EXHIBIT 10.32
CANDLEWOOD HOTEL COMPANY FUND I, LLC, Borrower
LOAN AGREEMENT
Dated as of June 1, 1999
BOSTON CAPITAL INSTITUTIONAL ADVISORS LLC, Lender
TABLE OF CONTENTS
Page
1. Definitions; Certain Rules of Construction ....................................... 1
2. The Loan ......................................................................... 16
2.1. Loan Facility ............................................................... 16
2.2. Maximum Available Loan and Tranche Amounts .................................. 16
2.3. Borrowing Requests .......................................................... 16
2.4. The Loan Account and the Note ............................................... 17
2.5. Advances .................................................................... 17
2.5.1. Method of Making Advances ............................................ 17
2.5.2. Timing of Advances ................................................... 17
2.5.3. Advances after an Event of Default ................................... 18
2.6. Application of Proceeds ..................................................... 18
3. Interest; Fees ................................................................... 19
3.1. Interest .................................................................... 19
3.2. Commitment Fee .............................................................. 19
3.3. Changes in Circumstances; Yield Protection .................................. 19
3.3.1. Reserve Requirements, etc ............................................ 19
3.3.2. Taxes ................................................................ 19
3.3.3. Regulatory Changes ................................................... 21
3.3.4. Compensation Claims .................................................. 21
3.3.5. Mitigation ........................................................... 21
3.3.6. Other Lenders ........................................................ 21
3.4. Computations of Interest and Fees ........................................... 21
4. Payment .......................................................................... 21
4.1. Payment at Maturity ......................................................... 22
4.2. Restrictions on Prepayment ................................................ 22
4.3. Prepayments Generally; Prepayments on Sales of Approved Projects;
Prepayments in Connection with Refinancing and Debt Service Coverage Test ........ 22
4.4. Prepayments from Increased Equity Contribution by Candlewood ................ 22
4.5. Involuntary Prepayments ..................................................... 23
4.6. No Reborrowing .............................................................. 23
4.7. Payments to be made with Accrued Interest ................................... 23
4.8. Order of Application of Payments ............................................ 23
5. Conditions to Making Loan Advances .............................................. 23
5.1. Conditions to Loan Advances as of the Date of this Agreement ................ 23
5.1.1. Note ................................................................ 23
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Page
5.1.2. Payment of Lender's Expenses ......................................... 24
5.1.3. Pledge Agreements .................................................... 24
5.1.4. Key Principal Recourse Agreement ..................................... 24
5.1.5. Environmental Indemnity .............................................. 24
5.1.6. Assignment and Subordination of Administrative Services Agreement .... 24
5.1.7. Administrative Services Agreement .................................... 24
5.1.8. Legal Opinion ........................................................ 24
5.2. Conditions to Loan Advances related to Approved Projects .................... 25
5.2.1. Approved Project Agreement ........................................... 25
5.2.2. Approved Project Collateral Documents ................................ 25
5.2.3. Execution of Collateral Documents by other Parties ................... 26
5.2.4. Approved Project Deliveries .......................................... 26
5.2.5. Opportunity to Inspect ............................................... 29
5.2.6. Senior Construction Loan Documents ................................... 29
5 2.7. Required Candlewood Equity Contribution .............................. 30
5.3. Conditions to Each Loan Advance ............................................. 30
5.3.1. Section 5.1 Conditions ............................................... 30
5.3.2. Perfection of Security ............................................... 30
5.3.3. Solvency Certificate ................................................. 30
5.3.4. Adverse Market Change ................................................ 31
5.3.5. Payment of Lender's Expenses ......................................... 31
5:3.6. Proper Proceedings ................................................... 31
5.3.7. General .............................................................. 31
5.3.8. Officer's Certificate ................................................ 32
5.3.9. Legality, etc. ....................................................... 32
5.3.10. AIA Form 6702 ....................................................... 32
6. General Covenants ................................................................ 32
6.1. Taxes and Other Charges; Accounts Payable ................................... 32
6.1.1. Taxes and Other Charges .............................................. 32
6.1.2. Accounts Payable ..................................................... 33
6.2. Conduct of Business, etc. ................................................... 33
6.2.1. Types of Business .................................................... 33
6.2.2. Maintenance of Properties and Existence .............................. 33
6.2.3. Statutory Compliance ................................................. 33
6.2.4. Compliance with Material Agreements .................................. 34
6.3. Insurance ................................................................... 34
6.3.1. Property Insurance ................................................... 34
6.3.2. Liability Insurance ................................................. 34
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Page
6.3.3. Business Interruption Insurance ...................................... 34
6.3.4. Intentionally Omitted ................................................ 35
6.3.5. Flood Insurance ...................................................... 35
6.3.6. Other Insurance Coverages ............................................ 35
6.4. Other Insurance Terms ....................................................... 35
6.5. Financial Statements and Reports ............................................ 36
6.5.1. Annual Reports ....................................................... 36
6.5.2. Quarterly and Monthly Reports ........................................ 37
6.5.3. Other Reports ........................................................ 37
6.5.4. Notice of Litigation, Defaults, etc .................................. 38
6.5.5. Other Information; Audit ............................................. 38
6.6. Debt Service Test ........................................................... 38
6.7. Indebtedness ................................................................ 39
6.8. Guarantees; Letters of Credit ............................................... 39
6.9. Liens ....................................................................... 40
6.10. Investments and Acquisitions ............................................... 40
6.11. Distributions .............................................................. 41
6.12. Asset Dispositions and Mergers ............................................. 41
6.13. Issuance of Membership Interests by Subsidiaries ........................... 42
6.14. Intentionally Omitted ...................................................... 42
6.15. Derivative Contracts ....................................................... 43
6.16. Negative Pledge Clauses .................................................... 43
6.17. ERISA, etc. ................................................................ 43
6.18. Transactions with Affiliates ............................................... 43
6.19. Environmental Laws ......................................................... 43
6.20. Senior Construction Loans .................................................. 43
7. Representations and Warranties ................................................... 44
7.1. Organization and Business ................................................... 44
7.1.1. The Borrower ......................................................... 44
7.1.2. Subsidiaries ......................................................... 44
7.1.3. Qualification ........................................................ 44
7.1.4. Capitalization ....................................................... 44
7.1.5. Intentionally Omitted ................................................ 44
7.1.6. No Prior Business Activity ........................................... 45
7.2. Proforma Financial Statements; Material Agreements .......................... 45
7.2.1. Proforma Financial Statements and Other Information .................. 45
7.2.2. Material Agreements .................................................. 45
7.3. No Agreements Relating to Indebtedness, Investments, etc. ................... 45
7.4. Title to Assets ............................................................. 45
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Page
7.5. Operations in Conformity With Law, etc. ..................................... 45
7.6. Litigation .................................................................. 46
7.7. Authorization and Enforceability ............................................ 46
7.8. No Legal Obstacle to Agreements ............................................. 46
7.9. Defaults .................................................................... 47
7.10. Licenses, Permits and Approvals ............................................ 47
7.11. Tax Returns ................................................................ 47
7.12. No Pension Plans ........................................................... 48
7.13. Environmental Compliance ................................................... 48
7.14. Government Regulation; Margin Stock ........................................ 48
7.15. Accuracy of Submitted Information .......................................... 48
7.16. Disclosure ................................................................. 48
7.17. Adverse Market Change ...................................................... 48
8. Defaults ......................................................................... 49
8.1. Events of Default ........................................................... 49
8.1.1. Payment .............................................................. 49
8.1.2. Other Covenants ...................................................... 49
8.1.3. Representations and Warranties ....................................... 49
8.1.4. Senior Construction Loans Cross Default, etc. ........................ 49
8.1.5. Other Borrower or Candlewood Obligations to the Lender Cross Default . 50
8.1.6. Ownership; Liquidation; etc. ......................................... 50
8.1.7. Enforceability, etc. ................................................. 51
8.1.8. Judgments ............................................................ 51
8.1.9. Bankruptcy, etc ...................................................... 51
8.1.10. Debt Service Coverage ............................................... 52
8.2. Certain Actions Following an Event of Default .................................. 52
8.2.1. Terminate Obligation to Make Loan Advances ........................... 52
8.2.2. Specific Performance; Exercise of Rights ............................. 53
8.2.3. Acceleration ......................................................... 53
8.2.4. Enforcement of Payment; Loan Security; Setoff ........................ 53
8.2.5. Right to Cure Senior Construction Loan Default ....................... 53
8.2.6. Cumulative Remedies .................................................. 54
8.3. Interest and Late Charges with respect to Defaults .......................... 54
8.4. Annulment of Defaults ....................................................... 54
8.5. Waivers ..................................................................... 54
8.6. Candlewood Right to Cure .................................................... 55
9. Expenses; Indemnity .............................................................. 55
9.1. Expenses .................................................................... 55
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Page
9.2. General Indemnity ........................................................... 56
10. Successors and Assigns; Lender Assignments and Participations ................... 56
10.1. Successors and Assigns ..................................................... 56
10.2. Assignments by the Lender .................................................. 57
10.2.1. Operations; Agent ................................................... 57
10.2.2. Assignees and Assignment Procedures ................................. 57
10.2.3. Substitution of Notes ............................................... 57
10.2.4. Further Assurances .................................................. 58
10.3. Participants ............................................................... 58
11. Confidentiality ................................................................. 59
12. Certain Special Provisions ...................................................... 59
12.1. Single Purpose Entity ...................................................... 59
12.1.1. Definition .......................................................... 59
12.1.2. Independent Existence ............................................... 60
12.1.3. Separate Assets ..................................................... 60
12.1.4. Separate Records .................................................... 61
12.1.5. Separate Liabilities ................................................ 61
12.1.6. Separate Identification ............................................. 61
12.1.7. Adequate Capitalization ............................................. 61
12.2. Candlewood Member's Equity Contribution .................................... 61
12.3. Certain Transaction and Due Diligence Expenses ............................. 62
12.4. Subordination of Collateral with respect to Approved Projects .............. 63
12.5. Brokers, Investment Bankers and other Advisors ............................. 63
12.6. Total Project Costs ........................................................ 63
13. Notices ......................................................................... 63
14. Liability of the Lender ......................................................... 65
14.1. No Relationship with Vendors ............................................... 65
14.2. No Rights of Third Parties ................................................. 65
15. General Provisions .............................................................. 65
15.1. Course of Dealing; No Implied Waivers; Amendments .......................... 65
15.2. Defeasance ................................................................. 66
15.3. Intentionally Omitted ...................................................... 66
15.4. Certain Obligor Acknowledgments ............................................ 66
15.5. Venue; Service of Process Certain Waivers .................................. 66
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Page
15.6. WAVER OF JURY TRIAL ........................................................ 67
15.7. Interpretation; Governing Law; etc ......................................... 67
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EXHIBITS
5.1.1. Note
5.1.3.A Borrower Pledge Agreement
5.1.3.B Parent Pledge Agreement
5.1.4. Key Principal Recourse Agreement
5.1.5. Environmental Indemnity.
5.1.6. Assignment and Subordination of Administrative Services Agreement
5.1.8. Form of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Opinion
5.2.1. Approved Project Agreement
5.2.2.A Guarantee Agreement
5.2.2.B Blanket Assignment
5.2.2.C Assignment and Subordination of Franchise Agreement
5.2.2.D Assignment and Subordination of Management Agreement
5.2.2.E Mortgage
5.2.2.F Security Agreement
5.2.2.I Assignment of Reservations Service Agreement
5.2.4.C Environmental Questionnaire
5.3.3. Solvency Certificate
5.3.8. Officer's Certificate
6.5.1.B Certificate Re: No Default
6.5.2.A Quarterly Report Certificate
7.2.2 Material Agreements
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LOAN AGREEMENT
This Agreement, dated as of June 1, 1999, is by and between CANDLEWOOD
HOTEL COMPANY FUND I, LLC, a Delaware limited liability company (the
"Borrower"), and BOSTON CAPITAL INSTITUTIONAL ADVISORS LLC, a Delaware limited
liability company (the "Lender"). The parties agree as follows:
Recitals:
Pursuant to this Agreement, the Lender is extending to the Borrower a term
loan facility of $37,500,000 (the "Loan"). The Loan matures on the Maturity
Date. The Loan is secured by liens on substantially all of the assets
(including the membership interests in the Subsidiaries) of the Borrower and by
a pledge of certain membership interests in the Borrower. The Loan may be
guaranteed by the Borrower's Subsidiaries and may be secured by liens on the
assets of the Borrower's Subsidiaries. The proceeds of the Loan shall be used
by the Borrower to fund a portion of any required equity contribution to the
Borrower's Subsidiaries for Approved Projects to be owned by such Borrower's
Subsidiaries and to pay for costs and expenses incurred in establishing such
Borrower's Subsidiaries for Approved Projects and for due diligence costs
related to Approved Projects.
