4.1.24 Boundaries................................................................. 39
4.1.25 Leases..................................................................... 39
4.1.26 Survey..................................................................... 39
4.1.27 Intentionally Deleted...................................................... 40
4.1.28 Filing and Recording Taxes................................................. 40
4.1.29 Franchise Agreement........................................................ 40
4.1.30 Management Agreement/Operating Lease....................................... 40
4.1.31 Illegal Activity........................................................... 40
4.1.32 No Change in Facts or Circumstances; Disclosure............................ 40
4.1.33 Investment Company Act..................................................... 41
4.1.34 Principal Place of Business; State of Organization......................... 41
4.1.35 Single Purpose Entity...................................................... 41
4.1.36 Business Purposes.......................................................... 45
4.1.37 Taxes...................................................................... 45
4.1.38 Intentionally Deleted...................................................... 46
4.1.39 Environmental Representations and Warranties............................... 46
4.1.40 Taxpayer Identification Number............................................. 46
4.1.41 OFAC....................................................................... 46
4.1.42 Intentionally Deleted...................................................... 46
4.1.43 Deposit Accounts........................................................... 46
Section 4.2 Survival of Representations............................................ 47
V. BORROWER COVENANTS........................................................................... 47
Section 5.1 Affirmative Covenants.................................................. 47
5.1.1 Existence; Compliance with Legal Requirements.............................. 47
5.1.2 Taxes and Other Charges.................................................... 48
5.1.3 Litigation................................................................. 49
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5.1.4 Access to the Property..................................................... 49
5.1.5 Notice of Default.......................................................... 49
5.1.6 Cooperate in Legal Proceedings............................................. 49
5.1.7 Award and Insurance Benefits............................................... 49
5.1.8 Further Assurances......................................................... 50
5.1.9 Mortgage and Intangible Taxes.............................................. 50
5.1.10 Financial Reporting........................................................ 50
5.1.11 Business and Operations.................................................... 53
5.1.12 Costs of Enforcement....................................................... 53
5.1.13 Estoppel Statement......................................................... 53
5.1.14 Intentionally Deleted...................................................... 54
5.1.15 Performance by Borrower.................................................... 54
5.1.16 Confirmation of Representations............................................ 54
5.1.17 Leasing Matters............................................................ 54
5.1.18 Management Agreement....................................................... 56
5.1.19 Environmental Covenants.................................................... 58
5.1.20 Alterations................................................................ 59
5.1.21 Franchise Agreement........................................................ 59
5.1.22 Operating Lease............................................................ 61
5.1.23 OFAC....................................................................... 61
5.1.24 Intentionally Deleted...................................................... 61
Section 5.2 Negative Covenants..................................................... 61
5.2.1 Liens...................................................................... 62
5.2.2 Dissolution................................................................ 62
5.2.3 Change In Business......................................................... 62
5.2.4 Debt Cancellation.......................................................... 63
5.2.5 Zoning..................................................................... 63
5.2.6 No Joint Assessment........................................................ 63
5.2.7 Name, Identity, Structure, or Principal Place of Business.................. 63
5.2.8 ERISA...................................................................... 64
5.2.9 Affiliate Transactions..................................................... 64
5.2.10 Transfers.................................................................. 64
5.2.11 Permitted Transfer......................................................... 66
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VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS.......................................... 68
Section 6.1 Insurance.............................................................. 68
Section 6.2 Casualty............................................................... 73
Section 6.3 Condemnation........................................................... 73
Section 6.4 Restoration............................................................ 74
VII. RESERVE FUNDS................................................................................ 78
Section 7.1 Required Repair Funds.................................................. 78
7.1.1 Deposits................................................................... 78
7.1.2 Release of Required Repair Funds........................................... 78
Section 7.2 Tax and Insurance Escrow Fund.......................................... 79
Section 7.3 Replacements and Replacement Reserve................................... 80
7.3.1 Replacement Reserve Fund................................................... 80
7.3.2 Disbursements from Replacement Reserve Account............................. 80
7.3.3 Performance of Replacements................................................ 81
7.3.4 Failure to Make Replacements............................................... 83
7.3.5 Balance in the Replacement Reserve Account................................. 83
Section 7.4 Intentionally Deleted.................................................. 84
Section 7.5 Intentionally Deleted.................................................. 84
Section 7.6 Intentionally Deleted.................................................. 84
Section 7.7 Reserve Funds, Generally............................................... 84
VIII.DEFAULTS..................................................................................... 85
Section 8.1 Event of Default....................................................... 85
Section 8.2 Remedies............................................................... 88
Section 8.3 Remedies Cumulative; Waivers........................................... 89
IX. SPECIAL PROVISIONS........................................................................... 90
Section 9.1 Sale of Notes and Securitization....................................... 90
Section 9.2 Securitization Indemnification......................................... 91
Section 9.3 Servicer............................................................... 93
Section 9.4 Exculpation............................................................ 94
X. MISCELLANEOUS................................................................................ 95
Section 10.1 Survival............................................................... 95
Section 10.2 Lender's Discretion.................................................... 96
Section 10.3 Governing Law.......................................................... 96
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Section 10.4 Modification, Waiver in Writing........................................ 97
Section 10.5 Delay Not a Waiver..................................................... 97
Section 10.6 Notices................................................................ 97
Section 10.7 Trial by Jury.......................................................... 98
Section 10.8 Headings............................................................... 99
Section 10.9 Severability........................................................... 99
Section 10.10 Preferences............................................................ 99
Section 10.11 Waiver of Notice....................................................... 99
Section 10.12 Remedies of Borrower................................................... 99
Section 10.13 Expenses; Indemnity.................................................... 100
Section 10.14 Schedules and Exhibits Incorporated.................................... 101
Section 10.15 Offsets, Counterclaims and Defenses.................................... 101
Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries.......... 101
Section 10.17 Publicity.............................................................. 102
Section 10.18 Waiver of Marshalling of Assets........................................ 102
Section 10.19 Waiver of Counterclaim................................................. 103
Section 10.20 Conflict; Construction of Documents; Reliance.......................... 103
Section 10.21 Brokers and Financial Advisors......................................... 103
Section 10.22 Prior Agreements....................................................... 103
Section 10.23 Counterparts........................................................... 103
Section 10.24 Liability.............................................................. 104
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of ______, 2004 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
"Agreement"), between JPMORGAN CHASE BANK, a New York banking corporation,
having an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Lender") and
___________________, a Delaware ______________, having its principal place of
business at c/o FelCor Lodging Trust Incorporated, ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined)
from Lender; and
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 (as
hereinafter defined).
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:
"Account Collateral" shall mean: (i) the Accounts, and all Cash,
checks, drafts, certificates and instruments, if any, from time to time
deposited or held in the Accounts from time to time; (ii) any and all amounts
invested in Permitted Investments; (iii) all interest, dividends, Cash,
instruments and other property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any or all of the
foregoing; and (iv) to the extent not covered by clauses (i) - (iii) above, all
"proceeds" (as defined under the UCC) of any or all of the foregoing.
"Accounts" shall mean, collectively, the Property Account, the Tax
Account, the Insurance Premium Account, the Required Repair Account, the
Replacement Reserve Account, the Debt Service Account, and the Lockbox Account.
"Accounts Receivable" shall have the meaning set forth in Article 1 of
the Security Instrument.
"Act" shall have the meaning set forth in Section 4.1.35(cc) hereof.
"Adjusted Net Operating Income" means the amount obtained by
subtracting Adjusted Operating Expenses from Gross Income from Operations.
"Adjusted Operating Expenses" shall mean the total of all expenditures,
computed in accordance with GAAP, of whatever kind relating to the operation,
maintenance and management of the Property that are incurred on a regular
monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance premiums, license fees, property
taxes and assessments, advertising expenses, management fees, payroll and
related taxes, computer processing charges, operational equipment or other lease
payments as approved by Lender, and other similar costs, including contributions
to the Replacement Reserve Fund, but excluding depreciation, Debt Service,
Capital Expenditures and contributions to the Reserve Funds (other than the
Replacement Reserve Fund).
"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.
"Affiliated Manager" shall mean any property manager which is an
Affiliate of Borrower, any Operating Lessee SPE Entity, Principal, or any
Guarantor or Indemnitor, or in which Borrower, any Operating Lessee SPE Entity,
Principal, or any Guarantor or Indemnitor has, directly or indirectly, any
legal, beneficial or economic equity interest.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Annual Budget" shall mean the operating budget, including all planned
capital expenditures, for the Property prepared by Manager and approved by
Borrower for the applicable Fiscal Year or other period.
"Applicable Laws" shall mean all existing and future U.S. federal,
state and local laws, orders, ordinances, governmental rules and regulations and
court orders.
"Applicable Interest Rate" shall mean 6.7430%.
"Appraisal" shall mean an appraisal prepared in accordance with the
requirements of FIRREA, prepared by an independent third party appraiser holding
an MAI designation, who is State licensed or State certified if required under
the laws of the State where the Property is located, who meets the requirements
of FIRREA and who is otherwise satisfactory to Lender.
"Approved Annual Budget" shall have the meaning set forth in Section
5.1.10(d) hereof.
"Assignment of Leases" shall mean that certain first priority
Assignment of Leases and Rents, dated as of the date hereof, from Borrower and
Operating Lessee, as assignor, to Lender, as assignee, assigning to Lender all
of Borrower's and Operating Lessee's interest in and to the Leases and Rents of
the Property as security for the Loan, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"Assignment of Management Agreement" shall mean that certain
Conditional Assignment of Management Agreement dated the date hereof among
Lender, Borrower,
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Operating Lessee and Manager, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Award" shall mean any compensation paid by any Governmental Authority
in connection with a Condemnation in respect of all or any part of the Property.
"Bankruptcy Code" shall mean Title 11 U.S.C. Section 101 et seq., and
the regulations adopted and promulgated pursuant thereto (as the same may be
amended from time to time).
"Basic Carrying Costs" shall mean the sum of the following costs
associated with the Property for the relevant Fiscal Year or payment period: (i)
Taxes and (ii) Insurance Premiums.
"Borrower" shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and assigns.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
"Business Party" shall have the meaning set forth in Section 4.1.35(aa)
hereof.
"Capital Expenditures" shall mean, for any period, the amount expended
for items capitalized under GAAP (including, but not limited to, expenditures
for building improvements or major repairs, leasing commissions and tenant
improvements).
"Cash" shall mean coin or currency of the United States of America or
immediately available federal funds, including such funds delivered by wire
transfer.
"Casualty" shall have the meaning set forth in Section 6.2 hereof.
"Casualty Consultant" shall have the meaning set forth in Section
6.4(b)(iii) hereof.
"Casualty Retainage" shall have the meaning set forth in Section
6.4(b)(iv) hereof.
"Closing Date" shall mean _____, 2004.
"Code" shall mean the Internal Revenue Code of 1986, as amended, as it
may be further amended from time to time, and any successor statutes thereto,
and all applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"Collateral" shall mean the Property, the Accounts, the Reserve Funds,
the Personal Property, the Rents, the Account Collateral, and all other real or
personal property of Borrower or any Guarantor that is at any time pledged,
mortgaged or otherwise given as security to Lender for the payment of the Debt
under the Security Instrument, this Agreement or any other Loan Document.
"Condemnation" shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
the Property, or any interest therein or right accruing
3
thereto, including any right of access thereto or any change of grade affecting
the Property or any part thereof.
"Condemnation Proceeds" shall have the meaning set forth in Section
6.4(b) hereof.
"Control" (and the correlative terms "controlled by" and "controlling")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of the business and affairs of
the entity in question by reason of the ownership of beneficial interests, by
contract or otherwise.
"Creditors Rights Laws" shall mean with respect to any Person, any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, conservatorship, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to its debts or debtors.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums due to Lender in respect of the Loan under the
Note, this Agreement, the Security Instrument or any other Loan Document,
including, without limitation, all Reserve Fund Deposits.
"Debt Service" shall mean, with respect to any particular period of
time, interest and principal payments due under the Note for such period.
"Debt Service Account" shall have the meaning set forth in Section
3.1(b)(iii) hereof.
"Debt Service Coverage Ratio" shall mean a ratio in which:
(a) the numerator is the Net Operating Income for the most recently
available 12 full calendar month period preceding the date of calculation as set
forth in the financial statements required hereunder, without deduction for (i)
actual management fees incurred in connection with the operation of the
Property, (ii) actual franchise fees incurred in connection with the operation
of the Property, or (iii) amounts paid to the Reserve Funds, less (A) management
fees equal to the greater of (1) assumed management fees of four percent (4%) of
Gross Income from Operations or (2) the actual management fees incurred, (B) the
actual franchise fees incurred and (C) the greater of (1) actual Replacement
Reserve Fund contributions equal to 4% of Gross Income from Operations and (2)
contributions for Replacements required pursuant to the Management Agreement and
the Franchise Agreement; and
(b) the denominator is all the aggregate interest and principal
payments that would be due and payable for such 12 full calendar month period on
the Loan assuming a principal and interest constant equal to 10.00%.
"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 constitute 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 Legal Rate, or (b) five percent (5%)
above the Applicable Interest Rate.
4
"Default Trigger" shall have the meaning set forth in the definition of
"Triggering Event" in Section 1.1 hereof.
"Defeasance Collateral" shall have the meaning set forth in Section
2.4.1(b) hereof.
"Defeasance Date" shall have the meaning set forth in Section
2.4.1(a)(i) hereof.
"Defeasance Deposit" shall mean an amount equal to the remaining
principal amount of the Note, the Yield Maintenance Premium, any costs and
expenses incurred or to be incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments and any revenue, documentary
stamp or intangible taxes or any other tax or charge due in connection with the
transfer of the Note or otherwise required to accomplish the agreements of
Section 2.4 hereof.
"Defeasance Event" shall have the meaning set forth in Section 2.4.1(a)
hereof.
"Disclosure Document" shall have the meaning set forth in Section
9.2(a) hereof.
"Discount Rate" shall mean the rate which, when compounded monthly, is
equivalent to the Treasury Rate, when compounded semi-annually.
"DSCR Trigger" shall have the meaning set forth in the definition of
"Triggering Event" in Section 1.1 hereof.
"Eligible Account" shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or State-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (b)
a segregated trust account or accounts maintained with a federal or State
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a State chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. Section
9.10(b), having in either case a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal and State
authority. An Eligible Account will not be evidenced by a certificate of
deposit, passbook or other instrument.
"Eligible Institution" shall mean a depository institution or trust
company, insured by the Federal Deposit Insurance Corporation, (a) the short
term unsecured debt obligations or commercial paper of which are rated at least
A-1 by S&P, P-1 by Moody's and F-1 by Fitch in the case of accounts in which
funds are held for thirty (30) days or less, or (b) the long term unsecured debt
obligations of which are rated at least AA by Fitch and S&P and Aa2 by Moody's
in the case of accounts in which funds are held for more than thirty (30) days.
"Environmental Indemnity" shall mean that certain Environmental
Indemnity Agreement executed by Borrower and Indemnitor in connection with the
Loan for the benefit of Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
5
"Environmental Law" shall mean any federal, State and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, that, at any time,
apply to Borrower and/or Indemnitor or the Property and relate to Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act and the Resource Conservation and
Recovery Act.
"Environmental Liens" shall have the meaning set forth in Section
5.1.19(a) hereof.
"Environmental Reports" shall have the meaning set forth in Section
4.1.39 hereof.
"Equipment" shall have the meaning set forth in Section 5.2.10(e)
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"Event of Default" shall have the meaning set forth in Section 8.1(a)
hereof.
"Exchange Act" shall have the meaning set forth in Section 9.2(a)
hereof.
"Exchange Act Filing" shall have the meaning set forth in Section
9.2(a) hereof.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as the same may be amended from time to time.
"Fiscal Year" shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during the term of the Loan.
"Fitch" shall mean Fitch, Inc.
"Flood Insurance Act" shall have the meaning set forth in Section
6.1(a)(vii) hereof.
"Foreign Taxes" shall mean any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority.
"Franchise Agreement" shall mean that certain franchise agreement more
specifically identified on Schedule 1.1(I) attached hereto or, if the context
requires, the Replacement Franchise Agreement executed in accordance with the
terms and provisions of this Agreement.
"Franchisor" shall mean the franchisor with respect to the Franchise
Agreement, as same is identified on Schedule 1.1(I) attached hereto.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
"Governmental Authority" shall mean any court, board, agency,
commission, office, central bank or other authority of any nature whatsoever for
any governmental unit (federal, State, county, district, municipal, city,
country or otherwise) or quasi-governmental unit whether now or hereafter in
existence.
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"Gross Income from Operations" shall mean all income, room revenues,
food and beverage revenue, telephone revenue, computed in accordance with GAAP
derived from the ownership and operation of the Property from whatever source,
including, but not limited to, the Rents, utility charges, service fees or
charges, license fees, parking fees, rent concessions or credits, and other
required pass-throughs, but excluding sales, use and occupancy or other taxes on
receipts required to be accounted for by Borrower or Operating Lessee to any
Governmental Authority, interest on the Reserve Funds, interest on credit
accounts, refunds and uncollectible accounts, sales of furniture, fixtures and
equipment, Insurance Proceeds (other than business interruption or other loss of
income insurance), Awards, unforfeited security deposits, utility and other
similar deposits, escalations, forfeited security deposits and any disbursements
to Borrower from the Reserve Funds. Gross income shall not be diminished as a
result of the Security Instrument or the creation of any intervening estate or
interest in a Property or any part thereof.
"Guarantor" shall mean FelCor Lodging Limited Partnership and any other
entity guaranteeing any payment or performance obligation of Borrower.
"Guaranty" shall mean that certain Guaranty of Recourse Obligations of
Borrower, dated as of the date hereof, from Guarantor to Lender, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
"Hazardous Materials" shall mean petroleum and petroleum products and
compounds containing them, including gasoline, diesel fuel and oil; explosives;
flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs")
and compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any
substance; toxic mold; any substance the presence of which on the Property is
prohibited by any federal, State or local authority; any substance that requires
special handling and/or disposal; and any other material or substance now or in
the future defined as a "hazardous substance," "hazardous material," "hazardous
waste," "toxic substance," "toxic pollutant," "contaminant," "pollutant" or
other words of similar import within the meaning of any Environmental Law.
"Hilton" shall mean Hilton Hotels Corporation or any Affiliate thereof.
"Improvements" shall have the meaning set forth in Article 1 of the
Security Instrument.
"Indebtedness" of a Person, at a particular date, means the sum
(without duplication) at such date of (a) all indebtedness or liability of such
Person (including, without limitation, amounts for borrowed money); (b)
obligations evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of credit; (e) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds, to invest in any Person or entity, or
otherwise to assure a creditor against loss; and (f) obligations secured by any
Liens, whether or not the obligations have been assumed.
"Indemnified Liabilities" shall have the meaning set forth in Section
10.13(b) hereof.
7
"Indemnified Parties" shall mean Lender, any Affiliate of Lender who is
or will have been involved in the origination of the Loan, any Person who is or
will have been involved in the servicing of the Loan, any Person in whose name
the encumbrance created by the Security Instrument is or will have been
recorded, Persons who may hold or acquire or will have held a full or partial
interest in the Loan, the holders of any Securities, as well as custodians,
trustees and other fiduciaries who hold or have held a full or partial interest
in the Loan for the benefit of third parties) as well as the respective
directors, officers, shareholders, partners, members, employees, agents,
servants, representatives, contractors, subcontractors, Affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including but not limited to any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan
or the Property, whether during the term of the Loan or as a part of or
following a foreclosure of the Loan and including, but not limited to, any
successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).
"Indemnitor" shall mean FelCor Lodging Limited Partnership.
"Independent Director" shall have the meaning set forth in Section
4.1.35(aa) hereof.
"Initial Replacement Reserve Monthly Deposit" shall mean $30,204.64.
"Initial Tier" shall have the meaning set forth in Section 6.1(b)
hereof.
"Initial Tier Insurer" shall have the meaning set forth in Section
6.1(b) hereof.
"Insolvency Opinion" shall mean, that certain bankruptcy
non-consolidation opinion letter delivered by counsel for Borrower in connection
with the Loan and approved by Lender or the Rating Agencies, as the case may be.
"Insurance Premium Account" shall have the meaning set forth in Section
3.1(b)(ii) hereof.
"Insurance Premiums" shall have the meaning set forth in Section 6.1(b)
hereof.
"Insurance Proceeds" shall have the meaning set forth in Section 6.4(b)
hereof.
"Investment Grade" shall mean a rating of BBB- or its equivalent (or
higher) by the Rating Agencies.
"Investor" shall have the meaning set forth in Section 5.1.10(g)
hereof.
"JPMorgan Chase" shall have the meaning set forth in Section 9.2(b)
hereof.
"JPMorgan Chase Group" shall have the meaning set forth in Section
9.2(b) hereof.
"Leases" shall have the meaning set forth in Article 1 of the Security
Instrument, including, without limitation, the Operating Lease.
8
"Legal Requirements" shall mean all federal, State, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions of Governmental Authorities affecting
Borrower, the Property or any part thereof, or the zoning, construction, use,
alteration, occupancy or operation thereof, or any part thereof, whether now or
hereafter enacted and in force, and all material permits, licenses and
authorizations and regulations relating thereto, and all material covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Borrower, at any time in force affecting the Property or
any part thereof, including, without limitation, any which may (a) require
repairs, modifications or alterations in or to the Property or any part thereof,
or (b) in any way limit the use and enjoyment thereof.
"Lender" shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and assigns.
"Liabilities" shall have the meaning set forth in Section 9.2(b)
hereof.
"Licenses" shall have the meaning set forth in Section 4.1.21 hereof.
"Lien" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting Borrower, Operating Lessee, the Property, any
portion thereof or any interest therein, including, without limitation, 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.
"LLC Agreement" shall have the meaning set forth in Section 4.1.35(cc)
hereof.
"Loan" shall mean the loan made by Lender to Borrower pursuant to this
Agreement and the other Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
the Security Instrument, the Assignment of Leases, the Environmental Indemnity,
the Assignment of Management Agreement, the Guaranty, the Operating Lease
Subordination Agreement and all other documents executed and/or delivered in
connection with the Loan.
"Lockbox Account" shall have the meaning set forth in Section 3.1(b)
hereof.
"Lockbox Bank" shall mean any Eligible Institution selected by Lender.
"Lockout Period" shall have the meaning set forth in Section 2.3.1
hereof.
"Losses" shall mean any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, fines, penalties, charges, fees,
expenses, judgments, awards, amounts paid in settlement of whatever kind or
nature (including but not limited to attorneys' fees and other costs of
defense).
"Major Lease" shall mean (i) the Operating Lease, (ii) any Lease for
sit-down restaurant facilities at the Property, (iii) any Lease which together
with all other Leases to the same tenant
9
and to all Affiliates of such tenant, (A) provides for ten percent (10%) or more
of the total gross income for the Property, (B) covers five percent (5%) or more
of the total space at the Property, in the aggregate, (C) provides for a lease
term of more than ten (10) years including options to renew or (D) is with an
Affiliate of Borrower and (iv) any instrument guaranteeing or providing credit
support for any Major Lease.
"Management Agreement" shall mean the management agreement entered into
by and between Borrower or Operating Lessee and Manager, pursuant to which the
Manager is to provide management and other services with respect to the
Property, or, if the context requires, the Replacement Management Agreement
executed in accordance with the terms and provisions of this Agreement.
"Manager" shall mean ______________., a ______________, or, if the
context requires, a Qualified Manager who is managing the Property in accordance
with the terms and provisions of this Agreement.
"Manager Account" shall mean such account as Manager may from time to
time designate by written notice to Lender.
"Maturity Date" shall mean June 1, 2014, or such other date on which
the final payment of the principal of the Note becomes due and payable as
therein or herein provided, whether at such stated maturity date, by declaration
of acceleration, or otherwise.
"Maximum Legal Rate" shall mean the maximum nonusurious interest rate,
if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or in the other Loan Documents, under the laws of such State
or States whose laws are held by any court of competent jurisdiction to govern
the interest rate provisions of the Loan.
"Member" shall have the meaning set forth in Section 4.1.35(cc) hereof.
"Monthly Debt Service Payment Amount" shall mean a constant monthly
payment of principal and interest equal to $147,539.54.
"Monthly Insurance Premium Deposit" shall have the meaning set forth in
Section 7.2 hereof.
"Monthly Operating Expense Amount" shall mean an amount equal to the
Operating Expenses (less Taxes and incentive management fees) actually incurred
during the then current calendar month by Manager on behalf of Borrower and
which such amount does not materially deviate from the corresponding monthly
amount for Operating Expenses (less Taxes and incentive management fees) set
forth in the Approved Annual Budget (i.e., to the extent by more than fifteen
(15%) percent of the quarterly amount for Operating Expenses (less Taxes and
incentive management fees) set forth in the Approved Annual Budget for the
calendar quarter in which such calendar month occurs).
"Monthly Tax Deposit" shall have the meaning set forth in Section 7.2
hereof.
10
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"Net Cash Flow" for any period shall mean the amount obtained by
subtracting Operating Expenses and Capital Expenditures for such period from
Gross Income from Operations for such period.
"Net Operating Income" means the amount obtained by subtracting
Operating Expenses from Gross Income from Operations.
"Net Proceeds" shall have the meaning set forth in Section 6.4(b)
hereof.
"Net Proceeds Deficiency" shall have the meaning set forth in Section
6.4(b)(vi) hereof.
"Note" shall mean that certain promissory note of even date herewith in
the original principal amount of TWENTY-ONE MILLION THREE HUNDRED SIXTY-EIGHT
THOUSAND AND 00/100 DOLLARS ($21,368,000.00), made by Borrower in favor of
Lender, as the same may be amended, restated, replaced, extended, renewed,
supplemented, severed, split, or otherwise modified from time to time.
"Obligations" shall mean Borrower's obligation to pay the Debt and
perform its obligations under the Note, this Agreement and the other Loan
Documents.
"Officer's Certificate" shall mean a certificate delivered to Lender by
Borrower which is signed by a Responsible Officer of Borrower.
"Operating Expenses" shall mean the total of all expenditures, computed
in accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Property that are incurred on a regular monthly or other
periodic basis, including without limitation, utilities, ordinary repairs and
maintenance, insurance premiums, license fees, property taxes and assessments,
advertising expenses, management fees, franchise fees, payroll and related
taxes, computer processing charges, operational equipment or other lease
payments as approved by Lender, and other similar costs, but excluding
depreciation, Debt Service, Capital Expenditures and contributions to the
Reserve Funds.
"Operating Lease" shall mean that certain Operating Lease described on
Schedule 1.1(III) attached hereto.
"Operating Lease Subordination Agreement" shall mean that certain
Operating Lease Subordination Agreement with respect to the Property.
"Operating Lessee" shall mean ____________________, a Delaware _____.
"Operating Lessee Principal" shall have the meaning set forth in the
Operating Lease Subordination Agreement.
"Operating Lessee SPE Entities" shall mean individually and
collectively, Operating Lessee and Operating Lessee Principal.
11
"Operating Lessee Documents" shall mean the Security Instrument, the
Assignment of Leases, the Environmental Indemnity, the Assignment of Management
Agreement, the Operating Lease Subordination Agreement and all other documents
executed and/or delivered by Operating Lessee in connection with the Loan.
"Other Charges" shall mean all personal property taxes, maintenance
charges, impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.
"Payment Date" shall mean the first (1st) day of each month, or if such
day is not a Business Day, the immediately succeeding Business Day.
Notwithstanding the foregoing, Lender shall have the one (1) time right to
change the Payment Date by giving at least thirty (30) days prior written notice
of such change to Borrower.
"Permitted Defeasance Date" shall mean the date that is the earlier of
(a) three (3) years from the Closing Date or (b) two (2) years from the "startup
day" within the meaning of Section 860G(a)(9) of the Code of the REMIC Trust.
"Permitted Encumbrances" shall mean (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 the Property or any
part thereof, (c) Liens, if any, for Taxes imposed by any Governmental Authority
not yet delinquent, (d) Liens securing Permitted FF&E Financing. and (e) such
other title and survey exceptions as Lender has approved or may approve in
writing in Lender's sole discretion.
"Permitted FF&E Financing" shall have the meaning set forth in Section
5.2.10 hereof.
"Permitted Investments" shall mean any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
including those issued by Servicer, the trustee under any Securitization or any
of their respective Affiliates, payable on demand or having a maturity date not
later than the Business Day immediately prior to the date it is anticipated such
funds will be needed to meet Borrower's obligations hereunder and meeting one of
the appropriate standards set forth below:
(i) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States or any agency
or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America including,
without limitation, obligations of: the U.S. Treasury (all direct or
fully guaranteed obligations), the Farmers Home Administration
(certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime
Administration (guaranteed Title XI financing), the Small Business
Administration (guaranteed participation certificates and guaranteed
pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan
Area Transit Authority (guaranteed transit bonds); provided, however,
that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by S&P,
12
must not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations),
the Federal National Mortgage Association (debt obligations), the
Financing Corp. (debt obligations), and the Resolution Funding Corp.
(debt obligations); provided, however, that the investments described
in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must
not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short term
obligations of which at all times are rated in the highest short term
rating category by each Rating Agency (or, if not rated by all Rating
Agencies, rated by at least one Rating Agency in the highest short term
rating category and otherwise acceptable to each other Rating Agency,
as confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the
Securities); provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(v) fully Federal Deposit Insurance Corporation-insured demand
and time deposits in, or certificates of deposit of, or bankers'
acceptances with maturities of not more than 365 days and issued by,
any bank or trust company, savings and loan association or savings
bank, the short term obligations of which at all times are rated in the
highest short term rating category by each Rating Agency (or, if not
rated by all Rating Agencies, rated by at least one Rating Agency in
the highest short term rating category and otherwise acceptable to each
other Rating Agency, as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification or
withdrawal of the initial, or, if higher, then current ratings assigned
to the Securities); provided, however, that the investments described
in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must
not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single
13
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(vi) debt obligations with maturities of not more than 365
days and at all times rated by each Rating Agency (or, if not rated by
all Rating Agencies, rated by at least one Rating Agency and otherwise
acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities) in its highest long-term unsecured
rating category; provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of principal due
at maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(vii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than one year after the date of
issuance thereof) with maturities of not more than 365 days and that at
all times is rated by each Rating Agency (or, if not rated by all
Rating Agencies, rated by at least one Rating Agency and otherwise
acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities) in its highest short-term unsecured
debt rating; provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not have
an "r" highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;
(viii) units of taxable money market funds, with maturities of
not more than 365 days and which funds are regulated investment
companies, seek to maintain a constant net asset value per share and
invest solely in obligations backed by the full faith and credit of the
United States, which funds have the highest rating available from each
Rating Agency (or, if not rated by all Rating Agencies, rated by at
least one Rating Agency and otherwise acceptable to each other Rating
Agency, as confirmed in writing that such investment would not, in and
of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the
Securities) for money market funds; and
(ix) any other security, obligation or investment which has
been approved as a Permitted Investment in writing by (a) Lender and
(b) each Rating Agency, as evidenced by a written confirmation that the
designation of such security, obligation or investment as a Permitted
Investment will not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current
ratings assigned to the Securities by such Rating Agency;
14
provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of 120% of the yield to maturity at par
of such underlying investment.
"Person" shall mean any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association,
any federal, State, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
"Personal Property" shall have the meaning set forth in Article 1 of
the Security Instrument.
"Physical Conditions Report" shall mean a structural engineering report
prepared by a company satisfactory to Lender regarding the physical condition of
the Property, satisfactory in form and substance to Lender in its sole
discretion, which report shall, among other things, (a) confirm that the
Property and its use complies, in all material respects, with all applicable
Legal Requirements (including, without limitation, zoning, subdivision and
building laws) and (b) include a copy of a final certificate of occupancy with
respect to all Improvements on the Property.
"Plan" shall mean an employee benefit plan (as defined in section 3(3)
of ERISA) whether or not subject to ERISA or a plan or other arrangement within
the meaning of section 4975 of the Code.
"Plan Assets" shall mean assets of a Plan within the meaning of section
29 C.F.R. section 2510.3-101 or similar law.
"Policies" shall have the meaning set forth in Section 6.1(b) hereof.
"Principal" shall have the meaning set forth in Section 4.1.35 hereof,
together with its successors and assigns.
"Prohibited Person" shall mean any Person:
(a) listed in the Annex to, or otherwise subject to the
provisions of, the Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(the "Executive Order");
(b) that is owned or controlled by, or acting for or on behalf
of, any person or entity that is listed to the Annex to, or is otherwise subject
to the provisions of, the Executive Order;
(c) with whom Lender is prohibited from dealing or otherwise
engaging in any transaction by any terrorism or money laundering law, including
the Executive Order;
15
(d) who commits, threatens or conspires to commit or supports
"terrorism" as defined in the Executive Order;
(e) that is named as a "specially designated national and
blocked person" on the most current list published by the U.S. Treasury
Department Office of Foreign Assets Control at its official website,
▇▇▇▇://▇▇▇.▇▇▇▇▇.▇▇▇.▇▇▇▇/▇▇▇▇▇▇.▇▇▇ or at any replacement website or other
replacement official publication of such list; or
(f) who is an Affiliate of or affiliated with a Person listed
above.
"Property" shall mean each parcel of real property, the Improvements
thereon and all Personal Property owned by Borrower, Operating Lessee and
encumbered by the Security Instrument, together with all rights pertaining to
the Property and Improvements, as more particularly described in Article 1 of
the Security Instrument and referred to therein as the "Property".
"Property Account" shall have the meaning set forth in Section 3.1(a)
hereof.
"Property Account Agreement" shall have the meaning set forth in
Section 3.1(a) hereof.
"Property Account Bank" shall mean ▇▇▇▇▇ Fargo Bank, N.A. and First
Tennessee Bank National Association, provided that each such bank remains an
Eligible Institution, and any successor Eligible Institution or other Eligible
Institution selected by Borrower, subject to Lender's approval.
"Provided Information" shall have the meaning set forth in Section
9.1(a) hereof.
"Qualified Insurer" shall have the meaning set forth in Section 6.1(b)
hereof.
"Qualified Manager" shall mean a reputable and experienced professional
management organization (a) which manages, together with its Affiliates, one
hundred fifty (150) properties of a type, quality and size similar to the
Property, totaling in the aggregate no less than 30,000 guest rooms and (b)
prior to whose employment as manager of the Property (i) prior to the occurrence
of a Securitization, such employment shall have been approved by Lender, which
approval shall not be unreasonably withheld or delayed and (ii) after the
occurrence of a Securitization, Lender shall have received written confirmation
from the Rating Agencies that the employment of such manager will not result in
a downgrade, withdrawal or qualification of the initial, or if higher, then
current ratings of the Securities.
"Qualified Transferee" shall mean either:
(A) (i) a pension fund, pension trust or pension account that (a) has
total real estate assets of at least $1 Billion and (b) is managed by a Person
who controls at least $1 Billion of real estate equity assets; or
(ii) a pension fund advisor who (a) immediately prior to such transfer,
controls at least $1 Billion of real estate equity assets and (b) is acting on
behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (i) of this definition; or
16
(iii) an insurance company which is subject to supervision by the
insurance commissioner, or a similar official or agency, of a state or territory
of the United States (including the District of Columbia) (a) with a net worth,
as of a date no more than six (6) months prior to the date of the transfer, of
at least $500 Million and (b) who, immediately prior to such transfer, controls
real estate equity assets of at least $1 Billion; or
(iv) a corporation organized under the banking laws of the United
States or any state or territory of the United States (including the District of
Columbia) (a) with a combined capital and surplus of at least $500 Million and
(b) who, immediately prior to such transfer, controls real estate equity assets
of at least $1 Billion; or
(v) any Person (a) with a long-term unsecured debt rating from the
Rating Agencies of at least Investment Grade or (b) who (i) is, or,
simultaneously with the applicable transfer enters into a Management Agreement
with, a Qualified Manager, (ii) has a net worth, as of a date no more than six
(6) months prior to the date of such transfer, of at least $500 Million and
(iii) immediately prior to such transfer, controls real estate equity assets of
at least $1 Billion.
or
(B) any other Person (a) approved by Lender or, (b) if a Securitization
shall have occurred, regarding which Lender shall have received written
confirmation by the Rating Agencies that the transfer to such Person will not,
in and of itself, cause a downgrade, withdrawal or qualification of the ratings
then assigned to the Securities.
"Quality Assurance Reports" shall mean any quality assurance reports of
inspection or compliance from a Franchisor under the Franchise Agreement.
"Rating Agencies" shall mean each of S&P, ▇▇▇▇▇'▇, and Fitch, and any
other nationally-recognized statistical rating agency which has been approved by
Lender, to the extent that such rating agency has rated the Securities.
"Release" of any Hazardous Materials shall mean any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing or other movement of Hazardous
Materials.
"REMIC Trust" shall mean a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code that holds the Note.
"Renewal Lease" shall have the meaning set forth in Section 5.1.17(a)
hereof.
"Rents" shall have the meaning set forth in Article 1 of the Security
Instrument.
"Replacement Franchise Agreement" shall mean, collectively, (a) either
(i) a franchise agreement with Franchisor substantially in the same form and
substance as the Franchise Agreement, or (ii) a franchise agreement with
Franchisor, which franchise agreement shall be acceptable to Lender in form and
substance, provided, with respect to this subclause (ii), Lender, at its option,
may require that Borrower obtain confirmation from the applicable Rating
Agencies that such franchise agreement will not result in a downgrade,
withdrawal or qualification of the
17
initial, or if higher, then current rating of the Securities or any class
thereof; and (b) a franchisor estoppel and recognition agreement or other
"comfort letter" substantially in the form delivered to Lender on the date
hereof (or such other form acceptable to Lender), executed and delivered to
Lender by Operating Lessee and Franchisor at Borrower's expense, provided, with
respect to this clause (b), if such franchisor estoppel and recognition
agreement is in a form that substantially differs from the form delivered to
Lender on the date hereof, Lender, at its option, may require that Borrower
obtain confirmation from the applicable Rating Agencies that such franchisor
estoppel and recognition agreement will not result in a downgrade, withdrawal or
qualification of the initial, or if higher, then current rating of the
Securities or any class thereof; provided, however, with respect to any expiring
Franchise Agreement, Borrower shall not be required to obtain Lender's consent
or a confirmation from the Rating Agencies in the event that the Franchise
Agreement in effect on the date hereof is extended on the same or more favorable
terms to Borrower and/or Operating Lessee, as applicable, prior to the
expiration thereof.
"Replacement Management Agreement" shall mean, collectively, (a) either
(i) a management agreement with a Qualified Manager substantially in the same
form and substance as the Management Agreement, or (ii) a management agreement
with a Qualified Manager, which management agreement shall be acceptable to
Lender in form and substance, provided, with respect to this subclause (ii),
Lender, at its option, may require that Borrower obtain confirmation from the
applicable Rating Agencies that such management agreement will not result in a
downgrade, withdrawal or qualification of the initial, or if higher, then
current rating of the Securities or any class thereof; and (b) a conditional
assignment of management agreement substantially in the form of the Assignment
of Management Agreement (or such other form acceptable to Lender), executed and
delivered to Lender by Operating Lessee and such Qualified Manager at Borrower's
expense, provided, with respect to this clause (b), if such conditional
assignment of management agreement is in a form that substantially differs from
the form delivered to Lender on the date hereof, Lender, at its option, may
require that Borrower obtain confirmation from the applicable Rating Agencies
that such conditional assignment of management agreement will not result in a
downgrade, withdrawal or qualification of the initial, or if higher, then
current rating of the Securities or any class thereof; provided, however, with
respect to any expiring Management Agreement, Borrower shall not be required to
obtain Lender's consent or a confirmation from the Rating Agencies in the event
that the Management Agreement in effect on the date hereof is extended on the
same or more favorable terms to Borrower and/or Operating Lessee, as applicable,
prior to the expiration thereof.
"Replacement Reserve Account" shall have the meaning set forth in
Section 3.1(b)(iv) hereof.
"Replacement Reserve Fund" shall have the meaning set forth in Section
7.3.1 hereof.
"Replacement Reserve Monthly Deposit" shall mean the greater of (i)
such amounts as are required under the Franchise Agreement to be reserved for
furniture, fixtures and equipment, (ii) such amounts as are required under the
Management Agreement to be reserved for furniture, fixtures and equipment and
(iii)(1) until the end of the calendar year in which the Closing Date occurs,
the amount of the Initial Replacement Reserve Monthly Deposit, and (2)
thereafter, the quotient obtained by dividing (A) the aggregate Gross Income
from Operations for the Property for the preceding calendar year (as reflected
in Borrower's annual operating statements as
18
approved and accepted by Lender) multiplied by four percent (4%) by (B) twelve
(12). The Replacement Reserve Monthly Deposit shall be adjusted annually and
shall be effective for the Replacement Reserve Monthly Deposit due on the
Payment Date first occurring after the appropriate financial statements have
been delivered to Lender as required herein.
"Replacements" shall have the meaning set forth in Section 7.3.1
hereof.
"Required Repair Account" shall have the meaning set forth in Section
7.1.1 hereof.
"Required Repair Fund" shall have the meaning set forth in Section
7.1.1 hereof.
"Required Repairs" shall have the meaning set forth in Section 7.1.1
hereof.
"Reserve Fund Deposits" shall mean the amounts to be deposited into the
Reserve Funds for any given month or at any other time as provided in this
Agreement or in the other Loan Documents.
"Reserve Funds" shall mean the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Required Repair Fund or any other escrow or
reserve fund established by the Loan Documents.
"Responsible Officer" means with respect to a Person, the president,
chief financial officer or treasurer of such Person.
"Restoration" shall mean the repair and restoration of the Property
after a Casualty or Condemnation as nearly as possible to the condition the
Property was in immediately prior to such Casualty or Condemnation, with such
alterations as may be approved by Lender.
"Restricted Party" shall mean Borrower, Principal, the Operating Lessee
SPE Entities, or any Affiliated Manager or any shareholder, partner or member or
any direct or indirect legal or beneficial owner of, Borrower, Principal, the
Operating Lessee SPE Entities or any Affiliated Manager; provided, however, that
in no event shall FelCor Lodging Limited Partnership, FelCor Lodging Trust
Incorporated or ______ be deemed a Restricted Party.
"S&P" shall mean Standard & Poor's Ratings Services, a division of
▇▇▇▇▇▇-▇▇▇▇, Inc.
"Sale or Pledge" shall mean a voluntary or involuntary sale,
conveyance, transfer or pledge of a direct or indirect legal or beneficial
interest.
"Scheduled Defeasance Payments" shall have the meaning set forth in
Section 2.4.1(b) hereof.
"Second Tier" shall have the meaning set forth in Section 6.1(b)
hereof.
"Second Tier Insurer" shall have the meaning set forth in Section
6.1(b) hereof.
"Securities" shall have the meaning set forth in Section 9.1 hereof.
"Securitization" shall have the meaning set forth in Section 9.1
hereof.
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"Securitization Closing Date" shall mean the date upon which a
Securitization closes.
"Securities Act" shall have the meaning set forth in Section 9.2(a)
hereof.
"Security Deposits" shall have the meaning set forth in Section
5.1.17(e) hereof.
"Security Instrument" shall mean that certain first priority Mortgage
(or Deed of Trust or Deed to Secure Debt, as applicable) and Security Agreement,
executed and delivered by Borrower and Operating Lessee as security for the Loan
and encumbering the Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"Servicer" shall have the meaning set forth in Section 9.3 hereof.
"Servicing Agreement" shall have the meaning set forth in Section 9.3
hereof.
"Severed Loan Documents" shall have the meaning set forth in Section
8.2(c) hereof.
"Special Member" shall have the meaning set forth in Section 4.1.35(cc)
hereof.
"State" shall mean the State or Commonwealth in which the Property or
any part thereof is located.
"Survey" shall mean a survey prepared by a surveyor licensed in the
State where the Property is located and satisfactory to Lender and the company
or companies issuing the Title Insurance Policy, and containing a certification
of such surveyor satisfactory to Lender.
"Tax Account" shall have the meaning set forth in Section 3.1(b)(i)
hereof.
"Tax and Insurance Escrow Fund" shall have the meaning set forth in
Section 7.2 hereof.
"Taxes" shall mean all real estate taxes, assessments, water rates or
sewer rents, now or hereafter levied or assessed or imposed against the Property
or part thereof.
"Terrorism Exclusion" shall have the meaning set forth in Section
6.1(a)(x) hereof.
"Terrorism Insurance" shall have the meaning set forth in Section
6.1(a)(x) hereof.
"Terrorism Insurance Cap" shall have the meaning set forth in Section
6.1(a)(x) hereof.
"Terrorism Insurance Required Amount" shall have the meaning set forth
in Section 6.1(a)(x) hereof.
"Title Insurance Policy" shall mean an ALTA mortgagee title insurance
policy in a form acceptable to Lender (or, if the Property is located in a State
which does not permit the issuance of such ALTA policy, such form as shall be
permitted in such State and acceptable to Lender) issued with respect to the
Property and insuring the lien of the Security Instrument encumbering the
Property.
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"Transfer" shall have the meaning set forth in Section 5.2.10(a)
hereof.
"Treasury Rate" shall mean the yield calculated by the linear
interpolation of the 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 date
the payment or such proceeds are received, of U.S. Treasury constant maturities
with maturity dates (one longer and one shorter) most nearly approximating the
Maturity Date. (In the event Release H.15 is no longer published, Lender shall
select a comparable publication to determine the Treasury Rate).
"Triggering Event" shall mean the earlier to occur of: (i) an Event of
Default (a "Default Trigger") or (ii) the date the Debt Service Coverage Ratio
for the twelve (12) full calendar months immediately preceding the date of such
calculation is not in excess of 1.10 to 1.00 (a "DSCR Trigger").
"Triggering Event Termination" shall mean the earlier to occur of (i)
if the most recent Triggering Event was a Default Trigger (and provided that no
other Triggering Event has occurred), Borrower's cure of such Event of Default
and Lender's acceptance of such cure, within Lender's sole discretion, prior to
Lender accelerating the Debt and exercising its remedies under the Loan
Documents and (ii) if the most recent Triggering Event was a DSCR Trigger (and
provided that no other Triggering Event has occurred), the Debt Service Coverage
Ratio for the Property, as calculated by Lender in its reasonable discretion,
for the two (2) consecutive calendar quarters immediately preceding such
calculation equals or exceeds 1.10:1.00.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the jurisdiction in which the Property is located or under
the laws of which Borrower was organized, as the context may require.
"Underwriter Group" shall have the meaning set forth in Section 9.2(b)
hereof.
"U.S. Obligations" shall mean direct non-callable obligations of the
United States of America.
"Yield Maintenance Premium" shall mean the amount (if any) which, when
added to the remaining principal amount of the Note, will be sufficient to
purchase U.S. Obligations providing the required Scheduled Defeasance Payments.
Section 1.2 Principles of Construction.
All references to sections and schedules are to sections and schedules
in or to this Agreement unless otherwise specified. All uses of the word
"including" shall mean "including, without limitation" unless the context shall
indicate otherwise. 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.
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II. GENERAL TERMS
Section 2.1 Loan Commitment; Disbursement to Borrower.
2.1.1 Agreement to Lend and Borrow.
Subject to and upon the terms and conditions set forth herein, Lender
hereby agrees to make and Borrower hereby agrees to accept the Loan on the
Closing Date.
2.1.2 Single Disbursement to Borrower.
Borrower may request and receive only one borrowing hereunder in
respect of the Loan and any amount borrowed and repaid hereunder in respect of
the Loan may not be reborrowed.
2.1.3 The Note, Security Instrument and Loan Documents.
The Loan shall be evidenced by the Note and secured by the Security
Instrument, the Assignment of Leases and the other Loan Documents. Borrower and
Operating Lessee hereby authorize Lender to file a financing statement or
statements under the UCC in connection with the Property in the form required to
properly perfect Lender's security interest therein.
2.1.4 Intentionally Deleted.
Section 2.2 Interest; Loan Payments; Late Payment Charge.
2.2.1 Payments.
(a) Interest on the outstanding principal balance of the Loan shall
accrue from the Closing Date to but excluding the Maturity Date at the
Applicable Interest Rate. The Monthly Debt Service Payment Amount shall be paid
on each Payment Date commencing on July 1, 2004 and on each subsequent Payment
Date thereafter up to and including the Maturity Date. Interest on the
outstanding principal amount of the Loan for the period through and including
June 1, 2004 shall be paid by Borrower on the Closing Date.
(b) All payments and other amounts due under the Note, this Agreement
and the other Loan Documents shall be made without any setoff, defense or
irrespective of, and without deduction for, counterclaims.
2.2.2 Interest Calculation.
Interest on the outstanding principal balance of the Loan shall be
calculated by multiplying (a) the actual number of days elapsed in the period
for which the calculation is being made by (b) a daily rate equal to the
Applicable Interest Rate divided by three hundred sixty (360) by (c) the
outstanding principal balance.
2.2.3 Payment on Maturity Date.
Borrower shall pay to Lender on (or, to the extent permitted herein
before) the Maturity Date the outstanding principal balance, all accrued and
unpaid interest thereon, and all other
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amounts due hereunder and under the Note, the Security Instrument and the other
Loan Documents.
2.2.4 Payments after Default.
Upon the occurrence and during the continuance of an Event of Default,
interest on the outstanding principal balance of the Loan and, to the extent
permitted by Applicable Law, overdue interest and other amounts due in respect
of the Loan, shall accrue at the Default Rate, calculated from the date such
payment was due without regard to any grace or cure periods contained herein
Interest at the Default Rate shall be computed from the occurrence of the
default until the actual receipt and collection of the Debt (or that portion
thereof that is then due). To the extent permitted by Applicable Law, interest
at the Default Rate shall be added to the Debt, shall itself accrue interest at
the same rate as the Loan and shall be secured by the Security Instrument. This
paragraph shall not be construed as an agreement or privilege to extend the date
of the payment of the Debt, nor as a waiver of any other right or remedy
accruing to Lender by reason of the occurrence of any Event of Default.
2.2.5 Late Payment Charge.
If any principal, interest or any other sums due under the Loan
Documents (including the sums due on the Maturity Date) is not received by
Lender prior to the seventh (7th) calendar day after the same is due (without
regard to any applicable cure and/or notice period), 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 expenses 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 Security Instrument and the
other Loan Documents to the extent permitted by Applicable Law; provided,
however, Borrower shall have the option, not to be exercised more than three (3)
times during the term of the Loan, to not pay the late payment charge
contemplated by this Section 2.2.5 in the event any Monthly Debt Service Payment
Amount is paid within one (1) Business Day after the date the same was due.
2.2.6 Usury Savings.
This Agreement and the Note are subject to the express condition that
at no time shall Borrower be obligated or required to pay interest on the
principal balance of the Loan at a rate in excess of the Maximum Legal Rate. If,
by the terms of this Agreement or the other Loan Documents, Borrower is at any
time required or obligated to pay interest on the principal balance due
hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest
Rate or the Default Rate, as the case may be, shall be deemed to be immediately
reduced to the Maximum Legal Rate and all previous payments in excess of the
Maximum Legal Rate shall be deemed to have been payments in reduction of
principal and not on account of the interest due hereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance, or detention of the sums
due under the Loan, shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Loan until payment in full so that the rate or amount of interest on account
of the Loan does not exceed the Maximum Legal Rate of
23
interest from time to time in effect and applicable to the Loan for so long as
the Loan is outstanding.
Section 2.3 Prepayments.
2.3.1 Voluntary Prepayments.
Except as otherwise provided herein, Borrower shall not have the right
to prepay the Loan in whole or in part prior to the Payment Date occurring on
March 1, ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇ ▇▇▇▇▇▇"). ▇▇ any Payment Date thereafter, Borrower
may, at its option and upon thirty (30) days prior written notice to Lender,
prepay the Debt in whole but not in part without payment of the Yield
Maintenance Premium or any other prepayment consideration provided, Borrower
pays to Lender, all accrued and unpaid interest on the amount of principal being
prepaid through and including the date of prepayment.
2.3.2 Mandatory Prepayments.
On the next occurring Payment Date following the date on which Borrower
actually receives any Net Proceeds, if and to the extent Lender is not obligated
to make such Net Proceeds available to Borrower for the Restoration of the
Property, Borrower shall prepay the outstanding principal balance of the Note in
an amount equal to one hundred percent (100%) of such Net Proceeds. No Yield
Maintenance Premium or any other prepayment consideration shall be due in
connection with any prepayment made pursuant to this Section 2.3.2.
2.3.3 Prepayments After Default.
If, following an uncured Event of Default, Borrower tenders payment of
all or any part of the Debt, or if all or any portion of the Debt is recovered
by Lender after such Event of Default such tender or recovery shall be deemed a
voluntary prepayment by Borrower in violation of the prohibition against
prepayment of the Loan prior to the expiration of the Lockout Period and
Borrower shall pay, in addition to the Debt, (i) an amount equal to the greater
of (a) one percent (1%) of the outstanding principal amount of the Loan to be
prepaid or satisfied, or (b) (x) the present value as of the date such payment
or proceeds are received of the remaining scheduled payments of principal and
interest from the date such payment or proceeds are received through the
Maturity Date (including any balloon payment) determined by discounting such
payments at the Discount Rate, less (y) the amount of the payment or proceeds
received, and (ii) all accrued and unpaid interest calculated at the Applicable
Interest Rate on the amount of principal being prepaid through and including the
date of prepayment. Lender shall notify Borrower of the amount and the basis of
determination of the required prepayment consideration, which shall be
conclusive except in the case of manifest error.
2.3.4 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 12:00 p.m., New York City time,
on or prior to 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
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day which is not a Business Day, such payment shall be made on the first
Business Day succeeding such scheduled due date.
2.3.5 Application of Principal Prepayments.
All prepayments received pursuant to this Section 2.3 shall be applied
to the payments of principal due under the Loan in the inverse order of
maturity.
Section 2.4 Defeasance.
2.4.1 Voluntary Defeasance.
(a) Provided no Event of Default shall then exist, Borrower shall have
the right at any time after the Permitted Defeasance Date to voluntarily defease
the entire Loan by and upon satisfaction of the following conditions (such event
being a "Defeasance Event"):
(i) Borrower shall provide not less than thirty (30) days
prior written notice to Lender specifying the Payment Date (the
"Defeasance Date") on which the Defeasance Event will occur and the
principal amount of the Loan to be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the principal balance of the Note to and including the
Defeasance 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 Security Instrument, and the other Loan
Documents;
(iv) Borrower shall deliver to Lender the Defeasance Deposit
applicable to the Defeasance Event;
(v) 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 the provisions of this
Section 2.4 (the "Security Agreement");
(vi) Borrower shall deliver an opinion of counsel for Borrower
in form and substance satisfactory to Lender stating, among other
things, that Borrower has legally and validly transferred and assigned
the U.S. Obligations and all obligations, rights and duties under and
to the Note to the Successor Borrower, that Lender has a perfected
first priority security interest in the Defeasance Deposit and the U.S.
Obligations delivered by Borrower and that any REMIC Trust formed
pursuant to a Securitization will not fail to maintain its status as a
"real estate mortgage investment conduit" within the meaning of Section
860D of the Code as a result of such Defeasance Event;
(vii) Borrower shall deliver confirmation in writing from the
applicable Rating Agencies to the effect that such release will not
result in a downgrading, withdrawal or qualification of the respective
ratings in effect immediately prior to such Defeasance Event for the
Securities issued in connection with the Securitization which are then
25
outstanding. 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;
(viii) Borrower shall deliver an Officer's Certificate
certifying that the requirements set forth in this Section 2.4.1(a)
have been satisfied;
(ix) Borrower shall deliver a certificate of Borrower's
independent certified public accountant certifying that the U.S.
Obligations purchased with the Defeasance Deposit generate monthly
amounts equal to or greater than the Scheduled Defeasance Payments;
(x) Borrower shall deliver such other certificates, documents
or instruments as Lender may reasonably request; and
(xi) Borrower shall pay all costs and expenses of Lender
incurred in connection with the Defeasance Event, including any costs
and expenses associated with a release of the Lien of the Security
Instrument as provided in Section 2.4.3 hereof as well as reasonable
attorneys' fees and expenses.
(b) In connection with a Defeasance Event, Borrower hereby appoints
Lender as its agent and attorney-in-fact for the purpose of using the Defeasance
Deposit to purchase U.S. Obligations (the "Defeasance Collateral") which provide
payments on or prior to, but as close as possible to, all successive scheduled
payment dates after the Defeasance Date upon which interest and principal
payments are required under the Note and in amounts equal to the scheduled
payments due on such dates under this Agreement and the Note (including without
limitation scheduled payments of principal, interest, servicing fees (if any)
and any other amounts due under the Loan Documents on such dates) and assuming
such Note is prepaid in full on the Maturity Date (the "Scheduled Defeasance
Payments"). Each of the U.S. Obligations that are part of the Defeasance
Collateral shall be duly endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and substance that would
be satisfactory to a prudent institutional lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to
effectuate book entry transfers and pledges through the book entry facilities of
such institution) in order to perfect upon the delivery of the Defeasance
Collateral a first priority security interest therein in favor of Lender in
conformity with all applicable state and federal laws governing the granting of
such security interests. Borrower, pursuant to the Security Agreement or other
appropriate document, shall authorize and direct that the payments received from
the U.S. Obligations may be made directly to the Lockbox Account (unless
otherwise directed by Lender) and applied to satisfy the obligations of Borrower
under the Note. Any portion of the Defeasance Deposit in excess of the amount
necessary to purchase the U.S. Obligations required by this Section 2.4 and
satisfy Borrower's other obligations under this Section 2.4 and Section 2.5
shall be remitted to Borrower.