1. Definitions; Certain Rules of Construction. Certain capitalized terms
are used in this Agreement and in the other Loan Documents with the specific
meanings defined below in this Section 1. Except as otherwise explicitly
specified to the contrary or unless the context clearly requires otherwise, (a)
the capitalized term "Section" refers to sections of this Agreement, (b) the
capitalized term "Exhibit" refers to exhibits to this Agreement, (c) references
to a particular Section include all subsections thereof, (d) the word
"including" shall be construed as "including without limitation", (e)
accounting terms not otherwise defined herein have the meaning provided under
GAAP, (f) references to a particular statute or regulation include all rules and
regulations thereunder and any successor statute, regulation or rules, in each
case as from time to time in effect, (g) references to a particular Person
include such Person's successors and assigns to the extent not prohibited by
this Agreement and the other Loan Documents and (h) references to "Dollars" or
"$" mean United States Funds. References to "the date hereof" mean the date
first set forth above.
"Administrative Service Agreement" is defined in Exhibit 7.2.2.
"Adjusted Net Income" means for any given period the sum of (a) gross revenue
from operations received by a Person for such period plus (b) any interest
reserves available to such Person (under either a Tranche or a Senior
Construction Loan applicable to such Person) to pay debt service on such loans
for such period minus(x) operating expenses incurred by such Person for such
period (including real estate and other taxes payable by such Person but
excluding income taxes payable by the direct or indirect members of the
Borrower who are required to pay such taxes in respect of the income received
by the Borrower during such period), and (y) debt service payable in respect of
the Senior Construction Loan by such Person for such period.
"Affiliate" means, with respect to the Borrower (or any other specified
Person), any other Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Borrower (or such specified
Person), and shall include (a) any officer, director, managing member or manager
of the Borrower (or such specified Person), (b) any Person of which the
Borrower (or such specified Person) or any Affiliate (as defined in clause (a)
above) of the Borrower (or such specified Person) shall, directly or indirectly,
beneficially own either (i) at least 10% of the outstanding equity securities
having the general power to vote or (ii) at least 10% of all equity interests
or (c) any Person directly or indirectly controlling the Borrower (or such
specified Person) through a management agreement, voting agreement or other
contract.
"Agreement" means this Loan Agreement as from time to time amended,
modified and in effect.
"Applicable Percentage" shall mean (a) ten percent (10%) (i) on or
before the date one year after the initial advance of the Loan or (ii) after
such date as long as at least ten (10) Approved Projects are then committed to
by the Lender and (b) fifteen percent (15%) after the date one year after the
initial advance of the Loan if ten (10) Approved Projects are not then
committed to by the Lender.
"Applicable Rate" has the meaning set forth in the Note.
"Appraisal" means for each Approved Project either (a) the appraisal
required by the Senior Construction Lender for such Approved Project provided
such appraisal satisfies the Appraisal Standards and is reasonably satisfactory
in form and substance to the Lender or (b) if such appraisal is not reasonably
satisfactory in form and substance to Lender, another appraisal for such
Approved Project provided such other appraisal satisfies the Appraisal Standards
and is reasonably satisfactory in form and substance to the Lender.
"Appraisal Standards" means an appraisal by an MAI qualified appraiser
reasonably satisfactory to the Lender with at least five years experience in
evaluating commercial real estate properties comparable to the applicable
Approved Project and incorporating usual and customary standards and provisions
for an appraisal of a commercial real estate property including calculations of
appraised value based on replacement cost, comparable sales and income methods.
"Appraised Value" means the value of an Approved Project established by
an Appraisal of such project.
"Approved Project" means a project involving an extended stay hotel and
related assets to be owned by a Hotel Owner with respect to which information
about the project in form and substance satisfactory to the Lender including,
without limitation thereto, unless expressly
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waived by the Lender, the following matters has been provided to and reviewed
and approved by the Lender:
(a) the project location.
(b) the contemplated size of the facility including the
contemplated square footage of the buildings and other improvements, the
contemplated number of rooms and the contemplated number of parking
spaces.
(c) marketing information regarding the project, the project
location and competitive properties including (1) local maps indicating
locations of competing hotels and of demand generators; (2) a regional
map indicating the location of Candlewood Hotels and proposed Candlewood
Hotels; (3) a comprehensive list of all demand generators including
lists by Dun & Bradstreet and the local chamber(s) of commerce; (4) a
list of all hotels, and to the extent known, proposed hotels, in the
marketplace noting direct competitors including such competitors'
occupancy rates, ADR, RevPar and available amenities; (5) a ▇▇▇▇▇ Travel
Research Report and other relevant independent market research and
reports and (d) a memorandum from Candlewood describing the strengths
and weaknesses of the proposed projects highlighting demand generators,
supply, strength of location versus competition, property access,
amenities and other merits of the project from a market and competitive
standpoint.
(d) the budget for development, design, construction, startup of
initial operations and the first full year of operations (including all
anticipated hard and soft costs, debt service reserves and contingency
amounts).
(e) anticipated Senior Construction Loan terms or if available a
term sheet or commitment for a Senior Construction Loan to finance the
project including to the extent available, detailed information on (i)
the level of collateral and controls the applicable Senior Construction
Lender will allow the Lender to have with respect to the Hotel Owner of
the project, (ii) the terms of any required subordination of the Loan to
such Senior Construction Loan and (iii) when the equity for the project
must be contributed.
(f) the expected Total Required Equity required to fund such
project including the anticipated Equity Contribution by Candlewood and
the portion of the Loan Amount to be allocated to the project (as
approved by the Lender such portion of the Loan Amount shall be the
Tranche Amount for such project).
(g) a site plan for the project.
(h) proforma financial statements for the project from expected
commencement of business operations through the end of the fifth full
calendar year
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following the initial calendar year of operations with the first one
year presented on a monthly basis and the last four years presented on
an annual basis and including (1) a construction draw schedule showing
the expected timing and proportionate draw downs of Equity Contributions
to the Borrower, the Loan and the applicable Senior Construction Loan
and (2) detail regarding when revenue from operations of the project are
expected to commence and when interest reserves for the project are
expected to be depleted.
(i) the promotional and marketing plans for the project.
(j) any preliminary plans and specifications for the project.
(k) a time schedule or schedules detailing all significant
development, design, construction and operational start up activities
and expected completion dates for the project.
(1) a permit schedule listing all permits needed for the
project, which permits have been obtained and when any permits not
already obtained are expected to be obtained in connection with the
project including a projected time table.
(m) hotel management staffing plans.
(n) any purchase or sale agreement or option agreement for the
land comprising such project.
(o) such other matters as the Lender may from time to time
generally or with respect to particular projects reasonably require the
Borrower to provide the Lender for evaluation regarding a project.
The Lender acknowledges that the schedules, budgets, projections and
proforma financial statements delivered by the Borrower with respect to proposed
projects are not a guarantee that the projected results will actually occur.
"Approved Project Agreement" is defined in Section 5.2.1.
"Assignee" is defined in Section 10.2.2.
"Assignment and Subordination of Administrative Services Agreement" is
defined in Section 5.1.6.
"Assignments" means all Blanket Assignments, all Assignment and
Subordination of Franchise Agreements, all Assignment and Subordination of
Management Agreements, the
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Assignment and Subordination of Administrative Services Agreement and all
Assignments of Reservations Service Agreement.
"Assignment and Subordination of Franchise Agreement" is defined in
Section 5.2.2(c).
"Assignment and Subordination of Management Agreement" is defined in
Section 5.2.2(d).
"Assignment of Reservations Service Agreement" is defined in Section
5.2.2(i).
"Authorized Signatory" means an individual not affiliated with the
Lender who (a) is duly authorized to act for the Borrower and its Subsidiaries,
(b) is generally familiar with the condition and affairs of the Borrower and its
Subsidiaries, (c) is authorized to execute and deliver documents on behalf of
the Borrower and its Subsidiaries and (d) has actual personal knowledge with
respect to the matters such individual is being asked to certify to the Lender.
To the extent such Authorized Signatory is reporting or certifying as to
financial matters such Authorized Signatory shall be the individual who is the
chief executive officer or chief financial officer of Candlewood.
"Bankruptcy Code" means Title 11 of the United States Code.
"Bankruptcy Default" means an Event of Default referred to in Section
8.1.9.
"Blanket Assignment" is defined in Section 5.2.2(b).
"Borrower" has the meaning defined in the preamble hereto.
"Borrower Pledge Agreement" is defined in Section 5.1.3.
"Business Day" means any day other than Saturday, Sunday or a day which
is a state or federal holiday in Boston, Massachusetts.
"By-laws" means all written by-laws, rules, regulations and all other
documents relating to the management, governance or internal regulation of any
Person other than an individual, or interpretive of the Charter of such Person,
all as from time to time in effect.
"Candlewood" means Candlewood Hotel Company, Inc., a Delaware
corporation.
"Candlewood LLC" means Candlewood Hotel Company, L.L.C., a wholly owned
subsidiary of Candlewood.
"Candlewood Member" means Candlewood Ventures I, LLC, a wholly owned
subsidiary of Candlewood and a member and the manager of the Borrower.
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"Capitalized Lease" means any lease which is required to be capitalized
on the balance sheet of the lessee in accordance with GAAP, including Statement
Nos. 13 and 98 of the Financial Accounting Standards Board.
"Capitalized Lease Obligations" means the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
"Cash Equivalents" means:
(a) negotiable certificates of deposit, time deposits (including
sweep accounts), demand deposits and bankers' acceptances having a
maturity of nine months or less and issued by any United States
financial institution having capital and surplus and undivided profits
aggregating at least $100,000,000 and rated at least Prime-1 by Moody's
or A-1 by S&P.
(b) corporate obligations having a maturity of nine months or
less and rated at least Prime-1 by Moody's or A-1 by S&P.
(c) any direct obligation of the United States of America or any
agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of
not more than one year or which is subject to a repurchase agreement
with any financial institution referred to in clause (a) above
exercisable within one year from the time of purchase and (ii) which, in
the case of obligations of any state or municipality, is rated at least
Aaa by Moody's or AAA by S&P.
(d) any mutual fund or other pooled investment vehicle rated at
least Aa by Moody's or AA by S&P which invests principally in
obligations described above.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other charter
document of any Person other than an individual, each as from time to time in
effect.
"Closing Date" means each date on which any loan advance is made
pursuant to Section 2.1.
"Commitment Fee" is defined in Section 3.2.
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"Consolidated" when used with reference to any term, means that term as
applied to the accounts of the Borrower (or other specified Person) and all of
its Subsidiaries (or other specified group of Persons), or such of its
Subsidiaries as may be specified, consolidated (or combined) in accordance with
GAAP.
"Default" means any Event of Default and any event or condition
described in Section 8.1 which with the passage of time or giving of notice, or
both, would become an Event of Default, including the filing against the
Borrower, any of its Subsidiaries or any other Obligor of a petition commencing
an involuntary case under the Bankruptcy Code.
"Distribution" means, with respect to the Borrower (or other specified
Person):
(a) the declaration or payment of any dividend or distribution
on or in respect of any membership interests in the Borrower (or such
specified Person);
(b) the purchase, redemption or other retirement of membership
interests in the Borrower (or such specified Person) or any of its
Subsidiaries, or of options, warrants or other rights for the purchase
of such membership interests, directly, indirectly through a Subsidiary
or parent or otherwise;
(c) any other distribution on or in respect of any membership
interests in the Borrower (or such specified Person);
(d) any payment of principal or interest with respect to, or any
purchase, redemption or defeasance of, any Indebtedness of the Borrower
(or such specified Person) or any of its Subsidiaries which by its terms
or the terms of any agreement is subordinated to the payment of the Loan
Obligations; and
(e) any payment, loan or advance by the Borrower (or such
specified Person) to, or any other Investment by the Borrower (or such
specified Person) in, the holder of any membership interests in the
Borrower (or such specified Person) or any Affiliate of such holder
(including the payment of administrative, franchise, management and
transaction fees and costs including the Transaction Expenses);
provided, however, that the term "Distribution" shall not include payments in
the ordinary course of business in respect of advances and reimbursements to
officers and directors for travel expenses, and similar expenditures.