2.4.2 Successor Borrower.
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In connection with any Defeasance Event, Borrower shall establish or
designate a successor entity (the "Successor Borrower") which shall be a single
purpose bankruptcy remote entity with an Independent Director approved by
Lender, and Borrower shall transfer and assign all obligations, rights and
duties under and to the Note together with the pledged U.S. Obligations to such
Successor Borrower. Such Successor Borrower shall assume the obligations under
the Note and the Security Agreement and Borrower shall be relieved of its
obligations under such documents. Borrower shall pay $1,000 to any such
Successor Borrower as consideration for assuming the obligations under the Note
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
in accordance with this Section 2.4.2, but Borrower shall pay all costs and
expenses incurred by Lender, including Lender's attorneys' fees and expenses,
incurred in connection therewith.
2.4.3 Release of Property.
Except as set forth in this Section 2.4 or Section 2.5 hereof, no
repayment, prepayment or defeasance of all or any portion of the Note shall
cause, give rise to a right to require, or otherwise result in, the release of
any Lien of the Security Instrument on the Property. If Borrower has elected to
defease the entire Loan and the requirements of this Section 2.4 have been
satisfied, the Property shall be released from the Lien of the Security
Instrument and the U.S. Obligations, pledged pursuant to the Security Agreement,
shall be the sole source of collateral securing the Note. In connection with the
release of the Security Instrument, Borrower shall submit to Lender, not less
than ten (10) days prior to the Defeasance Date, a release of Lien (and related
Loan Documents) for the Property for execution by Lender. Such release shall be
in a form appropriate in the jurisdiction in which the Property is located and
that would be satisfactory to a prudent lender. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release, together with an Officer's Certificate
certifying that such documentation (i) is in compliance with all applicable
Legal Requirements, and (ii) will effect such releases in accordance with the
terms of this Agreement.
Section 2.5 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 due on the Loan and all other
amounts due and payable under the Loan Documents in accordance with the terms
and provisions of the Note and this Agreement, release the Lien of the Security
Instrument.
III. CASH MANAGEMENT
Section 3.1 Establishment of Accounts.
(a) Borrower and Operating Lessee shall, simultaneously herewith, (i)
establish one or more accounts (individually and collectively, as the context
may require, the "Property Account") with one or more Property Account Banks
into which Borrower and/or Operating Lessee shall deposit, or cause to be
deposited, all Gross Income from Operations and (ii) execute an agreement with
Lender and each Property Account Bank providing for the control of each
27
Property Account substantially in the form of Exhibit A attached herewith
(individually and collectively, as the context may require, the "Property
Account Agreement").
(b) Lender (or Servicer on behalf of Lender) shall, simultaneously
herewith establish an account with the Lockbox Bank (the "Lockbox Account"),
into which, upon the occurrence of a Triggering Event and continuing until the
occurrence of a Triggering Event Termination, Borrower and Operating Lessee
shall deposit or cause Manager to deposit all sums on deposit in the Property
Account, in accordance with Section 3.2 and Section 3.6 hereof, establishing the
following Accounts (which may be book entry sub-accounts) into which amounts in
the Property Account shall be deposited or allocated:
(i) An account with Lockbox Bank into which Borrower shall
deposit, or cause to be deposited, the Monthly Tax Deposit (the "Tax
Account");
(ii) An account with Lockbox Bank into which Borrower shall
deposit, or cause to be deposited, the Monthly Insurance Premium
Deposit, if any (the "Insurance Premium Account");
(iii) An account with Lockbox Bank into which Borrower shall
deposit, or cause to be deposited, the Monthly Debt Service Payment
Amount (the "Debt Service Account"); and
(iv) An account with Lockbox Bank into which Borrower shall
deposit, or cause to be deposited, the Replacement Reserve Monthly
Deposit (the "Replacement Reserve Account").
Section 3.2 Deposits into Lockbox Account.
(a) Borrower represents, warrants and covenants that (i) Borrower
shall, or shall cause Manager or Operating Lessee to, immediately deposit all
Gross Income from Operations into the Property Account, (ii) Borrower or
Operating Lessee shall send a notice, substantially in the form of Exhibit B, to
all tenants now or hereafter occupying space at the Property directing them to
pay all Rents and other sums due under the Lease to which they are a party into
the Property Account, (iii) Borrower or Operating Lessee shall instruct Manager
to deposit all Accounts Receivable for the Property and all other sums collected
by Manager pursuant to the Management Agreement into the Property Account, (iv)
Borrower, Operating Lessee or Manager shall deliver a notice substantially in
the form of Exhibit C hereto to all credit card companies to pay all Accounts
Receivable directly into the Property Account, (v) other than the Accounts,
there shall be no other accounts maintained by Borrower, Operating Lessee or any
other Person into which revenues from the ownership and operation of the
Property are deposited, and (vi) neither Borrower nor any other Person shall
open any other such account with respect to the deposit of income in connection
with the Property. Until deposited into the Property Account, any Gross Income
from Operations from the Property held by Borrower, Operating Lessee or Manager
shall be deemed to be Collateral and shall be held in trust by it for the
benefit, and as the property, of Lender and shall not be commingled with any
other funds or property of Borrower, Operating Lessee or Manager.
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(b) Borrower, Operating Lessee or Lender on behalf of Borrower or
Operating Lessee, shall direct the applicable Property Account Bank to (i) prior
to the occurrence of a Triggering Event and after the occurrence of a Triggering
Event Termination, such account as shall be specified by Borrower and Operating
Lessee in writing, and (ii) following the occurrence of a Triggering Event and
prior to the occurrence of a Triggering Event Termination, (1) transfer to the
Manager Account, as directed by Manager, amounts necessary to pay (A) the
Monthly Operating Expense Amount for the then current calendar month, plus (B)
any unpaid Operating Expenses (less Taxes and incentive management fees)
attributable to the then prior calendar month and (2) transfer to the Lockbox
Account, on the Business Day before the last Business Day of each such current
calendar month, all remaining funds on deposit in the Property Account.
(c) Borrower and Operating Lessee warrant and covenant that they shall
not rescind, withdraw or change any notices or instructions required to be sent
by it pursuant to this Section 3.2 without Lender's prior written consent.
Section 3.3 Account Name.
(a) The Accounts (other than the Manager Account) shall each be in the
name of Borrower for the benefit of Lender.
(b) In the event Lender transfers or assigns the Loan, Borrower and
Operating Lessee acknowledge that each Property Account Bank and Lockbox Bank,
at Lender's request, shall change the name of each Account to the name of
Borrower for the benefit of the transferee or assignee. In the event Lender
retains a servicer to service the Loan, Borrower and Operating Lessee
acknowledge that each Property Account Bank and Lockbox Bank, at Lender's
request, shall rename each account to be in the name of Borrower for the benefit
of the servicer, as agent for Lender.
Section 3.4 Eligible Accounts.
Borrower and Operating Lessee shall, and Borrower and Operating Lessee
shall cause each Property Account Bank and Lockbox Bank to maintain each Account
as an Eligible Account.
Section 3.5 Permitted Investments.
Sums on deposit in any Account may be invested in Permitted Investments
provided (i) such investments are then regularly offered by Property Account
Bank or Lockbox Bank, as applicable, for accounts of this size, category and
type, (ii) such investments are permitted by Applicable Law, (iii) the maturity
date of the Permitted Investment is not later than the date on which sums in the
applicable Account are anticipated by Lender to be required for payment of an
obligation for which such Account was created, and (iv) no Event of Default
shall have occurred and be continuing. All income earned from Permitted
Investments shall be the property of Borrower. Borrower and Operating Lessee
hereby irrevocably authorize and direct each Property Account Bank or Lockbox
Bank, as applicable, to hold any income earned from Permitted Investments as
part of the Accounts. Borrower shall be responsible for payment of any federal,
State or local income or other tax applicable to income earned from Permitted
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Investments. No other investments of the sums on deposit in the Accounts shall
be permitted except as set forth in this Section 3.5. Lender shall not be liable
for any loss sustained on the investment of any funds constituting the Reserve
Funds or of any funds deposited in the related Accounts. Any investment of funds
in the Property Account shall only be made in Permitted Investments.
Notwithstanding anything to the contrary contained herein, Borrower acknowledges
that the only Permitted Investment which Lockbox Bank may offer is an interest
bearing escrow account (bearing interest at a money market rate as determined by
Lockbox Bank).
Section 3.6 The Initial Deposits.
Lender shall determine, in its reasonable discretion, the initial
deposit amounts (the "Initial Deposits") required to be deposited in each of the
Tax Account, the Insurance Premium Account, the Replacement Reserve Account, the
Required Repair Account and Borrower shall deposit the respective Initial
Deposits into each Account on the Closing Date.
Section 3.7 Transfer To and Disbursements from the Lockbox Account.
(a) Lockbox Bank shall withdraw all funds on deposit in the Lockbox
Account on the date immediately preceding each Payment Date (and if such day is
not a Business Day then the preceding day which is a Business Day).
(b) Lockbox Bank shall disburse the funds in the Lockbox Account in the
following order of priority:
(i) First, funds sufficient to pay the Monthly Tax Deposit
shall be deposited in the Tax Account;
(ii) Second, funds sufficient to pay the Monthly Insurance
Premium Deposit, if any, shall be deposited in the Insurance Premium
Account;
(iii) Third, funds sufficient to pay the Monthly Debt Service
Payment Amount shall be deposited into the Debt Service Account;
(iv) Fourth, funds sufficient to pay the Replacement Reserve
Monthly Deposit shall be deposited in the Replacement Reserve Account;
(v) Fifth, funds sufficient to pay any interest accruing at
the Default Rate, and late payment charges, if any, shall be deposited
in the Debt Service Account;
(vi) Sixth, to the payment of Lockbox Bank for customary and
reasonable fees and expenses incurred in connection with this Agreement
and the accounts established hereunder; and
(vii) Seventh, provided no Event of Default has occurred and
is continuing all amounts remaining in the Lockbox Account after
deposits for items (i) through (vi) for the current month and all prior
months shall be disbursed to Borrower.
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Section 3.8 Withdrawals From the Tax Account and the Insurance Premium
Account.
Lender shall have the right to withdraw funds from the Tax Account to
pay Taxes on or before the date Taxes are delinquent. Lender shall have the
right to withdraw funds from the Insurance Premium Account to pay Insurance
Premiums on or before the date Insurance Premiums are due and payable. Lockbox
Bank shall disburse funds from the Tax Account and the Insurance Premium Account
in accordance with Lender's written request therefor on the Business Day
following Lockbox Bank's receipt of such written request.
Section 3.9 Withdrawals from the Replacement Reserve Account.
Lender shall disburse funds on deposit in the Replacement Reserve
Account in accordance with the provisions of Section 7.3 hereof.
Section 3.10 Withdrawals from the Required Repair Account.
Lender shall disburse funds on deposit in the Required Repair Account
in accordance with the provisions of Section 7.1 hereof.
Section 3.11 Withdrawals from the Debt Service Account.
Subject to Section 3.19 hereof, Lender shall withdraw funds from the
Debt Service Account to pay, on or before the date when due, the Monthly Debt
Service Payment Amount and any other sums then due and payable under the Loan,
including, without limitation, any late payment charges or interest accruing at
the Default Rate.
Section 3.12 Intentionally Deleted.
Section 3.13 Intentionally Deleted.
Section 3.14 Sole Dominion and Control.
Borrower and Operating Lessee acknowledge and agree that the Accounts
are subject to the sole dominion, control and discretion of Lender, its
authorized agents or designees, including each Property Account Bank and Lockbox
Bank, subject to the terms hereof; and Borrower and Operating Lessee shall have
no right of withdrawal with respect to any Account except with the prior written
consent of Lender or as otherwise provided herein.
Section 3.15 Security Interest.
Borrower and Operating Lessee hereby grant to Lender a first priority
security interest in each of the Accounts and the Account Collateral as
additional security for the Debt.
Section 3.16 Rights on Default.
Notwithstanding anything to the contrary in this Article 3, upon the
occurrence of an Event of Default, Lender shall promptly notify each Property
Account Bank and Lockbox Bank in writing of such Event of Default and, without
notice from any Property Account Bank,
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Lockbox Bank or Lender, (a) Borrower and Operating Lessee shall have no further
right in respect of (including, without limitation, the right to instruct
Lockbox Bank or any Property Account Bank to transfer from) the Accounts, (b)
Lender may direct Lockbox Account to liquidate and transfer any amounts then
invested in Permitted Investments to the Accounts or reinvest such amounts in
other Permitted Investments as Lender may reasonably determine is necessary to
perfect or protect any security interest granted or purported to be granted
hereby or pursuant to the other Loan Documents or to enable Lockbox Bank, as
agent for Lender, or Lender to exercise and enforce Lender's rights and remedies
hereunder or under any other Loan Document with respect to any Account or any
Account Collateral, and (c) Lender shall have all rights and remedies with
respect to the Accounts and the amounts on deposit therein and the Account
Collateral as described in this Agreement and in the Security Instrument, in
addition to all of the rights and remedies available to a secured party under
the UCC, and, notwithstanding anything to the contrary contained in this
Agreement or in the Security Instrument, Lender may apply the amounts of such
Accounts as Lender determines in its sole discretion including, but not limited
to, payment of the Debt.
Section 3.17 Financing Statement; Further Assurances.
Borrower and Operating Lessee hereby authorize Lender to file, and upon
Lender's request, shall execute and deliver to Lender for filing, a financing
statement or statements under the UCC in connection with any of the Accounts and
the Account Collateral with respect thereto in the form required to properly
perfect Lender's security interest therein. Borrower and Operating Lessee agree
that at any time and from time to time, at the expense of Borrower, Borrower and
Operating Lessee will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Lender may request, in order to perfect and protect any security interest
granted or purported to be granted hereby (including, without limitation, any
security interest in and to any Permitted Investments) or to enable Lockbox Bank
or Lender to exercise and enforce its rights and remedies hereunder with respect
to any Account or Account Collateral.
Section 3.18 Borrower's Obligation Not Affected.
The insufficiency of funds on deposit in the Accounts shall not absolve
Borrower of the obligation to make any payments, as and when due pursuant to
this Agreement and the other Loan Documents, and such obligations shall be
separate and independent, and not conditioned on any event or circumstance
whatsoever.
Section 3.19 Payments Received Under this Agreement.
Notwithstanding anything to the contrary contained in this Agreement or
the other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower's obligations with respect to the monthly payment of Debt
Service and amounts due for the Tax and Insurance Escrow Fund, Required Repair
Fund, Replacement Escrow Fund, and any other payment reserves established
pursuant to this Agreement or any other Loan Document shall (provided Lender is
not prohibited from withdrawing or applying any funds in the Accounts by
Applicable Law or otherwise) be deemed satisfied to the extent sufficient
amounts are deposited in the Lockbox Account established pursuant to this
Agreement to satisfy such obligations on the
32
dates each such payment is required, regardless of whether any of such amounts
are so applied by Lender.
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations.
Borrower represents and warrants as of the Closing Date that:
4.1.1 Organization.
(a) Borrower is duly organized and is validly existing and in good
standing in the jurisdiction in which it is organized, with requisite power and
authority to own the Property and to transact the businesses in which it is now
engaged. 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 the
Property, its businesses and operations. Borrower possesses all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to
entitle it to own the Property and to transact the businesses in which it is now
engaged. Attached hereto as Schedule 4.1.1(a) is an organizational chart of
Borrower.
(b) Operating Lessee is duly organized and is validly existing and in
good standing in the jurisdiction in which it is organized, with requisite power
and authority to own the lessee's interest in the Operating Lease and to operate
the Property and to transact the businesses in which it is now engaged.
Operating Lessee 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 the
Property, its businesses and operations. Operating Lessee possesses all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to
entitle it to transact the businesses in which it is now engaged. Attached
hereto as Schedule 4.1.1(b) is an organizational chart of Operating Lessee.
4.1.2 Proceedings.
(a) Borrower has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and the other Loan Documents. This
Agreement and the other Loan Documents have been duly executed and delivered by
or on behalf of Borrower and constitute legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective terms,
subject only 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).
(b) Operating Lessee has taken all necessary action to authorize the
execution, delivery and performance of the Operating Lessee Documents. The
Operating Lessee Documents have been duly executed and delivered by or on behalf
of Operating Lessee and constitutes the legal, valid and binding obligations of
Operating Lessee enforceable against Operating Lessee in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors generally, and subject, as to
33
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
4.1.3 No Conflicts.
(a) 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 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 Borrower
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement, management agreement, franchise agreement, or other
agreement or instrument to which Borrower is a party or by which any of
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 Authority having jurisdiction over Borrower or the
Property or any of Borrower's other assets, or any license or other approval
required to operate the Property, and any consent, approval, authorization,
order, registration or qualification of or with any Governmental Authority
required for the execution, delivery and performance by Borrower of this
Agreement or any other Loan Documents have been obtained and is in full force
and effect.
(b) The execution, delivery and performance of the Operating Lessee
Documents by Operating Lessee will not conflict with or result in a breach of
any of the 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 such Loan Documents) upon any of the property or assets of Operating
Lessee pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, partnership agreement, management agreement, franchise agreement, or
other agreement or instrument to which Operating Lessee is a party or by which
any of Operating Lessee'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 Authority having jurisdiction over
Operating Lessee or the Property or any of Operating Lessee's other assets, or
any license or other approval required to operate the Property, and any consent,
approval, authorization, order, registration or qualification of or with any
Governmental Authority required for the execution, delivery and performance by
Operating Lessee of the Operating Lessee Documents have been obtained and is in
full force and effect.
4.1.4 Litigation.
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 Borrower, Operating Lessee or the Property, which actions,
suits or proceedings, if determined against Borrower, Operating Lessee or the
Property, would reasonably be expected to materially adversely affect the
condition (financial or otherwise) or business of Borrower, Operating Lessee or
the condition or ownership of the Property.
4.1.5 Agreements.
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Neither Borrower nor Operating Lessee is a party to any agreement or
instrument or subject to any restriction which would reasonably be expected to
materially and adversely affect Borrower, Operating Lessee or the Property, or
Borrower's or Operating Lessee's business, properties or assets, operations or
condition, financial or otherwise. Neither Borrower nor Operating Lessee is in
default in any material respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument to which it is a party or by which Borrower, Operating Lessee or the
Property are bound. Neither Borrower nor Operating Lessee has material financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Borrower or Operating Lessee is a party or by
which Borrower or Operating Lessee is a party or by which Borrower, Operating
Lessee or the Property is otherwise bound, other than (a) obligations incurred
in the ordinary course of the operation of the Property and (b) obligations
under the Loan Documents.
4.1.6 Solvency.
Neither Borrower nor Operating Lessee (a) has entered into the
transaction or executed the Note, this Agreement or any other Loan Documents
with the actual intent to hinder, delay or defraud any creditor and (b) has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower's
and Operating Lessee's assets exceeds and will, immediately following the making
of the Loan, exceed Borrower's and Operating Lessee's total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities. Borrower's and Operating Lessee's assets do not and,
immediately following the making of the Loan will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Neither Borrower nor Operating Lessee intends to incur debt and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debt and liabilities as they mature (taking into account the
timing and amounts of cash to be received by Borrower and Operating Lessee and
the amounts to be payable on or in respect of obligations of Borrower and
Operating Lessee). No petition under the Bankruptcy Code or similar state
bankruptcy or insolvency law has been filed against Borrower, Operating Lessee
or any constituent Person in the last seven (7) years, and neither Borrower,
Operating Lessee nor any constituent Person in the last seven (7) years has ever
made an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors. Neither Borrower, Operating Lessee
nor any of its constituent Persons are contemplating either the filing of a
petition by it under the Bankruptcy Code or similar state bankruptcy or
insolvency law or the liquidation of all or a major portion of Borrower's or
Operating Lessee's assets or property, and neither Borrower nor Operating Lessee
has any knowledge of any Person contemplating the filing of any such petition
against it or such constituent Persons.
4.1.7 Full and Accurate Disclosure.
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 in any material respects. No statement of fact made by
Operating Lessee in the Operating Lessee Documents contain any untrue statement
of a material fact or omits to state any material fact necessary to make
35
statements contained herein or therein not misleading in any material respect.
There is no fact presently known to Borrower or Operating Lessee which has not
been disclosed to Lender which materially and adversely affects, or would
reasonably be expected to materially and adversely affect, the Property or the
business, operations or condition (financial or otherwise) of Borrower or
Operating Lessee.
4.1.8 No Plan Assets.
Neither Borrower nor Operating Lessee is, a Plan and none of the assets
of Borrower or Operating Lessee constitute or will constitute "Plan Assets" of
one or more Plans. In addition, (a) neither Borrower nor Operating Lessee is a
"governmental plan" within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower and Operating Lessee are not subject to State
statutes regulating investment of, and fiduciary obligations with respect to,
governmental plans similar to the provisions of Section 406 of ERISA or Section
4975 of the Code currently in effect, which prohibit or otherwise restrict the
transactions contemplated by this Agreement.
4.1.9 Compliance.
Borrower, Operating Lessee, and the Property and the use thereof comply
in all material respects with all applicable Legal Requirements, including,
without limitation, to the best of Borrower's knowledge, all Environmental Laws,
building and zoning ordinances and codes. Neither Borrower nor Operating Lessee
is in default or violation in any material respect of any order, writ,
injunction, decree or demand of any Governmental Authority. There has not been
committed by Borrower, Operating Lessee or any other Person in occupancy of or
involved with the operation or use of the Property any act or omission affording
the federal government or any other Governmental Authority the right of
forfeiture as against the Property or any part thereof or any monies paid in
performance of Borrower's or Operating Lessee's obligations under any of the
Loan Documents.
4.1.10 Financial Information.
All financial data, including, without limitation, the statements of
cash flow and income and operating expense, that have been delivered to Lender
by or on behalf of Borrower, Operating Lessee and the Property (i) considered in
the aggregate, are true, complete and correct in all material respects, (ii)
fairly present the financial condition of Borrower, Operating Lessee and the
Property, as applicable, as of the date of such reports, and (iii) have been
prepared in accordance with GAAP throughout the periods covered, except as
disclosed therein (but subject to normal year-end adjustments). Except for
Permitted Encumbrances, neither Borrower nor Operating Lessee have 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 or Operating Lessee and reasonably likely to have a
materially adverse effect on the Property or the operation thereof as hotels
except as referred to or reflected in said financial statements. Since the date
of the most recent such financial statements, there has been no materially
adverse change in the financial condition, operations or business of Borrower or
Operating Lessee from that set forth in said financial statements.
36
4.1.11 Condemnation.
No Condemnation or other similar proceeding has been commenced or, to
the best of Borrower's and Operating Lessee's knowledge, is threatened or
contemplated with respect to all or any portion of the Property or for the
relocation of roadways providing access to the Property.
4.1.12 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.
4.1.13 Utilities and Public Access.
The Property has rights of access to public ways and is served by
public water, sewer, sanitary sewer and storm drain facilities adequate to
service the Property for its intended use. All public utilities necessary or
convenient to the full use and enjoyment of the Property are located either in
the public right-of-way abutting the Property (which are connected so as to
serve the Property without passing over other property) or in recorded easements
serving the Property and such easements are set forth in and insured by the
Title Insurance Policy. All roads necessary for the use of the Property for its
current purposes have been completed, are physically open and except as
disclosed on the Survey, are dedicated to public use and have been accepted by
all Governmental Authorities.
4.1.14 Not a Foreign Person.
Neither Borrower nor Operating Lessee is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
4.1.15 Separate Lots.
The Property is comprised of one (1) or more parcels which constitute a
separate tax lot or lots and does not constitute a portion of any other tax lot
not a part of the Property.
4.1.16 Assessments.
To the best of Borrower's knowledge, there are no pending or proposed
special or other assessments for public improvements or otherwise affecting the
Property, nor are there any contemplated improvements to the Property that may
result in such special or other assessments.
4.1.17 Enforceability.
The Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by Borrower or Operating Lessee, including the defense
of usury, and neither Borrower
37
nor Operating Lessee has asserted any right of rescission, set-off, counterclaim
or defense with respect thereto.
4.1.18 No Prior Assignment.
There are no prior assignments of the Leases or any portion of the
Rents due and payable or to become due and payable which are presently
outstanding.
4.1.19 Insurance.
Borrower has obtained and has delivered to Lender certified copies of
all insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. To the best of Borrower's knowledge,
no Person, including Borrower and Operating Lessee, has done, by act or
omission, anything which would impair the coverage of any such policy.
4.1.20 Use of Property.
The Property is used exclusively for hotel purposes and other
appurtenant and related uses including but not limited to restaurants and
lounges.
4.1.21 Certificate of Occupancy; Licenses.
All material certifications, permits, licenses and approvals, including
without limitation, certificates of completion and occupancy permits required
for the legal use, occupancy and operation of the Property by Borrower and
Operating Lessee as a hotel (collectively, the "Licenses"), have been obtained
and are in full force and effect and are not subject to revocation, suspension
or forfeiture. Borrower shall keep and maintain all Licenses necessary for the
operation of the Property as a hotel. The use being made of the Property is in
conformity with the certificate of occupancy issued for the Property.
4.1.22 Flood Zone.
Except as disclosed on the Survey, none of the Improvements on the
Property are located in an area as identified by the Federal Emergency
Management Agency as an area having special flood hazards and, if so located,
the flood insurance required pursuant to Section 6.1(a)(vii) is in full force
and effect with respect to each the Property.
4.1.23 Physical Condition.
The Property, including, without limitation, all buildings,
improvements, parking facilities, sidewalks, storm drainage systems, roofs,
plumbing systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and repair
in all material respects; there exists no structural or other material defects
or damages in the Property, whether latent or otherwise, and Borrower and
Operating Lessee have not received notice from any insurance company or bonding
company of any defects or inadequacies in the Property, or any part thereof,
which would adversely affect the insurability of the same or cause
38
the imposition of extraordinary premiums or charges thereon or of any
termination or threatened termination of any policy of insurance or bond. The
Property is free from damage caused by fire or other casualty. All liquid and
solid waste disposal, septic and sewer systems located on the Property are, in
all material respects, in a good and safe condition and repair and in compliance
with all Legal Requirements.
4.1.24 Boundaries.
Except as disclosed on the Survey, all of the Improvements which were
included in determining the appraised value of the Property lie wholly within
the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Property encroach upon any of the
Improvements.
4.1.25 Leases.
Borrower is the owner and lessor of landlord's interest in the
Operating Lease. Operating Lessee is the lessor under all other Leases. No
Person (other than hotel guests) has any possessory interest in the Property or
right to occupy the same except under and pursuant to the provisions of the
Leases and Management Agreement. The current Leases are in full force and effect
and, there are no defaults by Borrower or, to the best of Borrower's knowledge,
any tenant under any Lease, and there are no conditions that, with the passage
of time or the giving of notice, or both, would constitute defaults under any
Lease. No Rent has been paid more than one (1) month in advance of its due date.
There are no offsets or defenses to the payment of any portion of the Rents. All
work to be performed by Borrower under each Lease has been performed as required
and has been accepted by the applicable tenant, and any payments, free rent,
partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Borrower to any tenant has already been
received by such tenant. There has been no prior sale, transfer or assignment,
hypothecation or pledge of any Lease or of the Rents received therein which is
still in effect. No tenant under any Lease has sublet all or any portion of the
premises demised thereby, nor does anyone except such tenant and its employees
occupy such leased premises. No tenant under any Lease has a right or option
pursuant to such Lease or otherwise to purchase all or any part of the leased
premises or the building of which the leased premises are a part. Except as set
forth in the Leases, no tenant under any Lease has any right or option for
additional space in the Improvements. To the best of Borrower's knowledge, no
Hazardous Materials have been disposed, stored or treated by any tenant under
any Lease on or about the leased premises nor does Borrower or Operating Lessee
have any knowledge of any tenant's intention to use its leased premises for any
activity which, directly or indirectly, involves the use, generation, treatment,
storage, disposal or transportation of any Hazardous Materials, except those
that are both (i) in compliance with current Environmental Laws and with permits
issued pursuant thereto (if such permits are required), and (ii) either (A) in
amounts not in excess of that necessary to operate, clean, repair and maintain
the Property or each tenant's respective business at the Property as set forth
in their respective Leases, (B) held by a tenant for sale to the public in its
ordinary course of business, or (C) fully disclosed to and approved by Lender in
writing pursuant to the Environmental Reports.
4.1.26 Survey.
39
To the best of Borrower's knowledge, the Survey for the Property
delivered to Lender in connection with this Agreement does not fail to reflect
any material matter affecting the Property or the title thereto.
4.1.27 Intentionally Deleted.
4.1.28 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
Property 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 any of the Loan Documents, including, without limitation, the
Security Instrument, have been paid.
4.1.29 Franchise Agreement.
The Franchise Agreement, if applicable, for the Property is in full
force and effect, all franchise fees, reservation fees, royalties and other sums
due and payable thereunder have been paid in full to date, and neither Borrower,
Operating Lessee nor, to the best of Borrower's knowledge, Franchisor is in
default thereunder.
4.1.30 Management Agreement/Operating Lease.
(a) The Management Agreement for the Property is in full force and
effect and there is no default thereunder by Borrower, Operating Lessee or, to
Borrower's knowledge, Manager thereunder and, to the best of Borrower's
knowledge, no event has occurred that, with the passage of time and/or the
giving of notice would constitute a default thereunder
(b) The Operating Lease for the Property is in full force and effect
and there is no default thereunder by any party thereto and no event has
occurred that, with the passage of time and/or the giving of notice would
constitute a default thereunder.
4.1.31 Illegal Activity.
No portion of the Property has been or will be purchased by Borrower or
Operating Lessee with proceeds of any illegal activity and to the best of
Borrower's knowledge, there are no illegal activities or activities relating to
any controlled substances at the Property.
4.1.32 No Change in Facts or Circumstances; Disclosure.
All information submitted by Borrower and Operating Lessee to Lender
and in all financial statements, rent rolls, reports, certificates and other
documents submitted in connection with the Loan or in satisfaction of the terms
thereof and all statements of fact made by Borrower and Operating Lessee in this
Agreement or in any other Loan Document, considered in the aggregate, are
accurate, complete and correct in all material respects. There has been no
material adverse change in any condition, fact, circumstance or event that would
make any such
40
information inaccurate, incomplete or otherwise misleading in any material
respect or that otherwise materially and adversely affects or would reasonably
be expected to materially and adversely affect the use, operation or value of
the Property or the business operations or the financial condition of Borrower
or Operating Lessee.
4.1.33 Investment Company Act.
Neither Borrower nor Operating Lessee is (a) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; (b) 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 (c) subject to any other
federal or State law or regulation which purports to restrict or regulate its
ability to borrow money.
4.1.34 Principal Place of Business; State of Organization.
Borrower's principal place of business as of the date hereof is the
address set forth in the introductory paragraph of this Agreement. Borrower is
organized under the laws of the State of Delaware and its organizational
identification number is 3667857.
4.1.35 Single Purpose Entity.
Borrower covenants and agrees that its organizational documents shall
provide that it has not, and shall not, and that the organizational documents of
its general partner(s), if Borrower is a partnership, or its managing member(s),
if Borrower is a limited liability company (in each case, "Principal") shall
provide that it has not and shall not:
(a) with respect to Borrower, engage in any business or activity other
than the acquisition, development, ownership, operation, leasing, managing and
maintenance of the Property, and entering into the Loan, and activities
incidental thereto and with respect to Principal, engage in any business or
activity other than the ownership of its interest in Borrower, and activities
incidental thereto;
(b) with respect to Borrower, acquire or own any material assets other
than (i) the Property, and (ii) such incidental Personal Property as may be
necessary for the operation of the Property and with respect to Principal,
acquire or own any material asset other than its interest in Borrower;
(c) merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure;
(d) (i) fail to observe its organizational formalities or preserve its
existence as an entity duly organized, validly existing and in good standing (if
applicable) under the laws of the jurisdiction of its organization or formation,
and qualification to do business in the State where the Property is located, if
applicable, or (ii) without the prior written consent of Lender, amend, modify,
terminate or fail to comply with the provisions of Borrower's Partnership
Agreement,
41
Articles of Organization or similar organizational documents, as the case may
be, or of Principal's Certificate of Incorporation, Articles of Organization or
similar organizational documents, as the case may be, whichever is applicable;
(e) own any subsidiary or make any investment in, any Person without
the prior written consent of Lender;
(f) commingle its assets with the assets of any of its members, general
partners, Affiliates, principals or of any other Person or entity, participate
in a cash management system (other than pursuant to the Management Agreement)
with any other entity or Person or fail to use its own separate stationery,
invoices and checks;
(g) with respect to Borrower, incur any debt, secured or unsecured,
direct or contingent (including guaranteeing any obligation), other than (I)
Permitted Encumbrances, (II) the Permitted FF&E Financing and (III) the Debt,
except for trade payables in the ordinary course of its business of owning and
operating the Property, provided that such trade debt (i) is not evidenced by a
note, (ii) is paid within sixty (60) days of the date incurred, (iii) does not
exceed, in the aggregate, four percent (4%) of the outstanding principal balance
of the Note and (iv) is payable to trade creditors and in amounts as are normal
and reasonable under the circumstances and with respect to Principal, incur any
debt secured or unsecured, direct or contingent (including guaranteeing any
obligations);
(h) become insolvent and fail to pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its
assets as the same shall become due;
(i) (i) fail to maintain its records (including financial statements),
books of account and bank accounts separate and apart from those of the members,
general partners, principals and Affiliates of Borrower or of Principal, as the
case may be, the Affiliates of a member, general partner or principal of
Borrower or of Principal, as the case may be, and any other Person, (ii) permit
its assets or liabilities to be listed as assets or liabilities on the financial
statement of any other Person or (iii) include the assets or liabilities of any
other Person on its financial statements; except for consolidated financial
statements which contain a note indicating that Borrower's and Principal's
separate assets and liabilities are neither available to pay the debts of the
consolidated entity nor constitute obligations of the consolidated entity;
(j) other than in connection with the Operating Lease, enter into any
contract or agreement with any member, general partner, principal or Affiliate
of Borrower or of Principal, as the case may be, or any member, general partner,
principal or Affiliate thereof (other than a business management services
agreement with an Affiliate of Borrower, provided that (i) such agreement is
acceptable to Lender, (ii) the manager, or equivalent thereof, under such
agreement holds itself out as an agent of Borrower and (iii) the agreement meets
the standards set forth in this subsection (j) following this parenthetical),
except upon terms and conditions that are commercially reasonable, intrinsically
fair and substantially similar to those that would be available on an
arms-length basis with third parties other than any member, general partner,
principal or Affiliate of Borrower or of Principal, as the case may be, or any
member, general partner, principal or Affiliate thereof;
42
(k) seek the dissolution or winding up in whole, or in part, of
Borrower or of Principal, as the case may be;
(l) fail to correct any known misunderstandings regarding the separate
identity of Borrower, or of Principal, as the case may be, or any member,
general partner, principal or Affiliate thereof or any other Person;
(m) other than Borrower's guaranty of Operating Lessee's obligations
under or pursuant to the Management Agreement, guarantee or become obligated for
the debts of any other Person or hold itself out to be responsible for the debts
of another Person;
(n) make any loans or advances to any third party, including any
member, general partner, principal or Affiliate of Borrower or of Principal, as
the case may be, or any member, general partner, principal or Affiliate thereof,
and shall not acquire obligations or securities of any member, general partner,
principal or Affiliate of Borrower or Principal, as the case may be, or any
member, general partner, or Affiliate thereof;
(o) fail to file its own tax returns or be included on the tax returns
of any other Person except as required by Applicable Law;
(p) fail either to hold itself out to the public as a legal entity
separate and distinct from any other Person or to conduct its business solely in
its own name or a name franchised or licensed to it by an entity other than an
Affiliate of Borrower or of Principal, as the case may be, and not as a division
or part of any other entity in order not (i) to mislead others as to the
identity with which such other party is transacting business, or (ii) to suggest
that Borrower or Principal, as the case may be, is responsible for the debts of
any third party (including any member, general partner, principal or Affiliate
of Borrower, or of Principal, as the case may be, or any member, general
partner, principal or Affiliate thereof);
(q) fail to 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;
(r) share any common logo (other than a name franchised or licensed to
it by an entity other than an Affiliate of Borrower or of Principal) with or
hold itself out as or be considered as a department or division of (i) any
general partner, principal, member or Affiliate of Borrower or of Principal, as
the case may be, (ii) any Affiliate of a general partner, principal or member of
Borrower or of Principal, as the case may be, or (iii) any other Person;
(s) fail to allocate fairly and reasonably any overhead expenses that
are shared with an Affiliate, including paying for office space and services
performed by any employee of an Affiliate;
(t) pledge its assets for the benefit of any other Person, other than
with respect to the Loan;
(u) fail to maintain a sufficient number of employees in light of its
contemplated business operations;
43
(v) fail to provide in its (i) Articles of Organization, Certificate of
Formation and/or Operating Agreement, as applicable, if it is a limited
liability company, (ii) Limited Partnership Agreement, if it is a limited
partnership or (iii) Certificate of Incorporation, if it is a corporation, that
for so long as the Loan is outstanding pursuant to the Note, this Agreement and
the other Loan Documents, it shall not file or consent to the filing of any
petition, either voluntary or involuntary, to take advantage of any applicable
insolvency, bankruptcy, liquidation or reorganization statute, or make an
assignment for the benefit of creditors without the affirmative vote of the
Independent Director and of all other general partners/managing
members/directors;
(w) fail to hold its assets in its own name;
(x) if Borrower or Principal is a corporation, fail to consider the
interests of its creditors in connection with all corporate actions to the
extent required by Applicable Law;
(y) have any of its obligations guaranteed by an Affiliate;
(z) violate or cause to be violated the assumptions made with respect
to Borrower and Principal in the Insolvency Opinion;
(aa) with respect to Principal, or if Borrower is a single member
limited liability company that complies with the requirements of Section
4.1.35(cc) below, fail at any time to have at least one independent
director/manager (an "Independent Director") that is not and has not been for at
least five (5) years: (a) a stockholder, director (other than an independent
director of an Affiliate of Borrower), officer, employee, partner, member,
attorney or counsel of Borrower or of Principal or any Affiliate of either of
them; (b) a customer, supplier or other Person who derives its purchases or
revenues (other than any fee paid to such director as compensation for such
director to serve as an Independent Director) from its activities with Borrower,
Principal or any Affiliate of either of them (a "Business Party"); (c) a person
or other entity controlling or under common control with any such stockholder,
partner, member, director, officer, attorney, counsel or Business Party; or (d)
a member of the immediate family of any such stockholder, director, officer,
employee, partner, member, attorney, counsel or Business Party; or
(bb) with respect to Principal, or if Borrower is a single member
limited liability company that complies with the requirements of Section
4.1.35(cc) below, permit its board of directors/managers to take any action
which, under the terms of any applicable organizational documents, requires the
unanimous vote of one hundred percent (100%) of the members of the board without
the vote of the Independent Director.
(cc) In the event Borrower is a Delaware limited liability company that
does not have a managing member which complies with the requirements for a
Principal under this Section 4.1.35, the limited liability company agreement of
Borrower (the "LLC Agreement") shall provide that (A) upon the occurrence of any
event that causes the last remaining member of Borrower ("Member") to cease to
be the member of Borrower (other than (1) upon an assignment by Member of all of
its limited liability company interest in Borrower and the admission of the
transferee in accordance with the Loan Documents and the LLC Agreement, or (2)
the resignation of Member and the admission of an additional member of Borrower
in
44
accordance with the terms of the Loan Documents and the LLC Agreement), any
person designated by Borrower shall, without any action of any other Person and
simultaneously with the Member ceasing to be the member of Borrower,
automatically be admitted to Borrower ("Special Member") and shall continue
Borrower without dissolution and (B) Special Member may not resign from Borrower
or transfer its rights as Special Member unless a successor Special Member has
been admitted to Borrower as Special Member in accordance with requirements of
Delaware law. The LLC Agreement shall further provide that (v) Special Member
shall automatically cease to be a member of Borrower upon the admission to
Borrower of a substitute Member, (w) Special Member shall be a member of
Borrower that has no interest in the profits, losses and capital of Borrower and
has no right to receive any distributions of Borrower assets, (x) pursuant to
Section 18-301 of the Delaware Limited Liability Company Act (the "Act"),
Special Member shall not be required to make any capital contributions to
Borrower and shall not receive a limited liability company interest in Borrower,
(y) Special Member, in its capacity as Special Member, may not bind Borrower and
(z) except as required by any mandatory provision of the Act, Special Member, in
its capacity as Special Member, shall have no right to vote on, approve or
otherwise consent to any action by, or matter relating to, Borrower, including,
without limitation, the merger, consolidation or conversion of Borrower. In
order to implement the admission to Borrower of Special Member, Special Member
shall execute a counterpart to the LLC Agreement. Prior to its admission to
Borrower as Special Member, Special Member shall not be a member of Borrower.
Upon the occurrence of any event that causes the Member to cease to be
a member of Borrower, to the fullest extent permitted by law, the personal
representative of Member shall, within ninety (90) days after the occurrence of
the event that terminated the continued membership of Member in Borrower, agree
in writing (A) to continue Borrower and (B) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of Borrower, effective as of the occurrence of the event that terminated
the continued membership of Member of Borrower in Borrower. Any action initiated
by or brought against Member or Special Member under any Creditors Rights Laws
shall not cause Member or Special Member to cease to be a member of Borrower and
upon the occurrence of such an event, the business of Borrower shall continue
without dissolution. The LLC Agreement shall provide that each of Member and
Special Member waives any right it might have to agree in writing to dissolve
Borrower upon the occurrence of any action initiated by or brought against
Member or Special Member under any Creditors Rights Laws, or the occurrence of
an event that causes Member or Special Member to cease to be a member of
Borrower.
4.1.36 Business Purposes.
The Loan is solely for the business purpose of Borrower, and is not for
personal, family, household, or agricultural purposes.
4.1.37 Taxes.
Borrower and Operating Lessee have each filed all federal, State,
county, municipal, and city income and other tax returns required to have been
filed by it and has paid, prior to delinquency thereof, all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by it. Borrower and Operating Lessee know of
45
no basis for any additional assessment in respect of any such taxes and related
liabilities for prior years.
4.1.38 Intentionally Deleted.
4.1.39 Environmental Representations and Warranties.
Borrower represents and warrants, except as disclosed on those certain
written reports identified on Schedule 4.1.39 attached hereto and made a part
hereof (collectively, the "Environmental Reports") of the Property that: (a)
there are no Hazardous Materials or underground storage tanks in, on, or under
the Property, except those that are both (i) in compliance with current
Environmental Laws and with permits issued pursuant thereto (if such permits are
required), and (ii) either (A) in amounts not in excess of that necessary to
operate, clean, repair and maintain the Property or each tenant's respective
business at the Property as set forth in their respective Leases, or (B) held by
a tenant for sale to the public in its ordinary course of business, (b) there
are no past, present or threatened Releases of Hazardous Materials in violation
of any Environmental Law and which would require remediation by a Governmental
Authority in, on, under or from the Property; (c) there is no threat of any
Release of Hazardous Materials migrating to the Property; (d) there is no
present or, to Borrower's knowledge, prior non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with the Property
except as described in the Environmental Reports; (e) Borrower and Operating
Lessee do not know of, and has not received, any written or oral notice or other
communication from any Person (including but not limited to a Governmental
Authority) relating to Hazardous Materials in, on, under or from the Property;
and (f) Borrower and Operating Lessee have truthfully and fully provided to
Lender, in writing, any and all information relating to environmental conditions
in, on, under or from the Property known to Borrower or Operating Lessee or
contained in Borrower's or Operating Lessee's files and records, including but
not limited to any reports relating to Hazardous Materials in, on, under or
migrating to or from the Property and/or to the environmental condition of the
Property.
4.1.40 Taxpayer Identification Number.
Borrower's United States taxpayer identification number is ▇▇-▇▇▇▇▇▇▇.
4.1.41 OFAC.
Borrower represents and warrants that neither Borrower, Operating
Lessee, Guarantor, Indemnitor or any of their respective Affiliates is a
Prohibited Person, and Borrower, Operating Lessee, Guarantor, Indemnitor and
their respective Affiliates are in compliance in all material respects with all
applicable orders, rules, regulations and recommendations of The Office of
Foreign Assets Control of the U.S. Department of the Treasury.
4.1.42 Intentionally Deleted.
4.1.43 Deposit Accounts.
(a) This Agreement and the Property Account Agreement create valid and
continuing security interests (as defined in the UCC) in the Property Account
and the Lockbox Account in
46
favor of Lender, which security interests are prior to all other Liens and are
enforceable as such against creditors of and purchasers from Borrower;
(b) The Property Account and the Lockbox Account each constitute
"deposit accounts" within the meaning of the applicable UCC;
(c) Borrower owns and has good and marketable title to the Property
Account and the Lockbox Account free and clear of any Lien or claim of any
Person (other than Lender);
(d) Borrower has delivered to Lender fully executed agreements pursuant
to which the banks maintaining the Property Account and the Lockbox Account have
agreed to comply with all instructions originated by Lender directing
disposition of the funds in such accounts without further consent by Borrower;
(e) Other than the security interest granted to Lender pursuant to this
Agreement and the Property Account Agreement, Borrower has not pledged,
assigned, or sold, granted a security interest in, or otherwise conveyed the
Property Account or the Lockbox Account; and
(f) The Property Account and the Lockbox Account are not in the name of
any Person other than Borrower (or Manager) or Lender. Borrower has not
consented to the banks maintaining, the Lockbox Account or the Property Account,
to comply with instructions of any Person other than Lender.
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. BORROWER COVENANTS
Section 5.1 Affirmative 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
Liens of all Security Instrument encumbering the Property (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:
5.1.1 Existence; Compliance with Legal Requirements.
(a) Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence, rights,
licenses, permits and franchises, and comply, in all material respects, with all
Legal Requirements applicable to it and the Property. There shall
47
never be committed by Borrower or any other Person in occupancy of or involved
with the operation or use of the Property any act or omission affording the
federal government or any State or local government the right of forfeiture
against the 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. Borrower shall, or shall cause
Operating Lessee to, 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 the 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 this Agreement. Borrower shall keep the 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) 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 validity of any Legal Requirement, the
applicability of any Legal Requirement to Borrower or the Property or any
alleged violation of any Legal Requirement, provided that (i) no Event of
Default has occurred and remains uncured; (ii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all Legal
Requirements; (iii) neither the Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, cancelled or
lost; (iv) Borrower shall promptly upon final determination thereof comply with
any such Legal Requirement determined to be valid or applicable or cure any
violation of any Legal Requirement; (v) such proceeding shall suspend the
enforcement of the contested Legal Requirement against Borrower or the Property;
and (vi) Borrower shall furnish such security as may be required in the
proceeding, or as may be reasonably requested by Lender, to insure compliance
with such Legal Requirement, together with all interest and penalties payable in
connection therewith. Lender may apply any such security or part thereof, as
necessary to cause compliance with such Legal Requirement at any time when, in
the judgment of Lender, the validity, applicability or violation of such Legal
Requirement is finally established or the Property (or any part thereof or
interest therein) shall be in danger of being sold, forfeited, terminated,
cancelled or lost.
5.1.2 Taxes and Other Charges.
Borrower shall pay all Taxes and Other Charges now or hereafter levied
or assessed or imposed against the Property or any part thereof prior to
delinquency thereof. Borrower shall furnish to Lender receipts, or other
evidence for the payment of the Taxes and the Other Charges prior to the date
the same shall become delinquent (provided, however, that Borrower is not
required to furnish such receipts for payment of Taxes in the event that such
Taxes are being paid by Lender pursuant to Section 7.2 hereof). Borrower shall
not suffer and shall promptly cause to be paid and discharged any Lien or charge
whatsoever which may be or become a Lien or charge against the Property, and
shall promptly pay for all utility services provided to the 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
48
Charges, provided that (i) no Event of Default has occurred and remains uncured;
(ii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder and such proceeding shall be conducted
in accordance with all Legal Requirements; (iii) neither the Property nor any
part thereof or interest therein will be in danger of being sold, forfeited,
terminated, cancelled or lost; (iv) Borrower shall promptly upon final
determination thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith; (v) such proceeding shall suspend the collection of such
contested Taxes or Other Charges from the Property; and (vi) Borrower shall
furnish 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. Lender may apply such security
or part thereof held by Lender at any time when, in the judgment of Lender, the
validity or applicability of such Taxes or Other Charges are established or the
Property (or part thereof or interest therein) shall be in danger of being sold,
forfeited, terminated, cancelled or lost or there shall be any danger of the
Lien of the Security Instrument being primed by any related Lien.
5.1.3 Litigation.
Borrower shall give prompt written notice to Lender of any litigation
or governmental proceedings pending or threatened against Borrower which might
materially adversely affect Borrower's condition (financial or otherwise) or
business or the Property.
5.1.4 Access to the Property.
Borrower shall permit agents, representatives and employees of Lender
to inspect the Property or any part thereof at reasonable hours upon reasonable
advance notice.
5.1.5 Notice of Default.
Borrower shall promptly advise Lender of any material adverse change in
Borrower's condition, financial or otherwise, or of the occurrence of any
Default or Event of Default of which Borrower has knowledge.
5.1.6 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 adversely 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.
5.1.7 Award and Insurance Benefits.
Borrower shall cooperate with Lender in obtaining for Lender the
benefits of any Awards or Insurance Proceeds lawfully or equitably payable in
connection with the Property, and Lender shall be reimbursed for any expenses
incurred in connection therewith (including attorneys' fees and disbursements,
and the payment by Borrower of the expense of an appraisal on behalf of
49
Lender in case of Casualty or Condemnation affecting the Property or any part
thereof) out of such Award or Insurance Proceeds.
5.1.8 Further Assurances.
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 Borrower 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 the obligations of Borrower under the Loan
Documents, as Lender may reasonably require including, without limitation, the
authorization of Lender to execute and/or the execution by Borrower of UCC
financing statements and the execution and delivery of all such writings
necessary to transfer any liquor licenses into the name of Lender or its
designee after the occurrence of any Event of Default; 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.
5.1.9 Mortgage and Intangible Taxes.
Borrower shall pay (to the extent permitted by Applicable Law) all
State, county and municipal recording, mortgage, intangible, and all other taxes
imposed upon the execution and recordation of the Security Instrument and/or
upon the execution and delivery of the Note.
5.1.10 Financial Reporting.
(a) Borrower and Operating Lessee will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance with GAAP (or
such other accounting basis acceptable to Lender), proper and accurate books,
records and accounts reflecting all of the financial affairs of Borrower and
Operating Lessee and all items of income and expense in connection with the
operation on an individual basis of the Property. 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,
Operating Lessee or any other Person maintaining such books, records and
accounts and to make such copies or extracts thereof as Lender shall desire.
Upon the occurrence and during the continuance 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 Property, as Lender shall determine to be
necessary or appropriate.
50
(b) Borrower will furnish to Lender annually, within ninety (90) days
following the end of each Fiscal Year, a complete copy of (i) Operating Lessee's
annual financial statements certified by a Responsible Officer of Operating
Lessee accompanied by a consolidating schedule reflecting the results of
operation of the Property, (ii) Borrower's annual financial statements certified
by a Responsible Officer of Borrower, both in accordance with GAAP (or such
other accounting basis acceptable to Lender) covering the Property for such
Fiscal Year and containing statements of profit and loss and a balance sheet and
(iii) an operating statement certified by a Responsible Officer of Borrower for
the Property which presents the operating results of the Property in a manner
consistent with those operating statements given by Borrower to Lender in
connection with Lender's underwriting of the Loan, which operating statement
shall be in substantially the form attached hereto as Schedule 5.1.10. Such
statements referred to in subsection (iii) above shall set forth the financial
condition and the results of operations of the Property for such Fiscal Year,
and shall include, but not be limited to, amounts representing annual Net Cash
Flow, Net Operating Income, Gross Income from Operations and Operating Expenses.
Borrower's and Operating Lessee's annual financial statements shall be
accompanied by (i) a comparison of the budgeted income and expenses and the
actual income and expenses for the prior Fiscal Year, (ii) a certificate
executed by a Responsible Officer or other appropriate officer of Borrower, an
Operating Lessee SPE Entity or Principal, as applicable, stating that each such
annual financial statement presents fairly the financial condition and the
results of operations of Borrower, Operating Lessee and the Property being
reported upon and has been prepared in accordance with GAAP, and (iii) an annual
occupancy report for such year, including the average daily room rate for such
year. Notwithstanding the foregoing, for calendar year 2003 only, the statements
required pursuant to Section 5.1.10(b)(i) and (ii) hereof shall assume
Borrower's operations commenced on August 1, 2003.
(c) Borrower will furnish, or cause to be furnished, to Lender on or
before forty-five (45) days after the end of each calendar quarter the following
items, accompanied by a certificate of a Responsible Officer or other
appropriate officer of Borrower or Principal, as applicable, stating that such
items are true, correct, accurate, and complete and fairly present the results
of the operations of Borrower and the Property: (i) a report of occupancy for
the subject quarter including an average daily rate, and any and all franchise
inspection reports received by Borrower during the subject quarter accompanied
by an Officer's Certificate with respect thereto; (ii) quarterly and
year-to-date operating statements (including Capital Expenditures) presented for
the Property in a form consistent with the operating statements delivered by
Borrower to Lender in connection with Lender's underwriting of the Loan) which
operating statement shall be in substantially the form attached hereto as
Schedule 5.1.10) and prepared for each calendar quarter, noting Net Operating
Income, Gross Income from Operations, and Operating Expenses (not including any
contributions to the Replacement Reserve Fund), and other information necessary
and sufficient to fairly present the results of operation of the Property during
such calendar quarter, and containing a comparison of budgeted income and
expenses and the actual income and expenses; (iii) a detailed explanation of any
variances which are both (I) ten percent (10%) or more and (II) in excess of
$20,000 between budgeted and actual amounts for such periods, all in form
satisfactory to Lender; and (iv) a calculation reflecting the annual Debt
Service Coverage Ratio for the immediately preceding twelve (12) month period as
of the last day of such quarter accompanied by an Officer's Certificate with
respect thereto.
51
(d) Beginning in Fiscal Year 2004 and for each Fiscal Year thereafter,
(I) Borrower shall submit to Lender a preliminary Annual Budget for the Property
not later than thirty (30) days prior to the commencement of such Fiscal Year
and (II) Borrower shall submit to Lender a final proposed Annual Budget for the
Property not later than sixty (60) days after to the commencement of such Fiscal
Year, each in form reasonably satisfactory to Lender, and shall be subject to
Lender's written approval (each such Annual Budget after it has been approved in
writing by Lender shall be hereinafter referred to as an "Approved Annual
Budget"). In the event that Lender objects to either the preliminary or final
proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of
such objections within fifteen (15) days after receipt respectively thereof (and
deliver to Borrower a reasonably detailed description of such objections) and
Borrower shall promptly revise such Annual Budget and resubmit the same to
Lender. Lender shall advise Borrower of any objections to such revised Annual
Budget within ten (10) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall promptly
revise the same in accordance with the process described in this subsection
until Lender approves the Annual Budget. Until such time that Lender approves a
proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual
increases in Taxes, Insurance Premiums and utilities expenses. Any such proposed
preliminary or final proposed Annual Budget submitted to Lender for approval
shall be deemed approved if (i) Borrower delivers to Lender a written request
for such approval marked in bold lettering with the following language:
"LENDER'S RESPONSE IS REQUIRED WITHIN FIFTEEN (15) BUSINESS DAYS OF RECEIPT OF
THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED
AND LENDER. FAILURE TO RESPOND SHALL BE DEEMED AN APPROVAL." and the envelope
containing the request is marked "PRIORITY"; and (ii) Lender shall have failed
to notify Borrower of its approval or disapproval within such fifteen (15)
Business Days following Lender's receipt of Borrower's written request together
with such proposed preliminary or final proposed Annual Budget, and any and all
other information and documentation relating thereto reasonably required by
Lender to reach a decision.
(e) Borrower shall furnish to Lender, within ten (10) Business Days
after written request such further detailed information with respect to the
operation of the Property and the financial affairs of Borrower as may be
reasonably requested by Lender.
(f) Any reports, statements or other information required to be
delivered under this Agreement shall be delivered (i) in paper form, (ii) if
requested by Lender, on a diskette or via email, and (iii) if requested by
Lender and within the capabilities of Borrower's data systems without change or
modification thereto, in electronic form and prepared using a Microsoft Excel,
Microsoft Word for Windows or WordPerfect for Windows files (which files may be
prepared using a spreadsheet program and saved as word processing files).