"End of Loan Advance Date" means the later of (w) the date one year from
the date of the first loan advance under this Agreement and (x) July 1, 2000;
provided, however, if another mezzanine lender acceptable to the Lender and the
Borrower is identified and commits in a written agreement in form and substance
satisfactory to the Lender to make funds available to loan to the Borrower under
this Agreement thereby increasing the Loan Amount, then such
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date shall be the later of (y) 18 calendar months from the date of the first
loan advance under this Agreement and (z) January 1, 2001; provided, further
that if the Lender has funded any portion of a Tranche Amount prior to the dates
in clauses (w) or (x) above, whichever is applicable, then the End of Loan
Advance Date shall be two (2) years after the date hereof.
"Environmental Indemnity" is defined in Section 5.1.5.
"Environmental Laws" means all applicable present and future federal,
state and local laws, statutes, ordinances, codes, rules, regulations and other
governmental orders, directives or requirements (including consent decrees and
administrative orders), as well as applicable common law, relating to the
protection of human health, public health and safety and the protection of the
environment, including CERCLA, RCRA, the federal Occupational Health and Safety
Act and all similar state or local statutes or regulations.
"Equity Contribution" means the amount that Candlewood has caused
Candlewood Member to contribute to the Borrower in connection with an Approved
Project as provided in Sections 5.2.7 and 12.2.
"Event of Default" is defined in Section 8.1.
"Foreign Lender" is defined in Section 3.3.2(b)
"Franchise Agreement" is defined in Exhibit 7.2.2.
"GAAP" means generally accepted accounting principles as from time to
time in effect, including the statements and interpretations of the United
States Financial Accounting Standards Board; provided, however, that in the
event of a change in generally accepted accounting principles after the date of
this Agreement, either the Borrower or the Lender may request a change in the
definition of "GAAP", in which case the parties hereto shall negotiate in good
faith with respect to an amendment of this Agreement implementing such change.
"Guarantee" means, with respect to the Borrower (or other specified
Person):
(a) any guarantee by the Borrower (or such specified Person) of
the payment or performance of, or any contingent obligation by the
Borrower (or such specified Person) in respect of, any Indebtedness or
other obligation of any primary obligor;
(b) any other arrangement whereby credit is extended to a
primary obligor on the basis of any promise or undertaking of the
Borrower (or such specified Person), including any binding "comfort
letter" or "keep well agreement" written by the Borrower (or such
specified Person), to a creditor or prospective creditor of such primary
obligor, to (i) pay the Indebtedness of such primary obligor, (ii)
purchase an obligation owed by such primary obligor, (iii) pay for the
purchase or lease of assets or
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services regardless of the actual delivery thereof or (iv) maintain the capital,
working capital, solvency or general financial condition of such primary
obligor;
(c) any liability of the Borrower (or such specified Person),
as a general partner of a partnership in respect of Indebtedness or
other obligations of such partnership;
(d) any liability of the Borrower (or such specified Person) as
a joint venturer of a joint venture in respect of Indebtedness or other
obligations of such joint venture;
(e) any liability of the Borrower (or such specified Person)
with respect to the tax liability of others as a member of a group
(other than a group consisting solely of the Borrower and its
Subsidiaries) that is consolidated for tax purposes; and
(f) reimbursement obligations, whether contingent or matured, of
the Borrower (or such specified Person) with respect to letters of
credit, bankers acceptances, surety bonds, other financial guarantees
and interest rate protection agreements,
in each case whether or not any of the foregoing are reflected on the balance
sheet of the Borrower (or such specified Person) or in a footnote thereto;
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Guarantee and the amount of Indebtedness resulting from such Guarantee shall be
the maximum amount that the guarantor may become obligated to pay in respect of
the obligations (whether or not such obligations are outstanding at the time of
computation).
"Guarantee Agreement" is defined in Section 5.2.2(a).
"Hotel Owner" means a wholly Owned Subsidiary of the Borrower, organized
as a single member Delaware limited liability company as provided in the
Borrower's Charter, that owns an Approved Project.
"Indebtedness" means all obligations, contingent or otherwise, which in
accordance with GAAP are required to be classified upon the balance sheet of the
Borrower (or other specified Person) as liabilities, but in any event including
(without duplication):
(a) borrowed money.
(b) indebtedness evidenced by notes, debentures or similar
instruments.
(c) Capitalized Lease Obligations.
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(d) the deferred purchase price of assets, services or
securities, including related noncompetition, consulting and stock
repurchase obligations (other than ordinary trade accounts payable in
the order course of business).
(e) mandatory redemption or dividend rights on capital stock (or
other equity).
(f) reimbursement obligations, whether contingent or matured,
with respect to letters of credit, bankers acceptances, surety bonds,
other financial guarantees and interest rate protection agreements
(without duplication of other Indebtedness supported or guaranteed
thereby).
(g) liabilities secured by any Lien existing on property owned
or acquired by the Borrower (or such specified Person), whether or not
the liability secured thereby shall have been assumed.
(h) all Guarantees in respect of Indebtedness of others.
"Indemnified Party" is defined in Section 9.2.
"Investment" means, with respect to the Borrower (or other specified
Person).
(a) any share of capital stock, partnership, limited liability
company or other equity interest, evidence of Indebtedness or other
security issued by any other Person.
(b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person.
(c) any Guarantee of the obligations of any other Person.
(d) any acquisition of all, or any division or similar operating
unit of, the business of any other Person or the assets comprising such
business, division or unit.
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e) shall
be included in the term "Investment" whether they are made or acquired by
purchase, exchange, issuance of stock or other securities, merger,
reorganization or any other method; provided, however, that the term
"Investment" shall not include (i) trade and customer accounts receivable for
property leased, goods furnished or services rendered in the ordinary course of
business and payable in accordance with customary trade terms, (ii) deposits,
advances or prepayments to suppliers for property leased or licensed, goods
furnished and services rendered in the ordinary course of business, (iii)
advances to employees for relocation and travel expenses, drawing accounts and
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similar expenditures, (iv) stock or other securities acquired in connection with
the satisfaction or enforcement of Indebtedness or claims due to the Borrower
(or such specified Person) or as security for any such Indebtedness or claim or
(v) demand deposits in banks or similar financial institutions.
"Key Principal Recourse Agreement" is defined in Section 5.1.4.
"Legal Requirement" means any present or future requirement imposed upon
any of the Lender or the Borrower and its Subsidiaries by any law, statute,
rule, regulation, directive, order, decree or guideline (or any interpretation
thereof by courts or of administrative bodies) of the United States of America,
or any state or political subdivision of any of the foregoing, or by any board,
governmental or administrative agency, central bank or monetary authority of the
United States of America or where the Borrower or any of its Subsidiaries owns
property or conducts its business, or any political subdivision of any of the
foregoing. Any such law, statute, rule, regulation, directive, order, decree,
guideline or interpretation imposed on the Lender not having the force of law
shall be deemed to be a Legal Requirement for purposes of Section 3.3. if (i)
the Lender reasonably believes that compliance therewith is customary commercial
practice and (ii) the Lender is in fact complying therewith.
"Lender" has the meaning defined in the preamble hereto.
"Lexington" is defined in Exhibit 7.2.2.
"Lien" means, with respect to the Borrower (or any other specified
Person):
(a) any lien, encumbrance, mortgage, pledge, charge or security
interest of any kind upon any property or assets of the Borrower (or
such specified Person), whether now owned or hereafter acquired, or upon
the income or profits therefrom.
(b) the acquisition of, or the agreement to acquire, any
property or asset upon conditional sale or subject to any other title
retention agreement, device or arrangement (including a Capitalized
Lease).
(c) the sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of the Borrower (or such
specified Person), with or without recourse.
"LLC Agreement" means the Limited Liability Company Agreement of
Candlewood Hotel Company Fund I, LLC dated as of June 1, 1999 by and between
Candlewood Ventures I, LLC and BCIA CW Member, LLC.
"Loan" has the meaning defined in the recitals hereto.
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"Loan Account" is defined in Section 2.4.
"Loan Amount" means $37,500,000.
"Loan Documents" means:
(a) this Agreement, the Note, the Pledge Agreements, the Key
Principal Recourse Agreement, the Environmental Indemnity, all Approved
Project Agreements, the Guarantee Agreement, all Mortgages, the
Assignments, all Security Agreements, each as amended, modified and from
time to time in effect; and
(b) any other present or future agreement or instrument from
time to time entered into among the Borrower, any of its Subsidiaries or
any other obligor, on the one hand, and the Lender, on the other hand,
evidencing or securing the Loan or relating to, amending or modifying
this Agreement or any other Loan Document referred to above or which is
stated to be a Loan Document, each as amended, modified and from time to
time in effect.
"Loan Joint Venture" means a joint venture limited liability company
jointly controlled directly or indirectly by the Lender and Massachusetts Mutual
Life Insurance Company.
"Loan Obligations" means all present and future liabilities, obligations
and Indebtedness of the Borrower, any of its Subsidiaries or any other Obligor
owing to the Lender (or any Affiliate of a Lender) under or in connection with
this Agreement or any other Loan Document, including obligations, in respect of
principal, interest, accrued amounts, reimbursement obligations, the Commitment
Fee, amounts provided for in Sections 3.3. and 9 and other fees, charges,
indemnities and expenses from time to time owing hereunder or under any other
Loan Document (all whether accruing before or after a Bankruptcy Default and
regardless of whether allowed as a claim in bankruptcy or similar proceedings).
"Loan Participant" is defined in Section 10.3.
"Loan Security" means all assets now or from time to time hereafter
subjected to a pledge, security interest, mortgage, collateral assignment or
charge (or intended or required so to be subjected pursuant to any Loan
Document) to secure the payment or performance of any of the Loan Obligations on
a pari passu basis, including the assets described in the Pledge Agreements.
"Management Agreement" is defined in Exhibit 7.2.2.
"Material Adverse Change" means, since any specified date or from the
circumstances existing immediately prior to the happening of any specified
event, a material adverse change in (a) the financial condition or operations of
the Borrower (on an individual basis) or the
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Borrower and its Subsidiaries (on a Consolidated basis), whether as a result of
(i) general economic conditions affecting the hotel industry, (ii) difficulties
in obtaining supplies and raw materials (iii) fire, flood or other natural
calamities, (iv) environmental pollution, (v) regulatory changes, judicial
decisions, war or other governmental action or (vi) any other event or
development, whether or not related to those enumerated above or (b) the ability
of the Obligors to perform their material obligations under the Loan Documents.
"Material Agreements" is defined in Section 7.2.2.
"Maturity Date" has the meaning set forth in the Note.
"Maximum Available Loan Amount" is defined in Section 2.2.
"Maximum Available Tranche Amount" is defined in Section 2.2.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Mortgage" is defined in Section 5.2.2 (e).
"Net Asset Sale Proceeds" means the cash proceeds of the sale or
disposition of an Approved Project (including by way of merger) by any Hotel
Owner after the date of this Agreement, net of (a) any Indebtedness permitted by
Section 6.7.9 secured by such Approved Project required to be paid from such
proceeds, (b) income taxes that, as estimated by the Borrower in good faith,
will be required to be paid in cash as a result of, and within 16 months after,
such sale or disposition, (c) reasonable reserves for liabilities, escrows and
purchase price adjustments resulting from such sale or disposition and (d) all
reasonable expenses of the Borrower or the selling Hotel Owner payable in
connection with such sale or disposition.
"Ninety Percent Amount" means ninety percent (90%) of the lesser of the
Total Project Cost or the Appraised Value.
"Note" means that certain Promissory Note dated the date hereof made by
the Borrower to the Lender or to the Lender's successors and assigns to evidence
the Loan, in the form of Exhibit 5.1.1, as amended, modified and from time to
time in effect.
"Obligor" means the Borrower, Candlewood and each other Person
guaranteeing or providing collateral for the Loan Obligations.
"Parent Pledge Agreement" is defined in Section 5.1.3.
"Person" means any present or future natural person or any corporation,
association, partnership, joint venture, limited liability, joint stock or other
company, business trust, trust,
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organization, business or government or any governmental agency or political
subdivision thereof.
"Plan" means, at any date, any pension benefit plan subject to the
federal Employee Retirement Income Security Act of 1974 maintained, or to which
contributions have been made or are required to be made.
"Pledge Agreements" means the Parent Pledge Agreement and the Borrower
Pledge Agreement.
"Prepayment Fee" has the meaning set forth in the Note.
"RCRA" means the federal Resource Conservation and Recovery Act, 42
U.S.C. section 690, et seq.