(g) Borrower agrees that Lender may forward to each purchaser,
transferee, assignee, servicer, participant, or investor in all or any portion
of the Loan or any Securities (collectively, the "Investor") or any Rating
Agency rating such participations and/or Securities and each prospective
Investor, and any organization maintaining databases on the underwriting and
performance of commercial mortgage loans, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any
52
Indemnitor and the Property, whether furnished by Borrower, any Guarantor, any
Indemnitor or otherwise, as Lender determines necessary or desirable. To the
fullest extent permitted by Legal Requirements, Borrower irrevocably waives any
and all rights it may have under any Legal Requirements to prohibit such
disclosure, including, but not limited, to any right of privacy.
5.1.11 Business and Operations.
Borrower and Operating Lessee will continue to engage in the businesses
presently conducted by them as and to the extent the same are necessary for the
ownership, maintenance, management and operation of the Property. Borrower and
Operating Lessee will remain in good standing under the laws of each
jurisdiction to the extent required for the ownership, maintenance, management
and operation of the Property.
5.1.12 Costs of Enforcement.
In the event (a) that the Security Instrument encumbering the Property
is foreclosed in whole or in part or that the Security Instrument is put into
the hands of an attorney for collection, suit, action or foreclosure, (b) of the
foreclosure of any mortgage prior to or subsequent to the Security Instrument
encumbering the Property in which proceeding Lender is made a party, or (c) of
the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Borrower, Operating Lessee or any of their constituent Persons or an
assignment by Borrower, Operating Lessee or any of their constituent Persons for
the benefit of its creditors, Borrower, Operating Lessee, their successors or
assigns, shall be chargeable with and agrees to pay all costs of collection and
defense, including attorneys' fees and costs, incurred by Lender, Borrower, or
Operating Lessee in connection therewith and in connection with any appellate
proceeding or post-judgment action involved therein, together with all required
service or use taxes.
5.1.13 Estoppel Statement.
(a) After written request by Lender, Borrower shall within ten (10)
Business Days furnish Lender with a statement, duly acknowledged and certified,
setting forth (i) the amount of the original principal amount of the Note, (ii)
the unpaid principal amount of the Note, (iii) the Applicable Interest Rate of
the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Debt, and (vi) that the
Note, this Agreement, the Security Instrument and the other Loan Documents are
valid, legal and binding obligations and have not been modified or if modified,
giving particulars of such modification.
(b) Borrower shall deliver to Lender upon request, tenant estoppel
certificates from each commercial tenant leasing space at the Property in form
and substance reasonably satisfactory to Lender.
(c) Borrower shall use commercially reasonable efforts, promptly upon
request of Lender, deliver an estoppel certificate from Franchisor stating that
(i) the Franchise Agreement is in full force and effect and has not been
modified, amended or assigned, (ii) neither Franchisor nor Operating Lessee is
in default under any of the terms, covenants or provisions of the Franchise
Agreement and Franchisor knows of no event which, but for the passage of time or
the giving of notice or both, would constitute an event of default under the
Franchise Agreement, (iii) neither Franchisor nor Operating Lessee has commenced
any action or given or received any
53
notice for the purpose of terminating the Franchise Agreement and (iv) all sums
due and payable to Franchisor under the Franchise Agreement have been paid in
full.
(d) Borrower shall, promptly upon request of Lender, deliver to Lender
an estoppel certificate from Operating Lessee stating that (i) the Operating
Lease is in full force and effect and has not been modified, amended or
assigned, (ii) neither Operating Lessee nor Borrower is in default under any of
the terms, covenants or provisions of the Operating Lease and Operating Lessee
knows of no event which, but for the passage of time or the giving of notice or
both, would constitute an event of default under the Operating Lease, (iii)
neither Operating Lessee nor Borrower has commenced any action or given or
received any notice for the purpose of terminating the Operating Lease and (iv)
all sums due and payable under the Operating Lease have been paid in full.
5.1.14 Intentionally Deleted.
5.1.15 Performance by Borrower.
Borrower shall in a timely manner observe, perform and fulfill each and
every covenant, term and provision of each Loan Document executed and delivered
by, or applicable to, 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, Borrower without
the prior written consent of Lender.
5.1.16 Confirmation of Representations.
Borrower shall deliver, in connection with any Securitization, (a) one
or more Officer's Certificates certifying as to the accuracy in all material
respects of all representations made by Borrower in the Loan Documents as of the
date of the closing of such Securitization in all relevant jurisdictions, and
(b) certificates of the relevant Governmental Authorities in all relevant
jurisdictions indicating the good standing and qualification of Borrower,
Principal and the Operating Lessee SPE Entities as of the date of the closing of
such Securitization.
5.1.17 Leasing Matters.
(a) Borrower may (and may allow Operating Lessee to) enter into a
proposed Lease (including the renewal or extension of an existing Lease (a
"Renewal Lease")) without the prior written consent of Lender, provided such
proposed Lease or Renewal Lease (i) provides for rental rates and terms
comparable to existing local market rates and terms (taking into account the
type and quality of the tenant) as of the date such Lease is executed by
Borrower or Operating Lessee (unless, in the case of a Renewal Lease, the rent
payable during such renewal, or a formula or other method to compute such rent,
is provided for in the original Lease), (ii) is an arms-length transaction with
a bona fide, independent third party tenant, (iii) does not have a material
adverse effect on the value or quality of the Property, (iv) is subject and
subordinate to the Security Instrument and, upon Lender's reasonable request,
the lessee thereunder agrees to attorn to Lender and (v) is not a Major Lease.
All proposed Leases which do not satisfy the requirements set forth in this
Section 5.1.17(a) shall be subject to the prior approval of Lender, which
approval shall not be unreasonably withheld, delayed or conditioned. At Lender's
request, Borrower shall promptly deliver to Lender copies of all Leases which
are entered into pursuant
54
to this Subsection together with Borrower's certification that it has satisfied
all of the conditions of this Section.
(b) Borrower and/or Operating Lessee, as applicable, (i) shall observe
and perform all the obligations imposed upon the lessor under the Major Leases
and shall not do or permit to be done anything to impair the value of any of the
Major Leases as security for the Debt; (ii) shall promptly send copies to Lender
of all notices of default or other material matters which Borrower or Operating
Lessee shall send or receive with respect to the Major Leases; (iii) shall
enforce all of the material terms, covenants and conditions contained in the
Major Leases upon the part of the tenant thereunder to be observed or performed
(except for termination of a Major Lease which shall require Lender's prior
written approval); (iv) shall not collect any of the Rents more than one (1)
month in advance (except Security Deposits shall not be deemed Rents collected
in advance); (v) shall not execute any other assignment of the lessor's interest
in any of the Leases or the Rents; and (vi) shall not consent to any assignment
of or subletting under any Major Leases not in accordance with their terms,
without the prior written consent of Lender, which consent shall not be
unreasonably withheld, delayed or conditioned.
(c) Borrower may (and may allow Operating Lessee to), without the
consent of Lender, amend, modify or waive the provisions of any Lease or
terminate, reduce rents under, accept a surrender of space under, or shorten the
term of, any Lease (including any guaranty, letter of credit or other credit
support with respect thereto) provided that such Lease is not a Major Lease and
that such action (taking into account, in the case of a termination, reduction
in rent, surrender of space or shortening of term, the planned alternative use
of the affected space) does not have a material adverse effect on the value of
the Property taken as a whole, and provided that such Lease, as amended,
modified or waived, is otherwise in compliance with the requirements of this
Agreement and any lease subordination agreement binding upon Lender with respect
to such Lease. A termination of a Lease (other than a Major Lease) with a tenant
who is in default beyond applicable notice and grace periods shall not be
considered an action which has a material adverse effect on the value of the
Property taken as a whole. Any amendment, modification, waiver, termination,
rent reduction, space surrender or term shortening which does not satisfy the
requirements set forth in this Subsection shall be subject to the prior written
approval of Lender and its counsel, at Borrower's expense. At Lender's request,
Borrower shall promptly deliver to Lender copies of all Leases, amendments,
modifications and waivers which are entered into pursuant to this Section
5.1.17(c) together with Borrower's certification that it has satisfied all of
the conditions of this Section 5.1.17(c).
(d) Notwithstanding anything contained herein to the contrary, Borrower
shall not (and shall not allow Operating Lessee to), without the prior written
consent of Lender, enter into, materially amend, materially modify, waive any
material provisions of, terminate, reduce rents under, accept a surrender of
space under, or shorten the term of, or renew or extend upon terms and
conditions less favorable to Operating Lessee, any Major Lease or any instrument
guaranteeing or providing credit support for any Major Lease; provided, however,
Borrower shall not be required to obtain Lender's written consent to any
immaterial, non-economic change or beneficial economic change to a Major Lease
that is for sit-down restaurant facilities at the Property.
55
(e) To the extent actually received by Lender, Lender shall hold any
and all monies representing security deposits under the Leases (the "Security
Deposits") received by Lender, in accordance with the terms of the respective
Lease, and shall only release the Security Deposits in order to return a
tenant's Security Deposit to such tenant if such tenant is entitled to the
return of the Security Deposit under the terms of the Lease.
(f) To the extent that Lender's consent or approval is required under
this Section 5.1.17, any such proposed modification, change, supplement,
alteration, amendment, assignment or sublease of a Lease or Major Lease
submitted to Lender for approval shall be deemed approved if (i) Borrower
delivers to Lender a written request for such approval marked in bold lettering
with the following language: "LENDER'S RESPONSE IS REQUIRED WITHIN FIFTEEN (15)
BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN
AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER. FAILURE TO RESPOND SHALL BE DEEMED
AN APPROVAL." and the envelope containing the request is marked "PRIORITY"; and
(ii) Lender shall have failed to notify Borrower of its approval or disapproval
within such fifteen (15) Business Days following Lender's receipt of Borrower's
written request together with such proposed modification, change, supplement,
alteration, amendment, assignment or sublease of a Lease or Major Lease, and any
and all other information and documentation relating thereto reasonably required
by Lender to reach a decision. In no event shall Lender be deemed to have
approved (1) a surrender, termination or cancellation of a Lease or Major Lease,
(2) any change having a material adverse effect on Borrower's or Operating
Lessee's costs or obligations, or rent payable to Borrower or Operating Lessee,
under a Lease or Major Lease, or (3) a new Lease or Major Lease with a new
tenant. Upon Borrower's request, Lender shall deliver to Borrower a reasonably
detailed description of the reasons for any disapprovals under this Section
5.1.17.
5.1.18 Management Agreement.
(a) The Improvements on the Property are operated under the terms and
conditions of the Management Agreement. In no event shall the base management
fees under the Management Agreement exceed (I) if the Property is managed by
InterContinental Hotels Group, the sum of (x) five percent (5%) of total room
revenue and (y) two percent (2%) of total revenue; provided, however,
InterContinental Hotels Group shall not charge any additional franchise fees in
connection with the Property and (II) if the Property is managed by any Person
other than InterContinental Hotels Group, four percent (4%) of the gross income
derived from the Property (excluding any incentive management fees which are
subordinate to the Loan). Borrower shall (or shall cause Operating Lessee to)
(i) diligently perform and observe all of the terms, covenants and conditions of
the Management Agreement, on the part of Operating Lessee to be performed and
observed to the end that all things shall be done which are necessary to keep
unimpaired the rights of Operating Lessee under the Management Agreement and
(ii) promptly notify Lender of the giving of any notice by Manager to Operating
Lessee of any default by Operating Lessee in the performance or observance of
any of the terms, covenants or conditions of the Management Agreement on the
part of Operating Lessee to be performed and observed and deliver to Lender a
true copy of each such notice. Neither Borrower nor Operating Lessee shall
surrender the Management Agreement, consent to the assignment by the Manager of
its interest under the Management Agreement, or terminate or cancel the
Management Agreement, or modify, change, supplement, alter or amend the
Management Agreement, in any material respect, either orally or
56
in writing. Borrower hereby assigns (and Borrower shall cause Operating Lessee
to assign) to Lender as further security for the payment of the Debt and for the
performance and observance of the terms, covenants and conditions of this
Agreement, all the rights, privileges and prerogatives of Borrower and/or
Operating Lessee to surrender the Management Agreement, or to terminate, cancel,
modify, change, supplement, alter or amend the Management Agreement, in any
material respect, and any such surrender of the Management Agreement, or
termination, cancellation, modification, change, supplement, alteration or
amendment of the Management Agreement in any material respect, without the prior
consent of Lender, shall be void and of no force and effect. Any such proposed
modification, change, supplement, alteration or amendment of the Management
Agreement submitted to Lender for approval shall be deemed approved if (i)
Borrower delivers to Lender a written request for such approval marked in bold
lettering with the following language: "LENDER'S RESPONSE IS REQUIRED WITHIN
FIFTEEN (15) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A
LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER. FAILURE TO RESPOND SHALL BE
DEEMED AN APPROVAL." and the envelope containing the request is marked
"PRIORITY"; and (ii) Lender shall have failed to notify Borrower of its approval
or disapproval within such fifteen (15) Business Days following Lender's receipt
of Borrower's written request together with such proposed modification, change,
supplement, alteration or amendment of the Management Agreement, and any and all
other information and documentation relating thereto reasonably required by
Lender to reach a decision. In no event shall Lender be deemed to have approved
(1) a surrender, termination or cancellation of the Management Agreement, (2)
any change having a material adverse effect on Borrower's or Operating Lessee's
costs or obligations under the Management Agreement, or (3) or a new management
agreement with a new property manager. Upon Borrower's request, Lender shall
deliver to Borrower a reasonably detailed description of the reasons for any
disapprovals under this Section 5.1.18.
If Operating Lessee shall default in the performance or observance of
any material term, covenant or condition of the Management Agreement on the part
of Operating Lessee to be performed or observed, then, without limiting the
generality of the other provisions of this Agreement, and without waiving or
releasing Borrower from any of its obligations hereunder, Lender shall have the
right, but shall be under no obligation, to pay any sums and to perform any act
or take any action as may be appropriate to cause all the terms, covenants and
conditions of the Management Agreement on the part of Operating Lessee to be
performed or observed to be promptly performed or observed on behalf of
Operating Lessee to the end that the rights of Operating Lessee in, to and under
the Management Agreement shall be kept unimpaired and free from default. Lender
and any Person designated by Lender by written notice to Borrower shall have,
and are hereby granted, the right to enter upon the Property at any time and
from time to time for the purpose of taking any such action. If the Manager
shall deliver to Lender a copy of any notice sent to Borrower and/or Operating
Lessee of default under the Management Agreement, such notice shall constitute
full protection to Lender for any action taken or omitted to be taken by Lender
in good faith, in reliance thereon. Borrower and Operating Lessee shall not, and
shall not permit the Manager to, sub-contract all or any material portion of its
management responsibilities under the Management Agreement to a third-party
without the prior written consent of Lender, which consent shall not be
unreasonably withheld, delayed or conditioned. Borrower shall, from time to
time, cause Operating Lessee to request of Manager and deliver to Lender upon
receipt such certificates of estoppel with respect to compliance by
57
Operating Lessee with the terms of the Management Agreement as may be reasonably
requested by Lender. Borrower and/or Operating Lessee shall exercise each
individual option, if any, to extend or renew the term of the Management
Agreement to the extent required to continue it in full force and effect until
after the Maturity Date, and Borrower hereby authorizes and appoints (and shall
cause Operating Lessee to authorize and appoint) Lender their attorney-in-fact
to exercise any such option in the name of and upon behalf of Borrower and/or
Operating Lessee, which power of attorney shall be irrevocable and shall be
deemed to be coupled with an interest. Any sums expended by Lender pursuant to
this paragraph (i) shall bear interest at the Default Rate from the date such
cost is incurred to the date of payment to Lender, (ii) shall be deemed to
constitute a portion of the Debt, (iii) shall be secured by the lien of the
Security Instrument and the other Loan Documents and (iv) shall be immediately
due and payable upon demand by Lender therefor.
(a) Without limitation of the foregoing, Borrower shall cause Operating
Lessee, upon the request of Lender and in accordance with the provisions of the
applicable Assignment of Management Agreement, to terminate the Management
Agreement and replace the Manager, without penalty or fee, if at any time during
the Loan: (a) the Manager shall become insolvent or a debtor in any bankruptcy
or insolvency proceeding, (b) there exists an Event of Default or (c) there
exists an event of default by Manager under the Management Agreement. At such
time as the Manager may be removed, provided no Event of Default has occurred, a
Qualified Manager may be selected by Borrower and/or Operating Lessee to assume
management of the Property pursuant to a Replacement Management Agreement.
5.1.19 Environmental Covenants.
(a) Borrower covenants and agrees that so long as the Loan is
outstanding (i) all uses and operations on or of the Property, whether by
Borrower or any other Person, shall be in compliance in all material respects
with all Environmental Laws and permits issued pursuant thereto; (ii) there
shall be no Releases of Hazardous Materials in, on, under or from the Property;
(iii) there shall be no Hazardous Materials in, on, or under the Property,
except those that are both (A) in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required, and (B) (1)
in amounts not in excess of that necessary to operate the Property or (2) fully
disclosed to and approved by Lender in writing; (iv) Borrower shall keep the
Property free and clear of all liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of Borrower or any
other Person (the "Environmental Liens"); (v) Borrower shall, at its sole cost
and expense, fully and expeditiously cooperate in all activities pursuant to
paragraph (b) below, including but not limited to providing all relevant
information and making knowledgeable persons available for interviews; (vi)
Borrower shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Property, pursuant to any reasonable written request of Lender, upon
Lender's reasonable belief that the Property is not in full compliance with all
Environmental Laws, and share with Lender the reports and other results thereof,
and Lender and other Indemnified Parties shall be entitled to rely on such
reports and other results thereof; (vii) Borrower shall, at its sole cost and
expense, comply with all reasonable written requests of Lender to (A) reasonably
effectuate remediation of any Hazardous Materials in, on, under or from the
Property; and (B) comply with any Environmental Law; (viii) Borrower shall not
allow any tenant or other user of the Property to violate any Environmental
58
Law; and (ix) Borrower shall immediately notify Lender in writing after it has
become aware of (A) any presence or Release or threatened Releases of Hazardous
Materials in, on, under, from or migrating towards the Property; (B) any
non-compliance with any Environmental Laws related in any way to the Property;
(C) any actual or potential Environmental Lien; (D) any required or proposed
remediation of environmental conditions relating to the Property; and (E) any
written or oral notice or other communication of which Borrower becomes aware
from any source whatsoever (including but not limited to a Governmental
Authority) relating in any way to Hazardous Materials in connection with the
Property.
(a) Lender and any other Person designated by Lender by written notice
to Borrower, including but not limited to any representative of a Governmental
Authority, and any environmental consultant, and any receiver appointed by any
court of competent jurisdiction, shall have the right, but not the obligation,
to enter upon the Property at all reasonable times to assess any and all aspects
of the environmental condition of the Property and its use, including but not
limited to conducting any environmental assessment or audit (the scope of which
shall be determined in Lender's sole and absolute discretion) and taking samples
of soil, groundwater or other water, air, or building materials, and conducting
other invasive testing. Borrower shall cooperate with and provide access to
Lender and any such Person or entity designated by Lender by written notice to
Borrower.
5.1.20 Alterations.
Borrower shall obtain Lender's prior written consent to (i) any
structural alteration or (ii) any other alteration to any Improvements which is
estimated to cost in excess of four (4%) percent of the value of the Property,
which consent shall not be unreasonably withheld, delayed or conditioned, except
with respect to alterations that may have a material adverse effect on
Borrower's financial condition, the value of the Property or the Net Operating
Income thereof. Any such proposed alterations to any Improvements submitted to
Lender for approval shall be deemed approved if (i) Borrower delivers to Lender
a written request for such approval marked in bold lettering with the following
language: "LENDER'S RESPONSE IS REQUIRED WITHIN FIFTEEN (15) BUSINESS DAYS OF
RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE
UNDERSIGNED AND LENDER. FAILURE TO RESPOND SHALL BE DEEMED AN APPROVAL." and the
envelope containing the request is marked "PRIORITY"; and (ii) Lender shall have
failed to notify Borrower of its approval or disapproval within such fifteen
(15) Business Days following Lender's receipt of Borrower's written request
together with a reasonably detailed description of such proposed structural
alteration, and any and all other information and documentation relating thereto
reasonably required by Lender to reach a decision. In no event shall Lender be
deemed to have approved alterations that may have a material adverse effect on
Borrower's financial condition, the value of the Property or the Net Operating
Income thereof. Upon Borrower's request, Lender shall deliver to Borrower a
reasonably detailed description of the reasons for any disapprovals under this
Section 5.1.20.
5.1.21 Franchise Agreement.
The Improvements on the Property shall be operated under the terms and
conditions of the Franchise Agreement, if applicable. Borrower shall (or shall
cause Operating Lessee to) (i)
59
pay all sums required to be paid by Operating Lessee under the Franchise
Agreement, (ii) diligently perform, observe and enforce all of the terms,
covenants and conditions of the Franchise Agreement on the part of Operating
Lessee to be performed, observed and enforced to the end that all things shall
be done which are necessary to keep unimpaired the rights of Borrower and/or
Operating Lessee under the Franchise Agreement, (iii) promptly notify Lender of
the giving of any notice to Operating Lessee of any default by Operating Lessee
in the performance or observance of any of the terms, covenants or conditions of
the Franchise Agreement on the part of Operating Lessee to be performed and
observed and deliver to Lender a true copy of each such notice, and (iv)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditure plan, notice, report and estimate received by it under the
Franchise Agreement. Subject to the provisions of Section 5.1.21(b), Borrower
shall not (and shall cause Operating Lessee to not), without the prior consent
of Lender, surrender the Franchise Agreement or terminate or cancel the
Franchise Agreement or modify, change, supplement, alter or amend the Franchise
Agreement, in any material respect, either orally or in writing. Any such
proposed modification, change, supplement, alteration or amendment of the
Franchise Agreement submitted to Lender for approval shall be deemed approved if
(i) Borrower delivers to Lender a written request for such approval marked in
bold lettering with the following language: "LENDER'S RESPONSE IS REQUIRED
WITHIN FIFTEEN (15) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE
TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER. FAILURE TO RESPOND
SHALL BE DEEMED AN APPROVAL." and the envelope containing the request is marked
"PRIORITY"; and (ii) Lender shall have failed to notify Borrower of its approval
or disapproval within such fifteen (15) Business Days following Lender's receipt
of Borrower's written request together with such proposed modification, change,
supplement, alteration or amendment of the Franchise Agreement, and any and all
other information and documentation relating thereto reasonably required by
Lender to reach a decision. In no event shall Lender be deemed to have approved
(1) a surrender, termination or cancellation of the Franchise Agreement, (2) any
change having a material adverse effect on Borrower's or Operating Lessee's
costs or obligations under the Franchise Agreement, or (3) a new franchise
agreement with a new franchisor. Upon Borrower's request, Lender shall deliver
to Borrower a reasonably detailed description of the reasons for any
disapprovals under this Section 5.1.21.
Borrower hereby assigns (and Borrower shall cause Operating Lessee to
assign) to Lender as further security for the payment of the Debt and for the
performance and observance of the terms, covenants and conditions of this
Agreement, all the rights, privileges and prerogatives of Borrower and Operating
Lessee to surrender the Franchise Agreement or to terminate, cancel, modify,
change, supplement, alter or amend the Franchise Agreement in any material
respect, and any such surrender of the Franchise Agreement or termination,
cancellation, modification, change, supplement, alteration or amendment of the
Franchise Agreement in any material respect without the prior consent of Lender
shall be void and of no force and effect. If Operating Lessee shall default in
the performance or observance of any material term, covenant or condition of the
Franchise Agreement on the part of Operating Lessee to be performed or observed,
then, without limiting the generality of the other provisions of this Agreement,
and without waiving or releasing Borrower from any of its obligations hereunder,
Lender shall have the right, but shall be under no obligation, to pay any sums
and to perform any act or take any action as may be appropriate to cause all the
terms, covenants and conditions of the Franchise Agreement on the part of
Operating Lessee to be performed or observed to be
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promptly performed or observed on behalf of Operating Lessee, to the end that
the rights of Operating Lessee in, to and under the Franchise Agreement shall be
kept unimpaired and free from default. Lender and any Person designated by
Lender by written notice to Borrower shall have, and are hereby granted, the
right to enter upon the Property at any time and from time to time for the
purpose of taking any such action. If Franchisor shall deliver to Lender a copy
of any notice sent to Borrower and/or Operating Lessee of default under the
Franchise Agreement, such notice shall constitute full protection to Lender for
any action taken or omitted to be taken by Lender in good faith, in reliance
thereon. Borrower shall, from time to time, use its best efforts to obtain from
Franchisor such certificates of estoppel with respect to compliance by Operating
Lessee with the terms of the Franchise Agreement as may be requested by Lender.
Borrower and/or Operating Lessee shall exercise each individual option, if any,
to extend or renew the term of the Franchise Agreement to the extent required to
continue it in full force and effect until after the Maturity Date, and Borrower
hereby expressly authorizes and appoints (and Borrower shall cause Operating
Lessee to authorize and appoint) Lender as its attorney-in-fact to exercise any
such option in the name of and upon behalf of Borrower and/or Operating Lessee,
which power of attorney shall be irrevocable and shall be deemed to be coupled
with an interest. Any sums expended by Lender pursuant to this paragraph shall
bear interest at the Default Rate from the date such cost is incurred to the
date of payment to Lender, shall be deemed to constitute a portion of the Debt,
shall be secured by the lien of the Security Instrument and the other Loan
Documents and shall be immediately due and payable upon demand by Lender
therefor.
5.1.22 Operating Lease.
Borrower shall:
(i) promptly perform and/or observe all of the covenants and
agreements required to be performed and observed by it under the Operating Lease
and do all things necessary to preserve and to keep unimpaired its rights
thereunder;
(ii) promptly notify Lender of any event of default under the
Operating Lease;
(iii) promptly enforce the performance and observance of all
of the covenants and agreements required to be performed and/or observed by the
Operating Lessee under the Operating Lease.
5.1.23 OFAC.
At all times throughout the term of the Loan, Borrower, Guarantor,
Indemnitor and their respective Affiliates shall be in compliance in all
material respects with all applicable orders, rules, regulations and
recommendations of The Office of Foreign Assets Control of the U.S. Department
of the Treasury.
5.1.24 Intentionally Deleted.
Section 5.2 Negative Covenants.
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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
Liens of all Security Instrument encumbering the Property in accordance with the
terms of this Agreement and the other Loan Documents, Borrower covenants and
agrees with Lender that it will not do, directly or indirectly, any of the
following:
5.2.1 Liens.
Borrower shall not create, incur, assume or suffer to exist any Lien on
any portion of the Property or permit any such action to be taken, except for
Permitted Encumbrances.
5.2.2 Dissolution.
(a) Borrower shall not (a) engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (b) transfer,
lease or sell, in one transaction or any combination of transactions, the assets
or all or substantially all of the properties or assets of Borrower except to
the extent expressly permitted by the Loan Documents, (c) except as expressly
permitted under the Loan Documents, modify, amend, waive or terminate its
organizational documents or its qualification and good standing in any
jurisdiction or (d) cause Principal to (i) dissolve, wind up or liquidate or
take any action, or omit to take an action, as a result of which Principal would
be dissolved, wound up or liquidated in whole or in part, or (ii) except as
expressly permitted under the Loan Documents, amend, modify, waive or terminate
the certificate of incorporation, bylaws or similar organizational documents of
Principal, in each case, without obtaining the prior written consent of Lender,
which consent (with respect to (d)(ii) only) shall not be unreasonably withheld,
delayed or conditioned.
(b) Borrower shall not permit Operating Lessee to (a) engage in any
dissolution, liquidation or consolidation or merger with or into any other
business entity, (b) transfer, lease or sell, in one transaction or any
combination of transactions, the assets or all or substantially all of the
properties or assets of Operating Lessee except to the extent expressly
permitted by the Loan Documents, (c) except as expressly permitted under the
Loan Documents, modify, amend, waive or terminate its organizational documents
or its qualification and good standing in any jurisdiction or (d) cause the
Operating Lessee Principal to (i) dissolve, wind up or liquidate or take any
action, or omit to take an action, as a result of which Operating Lessee
Principal would be dissolved, wound up or liquidated in whole or in part, or
(ii) except as expressly permitted under the Loan Documents, amend, modify,
waive or terminate the certificate of incorporation, bylaws or similar
organizational documents of Operating Lessee Principal, in each case, without
obtaining the prior written consent of Lender, which consent (with respect to
(d)(ii) only) shall not be unreasonably withheld, delayed or conditioned.
5.2.3 Change In Business.
Borrower shall not enter into any line of business other than the
ownership, acquisition, development, operation, leasing and management of the
Property (including providing services in connection therewith), 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.
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5.2.4 Debt Cancellation.
Borrower shall not cancel or otherwise forgive or release any material
claim or debt (other than termination of Leases in accordance herewith) owed to
Borrower by any Person, except for adequate consideration and in the ordinary
course of Borrower's business.
5.2.5 Zoning.
Borrower shall not initiate or consent to any zoning reclassification
of any portion of the Property or seek any variance under any existing zoning
ordinance or use or permit the use of any portion of the Property in any manner
that could result in such use becoming a non-conforming use under any zoning
ordinance or any other Applicable Law, without the prior written consent of
Lender.
5.2.6 No Joint Assessment.
Borrower shall not suffer, permit or initiate the joint assessment of
the Property with (a) any other real property constituting a tax lot separate
from the Property, or (b) any portion of the 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 the Property.
5.2.7 Name, Identity, Structure, or Principal Place of Business.
Borrower shall not change its name, identity (including its trade name
or names), or principal place of business set forth in the introductory
paragraph of this Agreement, without, in each case, first giving Lender thirty
(30) days prior written notice. Borrower shall not change its corporate,
partnership or other structure, or the place of its organization as set forth in
Section 4.1.34, without, in each case, the consent of Lender. Any such proposed
change submitted to Lender for approval shall be deemed approved if (i) Borrower
delivers to Lender a written request for such approval marked in bold lettering
with the following language: "LENDER'S RESPONSE IS REQUIRED WITHIN FIFTEEN (15)
BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN
AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER" and the envelope containing the
request is marked "PRIORITY"; (ii) Lender shall have failed to notify Borrower
of its approval or disapproval within such fifteen (15) Business Days following
Lender's receipt of Borrower's written request together with a description of
the nature of such proposed change, and any and all other information and
documentation relating thereto reasonably required by Lender to reach a
decision; (iii) Borrower delivers to Lender a second written request for such
approval marked in bold lettering with the following language: "LENDER'S
RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE
PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER.
FAILURE TO RESPOND SHALL BE DEEMED AN APPROVAL." and the envelope containing the
request is marked "PRIORITY - FINAL NOTICE" and contains the information and
documentation required by (ii) above; and (iv) Lender shall have failed to
notify Borrower of its approval or disapproval within such ten (10) Business
Days following Lender's receipt of the written request referenced in (iii)
above. Upon Lender's request, Borrower shall execute and
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deliver additional financing statements, security agreements and other
instruments which may be necessary to effectively evidence or perfect Lender's
security interest in the Collateral as a result of such change of principal
place of business or place of organization. Upon Borrower's request, Lender
shall deliver to Borrower a reasonably detailed description of the reasons for
any disapprovals under this Section 5.2.7.
5.2.8 ERISA.
(a) During the term of the Loan or of any obligation or right
hereunder, Borrower shall not be a Plan and none of the assets of Borrower shall
constitute Plan Assets.
(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its sole discretion, and represents and
covenants that (A) Borrower is not and does not maintain an "employee benefit
plan" as defined in Section 3(32) of ERISA, which is subject to Title I of
ERISA, or a "governmental plan" within the meaning of Section 3(3) of ERISA; (B)
Borrower is not subject to State statutes regulating investments and fiduciary
obligations with respect to governmental plans; and (C) one or more of the
following circumstances is true:
(i) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(ii) Less than twenty-five percent (25%) of each outstanding
class of equity interests in Borrower are held by "benefit plan
investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(iii) Borrower qualifies as an "operating company" or a "real
estate operating company" within the meaning of 29 C.F.R. Section
2510.3-101(c) or (e).
5.2.9 Affiliate Transactions.
Borrower shall not enter into, or be a party to, any transaction with
an Affiliate of Borrower, Principal, the Operating Lessee SPE Entities or any of
the partners of Borrower, Principal or the Operating Lessee SPE Entities except
in the ordinary course of business and on terms which are fully disclosed to
Lender in advance and are no less favorable to Borrower or such Affiliate than
would be obtained in a comparable arm's-length transaction with an unrelated
third party.
5.2.10 Transfers.
(a) Neither Borrower nor Operating Lessee shall sell, convey, mortgage,
grant, bargain, encumber, pledge, assign, grant options with respect to, or
otherwise transfer or dispose of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) the Property or any part thereof or any legal or
beneficial interest therein (other than in connection with a Condemnation) or
permit or suffer a Sale or Pledge of an interest in any Restricted Party
(collectively, a "Transfer"), other than pursuant to Leases of space in the
Improvements to tenants in accordance with the provisions of Section 5.1.17
hereof, without (i) the prior written consent of Lender and (ii) if a
Securitization
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has occurred, delivery to Lender of written confirmation from the Rating
Agencies that the Transfer will not result in the downgrade, withdrawal or
qualification of the then current ratings assigned to any Securities or the
proposed rating of any Securities.
(b) A Transfer shall include, but not be limited to: (i) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
for a price to be paid in installments; (ii) an agreement by Borrower leasing
all or a substantial part of the Property for other than actual occupancy by a
space tenant thereunder or a sale, assignment or other transfer of, or the grant
of a security interest in, Borrower's right, title and interest in and to any
Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger,
consolidation or Sale or Pledge of such corporation's stock or the creation or
issuance of new stock; (iv) if a Restricted Party is a limited or general
partnership or joint venture, any merger or consolidation or the change,
removal, resignation or addition of a general partner or the Sale or Pledge of
the partnership interest of any general partner or any profits or proceeds
relating to such partnership interest, or the Sale or Pledge of limited
partnership interests or any profits or proceeds relating to such limited
partnership interests or the creation or issuance of new limited partnership
interests; (v) if a Restricted Party is a limited liability company, any merger
or consolidation or the change, removal, resignation or addition of a managing
member or non-member manager (or if no managing member, any member) or the Sale
or Pledge of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership
interest, or the Sale or Pledge of non-managing membership interests or the
creation or issuance of new non-managing membership interests; or (vi) if a
Restricted Party is a trust or nominee trust, any merger, consolidation or the
Sale or Pledge of the legal or beneficial interest in a Restricted Party or the
creation or issuance of new legal or beneficial interests.
(c) Notwithstanding the provisions of Sections 5.2.10(a) and (b), the
following transfers shall not be deemed to be a Transfer: (i) a transfer by
devise or descent or by operation of law upon the death of a member, partner or
shareholder of a Restricted Party or a Restricted Party itself; (ii) the Sale or
Pledge, in one or a series of transactions, of not more than forty nine percent
(49%) of the stock in a Restricted Party; provided, however, no such transfers
shall result in the change of voting control in the Restricted Party, and as a
condition to each such transfer, Lender shall receive not less than thirty (30)
days prior written notice of such proposed transfer and (iii) the Sale or
Pledge, in one or a series of transactions, of not more than forty nine percent
(49%) of the limited partnership interests or non managing membership interests
(as the case may be) in a Restricted Party; provided, however, as a condition to
each such transfer, Lender shall receive not less than thirty (30) days prior
written notice of such proposed transfer.
(d) Lender shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Debt immediately due and payable upon a Transfer in violation of this
Section 5.2.10. This provision shall apply to every Transfer regardless of
whether voluntary or not, or whether or not Lender has consented to any previous
Transfer. Notwithstanding anything to the contrary contained in this Section
5.2.10, (a) no transfer (whether or not such transfer shall constitute a
Transfer) shall be made to any Prohibited Person and (b) in the event any
transfer (whether or not such transfer shall constitute a Transfer) results in
any Person owning in excess of forty-nine percent (49%) of the ownership
interest in a Restricted Party, Borrower shall, prior to such transfer, deliver
an updated
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Insolvency Opinion to Lender, which opinion shall be in form, scope and
substance acceptable in all respects to Lender and the Rating Agencies.
(e) Notwithstanding anything to the contrary contained in this Section
5.2.10, Lender's consent shall not be required for the financing or leasing of
personal property, including, without limitation, furniture, fixtures and
equipment owned or to be purchased by Borrower that is used in connection with
the operation of the Property ("Equipment"), provided Lender has received prior
written notification of Borrower's intent to finance such Equipment, and
provided, further, that (i) any such financing or leasing is subject to
commercially prudent terms and conditions and at a market rate of interest, (ii)
the Equipment financed or leased is readily replaceable without material
interference or interruption to the operation of the Property, and (iii) the
aggregate principal amount of such financing and leasing for Equipment located
on or used in connection with the Property is at all times less than $250,000
("Permitted FF&E Financing") and (iv) the financing does not create a Lien on
the Property other than on the Equipment financed or leased thereunder.
(f) Notwithstanding anything to the contrary contained in this Section
5.2.10, a transfer of direct or indirect limited partnership interests and/or
non-managing membership interests in a Restricted Party (other than Borrower,
Principal, the Operating Lessee SPE Entities or any Affiliated Manager) shall be
permitted provided that (i) FelCor Lodging Limited Partnership shall, at all
times, own, directly or indirectly, at least fifty-one percent (51%) of the
equity interests in, and Control, all Restricted Parties and (ii) FelCor Lodging
Trust Incorporated must at all times be the sole general partner of FelCor
Lodging Limited Partnership.
5.2.11 Permitted Transfer.
Notwithstanding anything to the contrary contained in Section 5.2.10 of
this Agreement, Lender shall not unreasonably withhold its consent to a one-time
sale, assignment, or other transfer of the Property or the entire ownership
interest in Borrower (and, if applicable, Operating Lessee) provided that (a)
Lender receives at least sixty (60) days prior written notice of such transfer,
(b) no Event of Default has occurred and is continuing under this Agreement, the
Security Instrument, the Note or the other Loan Documents and (c) upon the
satisfaction (in the reasonable determination of Lender) of the following
conditions:
(a) Borrower or Transferee (defined below) shall pay any and all costs
incurred in connection with the transfer (including, without limitation,
Lender's reasonable counsel fees and disbursements and all recording fees, title
insurance premiums and mortgage and intangible taxes);
(b) Borrower shall pay to Lender a transfer fee not to exceed 0.5% of
the then unpaid principal balance of the Loan;
(c) The (i) fee estate or ground leasehold estate of Borrower, as
applicable, shall be transferred to a transferee (the "Property Transferee") and
the operating leasehold estate of Operating Lessee, if any, shall simultaneously
be transferred to an entity in control of or controlled by such Property
Transferee (the "Operating Lease Transferee") or (ii) entire interest in
Borrower (and, if applicable, Operating Lessee) shall be transferred to a
transferee (the
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"Borrower Transferee"; together with the Property Transferee and the Operating
Lease Transferee, individually and collectively, as the context may require, the
"Transferee");
(d) Each Transferee shall comply with all of the requirements of
Section 4.1.35 hereof and the Operating Lease Subordination Agreement, as
applicable, or, Borrower and, if applicable, Operating Lessee shall continue to
comply with all of the requirements of Section 4.1.35 hereof and the Operating
Lease Subordination Agreement, as applicable;
(e) Each Transferee shall be a Qualified Transferee or entities wholly
owned and controlled by a Qualified Transferee;
(f) If the Property, rather than Borrower (and, if applicable,
Operating Lessee) is transferred, Transferee shall assume all of the obligations
of Borrower and Operating Lessee, as applicable, under the Note, the Security
Instrument, this Agreement and the other Loan Documents;
(g) The proposed replacement guarantor shall assume all of the
obligations of Guarantor under the Guaranty and Environmental Indemnity, in a
manner satisfactory to Lender in all respects, including, without limitation, by
entering into an assumption agreement in form and substance satisfactory to
Lender and delivering such legal opinions as Lender may reasonably require and
such proposed replacement guarantor's (i) net worth, as reasonably determined by
Lender, shall be at least 150% of the original principal balance of the Loan and
(ii) creditworthiness and liquidity shall be satisfactory to Lender in all
respects;
(h) Unless Transferee delivers the written confirmation from the Rating
Agencies required by Section 5.2.11(i) hereof, the Property shall be managed by
a Qualified Manager following such transfer;
(i) If a Securitization has occurred, Transferee shall deliver to
Lender written confirmation from the Rating Agencies that the transfer and the
assumption by Transferee shall not result in a downgrade, withdrawal or
qualification of the ratings then assigned to the Securities;
(j) If the Property, rather than Borrower (and, if applicable,
Operating Lessee) is transferred, Transferee shall deliver an endorsement to the
existing Title Insurance Policy insuring the Security Instrument as modified by
the assumption agreement, as a valid first lien on the Property and naming
Transferee as owner of the fee estate, ground leasehold estate or operating
leasehold estate in the Property, as applicable, which endorsement shall insure
that as of the recording of the assumption agreement, the Property shall not be
subject to any additional Permitted Encumbrances other than those contained in
the Title Insurance Policy on the Closing Date;
(k) Transferee shall deliver to Lender an opinion of counsel from an
independent law firm with respect to the substantive non-consolidation of
Borrower, Operating Lessee and/or Transferee and its constituent entities
(partners, members or shareholders), which law firm and which opinion shall be
satisfactory in all respects to (i) Lender, if a Securitization has not
occurred, or (ii) Lender and the Rating Agencies, if a Securitization has
occurred; and
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(l) If required by Lender and the Rating Agencies, if a Securitization
has occurred, Borrower shall have delivered to Lender an opinion of counsel in
form and substance satisfactory to Lender and the Rating Agencies stating that,
if the holder of the Note shall at the time of such transfer be a REMIC, the tax
qualification and status of the REMIC Trust as a REMIC will not be adversely
affected or impaired as a result of such transfer.
A consent by Lender with respect to a transfer of the Property in its
entirety to, and the related assumption of the Loan by, a Transferee pursuant to
this Section 5.2.11 shall not be construed to be a waiver of the right of Lender
to consent to any subsequent transfer of the Property. Except as otherwise
specifically set forth herein, immediately upon a transfer of the Property to
Transferee and the satisfaction of all of the above requirements, the named
Borrower herein (unless Borrower is then owned by Transferee) and any then
existing Guarantor shall be released from all liability under the Loan Documents
accruing after such transfer and which are not the result of any act or omission
of Borrower, Operating Lessee SPE Entities, Principal, Guarantor and/or any of
its Affiliates.
VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS
Section 6.1 Insurance.
(a) Borrower shall obtain and maintain, or cause to be maintained,
Policies for Borrower and the Property providing at least the following
coverages:
(i) so called "All Risk" or Special Form insurance on the
Improvements and the Personal Property, in each case (ii) in an amount
equal to 100% of the "Full Replacement Cost," which for purposes of
this Agreement shall mean actual replacement value (exclusive of costs
of excavations, foundations, underground utilities and footings) with a
waiver of depreciation, (iii) containing an agreed amount endorsement
or its equivalent with respect to the Improvements, business income,
rent loss and Personal Property waiving all co-insurance provisions;
(iv) providing for no deductible in excess of $100,000; and (v)
providing coverage for contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements
together with an "Ordinance or Law Coverage" or "Enforcement"
endorsement if any of the Improvements or the use of the Property shall
at any time constitute legal non-conforming structures or uses. The
Full Replacement Cost shall be redetermined from time to time (but not
more frequently than once in any twenty-four (24) calendar months) at
the request of Lender by an appraiser or contractor designated and paid
by Borrower and approved by Lender, or by an engineer or appraiser in
the regular employ of the insurer. After the first appraisal,
additional appraisals may be based on construction cost indices
customarily employed in the trade. No omission on the part of Lender to
request any such ascertainment shall relieve Borrower of any of its
obligations under this Subsection;
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring
upon, in or about the Property, including "Dram Shop" or other liquor
liability coverage if alcoholic beverages are sold from or may be
consumed at the Property such insurance (A) to be on the so-called
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"occurrence" form with a combined single limit of not less than
$5,000,000.00; (B) to continue at not less than the aforesaid limit
until required to be changed by Lender in writing by reason of changed
economic conditions making such protection inadequate; and (C) to cover
at least the following hazards: (1) premises and operations; (2)
products and completed operations on an "if any" basis; (3) independent
contractors; (4) blanket contractual liability for all written and oral
contracts; and (5) contractual liability covering the indemnities
contained in Article 10 of the Security Instrument to the extent the
same is available;
(iii) business interruption/loss of rents insurance (A) with
loss payable to Lender; (B) covering all risks required to be covered
by the insurance provided for in Section 6.1(a)(i); (C) in an amount
equal to 100% of the projected gross income from the Property (on an
actual loss sustained basis) for a period continuing until the
Restoration of the Property is completed; the amount of such business
interruption/loss of rents insurance shall be determined prior to the
Closing Date and at least once each year thereafter based on the
greatest of: (x) Borrower's reasonable estimate of the gross income
from the Property and (y) the highest gross income received during the
term of the Note for any full calendar year prior to the date the
amount of such insurance is being determined, in each case for the
succeeding twenty-four (24) month period and (D) containing an extended
period of indemnity endorsement which provides that after the physical
loss to the Improvements and the Personal Property has been repaired,
the continued loss of income will be insured until such income either
returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the Property is
repaired or replaced and operations are resumed, whichever first
occurs, and notwithstanding that the policy may expire prior to the end
of such period; All insurance proceeds payable to Lender pursuant to
this Section 6.1(a)(iii) shall be held by Lender and shall be applied
to the obligations secured hereunder from time to time due and payable
hereunder and under the Note and this Agreement; provided, however,
that nothing herein contained shall be deemed to relieve Borrower of
its obligations to pay the obligations secured hereunder on the
respective dates of payment provided for in the Note and this Agreement
except to the extent such amounts are actually paid out of the proceeds
of such business interruption/loss of rents insurance.
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements
(A) owner's contingent or protective liability insurance covering
claims not covered by or under the terms or provisions of the insurance
provided for in Section 6.1(c)(ii); and (B) the insurance provided for
in Section 6.1(a)(i) shall be written in a so-called builder's risk
completed value form (1) on a non-reporting basis, (2) against all
risks insured against pursuant to Section 6.1(a)(i), (3) shall include
permission to occupy the Property, and (4) shall contain an agreed
amount endorsement waiving co-insurance provisions; provided, however,
the insurance required pursuant to this Section 6.1(a)(iv) may be
obtained by the Manager for the benefit of Borrower and the Property.
(v) workers' compensation, subject to the statutory limits of
the State in which the Property is located, and employer's liability
insurance with a limit of at least $1,000,000.00 per accident and per
disease per employee, and $1,000,000.00 for disease
69
aggregate in respect of any work or operations on or about the
Property, or in connection with the Property or its operation (if
applicable);
(vi) comprehensive boiler and machinery insurance covering all
mechanical and electrical equipment and boilers and pressure valves, if
applicable, in amounts as shall be reasonably required by Lender on
terms consistent with the commercial property insurance policy required
under Section 6.1(a)(i);
(vii) if any portion of the Improvements is at any time
located in an area identified by the Secretary of Housing and Urban
Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, as each may be amended, or any successor law (the "Flood
Insurance Acts"), flood hazard insurance of the following types and in
the following amounts (A) coverage under Policies issued pursuant to
the Flood Insurance Acts (the "Flood Insurance Policies") in an amount
equal to the maximum limit of coverage available for the Property under
the Flood Insurance Acts, subject only to customary deductibles under
such Policies and (B) coverage under supplemental private Policies in
an amount, which when added to the coverage provided under the Flood
Act Policies with respect to the Property, is not less than the Loan
amount;
(viii) if required by Lender, earthquake, sinkhole and mine
subsidence insurance in amounts as determined by Lender in its sole
discretion and in form and substance satisfactory to Lender, provided
that the insurance pursuant to this Section 6.1(a)(viii) hereof shall
be on terms consistent with the all risk insurance policy required
under Section 6.1(a)(i) hereof;
(ix) umbrella liability insurance in an amount not less than
Two Hundred Million and No/100 Dollars ($200,000,000.00) per occurrence
on terms consistent with the commercial general liability insurance
policy required under Section 6.1(a)(ii) hereof;
(x) insurance against terrorism, terrorist acts or similar
acts of sabotage ("Terrorism Insurance") pursuant to, at Borrower's
option, either (A) a blanket insurance policy with aggregate limits of
not less than $50,000,000.00 or (B) a stand-alone insurance policy
covering only the Property with coverage of not less than 110% of the
Debt (the "Insured Debt Amount"), and, in either case with a deductible
of not more than $250,000.00 (the "Terrorism Insurance Required
Amount"). Notwithstanding the foregoing sentence, in the event Borrower
has obtained a stand-alone insurance policy pursuant to subsection (B)
above, Borrower shall not be obligated to expend more than 1.0% times
the Insured Debt Amount in any fiscal year on Insurance Premiums for
Terrorism Insurance (the "Terrorism Insurance Cap") and if the cost of
the Terrorism Insurance Required Amount exceeds the Terrorism Insurance
Cap, Borrower shall purchase the maximum amount of Terrorism Insurance
available with funds equal to the Terrorism Insurance Cap; provided,
however, in the event it is customary among owners of Class A hotel
properties in the United States to have "All Risk" coverage without any
exclusion (a "Terrorism Exclusion") from coverage under such Policy for
loss or damage incurred as a result of an act of terrorism, terrorist
acts or similar acts of sabotage,
70
Borrower shall (provided the same does not add any material cost to
Borrower's Insurance Premiums) obtain a Policy without any such
Terrorism Exclusion. In the event that Borrower has obtained a blanket
insurance policy pursuant to (A) above and after the occurrence of any
event which reduces the amount of insurance available under the
Terrorism Insurance required hereunder (whether due to a claim or
otherwise), Borrower shall be obligated to immediately increase the
coverage of such Terrorism Insurance so that at least $50,000,000.00 of
coverage is available thereunder at all times.
(xi) a blanket fidelity bond and errors and omissions
insurance coverage insuring against losses resulting from dishonest or
fraudulent acts committed by (A) Borrower's personnel; (B) any
employees of outside firms that provide appraisal, legal, data
processing or other services for Borrower or (C) temporary contract
employees or student interns; provided, however, the insurance required
pursuant to this Section 6.1(a)(xi) may be obtained by the Manager for
the benefit of Borrower and the Property and
(xii) such other insurance and in such amounts as are required
pursuant to the Franchise Agreement or as Lender from time to time may
reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Property
located in or around the region in which the Property is located.
(b) All insurance provided for in Section 6.1(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), in such forms and, from time to time after the date
hereof, in such amounts as may be satisfactory to Lender, issued by financially
sound and responsible insurance companies authorized to do business in the State
in which the Property is located and approved by Lender. The initial $30,000,000
of insurance required pursuant to Section 6.1(a)(i), (iii) and (vi) hereof (the
"Initial Tier") may be with (1) one or more primary insurers having (or a
syndicate of insurers through which at least 75% of the coverage (if there are 4
or fewer members of the syndicate) or at least 60% of the coverage (if there are
5 or more members of the syndicate) is with carriers having), a claims paying
ability rating by S&P not lower than "AA-" and an A.M. Best rating of at least
"A:IX" (a "Initial Tier Insurer") and (2) the balance of the coverage is with
one or more carriers having a claims paying ability rating by S&P not lower than
"BBB-" and an A.M. Best rating of at least "A:IX"; provided, however, Endurance
Specialty Insurance, Ltd. shall be deemed a Initial Tier Insurer so long as it
(x) maintains an A.M. Best rating of at least "A-:IX" and (y) does not provide
in excess of $2,000,000 of the insurance coverage required pursuant to the
Initial Tier. The remaining portions of the insurance required pursuant to
Section 6.1(a)(i), (iii) and (vi) hereof (the "Second Tier") may be with (1) one
or more primary insurers having (or a syndicate of insurers through which at
least 75% of the coverage (if there are 4 or fewer members of the syndicate) or
at least 60% of the coverage (if there are 5 or more members of the syndicate)
is with carriers having), a claims paying ability rating by S&P not lower than
"A" and an A.M. Best rating of at least "A-:IX" (a "Second Tier Insurer") and
(2) the balance of the coverage is with one or more carriers having a claims
paying ability rating by S&P not lower than "BBB-" and an A.M. Best rating of at
least "A-:IX"; provided, however, Allied World Assurance Co. shall be deemed a
Second Tier Insurer so long as it (x) maintains an A.M. Best rating of at least
"A-:IX" and (y) does not provide in excess of $4,500,000 of the insurance
coverage required pursuant to the Second Tier. All other insurance companies
must have a claims paying ability/financial strength rating of "A"
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(or its equivalent) or better by all of the Rating Agencies and have an A.M.
Best rating of "A:IX" or greater (each such insurer shall be referred to below
as a "Qualified Insurer"). Not less than thirty (30) days prior to the
expiration dates of the Policies theretofore furnished to Lender pursuant to
Section 6.1(a), Borrower shall deliver certified copies of the Policies marked
"premium paid" or accompanied by evidence satisfactory to Lender of payment of
the premiums due thereunder (the "Insurance Premiums"). In the event Borrower
desires to obtain the insurance required hereunder from an insurer not meeting
the requirements of this Section 6.1(b), Borrower may request, in writing,
Lender's approval of such insurer, which approval may be given or withheld in
Lender's sole discretion.
(c) Borrower shall not obtain (i) any umbrella or blanket liability or
casualty Policy unless, in each case, such Policy is at least equal in scope of
coverage as if a "stand-alone" Policy meeting all of the requirement noted above
is provided as such Policy is approved in advance in writing by Lender and
Lender's interest is included therein as provided in this Agreement and such
Policy is issued by a Qualified Insurer, or (ii) separate insurance concurrent
in form or contributing in the event of loss with that required in Section
6.1(a) to be furnished by, or which may be reasonably required to be furnished
by, Borrower. In the event Borrower obtains separate insurance or an umbrella or
a blanket policy, Borrower shall notify Lender of the same and shall cause
certified copies of each Policy to be delivered as required in Section 6.1(a).
Any blanket insurance Policy shall specifically allocate to the Property the
amount of coverage from time to time required hereunder and shall otherwise
provide the same protection as would a separate Policy insuring only the
Property in compliance with the provisions of Section 6.1(a). Notwithstanding
Lender's approval of any umbrella or blanket liability or casualty Policy
hereunder, Lender reserves the right, in its sole discretion, to require
Borrower to obtain a separate Policy in compliance with this Section 6.1.
(d) All Policies provided for or contemplated by Section 6.1(a) hereof,
except for the Policy referenced in Section 6.1(a)(v), shall name Lender and
Borrower as the insured or additional insured, as their respective interests may
appear, and in the case of property damage, boiler and machinery, and flood
insurance, shall contain a so-called New York standard non-contributing
mortgagee clause in favor of Lender providing that the loss thereunder shall be
payable to Lender.
(e) All Policies provided for in Section 6.1(a) hereof shall contain
clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting for
Borrower, or failure to comply with the provisions of any Policy which
might otherwise result in a forfeiture of the insurance or any part
thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or cancelled without at least
30 days' written notice to Lender and any other party named therein as
an insured;
(iii) each Policy shall provide that the issuers thereof shall
give written notice to Lender if the Policy has not been renewed thirty
(30) days prior to its expiration; and
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(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
(f) Borrower shall furnish to Lender, on or before thirty (30) days
after the close of each of Borrower's fiscal years, a statement certified by
Borrower or a duly authorized officer of Borrower of the amounts of insurance
maintained in compliance herewith, of the risks covered by such insurance and of
the insurance company or companies which carry such insurance and, if requested
by Lender, verification of the adequacy of such insurance by an independent
insurance broker or appraiser acceptable to Lender.
(g) If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall have
the right, with prior notice to Borrower, to take such action as Lender deems
necessary to protect its interest in the Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate, and all expenses incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and until paid shall be secured by the
Security Instrument and shall bear interest at the Default Rate.
(h) In the event of a foreclosure of the Security Instrument, or other
transfer of title to the Property in extinguishment in whole or in part of the
Debt all right, title and interest of Borrower in and to the Policies then in
force and all proceeds payable thereunder shall thereupon vest in the purchaser
at such foreclosure or Lender or other transferee in the event of such other
transfer of title.
Section 6.2 Casualty.
If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty (a "Casualty"), Borrower shall give prompt notice of such
damage to Lender and shall promptly commence and diligently prosecute the
completion of the Restoration of the Property as nearly as possible to the
condition the Property was in immediately prior to such Casualty, with such
alterations as may be reasonably approved by Lender and otherwise in accordance
with Section 6.4. Borrower shall pay all costs of such Restoration whether or
not such costs are covered by insurance. Lender may, but shall not be obligated
to make proof of loss if not made promptly by Borrower.