"Reservations Service Agreement" is defined in Exhibit 7.2.2.
"Retest Date" is defined in Section 8.1.10.
"S&P" means Standard & Poor's, a division of The McGraw Hill Companies,
Inc.
"Security Agreement" is defined in Section 5.2.2(f).
"Senior Construction Lender" means the lender making a Senior
Construction Loan.
"Senior Construction Loan" means (i) a construction or
construction/mini-perm loan to a Hotel Owner for an Approved Project the terms
of which construction financing and the Senior Construction Lender for which
have each been approved by the Lender and (ii) any permanent refinancing of such
construction or construction/mini-perm loan, the terms of which permanent
financing and the lender for which have each been approved by the Lender. The
Lender agrees that so long as no Event of Default has occurred and is
continuing, it shall not unreasonably withhold its consent to any permanent
financing if the terms of such permanent financing are in all respects on
substantially the same terms and not more adverse to the Lender than the terms
of the construction or construction/mini-perm loan such permanent financing is
replacing. Further, so long as no Event of Default has occurred and is
continuing, the Lender shall consent to any permanent financing if the Borrower
prepays at least one hundred twenty five percent (125%) of the Tranche Amount
with respect to the Approved Project to which the permanent financing applies in
accordance with Section 4.3.
"Senior Construction Loan Documents" means the loan documents
evidencing, securing and otherwise entered into by Hotel Owner and other Persons
in connection with a Senior Construction Loan.
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"Single Purpose Entity" is defined in Section 12.1.1.
"Subsidiary" means any Person of which the Borrower (or other specified
Person) shall at the time, directly or indirectly through one or more of its
Subsidiaries, (a) own more than 50% of the outstanding capital stock (or other
shares of beneficial interest) entitled to vote generally, (b) hold more than
50% of the partnership, joint venture, limited liability company or similar
interests or (c) be a general partner, joint venturer or managing member.
"Tax" means any present or future tax, levy, duty, impost, deduction,
withholding or other charges of whatever nature at any time required by any
Legal Requirement (a) to be paid by any Lender or (b) to be withheld or deducted
from any payment otherwise required hereby to be made to any Lender, in each
case on or with respect to its obligations hereunder, the Loan, any payment in
respect of the Loan Obligations not included in the foregoing; provided,
however, that the term "Tax" shall not include taxes imposed upon or measured by
the net income, gross receipts, capital or net worth of such Lender or franchise
taxes that are imposed in lieu of net income taxes; provided, further, however,
that the term "Tax" shall include Withholding taxes in any event.
"Total Project Cost" means all costs and expenses (hard and soft)
whether incurred by Candlewood, the Borrower, the Lender or their respective
Affiliates of selecting, investigating, developing, designing, constructing,
opening for operations, start-up, financing (including debt service and lender's
fees under both the applicable Senior Construction Loan and the applicable
Tranche) until cash flow from operations is sufficient to pay debt service with
respect to an Approved Project and, for the first ten (10) Approved Projects, an
amount equal to ten percent (10%) of the Transaction Expenses, which costs shall
be substantiated by evidence in form and substance reasonably satisfactory to
the Lender and to the extent any of such costs are not yet expended such portion
of such costs shall be based on good faith estimates with a reasonable and
supportable basis.
"Total Required Equity" means for any Approved Project, the Total
Project Cost for such Approved Project minus the amount of the applicable Senior
Construction Loan.
"Tranche" means that portion of the Loan allocable to an Approved
Project which portion once advanced to the Borrower is to be contributed by the
Borrower to the applicable Hotel Owner for such Approved Project.
"Tranche Amount" means that portion of the Loan Amount allocated to an
Approved Project by the Lender. The Tranche Amount for each Tranche shall be
determined by the Lender at the time of approving a project for such Tranche as
an Approved Project to the extent such amount is then determinable or thereafter
when such amount may be finally determined but in any event prior to the first
advance of such Tranche and shall be equal to the difference between the Total
Required Equity and the Equity Contribution for the applicable
-15-
Approved Project. After the Tranche Amount is determined, it shall only be
increased with the Lender's consent.
"Transaction Expenses" is defined in Section 12.3.
"United States Funds" means such coin or currency of the United States
of America as at the time shall be legal tender therein for the payment of
public and private debts.
"Wholly Owned Subsidiary" means any Subsidiary of which all of the
outstanding capital stock (or other shares of beneficial interest) entitled to
vote generally is owned by the Borrower (or other specified Person) directly, or
indirectly through one or more Wholly Owned Subsidiaries.
2. The Loan.
2.1. Loan Facility. Subject to all the terms and conditions of this
Agreement and so long as no Default exists, from time to time on and after the
date hereof and prior to the End of Loan Advance Date, the Lender will make
loans to the Borrower in such amounts as may be requested by the Borrower in
accordance with Section 2.3 on the date that is ten (10) Business Days after a
request therefore. The aggregate principal amount of loans made under this
Section 2.1 that are available at any time to be borrowed hereunder shall in no
event exceed the Maximum Available Loan Amount. The aggregate principal amount
of loans with respect to a Tranche made under this Section 2.1 that are
available at any time to be borrowed hereunder shall in no event exceed the
Maximum Available Tranche Amount.
2.2. Maximum Available Loan and Tranche Amounts. The term "Maximum
Available Loan Amount" means as of any date an amount equal to (x) the Loan
Amount minus (y) an amount equal to the principal balance of all loans
outstanding to the Borrower made hereunder as of such date and minus (z) an
amount equal to all principal amounts prepaid on the Note as of such date in
accordance with its terms. The term "Maximum Tranche Amount" means as of any
date an amount equal to (x) the Tranche Amount for such Tranche, minus (y) an
amount equal to the principal balance of all loans outstanding for such Tranche
made to the Borrower under this Agreement as of such date and minus (z) an
amount equal to all principal amounts prepaid on the Note applicable to such
Tranche in accordance with Section 4.8 as of such date.
2.3. Borrowing Requests. Subject to the provisions of Section 2.5, the
Borrower may from time to time but no more frequently than once a month for each
Approved Project, request a loan under Section 2.1 by providing to the Lender a
notice. Such notice must be not later than noon (Boston time) on the tenth
(10th) Business Day prior to the requested Closing Date for such loan. The
notice must specify (a) the amount of the requested loan, and (b) the requested
Closing Date therefor, which shall be a Business Day and may not be a Friday or
a
-16-
Business Day immediately prior to a legal holiday. Each such loan will be
advanced in accordance with the provisions of Section 2.5.
2.4. The Loan Account and the Note. The Lender will establish on its
books a loan account for the Borrower (the "Loan Account"), which shall reflect
the loan advances made by the Lender pursuant to Section 2.1 and which the
Lender shall administer as follows: the Lender shall debit to the Loan Account
and the Loan Account shall evidence the principal amount of all advances of the
Loan from time to time made by the Lender to the Borrower pursuant to Section
2.1, and the Lender shall credit to the Loan Account all repayments of principal
of the Loan from time to time repaid in accordance with the terms of the Note
and Sections 4.2, 4.3, 4.4 and 4.5. The Loan Account shall also reflect
allocation of all loan advances made by the Lender against each Tranche of the
Loan. The outstanding amount of the Loan set forth in the Loan Account shall be
prima facie evidence of the principal amount thereof owing and unpaid to the
Lender, but the failure to record, or any error in so recording, any such amount
in the Loan Account shall not limit or otherwise affect the obligations of the
Borrower hereunder or under the Note to make payments of principal of or
interest on the Note when due. The Loan shall be evidenced by delivery to the
Lender of the Note.
2.5. Advances.
2.5.1. Method of Making Advances. Depending on the requirements
of the applicable Senior Construction Lender for an Approved Project,
the Lender shall loan the Tranche Amount or portion of the Tranche
Amount applicable to such Approved Project (a) by wire transferring such
Tranche or portion thereof to a bank account of the Borrower or to a
bank account of the applicable Hotel Owner as the Borrower directs the
Lender in writing or (b) if directed by Borrower in writing to an escrow
account established in connection with the Senior Construction Loan for
such Approved Project or (c) if directed by Borrower in writing to the
Senior Construction Lender for such Approved Project. The execution of
this Agreement by the Borrower shall constitute an irrevocable
authorization to so advance the proceeds of the Loan. All such advances
shall satisfy pro tanto the obligations of the Lender to make advances
of the Loan pursuant to Section 2.1, shall be treated as a loan advance
to the Borrower as of the date so advanced, shall become part of the
Loan Obligations and shall be secured by the Loan Security as fully as
if made directly to the Borrower in cases where such advances are made
to a Person other than the Borrower.
2.5.2. Timing of Advances. The Lender shall fund the Tranche
with respect to any Approved Project at the time required by the
applicable Senior Construction Lender. Unless the Senior Construction
Lender for an Approved Project requires that all or a portion of the
Tranche applicable to such Approved Project be funded in advance, the
Lender reserves the right to make advances of portions of Tranches at
the same time as or immediately before the Senior Construction Lender
for an Approved Project advances portions of the Senior Construction
Loan and after compliance with all
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of the conditions to the Senior Construction Lender's advances of such
Senior Construction Loan including approved requisitions, lien waivers,
title datedowns, inspections by an inspecting engineer and the like. If
the Senior Construction Lender funds the Senior Construction Loan or a
portion thereof, then Lender shall fund the applicable Tranche or
portion thereof provided the applicable conditions in Section 5 hereof
are satisfied. In the event the Lender is advancing a portion of a
Tranche at the same time as or immediately before a Senior Construction
Lender with respect to an Approved Project, the Lender shall only be
required to advance the portion of a Tranche equal to the Lender's pro-
rata share of the portion of the total loans (of the applicable Senior
Construction Loan and applicable Tranche) for such Approved Project
being loaned at the time of such loan advance including multiple
advances per month (notwithstanding the provisions of Section 2.3
hereof), if so made by the applicable Senior Construction Lender.
2.5.3. Advances after an Event of Default. At its option after
the occurrence and during the continuance of an Event of Default, the
Lender may make any or all loan advances under Section 2.1 to itself or
to any other Person as required to complete an Approved Project or to
cure a default under a Senior Construction Loan as provided in Section
8.2.5. Following the occurrence and during the continuance of an Event
of Default, the Lender may make loan advances aggregating with all other
advances of the Loan in excess of the Loan Amount if the Lender
determines such action is necessary to (i) complete an Approved Project,
(ii) effect a cure of such Event of Default or (iii) protect the
Lender's interest in the Loan Security. The execution of this Agreement
by the Borrower shall constitute an irrevocable authorization to so
advance the proceeds of the Loan. All such advances shall satisfy pro
tanto the obligations of the Lender to make advances of the Loan
pursuant to Section 2.1, shall be treated as a loan advance to the
Borrower as of the date so advanced, shall become part of the Loan
Obligations and shall be secured by the Loan Security as fully as if
made directly to the Borrower.
2.6. Application of Proceeds. The Borrower will apply or will cause the
applicable Hotel Owners to apply the proceeds of the Loan solely to the Total
Project Costs of Approved Projects including Transaction Expenses in accordance
with Section 12.3. As provided in Section 2.5.1, the Borrower may (i) direct the
Lender to make loan advances directly to a Hotel Owner for an Approved Project,
(ii) instead directly receive such loan advances and further advance or
contribute such funds to the applicable Hotel Owner, or (iii) have such loan
advances made to the Person or account required by the Senior Construction
Lender for such Approved Project. In any event unless the Lender otherwise
consents all such Persons shall only use the proceeds of the Loan for the Total
Project Cost of the applicable Approved Project with respect to which such
portion of the Loan was advanced. Without in any way limiting the foregoing
restriction, the Borrower will not, directly or indirectly, apply any part of
the proceeds of any extension of credit made pursuant to the Loan Documents to
purchase or to carry margin stock or to any transaction prohibited by the Loan
Documents or by Legal Requirements applicable to the Borrower or the Lender.
-18-
3. Interest Fees.
3.1. Interest. The amount of the Loan advanced and outstanding from
time to time shall accrue and bear interest at a rate per annum which shall at
all times equal the applicable rate set forth in the Note. The Borrower
covenants and agrees to pay interest on the Loan in arrears in the manner and on
the dates required in the Note. The Borrower hereby authorizes the Lender to pay
itself interest due on the Loan in the following manner: on each day interest is
due under the terms of the Note, the Lender shall advance to and pay itself a
portion of the Loan Amount in an amount equal to interest then due on the Loan.