Section 6.3 Condemnation.
Borrower shall promptly give Lender notice of the actual or threatened
commencement of any proceeding for the Condemnation of all or any part of the
Property and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by it to permit such participation. Borrower shall, at its
expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Notwithstanding any taking by any public or
quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the
73
exercise of such taking), Borrower shall continue to pay the Debt at the time
and in the manner provided for its payment in the Note and in this Agreement and
the Debt shall not be reduced until any Award shall have been actually received
and applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. 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 herein or in the Note.
If the Property or any portion thereof is taken by a condemning authority,
Borrower shall, promptly commence and diligently prosecute the Restoration of
the Property and otherwise comply with the provisions of Section 6.4. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the Award, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive the
Award, or a portion thereof sufficient to pay the Debt.
Section 6.4 Restoration.
The following provisions shall apply in connection with the Restoration
of the Property:
(a) If the Net Proceeds shall be less than Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) and the costs of completing the Restoration
shall be less than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00),
the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided
that all of the conditions set forth in Section 6.4(b)(i) are met and Borrower
delivers to Lender a written undertaking to expeditiously commence and to
satisfactorily complete with due diligence the Restoration in accordance with
the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000.00) or the costs of completing the
Restoration is equal to or greater than Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this Section 6.4. The term "Net
Proceeds" shall mean: (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 6.1(a)(i), (iv), (vi), (vii) and (viii) as a result
of such damage or destruction, after deduction of its reasonable costs and
expenses (including, but not limited to, reasonable counsel fees), if any, in
collecting same ("Insurance Proceeds"), or (ii) the net amount of the Award,
after deduction of its reasonable costs and expenses (including, but not limited
to, reasonable counsel fees), if any, in collecting same ("Condemnation
Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for
Restoration provided that each of the following conditions are met:
(A) no Default or Event of Default (unless caused
solely by the Condemnation or Casualty) shall have occurred
and be continuing;
(B) (1) in the event the Net Proceeds are Insurance
Proceeds, less than thirty percent (30%) of the total floor
area of the Improvements on the Property has been damaged,
destroyed or rendered unusable as a result of such Casualty or
(2) in the event the Net Proceeds are Condemnation Proceeds,
less than ten
74
percent (10%) of the land constituting the Property is taken,
and such land is located along the perimeter or periphery of
the Property, and no portion of the Improvements is located on
such land;
(C) The Operating Lease shall remain in full force
and effect during and after the completion of the Restoration;
(D) Borrower shall commence the Restoration as soon
as reasonably practicable (but in no event later than thirty
(30) days after such Casualty or Condemnation, whichever the
case may be, occurs) and shall diligently pursue the same to
satisfactory completion in compliance with all Legal
Requirements, including, without limitation, all applicable
Environmental Laws and in accordance with the terms and
conditions of the Franchise Agreement;
(E) Lender shall be satisfied that any operating
deficits, including all scheduled payments of principal and
interest under the Note, which will be incurred with respect
to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be
covered out of (1) the Net Proceeds, (2) the insurance
coverage referred to in Section 6.1(a)(iii), if applicable, or
(3) by other funds of Borrower;
(F) Lender shall be satisfied that the Restoration
will be completed on or before the earliest to occur of (1)
six (6) months prior to the Maturity Date, (2) six (6) months
after the occurrence of such Casualty or Condemnation, (3) the
earliest date required for such completion under the terms of
any Leases which are required in accordance with the
provisions of this Section 6.4(b) to remain in effect
subsequent to the occurrence of such Casualty or Condemnation
and the completion of the Restoration, (4) the date required
for such completion pursuant to the Franchise Agreement, (5)
such time as may be required under Applicable Law, in order to
repair and restore the Property to the condition it was in
immediately prior to such Casualty or Condemnation or (6) the
expiration of the insurance coverage referred to in Section
6.1(a)(iii);
(G) the Property and the use thereof after the
Restoration will be in compliance with and permitted under all
Legal Requirements;
(H) Lender shall be satisfied that the Debt Service
Coverage Ratio for the twelve (12) month period immediately
succeeding the completion of the Restoration shall be equal to
or greater than 1.30 to 1;
(I) such Casualty or Condemnation, as applicable,
does not result in the loss of access in any material respect
to the Property or the Improvements;
(J) Borrower shall deliver, or cause to be delivered,
to Lender a signed detailed budget approved in writing by
Borrower's architect or engineer stating the entire cost of
completing the Restoration, which budget shall be acceptable
to Lender;
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(K) the Net Proceeds together with any Cash or Cash
equivalent deposited by Borrower with Lender are sufficient in
Lender's discretion to cover the cost of the Restoration;
(L) the Management Agreement in effect as of the date
of the occurrence of such Casualty or Condemnation, whichever
the case may be, shall (1) remain in full force and effect
during the Restoration and shall not otherwise terminate as a
result of the Casualty or Condemnation or the Restoration or
(2) if terminated, shall have been replaced with a Replacement
Management Agreement with a Qualified Manager, prior to the
opening or reopening of the Property or any portion thereof
for business with the public; and
(M) the Franchise Agreement is not terminated as a
result of such Casualty or Condemnation.
(ii) The Net Proceeds shall be held by Lender in an
interest-bearing account and, until disbursed in accordance with the
provisions of this Section 6.4(b), shall constitute additional security
for the Debt and other obligations under the Loan Documents. The Net
Proceeds shall be disbursed by Lender to, or as directed by, Borrower
from time to time during the course of the Restoration, upon receipt of
evidence satisfactory to Lender that (A) all materials installed and
work and labor performed (except to the extent that they are to be paid
for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices
of pendency, stop orders, mechanic's or materialman's liens or notices
of intention to file same, or any other Liens or encumbrances of any
nature whatsoever on the Property which have not either been fully
bonded to the satisfaction of Lender and discharged of record or in the
alternative fully insured to the satisfaction of Lender by the title
company issuing the Title Insurance Policy.
(iii) All plans and specifications required in connection with
the Restoration, the cost of which is greater than $250,000.00, shall
be subject to prior review and acceptance in all respects by Lender and
by an independent consulting engineer selected by Lender (the "Casualty
Consultant"). Lender shall have the use of the plans and specifications
and all permits, licenses and approvals required or obtained in
connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration the cost of
which is greater than $250,000.00, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance
by Lender and the Casualty Consultant. All costs and expenses incurred
by Lender in connection with making the Net Proceeds available for the
Restoration including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the
costs actually incurred from time to time for work in place as part of
the Restoration, as certified by the Casualty Consultant, minus the
Casualty Retainage. The term "Casualty Retainage" shall mean an amount
equal to ten percent (10%), of the costs actually incurred for work in
place as part of the
76
Restoration, as certified by the Casualty Consultant, until the
Restoration has been completed. The Casualty Retainage shall in no
event, and notwithstanding anything to the contrary set forth above in
this Section 6.4(b), be less than the amount actually held back by
Borrower from contractors, subcontractors and materialmen engaged in
the Restoration. The Casualty Retainage shall not be released until the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Section 6.4(b) and
that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate Governmental
Authorities, and Lender receives evidence satisfactory to Lender that
the costs of the Restoration have been paid in full or will be paid in
full out of the Casualty Retainage; provided, however, that Lender will
release the portion of the Casualty Retainage being held with respect
to any contractor, subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty Consultant certifies
to Lender that the contractor, subcontractor or materialman has
satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums
due to the contractor, subcontractor or materialman as may be
reasonably requested by Lender or by the title company issuing the
Title Insurance Policy for the Property, and Lender receives an
endorsement to such Title Insurance Policy insuring the continued
priority of the Lien of the Security Instrument and evidence of payment
of any premium payable for such endorsement. If required by Lender, the
release of any such portion of the Casualty Retainage shall be approved
by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or
materialman.
(v) Lender shall not be obligated to make disbursements of the
Net Proceeds more frequently than once every calendar month.
(vi) If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the opinion of Lender in consultation
with the Casualty Consultant, if any, be sufficient to pay in full the
balance of the costs which are estimated by the Casualty Consultant to
be incurred in connection with the completion of the Restoration,
Borrower shall deposit the deficiency (the "Net Proceeds Deficiency")
with Lender before any further disbursement of the Net Proceeds shall
be made. The Net Proceeds Deficiency deposited with Lender shall be
held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to
the disbursement of the Net Proceeds, and until so disbursed pursuant
to this Section 6.4(b) shall constitute additional security for the
Debt and other obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited
with Lender after the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of
this Section 6.4(b), and the receipt by Lender of evidence satisfactory
to Lender that all costs incurred in connection with the Restoration
have been paid in full, shall be remitted by Lender to Borrower,
provided no Event of Default shall have
77
occurred and shall be continuing under the Note, this Agreement or any
of the other Loan Documents.
(c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 6.4(b)(vii) may be retained and applied by Lender toward the payment
of the Debt whether or not then due and payable in such order, priority and
proportions as Lender in its sole discretion shall deem proper, or, at the
discretion of Lender, the same may be paid, either in whole or in part, to
Borrower for such purposes as Lender shall approve, in its discretion. If Lender
shall receive and retain Net Proceeds, the Lien of the Security Instrument shall
be reduced only by the amount thereof received and retained by Lender and
actually applied by Lender in reduction of the Debt.
VII. RESERVE FUNDS
Section 7.1 Required Repair Funds.
7.1.1 Deposits.
On the Closing Date, Borrower shall deposit into an escrow account with
Lender (the "Required Repair Account") the amount set forth on such Schedule
7.1.1 hereto to perform the Required Repairs. Amounts so deposited with Lender
shall be held by Lender in accordance with Section 7.7 hereof. Amounts so
deposited shall hereinafter be referred to as Borrower's "Required Repair Fund."
Borrower shall perform the repairs at the Property, as more particularly set
forth on Schedule 7.1.1 hereto (such repairs hereinafter referred to as
"Required Repairs"). Borrower shall complete the Required Repairs on or before
the date which is three hundred sixty five (365) days from the date hereof. It
shall be an Event of Default under this Agreement if (a) Borrower does not
complete the Required Repairs at the Property within three hundred sixty five
(365) days from the date hereof, or (b) Borrower does not satisfy each condition
contained in Section 7.1.2 hereof. Upon the occurrence 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 the Property 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.
7.1.2 Release of Required Repair Funds.
Lender shall disburse to Borrower the Required Repair Funds from the
Required Repair Account from time to time 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) days prior to the date on which Borrower
requests such payment be made and specifies the Required Repairs to be paid, (b)
on the date such request is received by Lender and on the date such payment is
to be made, no Event of Default shall exist and remain uncured, (c) Lender shall
have received an Officer's Certificate (i) stating that all Required Repairs at
the Property to be funded by the requested disbursement have been completed in
good and workmanlike manner and, to the best of Borrower's knowledge, in
accordance with all Legal Requirements and
78
Environmental Laws, such certificate to be accompanied by a copy of any license,
permit or other approval by any Governmental Authority required to commence
and/or complete the Required Repairs, (ii) identifying each Person that supplied
materials or labor in connection with the Required Repairs performed at the
Property with respect to the reimbursement to be funded by the requested
disbursement, and (iii) stating that each such Person has been paid in full upon
such disbursement, such Officer's Certificate to be accompanied by lien waivers
or other evidence of payment satisfactory to Lender, (d) at Lender's option, a
title search for the Property indicating that the Property is free from all
Liens, claims and other encumbrances not previously approved by Lender, and (e)
Lender shall have received such other evidence as Lender shall reasonably
request that the Required Repairs at the Property to be funded by the requested
disbursement have been completed and are paid for upon such disbursement to
Borrower. Lender shall not be required to make disbursements from the Required
Repair Account unless such requested disbursement is in an amount greater than
$25,000 (or a lesser amount if the total amount in the Required Repair Account
is less than $25,000, in which case only one disbursement of the amount
remaining in the account shall be made). Lender shall not be obligated to make
disbursements from the Required Repair Account in excess of the amount deposited
by Borrower. Upon Lender's receipt of evidence of completion of all Required
Repairs in accordance with the terms hereof, any remaining Required Repair Funds
shall be disbursed to Borrower.
Section 7.2 Tax and Insurance Escrow Fund.
Borrower shall pay to Lender on each Payment Date (a) one-twelfth of
the Taxes (the "Monthly Tax Deposit") 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 their
respective due dates; and (b) at the option of Lender, if the liability or
casualty Policy maintained by Borrower covering the Property shall not
constitute an approved blanket or umbrella Policy pursuant to Section 6.1(c)
hereof, one-twelfth of the Insurance Premiums (the "Monthly Insurance Premium
Deposit") that Lender 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"). In the event Lender
shall elect to collect payments in escrow for Insurance Premiums pursuant to
clause (b) above, Borrower shall pay to Lender an initial deposit to be
determined by Lender, in its sole discretion, to increase the amounts in the Tax
and Insurance Escrow Fund to an amount which, together with anticipated Monthly
Insurance Premium Deposits, shall be sufficient to pay all Insurance Premiums as
they become due. The Tax and Insurance Escrow Fund and the payments of interest
or principal or both, payable pursuant to the Note and this Agreement, 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 Section 5.1.2
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. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums
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pursuant to Section 5.1.2 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 Property.
Any amount remaining in the Tax and Insurance Escrow Fund after the Debt has
been paid in full shall be returned to Borrower. If at any time Lender
reasonably determines that the Tax and Insurance Escrow Fund is not or will not
be sufficient to pay Taxes and Insurance Premiums by the dates 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 thirty (30) days prior to expiration of
the Policies, as the case may be.
Section 7.3 Replacements and Replacement Reserve.
7.3.1 Replacement Reserve Fund.
Borrower shall pay to Lender on each Payment Date, the Replacement
Reserve Monthly Deposit for Capital Expenditures required to be made to the
Property during the calendar year, as may be necessary to maintain and operate
first class, reputable hotels in the manner and quality of the hotels operated
at the Property on the date hereof (collectively, the "Replacements"). Amounts
so deposited shall hereinafter be referred to as Borrower's "Replacement Reserve
Fund".
7.3.2 Disbursements from Replacement Reserve Account.
(a) Lender shall make disbursements from the Replacement Reserve
Account to reimburse Borrower only for the costs of the Replacements. Lender
shall not be obligated to make disbursements from the Replacement Reserve
Account to reimburse Borrower for the costs of routine maintenance (other than
Replacements) to the Property or for costs which are to be reimbursed from the
Required Repair Fund.
(b) Lender shall, upon written request from Borrower and satisfaction
of the requirements set forth in this Section 7.3.2, disburse to Borrower
amounts from the Replacement Reserve Account necessary to reimburse Borrower for
the actual costs of Replacements. In no event shall Lender be obligated to
disburse funds from the Replacement Reserve Account if an Event of Default
exists.
(c) Each request for disbursement from the Replacement Reserve Account
shall be in a form reasonably acceptable to Lender and shall specify (i) the
specific Replacements for which the disbursement is requested, (ii) the quantity
and price of each item purchased, if the Replacement includes the purchase or
replacement of specific items, (iii) the price of all materials (grouped by type
or category) used in any Replacement other than the purchase or replacement of
specific items, and (iv) the cost of all contracted labor or other services
applicable to each Replacement for which the disbursement is requested. With
each request Borrower shall certify that, to the best of Borrower's knowledge,
all Replacements have been made in accordance with all applicable Legal
Requirements of any Governmental Authority having jurisdiction over the Property
to which the Replacements are being provided. Upon request of
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Lender in connection with each request for disbursement in excess of $200,000,
Borrower shall provide Lender with copies of invoices for amounts in excess of
$100,000 for items or materials purchased or contracted labor or services.
Borrower shall provide Lender evidence of completion satisfactory to Lender in
its reasonable judgment.
(d) Borrower shall pay all invoices in connection with the Replacements
with respect to each request for disbursement prior to submitting such request
for disbursement from the Replacement Reserve Account or, at the request of
Borrower, Lender will issue joint checks, payable to Borrower and the
contractor, supplier, materialman, mechanic, subcontractor or other party to
whom payment is due in connection with a Replacement. In the case of payments
made by joint check, Lender may require a waiver of lien from each Person
receiving payment prior to Lender's disbursement from the Replacement Reserve
Account. In addition, as a condition to any disbursement, Lender may require
Borrower to obtain lien waivers from each contractor, supplier, materialman,
mechanic or subcontractor who receives payment in an amount equal to or greater
than $100,000 for completion of its work or delivery of its materials. Any lien
waiver delivered hereunder shall conform to the requirements of Applicable Law
and shall cover all work performed and materials supplied (including equipment
and fixtures) for the Property by that contractor, supplier, subcontractor,
mechanic or materialman through the date covered by the current reimbursement
request (or, in the event that payment to such contractor, supplier,
subcontractor, mechanic or materialmen is to be made by a joint check, the
release of lien shall be effective through the date covered by the previous
release of funds request).
(e) Borrower shall not make a request for disbursement from the
Replacement Reserve Account more frequently than once in any calendar month and
(except in connection with the final disbursement) the total cost of all
Replacements in any request shall not be less than $25,000.
7.3.3 Performance of Replacements.
(a) Borrower shall make Replacements when required in order to keep the
Property in condition and repair consistent with other first class, full service
hotels in the same market segment and under the same franchisor in the
metropolitan area in which the Property is located, and to keep the Property or
any portion thereof from deteriorating. Borrower shall complete all Replacements
in a good and workmanlike manner as soon as practicable following the
commencement of making each such Replacement.
(b) Intentionally Deleted.
(c) Upon the occurrence and during the continuance of an Event of
Default, in the event Lender determines in its reasonable discretion that any
Replacement is not being performed in a workmanlike or timely manner or that any
Replacement has not been completed in a workmanlike or timely manner, Lender
shall have the option, without providing any prior notice to Borrower, to
withhold disbursement for such unsatisfactory Replacement and to proceed under
existing contracts or, upon five (5) Business Days prior written notice to
Borrower, to contract with third parties to complete such Replacement and to
apply the Replacement Reserve Fund toward the labor and materials necessary to
complete such
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Replacement and to exercise any and all other remedies available to Lender upon
an Event of Default hereunder.
(d) In order to facilitate Lender's completion or making of the
Replacements pursuant to Section 7.3.3(c) above, upon the occurrence and during
the continuance of an Event of Default, Borrower grants Lender the right to
enter onto the Property and perform any and all work and labor necessary to
complete or make the Replacements and/or employ watchmen to protect the Property
from damage. All sums so expended by Lender, to the extent not from the
Replacement Reserve Fund, shall be deemed to have been advanced under the Loan
to Borrower and secured by the Security Instrument. For this purpose, Borrower
constitutes and appoints Lender its true and lawful attorney-in-fact with full
power of substitution to complete or undertake the Replacements in the name of
Borrower. Such power of attorney shall be deemed to be a power coupled with an
interest and cannot be revoked. Borrower empowers said attorney-in-fact as
follows: (i) to use any funds in the Replacement Reserve Account for the purpose
of making or completing the Replacements; (ii) to make such additions, changes
and corrections to the Replacements as shall be necessary or desirable to
complete the Replacements; (iii) to employ such contractors, subcontractors,
agents, architects and inspectors as shall be required for such purposes; (iv)
to pay, settle or compromise all existing bills and claims which are or may
become Liens against the Property, or as may be necessary or desirable for the
completion of the Replacements, or for clearance of title; (v) to execute all
applications and certificates in the name of Borrower which may be required by
any of the contract documents; (vi) to prosecute and defend all actions or
proceedings in connection with the Property or the rehabilitation and repair of
the Property; and (vii) to do any and every act which Borrower might do in its
own behalf to fulfill the terms of this Agreement.
(e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible
for making or completing the Replacements; (ii) require Lender to expend funds
in addition to the Replacement Reserve Fund to make or complete any Replacement;
(iii) obligate Lender to proceed with the Replacements; or (iv) obligate Lender
to demand from Borrower additional sums to make or complete any Replacement.
(f) Borrower shall permit Lender and Lender's agents and
representatives (including, without limitation, Lender's engineer, architect, or
inspector) or third parties making Replacements pursuant to this Section 7.3.3
to enter onto the Property during normal business hours (subject to the rights
of tenants under their Leases) to inspect the progress of any Replacements and
all materials being used in connection therewith, to examine all plans and shop
drawings relating to such Replacements which are or may be kept at the Property,
and to complete any Replacements made pursuant to this Section 7.3.3. Borrower
shall cause all contractors and subcontractors to cooperate with Lender or
Lender's representatives or such other persons described above in connection
with inspections described in this Section 7.3.3(f) or the completion of
Replacements pursuant to this Section 7.3.3.
(g) Upon the occurrence and during the continuance of an Event of
Default, Lender may require an inspection of the Property at Borrower's expense
prior to making a monthly disbursement from the Replacement Reserve Account in
order to verify completion of the Replacements for which reimbursement is
sought. Lender may require that such inspection be conducted by an appropriate
independent qualified professional selected by Lender and/or may
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require a copy of a certificate of completion by an independent qualified
professional acceptable to Lender prior to the disbursement of any amounts from
the Replacement Reserve Account. Borrower shall pay the expense of the
inspection as required hereunder, whether such inspection is conducted by Lender
or by an independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or any
other item comprising a part of any Replacement shall be constructed, installed
or completed, as applicable, free and clear of all mechanic's, materialmen's or
other Liens.
(i) Before each disbursement from the Replacement Reserve Account
relating to actual physical work on the Improvements in excess of $200,000,
Lender may require Borrower to provide Lender with a search of title to the
Property effective to the date of the disbursement, which search shows that no
mechanic's or materialmen's Liens or other Liens of any nature have been placed
against the Property since the date of recordation of the Security Instrument
and that title to the Property is free and clear of all Liens (other than the
Lien of the Security Instrument and other Permitted Encumbrances).
(j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
Property and applicable insurance requirements including, without limitation,
applicable building codes, special use permits, environmental regulations, and
requirements of insurance underwriters.
(k) In addition to any insurance required under the Loan Documents,
Borrower shall provide or cause to be provided workmen's compensation insurance,
builder's risk, and public liability insurance and other insurance to the extent
required under Applicable Law in connection with a particular Replacement. All
such policies shall be in form and amount reasonably satisfactory to Lender. All
such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such
policies shall be delivered to Lender
7.3.4 Failure to Make Replacements.
(a) It shall be an Event of Default under this Agreement if Borrower
fails to comply with any provision of this Section 7.3 and such failure is not
cured within thirty (30) days after written notice from Lender. Upon the
occurrence of an Event of Default, Lender may use the Replacement Reserve Fund
(or any portion thereof) for any purpose, including but not limited to
completion of the Replacements as provided in Sections 7.3.3(c) and 7.3.3(d), or
for any other repair or replacement to the Property 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 the Replacement Reserve Funds
shall be in addition to all other rights and remedies provided to Lender under
this Agreement and the other Loan Documents.
(b) Nothing in this Agreement shall obligate Lender to apply all or any
portion of the Replacement Reserve Fund on account of an Event of Default to
payment of the Debt or in any specific order or priority.
7.3.5 Balance in the Replacement Reserve Account.
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The insufficiency of any balance in the Replacement Reserve Account
shall not relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents.
Section 7.4 Intentionally Deleted.
Section 7.5 Intentionally Deleted.
Section 7.6 Intentionally Deleted.
Section 7.7 Reserve Funds, Generally.
(a) Borrower grants to Lender a first-priority perfected security
interest in each of the Reserve Funds and the related Accounts and any and all
monies now or hereafter deposited in each Reserve Fund and related Account as
additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Funds and the related Accounts shall constitute
additional security for the Debt.
(b) Upon the occurrence of an Event of Default, Lender may, in addition
to any and all other rights and remedies available to Lender, apply any sums
then present in any or all of the Reserve Funds to the payment of the Debt in
any order in its sole discretion.
(c) The Reserve Funds shall not constitute trust funds and may be
commingled with other monies held by Lender.
(d) The Reserve Funds shall be held in interest bearing accounts and
all earnings or interest on a Reserve Fund shall be added to and become a part
of such Reserve Fund and shall be disbursed in the same manner as other monies
deposited in such Reserve Fund, except that earnings or interest on the Tax and
Insurance Escrow Fund shall not be added to or become a part thereof and shall
be the sole property of and shall be paid to Lender.
(e) Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in any Reserve
Fund or related Account or the monies deposited therein 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.
(f) Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the related Accounts or the performance of the
obligations for which the Reserve Funds or the related Accounts were
established, except to the extent arising from the fraud, illegal acts, gross
negligence or willful misconduct of Lender, its agents or employees. Borrower
shall assign to Lender all rights and claims Borrower may have against all
Persons supplying labor, materials or other services which are to be paid from
or secured by the Reserve Funds or the related Accounts; provided, however, that
Lender may not pursue any such right or claim unless an Event of Default has
occurred and remains uncured.
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VIII. DEFAULTS
Section 8.1 Event of Default.
(a) Each of the following events shall constitute an event of default
hereunder (an "Event of Default"):
(i) if any portion of the Debt is not paid on or before the
date the same is due and payable;
(ii) if any of the Taxes or Other Charges are not paid on or
before the date when the same are due and payable;
(iii) if the Policies are not kept in full force and effect or
if certified copies of the Policies are not delivered to Lender
promptly on request;
(iv) if a Transfer occurs in violation of the provisions of
Section 5.2.10 hereof or Article 7 of the Security Instrument;
(v) if any representation or warranty made by Borrower, an
Operating Lessee SPE Entity, Principal, Indemnitor or Guarantor herein
or in any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished to
Lender shall have been false or misleading in any material respect as
of the date the representation or warranty was made;
(vi) if Borrower, an Operating Lessee SPE Entity, Principal,
Indemnitor, Guarantor or any other guarantor under any guaranty issued
in connection with the Loan shall make an assignment for the benefit of
creditors;
(vii) if a receiver, liquidator or trustee shall be appointed
for Borrower, Principal, an Operating Lessee SPE Entity, Indemnitor,
Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Principal, an Operating Lessee
SPE Entity, Indemnitor, Guarantor or such other guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to the Bankruptcy Code, or any
similar federal or State law, shall be filed by or against, consented
to, or acquiesced in by, Borrower, Principal, an Operating Lessee SPE
Entity, Indemnitor, Guarantor or such other guarantor, or if any
proceeding for the dissolution or liquidation of Borrower, Principal,
an Operating Lessee SPE Entity, Indemnitor, Guarantor or such other
guarantor shall be instituted; provided, however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented
to by Borrower, Principal, an Operating Lessee SPE Entity, Indemnitor,
Guarantor or such other guarantor, upon the same not being discharged,
stayed or dismissed within sixty (60) days;
(viii) if Borrower or Operating Lessee attempts to assign its
rights under this Agreement or any of the other Loan Documents or any
interest herein or therein in contravention of the Loan Documents;
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(ix) other than for with respect to a default which is
expressly contemplated by another subsection of this Section 8.1(a), if
Borrower breaches any of its respective negative covenants contained in
Section 5.2;
(x) if Borrower violates or does not comply in any material
respect with any of the provisions of Section 5.1.17 hereof;
(xi) if a (a) default has occurred and continues beyond any
applicable cure period under the Management Agreement (or any
Replacement Management Agreement) if such default permits the Manager
thereunder to terminate or cancel the Management Agreement (or any
Replacement Management Agreement) or (b) any Management Agreement (or
Replacement Management Agreement) expires or otherwise terminates and
is not replaced with a Replacement Management Agreement or (c) if the
Property operates for any time without the Management Agreement or a
Replacement Management Agreement;
(xii) if Borrower or Principal violates or does not comply in
all material respects with the provisions of Section 4.1.35 hereof;
(xiii) if the Property becomes subject to any mechanic's,
materialman's or other Lien other than a Lien for local real estate
taxes and assessments not then due and payable and the Lien shall
remain undischarged of record (by payment, bonding or otherwise) for a
period of sixty (60) days;
(xiv) if any federal tax Lien or state or local income tax
Lien is filed against Borrower, Principal, an Operating Lessee SPE
Entity, any Guarantor, Indemnitor or the Property and same is not
discharged of record within thirty (30) days after same is filed;
(xv) (A) Borrower fails to timely provide Lender with the
written certification and evidence referred to in Section 5.2.8 hereof,
(B) Borrower or Operating Lessee is a Plan or its assets constitute
Plan Asset; or (C) Borrower or Operating Lessee consummates a
transaction which would cause the Security Instrument or Lender's
exercise of its rights under the Security Instrument, the Note, this
Agreement or the other Loan Documents to constitute a nonexempt
prohibited transaction under ERISA or result in a violation of a State
statute regulating governmental plans, subjecting Lender to liability
for a violation of ERISA, the Code, a State statute or other similar
law;
(xvi) if Borrower shall fail to deliver to Lender, within
fifteen (15) Business Days after request by Lender, the estoppel
certificates required pursuant to the terms of Section 5.1.13(a)
hereof;
(xvii) if any default occurs under any guaranty or indemnity
executed in connection herewith (including, without limitation, the
Guaranty and the Environmental Indemnity) and such default continues
after the expiration of applicable grace periods, if any;
(xviii) other than in connection with the Permitted FF&E
Financing, if Borrower shall be in default beyond applicable notice and
grace periods under any other mortgage,
86
deed of trust, deed to secure debt or other security agreement covering
any part of the Property whether it be superior or junior in lien to
the Security Instrument;
(xix) with respect to any term, covenant or provision set
forth herein which specifically contains a notice requirement or grace
period, if Borrower shall be in default under such term, covenant or
condition after the giving of such notice or the expiration of such
grace period;
(xx) if any default occurs under the Operating Lease
Subordination Agreement, and such default continues after the
expiration of applicable grace or cure periods, if any;
(xxi) if there shall occur any material default under the
Operating Lease, in the observance or performance of any term, covenant
or condition of the Operating Lease to be observed or performed and
said default is not cured following the expiration of any applicable
grace and notice periods therein provided or if the leasehold estate
created by the Operating Lease shall be surrendered or if the Operating
Lease shall cease to be in full force and effect or the Operating Lease
shall be terminated or canceled for any reason or under any
circumstances whatsoever, or if any of the terms, covenants or
conditions of the Operating Lease shall in any manner be modified,
changed, supplemented, altered, or amended in any material respect
without the consent of Lender;
(xxii) if any of the assumptions contained in the Insolvency
Opinion, or in any other "non-consolidation" opinion delivered to
Lender in connection with the Loan, or in any other "non-consolidation"
opinion delivered subsequent to the closing of the Loan, is or shall
become untrue in any material respect;
(xxiii) if (a) a material default has occurred and continues
beyond any applicable cure period under the Franchise Agreement, and
such default permits a party to terminate or cancel the Franchise
Agreement or (b) any Franchise Agreement expires or otherwise
terminates and is not replaced with a Replacement Franchise Agreement;
(xxiv) if Borrower ceases to operate a hotel on the Property
or terminates such business for any reason whatsoever (other than
temporary cessation in connection with any renovations to the Property
or restoration of the Property after Casualty or Condemnation);
(xxv) if Borrower terminates or cancels the Franchise
Agreement, without Lender's prior written consent;
(xxvi) 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 (xxv) above, for ten (10) days after
written 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 written 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 thirty (30) day period and thereafter diligently
and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for such time as
87
is reasonably necessary for Borrower in the exercise of due diligence
to cure such Default, such additional period not to exceed sixty (60)
days; or
(xxvii) if there shall be default under the Security
Instrument or any of the other Loan Documents beyond any applicable
notice and cure periods contained in such documents, whether as to
Borrower or the 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.