Any payments of interest shall not be subject to the restrictions on advances in
Section 2.3 or the conditions set forth in Section 5. The amount of interest so
advanced from time to time by the Lender shall become part of the Loan
Obligations the repayment of which shall be secured by the Loan Security as
fully as if such amount was paid to the Borrower as a loan advance and such
advanced amounts shall themselves bear interest until repaid in full at the
applicable rate set forth in the Note.
3.2. Commitment Fee. In consideration of the Lender's commitment to make
the Loan, at the time of the first advance of funds for each Tranche provided
for in Section 2.1 the Borrower will pay to the Lender a commitment fee equal in
amount to four percent (4%) of the applicable Tranche Amount (the "Commitment
Fee"). The Commitment Fee shall be deemed earned at the time paid with respect
to a Tranche Amount without regard to whether the entire Tranche Amount is
ultimately funded. The Borrower hereby authorizes the Lender to pay itself the
Commitment Fee due the Lender by increasing the first loan advance of each
Tranche for the amount of the Commitment Fee and by retaining such Commitment
Fee. The Commitment Fee as from time to time so paid to the Lender shall be
treated as a loan advance to the Borrower as of the date paid, such advanced
amounts shall become part of the Loan Obligations the repayment of which shall
be secured by the Loan Security and such advanced amounts shall bear interest
until repaid in full at the applicable rate set forth in the Note.
3.3. Changes in Circumstances; Yield Protection.
3.3.1. Reserve Requirements, etc. If any change in any Legal
Requirement after the date hereof shall impose, modify, increase or deem
applicable any insurance assessment, reserve, special deposit or similar
requirement against the Lender and the effect of any of the foregoing
shall be to increase the cost to the Lender of issuing, making, funding
or maintaining any portion of the Loan, to reduce the amounts received
or receivable by the Lender under this Agreement or to require the
Lender to make any payment or forego any amounts otherwise payable to
the Lender under this Agreement (other than any Tax), then the Lender
may claim compensation from the Borrower under Section 3.3.4.
3.3.2. Taxes.
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(a) All payments of the Loan Obligations shall be made without set-off
or counterclaim and free and clear of any deductions, including deductions for
Taxes, unless the Borrower is required by law to make such deductions. If (a)
the Lender shall be subject to any Tax with respect to any payment of the Loan
Obligations or its obligations hereunder or (b) the Borrower shall be required
to withhold or deduct any Tax on any payment on the Loan Obligations, then the
Lender may claim compensation from the Borrower under Section 3.3.4. Whenever
Taxes must be withheld by the Borrower with respect to any payments of the Loan
Obligations, the Borrower shall promptly furnish to the Lender for the account
of the Lender official receipts (to the extent that the relevant governmental
authority delivers such receipts) evidencing payment of any such Taxes so
withheld. If the Borrower fails to pay any such Taxes when due or fails to remit
to the Lender for the account of the Lender the required receipts evidencing
payment of any such Taxes so withheld or deducted, the Borrower shall indemnify
the Lender for any incremental Taxes and interest or penalties that may become
payable by the Lender as a result of any such failure. In the event the Lender
receives a refund or tax credit of any Taxes for which it has received payment
from the Borrower under this Section 3.3.2.(a), the Lender shall promptly pay
the amount of such refund or credit to the Borrower, together with any interest
thereon actually earned by the Lender. The Lender agrees to take all reasonable
steps to obtain any refund or credit to which the Lender is entitled.
(b) If any Person organized under the laws of a jurisdiction outside the
United States (a "Foreign Lender") as to which payments to be made under this
Agreement or under the Loan Obligations are exempt from United States
withholding tax under an applicable statute or tax treaty becomes a Lender
hereunder, such Person shall provide to Borrower a properly completed and
executed United States Internal Revenue Service Form 4224 or Form 1001 or other
applicable form, certificate or document prescribed by the United States
Internal Revenue Service or the United States certifying as to such Foreign
Lender's entitlement to such exemption (a "Certificate of Exemption") prior to
becoming a Lender hereunder. Notwithstanding the foregoing, if a Foreign Lender
is unable to deliver a Certificate of Exemption, the Borrower shall be entitled
to withhold or deduct any Tax on any payment on the Loan Obligations with
respect to such Foreign Lender pursuant to Section 3.3.2 hereof but shall not be
required to compensate such Foreign Lender pursuant to Section 3.3.4.
(c) If the Lender receives notice of a claim for any Taxes, the Lender
shall promptly notify the Borrower in writing. If the Borrower reasonably
requests, the Lender shall contest such claim in the name of the Lender, or in
the Lender's discretion, in the Borrower's name, provided that the Borrower
shall pay all expenses incurred by the Lender in such contest, including
reasonable attorneys' fees.
(d) If the Borrower becomes liable for any Taxes, the Lender shall
cooperate to mitigate or eliminate such liability by, for example, transferring
its interest
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hereunder to another branch, provided that such action would not require the
Lender to bear any unindemnified cost.
(e) Lender shall consult in good faith with Borrower prior to taking any
material action regarding any claim for Taxes
3.3.3. Regulatory Changes. Except for Taxes addressed in Section
3.3.2, if the Lender shall determine that (a) any change in any Legal
Requirement (including any new Legal Requirement) after the date hereof
shall directly or indirectly (i) reduce the amount of any sum received
or receivable by the Lender with respect to the Loan or the return to be
earned by the Lender on the Loan, (ii) impose a cost on the Lender or
any Affiliate of the Lender that is attributable to the making or
maintaining of, or the Lender's commitment to make, the Loan, or (iii)
require the Lender or any Affiliate of the Lender to make any payment
on, or calculated by reference to, the gross amount of any amount
received by the Lender under any Loan Document (other than Taxes or
income or franchise taxes), and (b) such reduction, increased cost or
payment shall not be fully compensated for by an adjustment in the
applicable interest rate payable under the Note, then the Lender may
claim compensation from the Borrower under Section 3.3.4.
3.3.4. Compensation Claims. Within 15 days after the receipt by
the Borrower of a certificate from the Lender setting forth why it is
claiming compensation under this Section 3.3.4 and computations (in
reasonable detail) of the amount thereof, the Borrower shall pay to the
Lender such additional amounts as the Lender sets forth in such
certificate as sufficient fully to compensate it on account of the
foregoing provisions of this Section 3.3, together with interest on such
amount from the 15th day after receipt of such certificate until payment
in full thereof at the applicable interest rate payable under the Note.
3.3.5. Mitigation. The Lender shall take such commercially
reasonable steps as it may determine are not disadvantageous to it in
order to reduce amounts otherwise payable by the Borrower to such Lender
pursuant to Sections 3.3.1, 3.3.2 and 3.3.3.
3.3.6. Other Lenders. Successors and assigns of the original
Lender hereunder shall only be entitled to recover a compensation claim
under this Section 3.3 from the Borrower to the extent the original
Lender would have been able to recover such claim.
3.4. Computations of Interest and Fees. For purposes of this Agreement,
interest (and any other amount expressed as interest) shall be computed on the
basis of a 360-day year for actual days elapsed.
4. Payment.
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4.1. Payment at Maturity. On the Maturity Date or any accelerated
maturity of the Loan, the Borrower will pay to the Lender an amount equal to the
principal balance of the Loan then outstanding, together with all accrued and
unpaid interest, charges, fees and other amounts with respect thereto and all
other Loan Obligations then outstanding.
4.2. Restrictions on Prepayment. No prepayment of all or any portion of
the principal balance of the Loan is permitted except as provided in the Note or
in this Section 4.2 or in Sections 4.3, 4.4 or 4.5. The Borrower shall give the
Lender at least sixty (60) days prior notice of its intention to prepay the Loan
under the Note or under Sections 4.3, 4.4 or 4.5 specifying the date of payment
(which shall be an installment payment date under the Note) and the total amount
of the Loan to be paid on such date. If the Borrower provides notice to the
Lender of its intention to prepay all or a portion of the Loan as provided in
the Note or in Sections 4.3, 4.4 or 4.5 and thereafter revokes or withdraws
such notice then any prepayment obligation shall be rescinded and the Borrower
shall pay to the Lender a revocation fee in the amount provided in the Note.
4.3. Prepayments Generally; Prepayments on Sales of Approved Projects;
Prepayments in Connection with Refinancing and Debt Service Coverage Test. The
Borrower may from time to time prepay all of the Loan subject to the prior
notice and date of payment constraints of Section 4.2 and provided that such
prepayment is accompanied by the applicable Prepayment Fee for such prepayment
as determined in the Note. The Borrower may not prepay less than all of the Loan
except as hereinafter provided in this Section 4.3 or in Sections 4.4 or 4.5. In
the event the Borrower sells or otherwise disposes of assets as permitted in
Section 6.12.3 the Borrower shall prepay a portion of the Loan equal in amount
to the amount determined pursuant to Section 6.12.3 accompanied by the
applicable Prepayment Fee for such prepayment as determined in the Note. The
Borrower may prepay one hundred and twenty five percent (125%) Of the Tranche
Amount with respect to an Approved Project at the time of a refinancing of a
Senior Construction Loan accompanied by the applicable Prepayment Fee for such
prepayment as determined in the Note. Candlewood Member or Candlewood (but not
the Borrower) may prepay a portion of the Loan up to such amount as would be
sufficient to enable the debt service coverage test in Section 6.6 to be
satisfied accompanied by the applicable Prepayment Fee for such prepayment as
determined in the Note.
4.4. Prepayments from Increased Equity Contribution by Candlewood. To
the extent the Borrower receives any increase in the Equity Contribution from
Candlewood in excess of ten percent (10%) of the Total Project Costs of all
Approved Projects in accordance with Section 12.2, the Borrower shall use all of
such excess proceeds to prepay the Loan and such prepayment shall be applied to
the Tranche Amounts that have been funded in the order that they were funded
(but such prepayment shall not be subject to the prior notice and date of
payment constraints of Section 4.2). No Prepayment Fee shall be applicable to
prepayments made pursuant to this Section 4.4.
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4.5. Involuntary Prepayments. In addition to the prepayments allowed by
Sections 4.2, 4.3 and 4.4, the Borrower may from time to time prepay all or any
portion of the Loan subject to the prior notice and date of payment constraints
of Section 4.2 without the Prepayment Fee or any other premium or penalty of any
type being applicable provided that (i) such prepayment is made using casualty
insurance proceeds or eminent domain amounts and (ii) all such proceeds not
otherwise paid to the Senior Construction Lender to repay the Senior
Construction Loan or otherwise used to restore the destroyed or taken property
are paid to the Lender.
4.6. No Reborrowing. The Loan is not a revolving loan and no portion of
the Loan repaid or prepaid may be reborrowed.
4.7. Payments to be made with Accrued Interest. Upon all prepayments of
the Loan, the Borrower shall pay to the Lender the principal amount to be
prepaid, together with unpaid interest in respect thereof accrued to the date of
prepayment and any applicable Prepayment Fee as provided in the Note.
4.8. Order of Application of Payments. All payments made to the Lender
with respect to the Loan or the Loan Obligations, including all prepayments,
shall be applied first to any costs and expenses of the Lender, including
reasonable attorneys' fees and all expenses under Sections 3.3 and 9, then to
any late charges owed to the Lender including under Section 8.3 or under any of
the other Loan Documents, then to any fees or charges owed to the Lender, then
to interest owed to the Lender, and any balance shall be applied in reduction of
principal including any accrued amounts added thereto. The allocation of any
payments, including all prepayments, on the Loan to particular Tranches shall be
made by the Lender to the Tranches that have been funded in the order in which
the Tranches were funded. If a prepayment is made with respect to the sale of an
Approved Project as permitted by Section 6.12.3, the Lender shall release any
security interests it may have in such Approved Project pursuant to Section
6.12.
5. Conditions to Making Loan Advances. If the conditions set forth in this
Section 5 are not met on or prior to the applicable date, the Lender shall have
no obligation to make any loan advance hereunder.
5.1. Conditions to Loan Advances as of the Date of this Agreement. The
obligation of the Lender to make the initial advance of the Loan pursuant to
Section 2 shall be subject to the satisfaction at the time of execution of this
Agreement, of the following conditions:
5.1.1. Note. The Borrower shall have duly executed and delivered
to the Lender the Note in the form of Exhibit 5.1.1.
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5.1.2. Payment of Lender's Expenses. Subject to Section 12.3.
hereof, the Borrower shall have reimbursed the Lender for all of
Lender's reasonable out-of-pocket costs and expenses relating to the
Loan for which invoices have been submitted including without limitation
for all expenses described in Section 9.1 and all reasonable attorneys'
fees, travel expenses and consultant and third party due diligence
report costs.
5.1.3. Pledge Agreements. The Borrower shall have duly executed
and delivered to the Lender a Pledge Agreement in the form of Exhibit
5.1.3.A (the "Borrower Pledge Agreement"). Candlewood Member shall have
duly authorized, executed and delivered to the Lender a Pledge Agreement
in the form of Exhibit 5.1.3.B (the "Parent Pledge Agreement"). The
Obligor shall have duly executed and delivered such financing statements
and other instruments as the Lender reasonably determines are necessary
to perfect the Liens granted under the Borrower Pledge Agreement and the
Parent Pledge Agreement.
5.1.4. Key Principal Recourse Agreement. Candlewood shall have
duly authorized, executed and delivered to the Lender the Key Principal
Recourse Agreement in the form of Exhibit 5.1.4 (the "Key Principal
Recourse Agreement").
5.1.5. Environmental Indemnity. The Borrower shall have duly
executed and delivered, and Candlewood shall have duly authorized,
executed and delivered, to the Lender the Environmental Indemnity in the
form of Exhibit 5.1.5 (the "Environmental Indemnity").
5.1.6. Assignment and Subordination of Administrative Services
Agreement. Candlewood shall have duly authorized, executed and delivered
to the Lender the Assignment and Subordination of Administration
Services Agreement in the form of Exhibit 5.1.6. (the "Assignment and
Subordination of Administrative Services Agreement").
5.1.7. Administrative Services Agreement. Each of the Borrower
and Candlewood shall have duly authorized, executed and delivered the
Administrative Services Agreement, which agreement shall be in form and
substance satisfactory to the Lender.
5.1.8. Legal 0pinion. The Lender shall have received from ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, special counsel for Candlewood, the Borrower and its
Subsidiaries, a legal opinion dated the date of this Agreement with
respect to the transactions contemplated by the Loan Documents, which
opinion shall be in form attached hereto as Exhibit 5.1.8. The Borrower
hereby authorizes and directs its special counsel to furnish the
foregoing opinion.
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5.2. Conditions to Loan Advances related to Approved Projects. The
obligation of the Lender to make the, initial loan advance of any Tranche of the
Loan for an Approved PROJECT AND to make any loan advance thereafter with
respect to SUCH TRANCHE PURSUANT TO SECTION 2 SHALL be subject to the
satisfaction (in addition to the conditions in Sections 5.1 and 5.3), on or
before the Closing Date for such loan advance applicable to. such Tranche of the
following conditions:
5.2.1. Approved Project Agreement. To the extent permitted under
the terms of the Senior Construction Loan applicable to such Approved
Project, the Hotel Owner for such Approved Project shall have duly
authorized, executed and delivered an Approved Project Agreement for
such Approved Project in the form of Exhibit 5.2.1. The Borrower shall
also have executed and delivered the Approved Project Agreement for such
Approved Project executed and delivered by such Hotel Owner or, if for
any Approved Project, the terms of the applicable Senior Construction
Loan will not permit the applicable Hotel Owner to enter into such
agreement, then the Borrower shall have executed and delivered such
agreement modified in form and substance reasonably satisfactory to the
Lender to remove the applicable Hotel Owner as a signatory thereto. Such
agreement (modified if required as provided in this Section 5.2.1) shall
be referred to as an "Approved Project Agreement".
5.2.2. Approved Project Collateral Documents. To the extent
permitted under the terms of the Senior Construction Loan applicable to
such Approved Project, the Hotel Owner for such Approved Project shall
have duly authorized, executed and delivered the following Loan
Documents to the Lender to provide Loan Security for the Loan
Obligations:
(a) for the first Hotel Owner executing and delivering such
agreement the Guarantee Agreement in the form of Exhibit 5.2.2A (the
"Guarantee Agreement") and for each subsequent Hotel Owner a joinder to
such Guarantee Agreement in the form attached thereto pursuant to which
such subsequent Hotel Owner joins in and jointly and severally assumes
the obligations to the Lender under the Guarantee Agreement;
(b) an Assignment of Lease, Rents and Project Documents in the
form of Exhibit 5.2.2B (the "Blanket Assignment");
(c) an Assignment and Subordination of Franchise Agreement in
the form of Exhibit 5.2.2C (the "Assignment and Subordination of
Franchise Agreement");
(d) an Assignment and Subordination of Management Agreement in
the form of Exhibit 5.2.2D (the "Assignment and Subordination of
Management Agreement");
(e) a second mortgage (or a version thereof converted into a
deed of trust if required in the jurisdiction where such Approved
Project is located) modified as
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reasonably required by the Lender to include all necessary changes in
remedial provisions, waivers and other matters applicable to the
jurisdiction where such Approved Project is located and otherwise in the
form of Exhibit 5.2.2E (the "Mortgage");
(f) a Security Agreement in the form of Exhibit 5.2.2F (the
"Security Agreement");
(g) a joinder to the Environmental Indemnity Agreement (in the
form attached thereto) pursuant to which such Hotel Owner joins in and
jointly and severally assumes the obligations to the Lender under the
Environmental Indemnity;
(h) such UCC-1 financing statements as the Lender reasonably
determines are necessary with respect to the Loan Security granted by
such Hotel Owner;
(i) an Assignment of Reservations Service Agreement in the form
of Exhibit 5.2.2.I (the "Assignment of Reservations Service Agreement").
5.2.3. Execution of Collateral Documents by other Parties. If an
Assignment and Subordination of Franchise Agreement, an Assignment and
Subordination of Management Agreement and an Assignment of Reservations
Service Agreement are permitted by the terms of the applicable Senior
Construction Loan for an Approved Project under Section 5.2.2, then
Candlewood LLC shall have duly authorized, executed and delivered the
Assignment and Subordination of Franchise Agreement, Candlewood shall
have duly authorized, executed and delivered the Assignment and
Subordination of Management Agreement and Lexington, shall have duly
authorized, executed and delivered a consent to the Assignment of
Reservations Service Agreement executed and delivered by the applicable
Hotel Owner or consents thereto as required by the Lender. The Borrower
shall have duly executed and delivered a confirmation to the Borrower
Pledge Agreement (in the form attached thereto) to the Lender confirming
that the membership interests in the Hotel Owner which owns such
Approved Project have been pledged to the Lender as part of the Loan
Security and shall have duly executed and delivered such financing
statements and other instruments as the Lender reasonably determines are
necessary to perfect the Lien created by such confirmation. The parties
to the Environmental Indemnity shall have duly executed and delivered a
supplement to the Environmental Indemnity (in the form attached thereto)
to the Lender supplementing the properties covered thereby by adding
such Approved Project to the properties covered by the Environmental
Indemnity.
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5.2.4. Approved Project Deliveries. The Borrower shall have
furnished the following items or documents with respect to such
Approved Project to the Lender, each of which shall be in form and
substance and from a source reasonably satisfactory to the Lender and
each of which shall be delivered sufficiently in advance of the
applicable Closing Date so the Lender will have a reasonable period to
review such items or documents:
(a) a written report updating the Lender with respect to any
material changes in the information provided to the Lender in
connection with the initial approval of such Approved Project (such
information being that described in the definition of Approved Project
included in this Agreement).
(b) an Appraisal.
(c) a completed Environmental Questionnaire in the form of
Exhibit 5.2.C executed and delivered by the Borrower and the
applicable Hotel Owner.
(d) a phase 1 environmental site assessment report of recent
date for the land comprising such Approved Project either certified to
the Lender or accompanied by a reliance letter allowing the Lender to
legally rely upon such report.
(e) a complete set of final construction level plans and
specifications for the improvements to be constructed as part of such
Approved Project; provided, however, if such final plans and
specifications will not be completed until a later date then a set of
plans and specifications to the level of detail then completed with
such final plans and specifications finished to be submitted for the
Lender's review and approval once so completed.
(f) complete copies of the design contract(s) (architect's
and engineer's contracts) and the general construction contract for
the design and construction of the improvements to be constructed as
part of such Approved Project with (i) such architect, engineer and
general contractor to be reasonably satisfactory to the Lender and
(ii) such construction contract including a provision for a guaranteed
maximum contract price which price is equal to or less than the amount
included for such construction in the Total Project Cost for such
Approved Project.
(g) written evidence of insurance as required herein and in
the applicable Approved Project Agreement.
(h) if the Lender is being granted a Mortgage on the real
property comprising such Approved Project an ALTA Loan form of title
insurance policy (or a title insurance commitment therefore with
arrangements satisfactory to the Lender for the subsequent issuance of
such policy) (i) in the Tranche Amount for such Approved Project, (ii)
with the standard exceptions deleted, (iii) with such title insurance
endorsements as the Lender reasonably requires, (iv) insuring the
title to such real property is subject only to the applicable Senior
Construction Loan Documents and other matters of record consented to
by the Lender which consent shall not be
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unreasonably withheld or delayed and (v) with last dollar and tie in
endorsements if available in the jurisdiction where the Approved Project
is located. If the Lender is not being granted such a Mortgage, a title
report, title commitment (which may be the same title commitment
delivered to the applicable Senior Construction Lender) or other title
information showing as matters of record with respect to the real
property comprising such Approved Project that the title is subject only
to the applicable Senior Construction Loan Documents and other matters
consented to by the Lender which consent shall not be unreasonably
withheld or delayed. In either case accompanied by copies of the
applicable title exception documents for the Lender's review.
(i) an ALTA survey of the real property comprising such Approved
Project which if the Lender is being granted a Mortgage on such real
property (i) shall be certified to the Lender and the applicable title
insurance company issuing a title insurance policy to the Lender, (ii)
is sufficient to remove the survey exception from the title insurance
policy insuring the lien of such Mortgage and (iii) provides any
necessary certifications to the title insurance company to allow for
issuance of any title insurance endorsements reasonably requested by the
Lender.
(j) written evidence that the real property comprising such
Approved Project and the improvements to be constructed as part of such
Approved Project comply with applicable zoning ordinances and if such
improvements constitute legally permitted but non-conforming structures
evidence that such improvements can be legally reconstructed in the
event of a casualty. Such evidence shall include, if reasonably
requested by the Lender, (i) acknowledgment letters from local
governmental officials with responsibility for zoning matters with
respect to such Approved Project, (ii) certificates from architects or
engineers for such Approved Project and/or (iii) a legal opinion from
legal counsel in the jurisdiction of such Approved Project, regarding
compliance of such Approved Project with zoning.
(k) written evidence that all necessary permits, licenses and
approvals for such Approved Project have been obtained or, to the extent
not yet obtained, are not needed at the then current stage of
development of such Approved Project and are reasonably obtainable when
and as needed in the development of such Approved Project in the
ordinary course. Such evidence shall include if reasonably requested by
the Lender, (i) acknowledgment letters from local governmental officials
with responsibility for such permits, licenses and approvals, (ii)
certificates from architects or engineers for such Approved project
and/or (iii) a legal opinion from legal counsel in the jurisdiction of
such Approved Project, regarding permitting matters for such Approved
Project.
(1) written evidence that all taxes, assessments and
governmental charges with respect to the real property and existing
improvements comprising such Approved Project are paid in full except
for any such amounts as are not yet due and payable.
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(m) written evidence that all utility services necessary for the
operation of such Approved Project are available at the boundaries of
the real property comprising such Approved Project and that there is no
moratoria on connecting to and using such services to the extent needed
for the operation of such Approved Project including availability
letters from the utility companies providing such utility services.
(n) written evidence that the land comprising such Approved
Project either has direct access to duly dedicated public roadways
adequate for such Approved Project or indirect access thereto by
irrevocable private easement(s) adequate for such Approved Project.
(o) if there exists any leases or occupancy agreements, a copy
of such agreements and duly authorized, executed and delivered estoppel
certificates and, if Lender is being granted a Mortgage on such real
property, subordination, nondisturbance and attornment agreements in the
Lender's customary form from the applicable tenants.
(p) a copy of a Franchise Agreement duly authorized, executed
and delivered by each of the applicable Hotel Owner and Candlewood LLC.
Notwithstanding anything in this Agreement to the contrary, the form of
the Franchise Agreement has not yet been agreed upon by the parties
thereto. It shall be a precondition of any funding of the Loan that the
Franchise Agreement shall be in form and substance satisfactory to the
Lender.
(q) a copy of a Management Agreement duly authorized, executed
and delivered by each of the applicable Hotel Owner and Candlewood.
(r) a copy of a Reservations Service Agreement duly authorized,
executed and delivered by the applicable Hotel Owner and Lexington.