(b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi) or (vii) above) and at any time thereafter, 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 all or the Property,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower and any or all of the Property,
including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in clauses (vi) or (vii) 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 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 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 the
Property or any other Collateral. 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
Applicable Law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by Applicable 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)
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 Property and the other Collateral and the Security
Instrument 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 Property, nothing contained herein
or in any other Loan Document shall be construed as requiring Lender to resort
to the Property or
88
Collateral for the satisfaction of any of the Debt in preference or priority to
any other Property or Collateral, and Lender may seek satisfaction out of all of
the Property or any other Collateral 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 Security Instrument in any manner and
for any amounts secured by the Security Instrument then due and payable as
determined by Lender in its sole discretion including, without limitation, the
following circumstances: (i) in the event Borrower defaults beyond any
applicable grace period in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose one or more of the Security
Instrument 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 Security Instrument 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 Security Instrument as Lender may
elect. Notwithstanding one or more partial foreclosures, the Property shall
remain subject to the Security Instrument to secure payment of sums secured by
the Security Instrument and not previously recovered.
(c) Lender shall have the right, from time to time, to sever the Note
and the other Loan Documents into one or more separate notes, mortgages and
other security documents (the "Severed Loan Documents") in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time, promptly after the request of 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; provided, however, Lender shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrower by Lender of Lender's intent to exercise its
rights under such power. The Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the Loan Documents and
any such representations and warranties contained in the Severed Loan Documents
will be given by Borrower only as of the Closing Date.
Section 8.3 Remedies Cumulative; Waivers.
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 singularly, 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 or more
Defaults or Events 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.
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IX. SPECIAL PROVISIONS
Section 9.1 Sale of Notes and Securitization.
Lender may, at any time, sell, pledge, transfer or assign the
Note, this Agreement, the Security Instrument and the other Loan Documents, and
any or all servicing rights with respect thereto, or grant participations
therein or issue mortgage pass-through certificates or other securities (the
"Securities") evidencing a beneficial interest in a rated or unrated public
offering or private placement (a "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 (subject to the limitations set forth at the end
of this Section 9.1) shall use its best efforts to satisfy the market standards
to which Lender customarily adheres or which may be reasonably required in the
marketplace or by the Rating Agencies in connection with a Securitization or the
sale of the Note or the participations or Securities, including, without
limitation, to:
(a) (i) provide such financial and other information with respect to
the Property, Borrower and the Manager, (ii) provide budgets relating to the
Property and (iii) permit Lender or Lender's designees to perform or permit or
cause to be performed or permitted such site inspection, appraisals, market
studies, environmental reviews and reports (Phase I's and, if appropriate, Phase
II's), engineering reports and other due diligence investigations of the
Property, as may be reasonably requested by the holder of the Note or the Rating
Agencies or as may be 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 accountants or opinions of counsel of independent attorneys
acceptable to Lender and the Rating Agencies;
(b) if required by the Rating Agencies, deliver (i) a revised
Insolvency Opinion, (ii) revised opinions of counsel as to due execution and
enforceability with respect to the Property, Borrower, Guarantor, Indemnitor,
Principal, the Operating Lessee SPE Entities and the Loan Documents, and (iii)
revised organizational documents for Borrower, Guarantor, Indemnitor, Principal
the Operating Lessee SPE Entities and their respective Affiliates (including,
without limitation, such revisions as are necessary to comply with the
provisions of Section 4.1.35 hereof), which counsel, opinions and organizational
documents shall be satisfactory to Lender and the Rating Agencies;
(c) if required by the Rating Agencies, deliver such additional tenant
estoppel letters, subordination agreements or other agreements from parties to
agreements that affect the Property, reasonably requested by Lender and the
Rating Agencies;
(d) execute such amendments to the Loan Documents and organizational
documents as may be reasonably requested by the holder of the Note or the Rating
Agencies or otherwise to effect the Securitization; provided, however, that
Borrower shall not be required to modify or amend any Loan Document if such
modification or amendment would (i) materially increase Borrower's obligations
or out-of-pocket costs related to compliance with this Agreement, (except for
modifications and amendments required to be made pursuant to Section 9.1 (e)
below), (ii) change the interest rate, the stated maturity or the amortization
of principal set forth in the Note
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or (iii) modify or amend any other economic, financial or payment term (or
otherwise modify or amend in any material respect any of the terms) of the Loan;
(e) if Lender elects, in its sole discretion, prior to or upon a
Securitization, to split the Loan into two or more parts, or the Note into
multiple component notes or tranches which may have different interest rates,
amortization payments and principal amounts, Borrower agrees to cooperate with
Lender in connection with the foregoing and to execute the required
modifications and amendments to the Note, this Agreement and the Loan Documents
and to provide opinions necessary to effectuate the same. Such Notes or
components may be assigned different interest rates, so long as the initial
weighted average of such interest rates does not exceed the Applicable Interest
Rate and the aggregate monthly debt service payments do not exceed the Monthly
Debt Service Payment Amount; and
(f) make such representations and warranties as of the closing date of
the Securitization with respect to the Property, 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.
Other than costs and expenses which are otherwise the responsible of
Borrower pursuant to the terms of the Loan Documents, in connection with
Borrower's complying with requests made under this Section 9.1, Borrower shall
only be responsible for the payment of (i) Borrower's legal counsel and
accountants and (ii) any internal, administrative or clerical cost and expenses
incurred by Borrower.
Section 9.2 Securitization Indemnification.
(a) Borrower understands that certain of the Provided Information may
be included in disclosure documents in connection with the Securitization,
including, without limitation, a prospectus supplement, private placement
memorandum, offering circular or other offering document (each a "Disclosure
Document") and may also be included in filings (an "Exchange Act Filing") 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 Disclosure Document
by providing all current information necessary to keep the Disclosure Document
accurate and complete in all material respects.
(b) Borrower agrees to provide in connection with each of (i) a
preliminary and a final private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, or (iii) collateral
and structured term sheets or similar materials, an indemnification certificate
(A) certifying that Borrower has carefully examined such memorandum or
prospectus or term sheets, as applicable, including without limitation, the
sections entitled "Special Considerations," "Description of the Mortgages,"
"Description of the
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Mortgage Loans and Mortgaged Property," "The Manager," "The Borrower" and
"Certain Legal Aspects of the Mortgage Loan," and such sections (and any other
sections reasonably requested) 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 in any material respect, (B) indemnifying Lender (and for purposes of
this Section 9.2, Lender hereunder shall include its officers and directors),
the Affiliate of JPMorgan Chase Bank ("JPMorgan Chase") 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 who controls the Affiliate within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collectively, the "JPMorgan Chase Group"), and JPMorgan Chase, each of its
directors and each Person who controls JPMorgan Chase within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act
(collectively, the "Underwriter Group") for any losses, claims, damages or
liabilities (collectively, the "Liabilities") to which Lender, the JPMorgan
Chase Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement of any material
fact contained in such sections described in clause (A) above, or arise out of
or are based upon the omission to state therein a material fact required to be
stated in such sections or necessary in order to make the statements in such
sections or in light of the circumstances under which they were made, not
misleading in any material respect and (C) agreeing to reimburse Lender, the
JPMorgan Chase Group and the Underwriter Group for any legal or other expenses
reasonably incurred by Lender the JPMorgan Chase Group and the Underwriter Group
in connection with investigating or defending the Liabilities; provided,
however, that Borrower will be liable in any such case under clauses (B) or (C)
above only to the extent that any such Liability arises out of or is based upon
any such untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Lender by or on behalf of Borrower in
connection with the preparation of the memorandum or prospectus or in connection
with the underwriting of the debt, including, without limitation, financial
statements of Borrower, operating statements, rent rolls, environmental site
assessment reports and property condition reports with respect to the Property.
This indemnification will be in addition to any liability which Borrower may
otherwise have. Moreover, the indemnification provided for in Clauses (B) and
(C) above shall be effective whether or not an indemnification certificate
described in (A) above is provided and shall be applicable based on information
previously provided by Borrower or its Affiliates if Borrower does not provide
the indemnification certificate.
(c) In connection with filings under the Exchange Act, Borrower agrees
to indemnify (i) Lender, the JPMorgan Chase Group and the Underwriter Group for
Liabilities to which Lender, the JPMorgan Chase Group or the Underwriter Group
may become subject insofar as the Liabilities arise out of or are based upon the
omission to state in the Provided Information a material fact required to be
stated in the Provided Information in order to make the statements in the
Provided Information, in light of the circumstances under which they were made
not misleading in any material respect and (ii) reimburse Lender, the JPMorgan
Chase Group or the Underwriter Group for any legal or other expenses reasonably
incurred by Lender, the JPMorgan Chase Group or the Underwriter Group in
connection with defending or investigating the Liabilities.
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(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 the indemnifying party shall not be responsible for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there are any legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party to
parties. The indemnifying party shall not be liable for the expenses of more
than one such separate counsel unless an indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to another indemnified party.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnifications provided for in Section 9.2(b) or
(c) is or are for any reason held to be unenforceable by an indemnified party in
respect of any Liabilities (or action in respect thereof) referred to therein
which would otherwise be indemnifiable under Section 9.2(b) or (c), the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such 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) JPMorgan Chase'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 would not be equitable if the amount of such
contribution were determined solely by pro rata or per capita allocation.
(f) The liabilities and obligations of both Borrower and Lender under
this Section 9.2 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt.
Section 9.3 Servicer.
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At the option of Lender or Agent, the Loan may be serviced by a
servicer/trustee (the "Servicer") selected by Lender or Agent and Lender or
Agent may delegate all or any portion of its responsibilities under this
Agreement and the other Loan Documents to the Servicer pursuant to a servicing
agreement (the "Servicing Agreement") between Lender or Agent and Servicer.
Section 9.4 Exculpation.
(a) Except as otherwise provided in this Section 9.4 and comparable
provisions in the Security Instrument or in the other Loan Documents, Lender
shall not enforce the liability and obligation of Borrower or any of Borrower's
Affiliates to perform and observe the obligations contained in this Agreement,
the Note or the Security Instrument by any action or proceeding wherein a money
judgment shall be sought against Borrower or any of Borrower's Affiliates,
except that Lender may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Lender to
enforce and realize upon this Agreement, the Note, the Security Instrument, the
other Loan Documents, and the interest in the Property, the Rents and any other
Collateral created by this Agreement, the Note, the Security Instrument and the
other Loan Documents; provided, however, that any judgment in any such action or
proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other Collateral.
Lender, by accepting this Agreement, the Note and the Security Instrument,
agrees that it shall not, except as otherwise provided in this Section 9.4 and
comparable provisions in the Security Instrument, ▇▇▇ for, seek or demand any
deficiency judgment against Borrower or any of Borrower's Affiliates in any such
action or proceeding, under or by reason of or under or in connection with this
Agreement, the Note, the Security Instrument or the other Loan Documents. The
provisions of this Section shall not, however, (i) constitute a waiver, release
or impairment of any obligation evidenced or secured by this Agreement, the
Note, the Security Instrument or the other Loan Documents; (ii) impair the right
of Lender to name Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under the Security Instrument; (iii) except as set
forth in this Section 9.4, affect the validity or enforceability of any
indemnity (including, without limitation, the Environmental Indemnity), guaranty
(including, without limitation, the Guaranty), master lease or similar
instrument made in connection with this Agreement, the Note, the Security
Instrument, or the other Loan Documents; (iv) impair the right of Lender to
obtain the appointment of a receiver; (v) except as set forth in this Section
9.4, impair the enforcement of the Assignment of Leases; (vi) impair the right
of Lender to enforce the provisions of Sections 10.2 of the Security Instrument
or Sections 4.1.8, 4.1.28, 5.1.9 and 5.2.8 hereof; or (vii) impair the right of
Lender to obtain a deficiency judgment or other judgment on the Note against
Borrower to the extent necessary to (A) preserve or enforce its rights and
remedies against the Property or (B) obtain any Insurance Proceeds or Awards to
which Lender would otherwise be entitled under the terms of this Agreement or
the Security Instrument; provided however, Lender shall only enforce such
judgment to the extent of the Insurance Proceeds and/or Awards.
(b) Notwithstanding the provisions of this Section 9.4 to the contrary,
Borrower shall be personally liable to Lender for the Losses Lender incurs to
the extent due to: (i) fraud or material misrepresentation in connection with
the execution and the delivery of this Agreement, the Note, the Security
Instrument, or the other Loan Documents; (ii) Borrower's or Operating Lessee's
misapplication or misappropriation of Rents received by Borrower or Operating
Lessee after the occurrence of an Event of Default; (iii) Borrower's or
Operating Lessee's
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misapplication or misappropriation of Security Deposits or Rents collected more
than thirty (30) days in advance; (iv) Borrower's or Operating Lessee's
misapplication or the misappropriation of Insurance Proceeds or Awards; (v)
Borrower's or Operating Lessee's failure to pay Taxes, Other Charges (except to
the extent that sums sufficient to pay such amounts have been deposited in
escrow with Lender pursuant to the terms of Section 7.2 hereof), charges for
labor or materials or other charges that can create Liens on the Property; (vi)
Borrower's or Operating Lessee's failure to return or to reimburse Lender for
all Personal Property taken from the Property by or on behalf of Borrower or
Operating Lessee and not replaced with Personal Property of comparable utility
and value; (vii) any act of intentional waste or arson to the Collateral by
Borrower, Principal, the Operating Lessee SPE Entities or any Affiliate or
thereof or by any Indemnitor or Guarantor; (viii) any fees or commissions paid
by Borrower to Principal, the Operating Lessee SPE Entities or any Affiliate of
Borrower, Principal, the Operating Lessee SPE Entities, Indemnitor, or Guarantor
in violation of the terms of this Agreement, the Note, the Security Instrument
or the other Loan Documents; (ix) Borrower's failure to comply with the
provisions of Sections 4.1.39 and 5.1.19 of this Agreement; (x) any Loss
resulting from a Casualty due to Borrower's failure to obtain the insurance
required pursuant to Section 6.1; and (xi) Borrower's default under Section
5.1.10 hereof (after ten (10) Business Days prior written notice to Borrower).
(c) Notwithstanding the foregoing, the agreement of Lender not to
pursue recourse liability as set forth in Subsection (a) above SHALL BECOME NULL
AND VOID and shall be of no further force and effect and the obligation to repay
the Debt shall become a personal recourse obligation of Borrower (i) in the
event of Borrower's or Principal's default under Section 4.1.35 hereof or
Operating Lessee's default under Section 12 of the Operating Lease Subordination
Agreement (such that such failure was considered by a court as a factor in the
court's finding for a consolidation of the assets of Borrower, Principal and/or
Operating Lessee with the assets of another Person) or any Transfer in violation
of the provisions of Section 5.2.10 hereof or Article 7 of the Security
Instrument, (ii) if the Property or any part thereof shall become an asset, or
if Borrower, Principal, or an Operating Lessee SPE Entity shall be a debtor, in
(A) a voluntary bankruptcy or insolvency proceeding or (B) an involuntary
bankruptcy or insolvency proceeding commenced by any Person (other than Lender)
and, with respect to such involuntary proceeding, Borrower consents or fails to
object to such proceedings) or if Borrower, Principal, or an Operating Lessee
SPE Entity has acted in concert with, colluded or conspired with the party to
cause the filing of such involuntary proceeding or (iii) an Event of Default
contemplated by Section 8.1(a)(xi)(b), 8.1(a)(xi)(c) or 8.1(a)(xxiii)(b) hereof
has occurred (unless caused by, or at the request of Lender).
(d) Nothing herein shall be deemed to be a waiver of any right which
Lender may have under Section 506(a), 506(b), 1111(b) or any other provision of
the Bankruptcy Code to file a claim against Borrower or Principal for the full
amount of the indebtedness secured by the Security Instrument or to require that
all Collateral shall continue to secure all of the indebtedness owing to Lender
in accordance with this Agreement, the Note, the Security Instrument and the
other Loan Documents.
X. MISCELLANEOUS
Section 10.1 Survival.
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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 unless a longer period is expressly
set forth herein or in the other Loan Documents. 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, by or on behalf of Borrower, shall
inure to the benefit of the legal representatives, successors and assigns of
Lender, and all covenants, promises and agreements in this Agreement, by or on
behalf of Lender, shall be binding upon the 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 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 SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO
PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE
GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (OTHER THAN THOSE CONFLICT OF LAW PROVISIONS THAT WOULD DEFER
TO THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION). WITHOUT IN ANY WAY LIMITING
THE PRECEDING CHOICE OF LAW, THE PARTIES ELECT TO BE GOVERNED BY NEW YORK LAW IN
ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART) ON, SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK; PROVIDED HOWEVER, THAT WITH
RESPECT TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED BY THIS AGREEMENT, THE SECURITY INSTRUMENT AND THE
OTHER LOAN DOCUMENTS, AND THE DETERMINATION OF DEFICIENCY JUDGMENTS, THE LAWS OF
THE STATE WHERE THE PROPERTY IS LOCATED SHALL APPLY.
(b) WITH RESPECT TO ANY CLAIM OR ACTION ARISING HEREUNDER OR UNDER THIS
AGREEMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS, BORROWER (A) IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK, NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF, AND (B) IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING ON VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTE OR THE OTHER LOAN
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DOCUMENTS BROUGHT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING IN THIS AGREEMENT, THE NOTE OR THE OTHER LOAN
DOCUMENTS WILL BE DEEMED TO PRECLUDE LENDER FROM BRINGING AN ACTION OR
PROCEEDING WITH RESPECT HERETO IN ANY OTHER JURISDICTION. WITHOUT IN ANY WAY
LIMITING THE PRECEDING CONSENTS TO JURISDICTION AND VENUE, THE PARTIES AGREE TO
SUBMIT TO THE JURISDICTION OF SUCH NEW YORK COURTS IN ACCORDANCE WITH SECTION
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.
Section 10.4 Modification, Waiver in Writing.
No modification, amendment, extension, discharge, termination or waiver
of any provision of this Agreement, the Note, or of any other Loan Document, nor
consent to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on Borrower, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances.
Section 10.5 Delay Not a Waiver.
Neither any failure nor any delay on the part of Lender or Borrower 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 or other written communications hereunder shall be deemed
to have been properly given (i) upon delivery, if delivered in person or by
facsimile transmission with receipt acknowledged by the recipient thereof and
confirmed by telephone by sender, (ii) one (1) Business Day after having been
deposited for overnight delivery with any reputable overnight courier service,
or (iii) three (3) Business Days after having been deposited in any post office
or mail depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
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If to Borrower: c/o FelCor Lodging Trust Incorporated
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Jenkens & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: JPMorgan Chase Bank
c/o ARCap Servicing, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Greenhouse
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Two World ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Section 10.7 Trial by Jury.
BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. BORROWER AND LENDER ARE HEREBY
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AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE
EVIDENCE OF THIS WAIVER BY BORROWER AND LENDER, AS APPLICABLE.
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.
Except as otherwise expressly provided herein, Lender shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments by Borrower to any portion of the obligations of Borrower hereunder. To
the extent Borrower makes a payment or payments to Lender, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, State or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
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 have acted unreasonably or unreasonably delayed acting in any case where
by law or under this Agreement or the other Loan Documents, Lender or such
agent, as the case may be, has an obligation to act reasonably or promptly,
Borrower agrees that neither Lender nor its agents shall be liable for any
monetary damages, and Borrower's sole remedies shall be limited to commencing an
action
99
seeking injunctive relief or declaratory judgment. 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) Except as otherwise expressly provided herein, Borrower covenants
and agrees to pay or, if Borrower fails to pay, to reimburse, Lender within five
(5) days of receipt of written notice from Lender 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 without limitation any opinions
requested by Lender as to any legal matters arising under this Agreement or the
other Loan Documents); (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, without limitation, 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) securing Borrower's compliance with any requests made
pursuant to the provisions of this Agreement; (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 Property, 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 Property or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings; provided, however, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same arise by reason of
the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any
cost and expenses due and payable to Lender may be paid from any amounts in the
Lockbox Account.
(b) Borrower shall indemnify, defend 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, without limitation, the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of (i)
any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement
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or the other Loan Documents, or (ii) the use or intended use of the proceeds of
the Loan (collectively, the "Indemnified Liabilities"); provided, however, that
Borrower shall not have any obligation to Lender hereunder to the extent that
such Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of Lender. To the extent that the undertaking to indemnify, defend
and hold harmless set forth in the preceding sentence may be unenforceable
because it violates any law or public policy, Borrower shall pay the maximum
portion that it is permitted to pay and satisfy under Applicable Law to the
payment and satisfaction of all Indemnified Liabilities incurred by Lender.
(c) Borrower shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless Lender and the Indemnified Parties from and
against any and all losses (including, without limitation, reasonable attorneys'
fees and costs incurred in the investigation, defense, and settlement of losses
incurred in correcting any prohibited transaction or in the sale of a prohibited
loan, and in obtaining any individual prohibited transaction exemption under
ERISA, the Code, any State statute or other similar law that may be required, in
Lender's sole discretion) that Lender may incur, directly or indirectly, as a
result of a default under Sections 4.1.8 or 5.2.8 hereof.
(d) Other than in connection with a Securitization, Borrower covenants
and agrees to pay for or, if Borrower fails to pay, to reimburse Lender for, (i)
any fees and expenses incurred by any Rating Agency in connection with any
Rating Agency review of the Loan, the Loan Documents or any transaction
contemplated thereby or (ii) any consent, approval, waiver or confirmation
obtained from such Rating Agency pursuant to the terms and conditions of this
Agreement or any other Loan Document and Lender shall be entitled to require
payment of such fees and expenses as a condition precedent to the obtaining of
any such consent, approval, waiver or confirmation.
Section 10.14 Schedules and Exhibits Incorporated.
The Schedules and 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 the Loan Documents which
Borrower may otherwise have against any assignor of the Loan 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; No Third Party
Beneficiaries.
(a) Borrower and Lender intend that the relationships created hereunder
and under the other Loan Documents be solely that of borrower and lender.
Nothing herein or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship
101
between Borrower and Lender nor to grant Lender any interest in the Property
other than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for the
benefit of Lender and Borrower and nothing contained in this Agreement or the
other Loan Documents shall be deemed to confer upon anyone other than Lender and
Borrower (or an Affiliate of either of the foregoing acting on behalf of
Borrower or Lender, as applicable) 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 10.17 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, JPMorgan Chase, or any of their Affiliates shall be subject to the prior
written approval of Lender, which shall not be unreasonably withheld.
Notwithstanding the foregoing, disclosure required by any federal or State
securities laws, rules or regulations, as determined by Borrower's counsel,
shall not be subject to the prior written approval of Lender.
Section 10.18 Waiver of Marshalling of Assets.
(a) Intentionally Deleted.
(b) To the fullest extent permitted by Applicable Law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of the
assets of Borrower and of the Property, or to a sale in inverse order of
alienation in the event of foreclosure of the Security Instrument, 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 Property
for the collection of the Debt without any prior or different resort for
collection or of the right of Lender to the payment of the Debt out of the net
proceeds of the 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 Security Instrument, any equitable
right otherwise available to Borrower which would require the separate sale of
the Property or require Lender to exhaust its remedies against the Property or
any combination of the Property before proceeding against any other Property or
combination of Property; and further in the event of such foreclosure Borrower
does hereby expressly consent to and authorize, at the option of Lender, the
foreclosure and sale either separately or together of any combination of the
Property.
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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.
Section 10.20 Conflict; Construction of Documents; Reliance.
In the event of any conflict between the provisions of this Agreement
and any of the other Loan Documents, the provisions of this Agreement shall
control. The parties hereto acknowledge that they were represented by competent
counsel in connection with the negotiation, drafting and execution of the Loan
Documents and that such Loan Documents shall not be subject to the principle of
construing their meaning against the party which drafted same. Borrower
acknowledges that, with respect to the Loan, Borrower shall rely solely on its
own judgment and advisors in entering into the Loan without relying in any
manner on any statements, representations or recommendations of Lender or any
parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it
under any of the Loan Documents or any other agreements or instruments which
govern the Loan by virtue of the ownership by it or any parent, subsidiary or
Affiliate of Lender of any equity interest any of them may acquire in Borrower,
and Borrower hereby irrevocably waives the right to raise any defense or take
any action on the basis of the foregoing with respect to Lender's exercise of
any such rights or remedies. Borrower acknowledges that Lender engages in the
business of real estate financings and other real estate transactions and
investments which may be viewed as adverse to or competitive with the business
of Borrower or its Affiliates.
Section 10.21 Brokers and Financial Advisors.
Borrower and Lender hereby represent that they have dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the transactions contemplated by this Agreement. Borrower
hereby agrees to indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities, costs and expenses of any kind (including Lender's
reasonable attorneys' fees and expenses) in any way relating to or arising from
a claim by any Person that such Person acted on behalf of Borrower in connection
with the transactions contemplated herein. The provisions of this Section 10.21
shall survive the expiration and termination of this Agreement and the payment
of the Debt.
Section 10.22 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, between Borrower and/or its Affiliates and
Lender are superseded by the terms of this Agreement and the other Loan
Documents.
Section 10.23 Counterparts.
This Agreement may be executed in any number of duplicate originals and
each duplicate original shall be deemed to be an original. This Agreement may be
executed in several
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counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement.
Section 10.24 Liability.
This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.
BORROWER:
________________________________,a
Delaware__________________________
By: ___________________________________
Name:
Title:
LENDER:
JPMORGAN CHASE BANK, a New York
banking corporation
By: ___________________________________
Name:
Title:
Acknowledged and agreed to with respect
to its obligations set forth in
Article 9 hereof:
FELCOR LODGING LIMITED PARTNERSHIP, a
Delaware limited partnership
By: FELCOR LODGING TRUST INCORPORATED,
a Maryland corporation, its
general partner
By: ___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
SCHEDULES AND EXHIBITS INTENTIONALLY OMITTED