5.2.5. Opportunity to Inspect. The Lender and such inspecting
engineers, other consultants or representatives as the Lender reasonably
requires shall have had an opportunity to visit and inspect such
Approved Project including the land comprising such Approved Project,
the plans and specifications for contemplated improvements to be
constructed as part of such Approved Project and all plans,
specifications, permits and other documentation describing such Approved
Project, which inspections and the results thereof shall have been
satisfactory to the Lender.
5.2.5. Senior Construction Loan Documents. The Borrower shall
have furnished a copy of the applicable Senior Construction Loan
Documents with respect to such Approved Project to the Lender each of
which documents shall be generally in compliance with the approved term
sheet or commitment letter for the applicable Senior
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Construction Loan and otherwise in form and substance reasonably
satisfactory to the Lender.
5.2.7. Required Candlewood Equity Contribution. Candlewood shall
have caused Candlewood Member to make an Equity Contribution to the
Borrower prior to the first funding of the applicable Tranche Amount
pursuant to Section 2.5.2 which the Borrower shall have contributed to
the Hotel Owner for such Approved Project equal in value to the greatest
of (a) twenty-five percent (25%) of the Total Required Equity for such
Approved Project, (b) the Applicable Percentage of the Total Project
Cost for such Approved Project and (c) the difference between the Total
Project Cost and the Ninety Percent Amount. If at any time after one
year from the date of the initial advance of the Loan the total number
of Approved Projects for which a Tranche of the Loan is committed to be
advanced hereunder becomes less than ten (10) then Candlewood shall
prior to any further advances of the Loan by the Lender if so requested
by the Lender have caused Candlewood Member to make an additional Equity
Contribution to the Borrower to increase the total Equity Contribution
made by Candlewood Member to the Borrower to an amount equal to the
difference between the Total Project Costs of all Approved Projects and
eighty-five percent (85%) of the lesser of such Total Project Costs on
the total of the Appraised Values of all Approved Projects.
5.2.8. Financing Statements. The Borrower shall have executed
such UCC-1 financing statements as the Lender reasonably determines are
necessary with respect to the Borrower Pledge Agreement.
5.3. Conditions to Each Loan Advance. The obligations of the Lender to
make any advance of the Loan pursuant to Section 2 shall be subject to the
satisfaction (in addition to the conditions in Section 5.2), on or before the
Closing Date for such loan advance, of the following conditions:
5.3.1. Section 5.1 Conditions. The conditions in Section 5.1
shall remain satisfied as of such Closing Date.
5.3.2. Perfection of Security. Each Obligor shall have duly
authorized, executed, acknowledged, delivered, filed, registered and
recorded such security agreements, notices, financing statements, and
other instruments as the Lender may have reasonably requested in order
to perfect the Liens purported or required pursuant to the Loan
Documents to be created in the Loan Security and shall have paid all
filing or recording fees or taxes required to be paid in connection
therewith, including any recording, mortgage, documentary, transfer or
intangible taxes.
5.3.3. Solvency Certificate. After giving effect to the
obligations under the Senior Construction Loans and the Loan
Obligations, the Borrower and its Subsidiaries, taken as a whole:
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(i) will be solvent.
(ii) will have assets having a fair saleable value in
excess of the amount required to pay their probable liability on
their existing debts as such debts become absolute and mature.
(iii) will have access to adequate capital for the
conduct of their business.
(iv) will have the ability to pay their debts from time
to time incurred as such debts mature.
Prior to the initial funding for each Tranche (but not for subsequent
fundings from such Tranche unless reasonably requested by the Lender)
the Borrower shall have furnished to the Lender a certificate signed by
an Authorized Signatory on behalf of Borrower and its Subsidiaries to
such effect, in the form of Exhibit 5.3.3.
5.3.4. Adverse Market Change. Since December 31, 199$ no
material adverse change shall have occurred in the financial condition
or operations of the Borrower.
5.3.5. Payment of Lender's Expenses. The Borrower shall have
reimbursed the Lender for all of Lender's reasonable out-of-pocket costs
and expenses relating to the Loan for which invoices have been submitted
including without limitation for all expenses described in Section 9.1
and all reasonable attorneys' fees, travel expenses and consultant and
third party due diligence report costs.
5.3.6. Proper Proceedings. This Agreement, each other Loan
Document and the transactions contemplated hereby and thereby shall have
been authorized by all necessary corporate or other company proceedings.
All necessary consents, approvals and authorizations of any governmental
or administrative agency or any other Person of any of the transactions
contemplated hereby or by any other Loan Document shall have been
obtained and shall be in full force and effect.
5.3.7. General. All legal corporate and company proceedings in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Lender and the
Lender shall have received copies of all documents that the Lender may
have reasonably requested in connection therewith, including, without
limitation, copies of the Charter and By-Laws of Candlewood, Candlewood
Member, the Borrower, its Subsidiaries and the other Obligors,
certificates of legal existence, good standing and foreign registration
for the Obligors, records of corporate and company proceedings;
certificates as to signatures and
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incumbency of officers and opinions of counsel, certified by proper
corporate, company or governmental authorities. The Borrower shall not
be required by this Section 5.3.7 to deliver the Charter and By-laws of
Candlewood, Candlewood Member, the Borrower or its Subsidiaries to the
Lender if the Borrower has previously delivered such documents to the
Lender and if such documents have not changed since the date of the
prior delivery.
5.3.8. Officer's Certificate. The representations and warranties
contained in Section 7 shall be true and correct on and as of such
Closing Date with the same force and effect as though made on and as of
such date (except as to any representation or warranty which refers to a
specific earlier date); no Default shall exist on such Closing Date
prior to or immediately after giving effect to the requested loan
advance; no Material Adverse Change shall have occurred since the
immediately preceding Closing Date; and prior to the initial funding for
each Tranche (but not with respect to subsequent fundings from such
Tranche unless reasonably requested by the Lender), the Borrower shall
have furnished to the Lender in connection with the requested loan
advance a certificate to these effects, in the form of Exhibit 5.3.8,
signed by an Authorized Signatory.
5.3.9. Legality etc. The making of the requested loan advance
shall not (a) subject the Lender to any Tax (other than a Tax for which
the Borrower is required to reimburse the Lender under Section 3.3),
(b) be prohibited by any Legal Requirement or (c) violate any credit
restraint program of the executive branch of the government of the
United States of America, the Board of Governors of the Federal Reserve
System or any other governmental or administrative agency so long as any
Lender reasonably believes that compliance therewith is customary
commercial practice and the Lender is in fact complying therewith.
5.3.10. AIA Form G702. Prior to the initial funding for each
Tranche, the Borrower shall have delivered to the Lender AIA Form G702
with respect to the Approved Project for which the Loan advance is
requested together with (i) a certificate of the project manager of
such Approved Project and (ii) a certificate of the architect and
general contractor of such Approved Project, each stating that the
statements made in the AIA Form G702 are true, accurate and complete.
6. General Covenants. The Borrower covenants and agrees that, until all of the
Loan Obligations shall have been paid in full and until the Lender's commitment
to extend credit under this Agreement and any other Loan Document shall have
been irrevocably terminated, the Borrower and its Subsidiaries will comply with
the following provisions:
6.1. Taxes and Other Charges: Accounts Payable.
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6.1.1. Taxes and Other Charges. Each of the Borrower and its
Subsidiaries shall duly pay and discharge, or cause to be paid and
discharged, before the same becomes in arrears, all taxes, assessments
and other governmental charges imposed upon such person and its
properties, sales or activities, or upon the income or profits
therefrom, as well as all claims for labor, materials or supplies which
if unpaid might by law become a Lien upon any of its property;
provided, however, that any such tax, assessment, charge or claim need
not be paid if the validity or amount thereof shall at the time be
contested in good faith by appropriate proceedings and if such Person
shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto; and provided, further, that each of the
Borrower and its Subsidiaries shall pay or bond, or cause to be paid or
bonded, all such taxes, assessments, charges or other governmental
claims (i) immediately upon the commencement of proceedings to foreclose
any Lien which may have attached as security therefor and (ii) if
required in order to contest such tax, assessment or government charge.
6.1.2. Accounts Payable. Each of the Borrower and its
Subsidiaries shall promptly pay when due, or in conformity with
customary trade terms, all accounts payable incident to the operations
of such Person not referred to in Section 6.1.1; provided, however, that
any such accounts payable need not be paid if the validity or amount
thereof shall at the time be contested in good faith and if such Person
shall, in accordance with GAAP, have set aside on its books adequate
reserves with respect thereto.
6.2. Conduct of Business etc.
6.2.1. Types of Business. Unless otherwise expressly consented
to by the Lender, the Borrower and its Subsidiaries shall engage only in
the business of (a) owning, financing, developing and operating extended
stay hotel facilities in the Candlewood Suites format and (b) other
activities related thereto.
6.2.2. Maintenance of Properties and Existence. Each of the
Borrower and its Subsidiaries:
(a) shall keep its properties in such repair, working order and
condition, and shall from tine to time make such repairs, replacements,
additions and improvements thereto, as are reasonably necessary for the
efficient operation of its businesses and shall comply at all times in
all material respects with all material franchises, licenses and leases
to which it is party so as to prevent any loss or forfeiture thereof or
thereunder, except where (i) compliance is at the time being contested
in good faith by appropriate proceedings and (ii) failure to comply with
the provisions being contested has not resulted, and does not create a
material risk of resulting, in the aggregate in any Material Adverse
Change; and
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(b) shall do all things necessary to preserve, renew and keep in
full force and effect and in good standing its legal existence and
authority necessary to continue its business; provided, however, that
this Section 6.2.2(b) shall not prevent the liquidation of any
Subsidiary which has sold the Approved Project previously owned by it as
permitted by Section 6.12.2.
6.2.3. Statutory Compliance. Each of the Borrower and its
Subsidiaries shall comply in all material respects with all valid Legal
Requirements applicable to it, except where (a) compliance therewith
shall at the time be contested in good faith by appropriate proceedings
and (b) failure so to comply with the provisions being contested has not
resulted, and does not create a material risk of resulting, in the
aggregate in any Material Adverse Change. Notwithstanding the foregoing,
with respect to each Approved Project each of the Borrower and the
applicable Hotel Owner shall comply with Section 4.5 of the Approved
Project Agreement for such Approved Project and with respect to Section
5.5 of any Mortgage for such Approved Project including to the extent
such provisions impose stricter or more specific obligations than the
foregoing covenant in this Section 6.2.3.
6.2.4. Compliance with Material Agreements. Each of the Borrower
and its Subsidiaries shall comply in all respects with the Material
Agreements (to the extent not in violation of the other provisions of
this Agreement or any other Loan Document). Without the prior written
consent of the Lender, no Material Agreement shall be amended, modified,
waived or terminated in any manner that would have an adverse effect on
the interests of the Lender.
6.3. Insurance. The Borrower and its Subsidiaries shall maintain with
financially sound and reputable insurers the following policies of insurance:
6.3.1. Property Insurance. Insurance against loss or damage to
buildings and improvements by reason of fire and any of the risks
covered by "fire and extended coverage" insurance, in an amount not less
than 100% of full replacement cost of such buildings and improvements,
if available, and not in any event less than an amount sufficient to
prevent it from becoming a co-insurer of such improvements. Insurance
against loss or damage to the tangible personal property owned by the
Borrower and its Subsidiaries by fire and other risks covered by "fire
and extended coverage" insurance to the extent and in the manner
customary for companies in similar businesses similarly situated or such
greater amount and extent as the Lender may from time to time reasonably
require. Boiler and machinery insurance covering any pressure vessels,
air tanks, boilers, machinery, pressure piping and any heating, air
conditioning, elevator and escalator equipment, so long as the buildings
and improvements contains equipment of such nature, in such amounts as
are reasonably required by the Lender.
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6.3.2. Liability Insurance. Comprehensive general liability
insurance against death, personal injury and damage to property in an
amount not less than $2,000,000 combined single limit, and excess
liability insurance against death, personal injury and damage to
property in an amount not less than $10,000,000 or such greater amount
and extent as the Lender may from time to time reasonably require.
6.3.3. Business Interruption Insurance. Business interruption or
rental loss insurance in an amount sufficient to recover at least the
total estimated loss sustained from all sources of income and
noncontinuing expenses for the Borrower's and its Subsidiaries' hotel
facilities, including, without limitation, rents, room rentals, issues,
profits, revenues, earnings and royalties therefrom, for two years.
6.3.4. Intentionally Omitted.
6.3.5. Flood Insurance. For each parcel of improved real
property owned or leased by the Borrower or any of its Subsidiaries
which is (a) included in the Loan Security, (b) in an area determined by
the Director of the Federal Emergency Management Agency to be subject to
special flood hazard and (c) in a community participating in the
National Flood Insurance Program, insurance against such special flood
hazards in an amount necessary to ensure compliance with the federal
National Flood Insurance Act of 1968.
6.3.6. Other Insurance Coverages. Such other insurance coverages
in such amounts as may from time to time be reasonably required by the
Lender against the foregoing or other hazards.
6.4. Other Insurance Terms. Unless otherwise required by the Senior
Construction Lender, the policies of insurance insuring against liability to
others shall either name the Lender in its capacity as Lender hereunder as an
additional insured, as loss payee or provide that all proceeds shall be payable
to the Lender pursuant to a standard lender endorsement as appropriate. Each of
the Borrower and its Subsidiaries shall perform and comply with all conditions
of all insurance policies. Unless otherwise required by the Senior Construction
Lender, all policies of insurance provided for herein shall be effected with
insurers reasonably satisfactory to the Lender and qualified to do business in
the jurisdictions in which the Approved Projects are located and shall provide:
(i) for the complete address or legal description of the Approved Projects; (ii)
for deductibles in an amount not greater than $5,000; (iii) that the term
thereof be not less than one (1) year; (iv) that such policies shall not be
canceled or materially amended without at least thirty (30) days' prior written
notice to the Lender; (v) that any amount payable due to a covered cause of loss
shall be payable (a) prior to the occurrence of an Event of Default provided the
aggregate proceeds from an insured casualty is less than $250,000, to the
Borrower for the restoration and repair of the damaged Approved Project and (b)
after the occurrence of an Event of Default or if the aggregate proceeds from an
insured casualty are equal to or greater than $250,000, at the Lender's
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option, to the Lender to be applied to the reduction of the Loan Obligations
notwithstanding any act or omission or negligence of the Borrower or any of its
Subsidiaries which might otherwise result in forfeiture of such insurance; and
(vi) that the insurer waives all rights of subrogation against the Borrower and
its Subsidiaries. Upon delivery hereof and thereafter at least ten (10) Business
Days prior to the expiration dates of the expiring policies, originals of the
policies provided for in this Section 6.4, or a certificate of insurance
therefor, each bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to the Lender of such payment, shall
be delivered to the Lender. The Borrower may procure and keep in force, in place
of separate policies, blanket policies of insurance having the same coverage and
provisions as are herein required with respect to separate policies. If such
blanket insurance is so furnished, the Borrower shall deliver to the Lender, in
lieu of separate policies or certificates as hereinabove required, an attested
copy of the policy or a certificate, stating the amount allocated to each
Approved Project. If the Borrower or any of its Subsidiaries fails to provide
insurance as required by this Agreement, the Lender may, at its option, purchase
such insurance, and the Borrower will on demand pay to the Lender the amount of
any payments made by the Lender for such purpose, together with interest on the
amounts so disbursed from the date and at the rate as provided in Section 8.3.
All such amounts constitute a part of the Loan Obligations.
6.5. Financial Statements and Reports. Each of the Borrower and its
Subsidiaries shall maintain a system of accounting in which correct entries
shall be made of all transactions in relation to their business and affairs in
accordance with generally accepted accounting practice. The fiscal year of the
Borrower and its Subsidiaries shall end on December 31 in each year and the
fiscal quarters of the Borrower and its Subsidiaries shall end on March 31, June
30, September 30 and December 31 in each year.
6.5.1. Annual Reports. The Borrower shall furnish to the Lender
as soon as available, and in any event within 90 days after the end of
each fiscal year, the Consolidated and separately prepared balance
sheets of the Borrower and its Subsidiaries as at the end of such fiscal
year, the Consolidated and separately prepared statements of income and
the Consolidated and separately prepared statements of changes in
members' equity and of cash flows of the Borrower and its Subsidiaries
for such fiscal year (all in reasonable detail) and comparative figures
for the immediately preceding fiscal year, all accompanied by:
(a) Reports of independent certified public accountants of
recognized national standing reasonably satisfactory to the Lender,
containing no material qualification, to the effect that they have
audited the foregoing Consolidated financial statements in accordance
with generally accepted auditing standards and that such Consolidated
financial statements present fairly, in all material respects, the
financial position of the Borrower and its Subsidiaries covered thereby
at the dates thereof and the results of their operations for the periods
covered thereby in conformity with GAAP.
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(b) A certificate of the Borrower signed by an Authorized
Signatory to the effect that such Person has caused this Agreement to be
reviewed and has no knowledge of any Default, or if such Person has such
knowledge, specifying such Default and the nature thereof, and what
action the Borrower has taken, is taking or proposes to take with
respect thereto, in the form of Exhibit 6.5.1.B.
(c) Computations by the Borrower comparing the financial
statements referred to above with the most recent budget for such fiscal
year furnished to the Lender in accordance with Section 6.5.3.
(d) In reasonable detail a report describing the operations of
each Approved Project as at the end of and for the year covered by such
financial statements.
6.5.2. Quarterly and Monthly Reports. The Borrower shall furnish
to the Lender as soon as available and, in any event, within 45 days
after the end of each of the first three fiscal quarters of the
Borrower, the internally prepared Consolidated and separately prepared
balance sheets of the Borrower and its Subsidiaries as of the end of
such fiscal quarter, the Consolidated and separately prepared statements
of income, changes in the Borrower's members' equity and of cash flows
of the Borrower and its Subsidiaries for such fiscal quarter and for the
portion of the fiscal year then ended (all in reasonable detail) and
comparative figures for the same period in the preceding fiscal year,
all accompanied by:
(a) A certificate of the Borrower signed by an Authorized
Signatory to the effect that such financial statements have been
prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of the Borrower and its Subsidiaries
covered thereby at the dates thereof and the results of their operations
for the periods covered thereby, subject only to normal year-end audit
adjustments and the addition of footnotes in the form of Exhibit
6.5.2.A.
(b) A certificate of the Borrower signed by an Authorized
Signatory that such Person has caused this Agreement to be reviewed and
has no knowledge of any Default, or if such Person has such knowledge,
specifying such Default and the nature thereof and what action the
Borrower has taken, is taking or proposes to take with respect thereto,
in the form of Exhibit 6.5.1.B.
(c) Computations by the Borrower comparing the financial
statements referred to above with the most recent budget for the period
covered thereby furnished to the Lender, in accordance with Section
6.5.3.
(d) In reasonable detail a report describing the operations of
each Approved Project as at the end of and for the fiscal period covered
by the financial statements referred to above.
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The Borrower shall furnish to the Lender not less than fifteen
(15) days after the end of each calendar month internally prepared
Consolidated and separately prepared balance sheets of the Borrower and
its Subsidiaries as of the end of such calendar month and separately
prepared statements of income.
6.5.3. Other Reports. The Borrower shall promptly furnish to the
Lender:
(a) As soon as prepared and in any event before the beginning of
each fiscal year, an annual budget and operating projections for such
fiscal year of the Borrower and its Subsidiaries, in form and substance
reasonably acceptable to the Lender.
(b) Any material updates of such budget and projections.
(c) Any management letters furnished to the Borrower or any of
its Subsidiaries by the Borrower's auditors.
(d) All budgets, projections, statements of operations and other
material reports furnished generally to the members of the Borrower.
6.5.4. Notice of Litigation, Defaults, etc. The Borrower shall
promptly furnish to the Lender notice of any litigation or any
administrative or arbitration proceeding (a) which creates a material
risk of resulting, after giving effect to any applicable insurance, in
the payment by the Borrower and its Subsidiaries of more than $25,000 or
(b) which results, or creates a material risk of resulting, in a
Material Adverse Change. Promptly upon acquiring knowledge thereof, the
Borrower shall notify the Lender of the existence of any Default
specifying the nature thereof and what action the Borrower or any of its
Subsidiaries has taken, is taking or proposes to take with respect
thereto.
6.5.5. Other Information: Audit. From time to time at reasonable
intervals upon the reasonable request of the Lender, each of the
Borrower and its Subsidiaries shall furnish to the Lender such other
information regarding the business, assets, financial condition, income
or prospects of the Borrower and its Subsidiaries as the Lender may
reasonably request, including copies of all tax returns, licenses,
agreements, leases and instruments to which any of the Borrower or its
Subsidiaries is party. The Lender shall have the right during normal
business hours upon reasonable notice and at reasonable intervals to
examine the books and records of the Borrower and its Subsidiaries, to
make copies and notes therefrom for the purpose of ascertaining
compliance with or obtaining enforcement of this Agreement or any other
Loan Document.
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6.6. Debt Service Test. On the first day of each calendar quarter, the
Hotel Owners constituting at least seventy five percent (75%) of the total
number of Hotel Owners (rounded to the nearest whole number) that have been open
for business for at least three (3) months at the beginning of such period shall
each have an Adjusted Net Income (calculated on an individual Hotel Owner basis)
that equals or exceeds the interest payable (after taking account of any
deferral thereof provided for in the Note) by the Borrower to the Lender in
respect of the Tranche applicable to and actually funded to such Hotel Owner
over the shorter period of (i) one year prior to such first day of the calendar
quarter or (ii) the amount of time the Hotel Owner has been open for business.
6.7. Indebtedness. Neither the Borrower nor any of its Subsidiaries
shall create, incur, assume or otherwise become or remain liable with respect to
any Indebtedness (or become contractually committed to do so), except the
following:
6.7.1. Indebtedness in respect of the Loan Obligations.
6.7.2. Guarantees permitted by Section 6.8.
6.7.3. Current liabilities incurred in the ordinary course of
business.
6.7.4. To the extent that payment thereof shall not at the time
be required by Section 6.1, Indebtedness in respect of taxes,
assessments and governmental charges.
6.7.5. Indebtedness secured by Liens of carriers, warehouses,
mechanics, landlords and other Persons permitted by Sections 6.9.4.
6.7.6. Indebtedness in respect of judgments or awards that does
not result in an Event of Default under Section 8.1.8.
6.7.7. Intentionally Omitted.
6.7.8. Indebtedness in respect of inter-company loans and
advances by the Borrower to its Subsidiaries which are not prohibited by
Section 6.10.
6.7.9. Indebtedness in respect of Senior Construction Loans by a
Hotel Owner solely with respect to the Senior Construction Loan for the
Approved Project owned by such Hotel Owner.
6.7.10. Indebtedness arising under the Franchise Agreements and
the Management Agreements.
6.8. Guarantees; Letters of Credit. Neither the Borrower nor any of its
Subsidiaries shall become or remain liable with respect to any Guarantee,
including
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reimbursement obligations, whether contingent or matured, under letters of
credit or other financial guarantees by third parties (or become contractually
committed do to so), except the following:
6.8.1. Guarantees of the Loan Obligations.
6.8.2. If a Senior Construction Lender has made a Senior
Construction Loan with respect to more than one Approved Project; a
Guarantee by the Hotel Owners of any such Approved Projects of the
Indebtedness permitted by Section 6.7.9 of any Hotel Owner of any other
such Approved Projects.
6.9 Liens. Neither the Borrower nor any of its Subsidiaries shall
create, incur or enter into, or suffer to be created or incurred or to exist,
any Lien (or become contractually committed to do so), except the following:
6.9.1. Liens on the Loan Security that secure the Loan
Obligations.
6.9.2. Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be
required by Section 6.1.
6.9.3. Liens in respect of judgments or awards, to the extent
that such judgments or awards are permitted by Section 6.7.6 but only to
the extent that such Liens are junior to the Liens, if any, on the Loan
Security granted to secure the Loan Obligations.
6.9.4. Liens of carriers, warehouses, mechanics and similar
Liens, in each case (a) in existence less than thirty (30) days from the
date of creation thereof and (b) being contested in good faith by the
Borrower or any Subsidiary in appropriate proceedings (so long as the
Borrower or such Subsidiary shall, in accordance with GAAP, have set
aside on its books adequate reserves with respect thereto).
6.9.5. Permitted Encumbrances (as defined in the Approved
Project Agreements) for each Approved Project.
6.9.6. Restrictions under federal and state securities laws on
the transfer of securities.
6.9.7. Liens securing Indebtedness permitted by Section 6.7.9
limited in each case to Liens against assets of a Hotel Owner securing
the Senior Construction Loan for the Approved Project owned by such
Hotel Owner.
6.9.8. If a Senior Construction Lender has made a Senior
Construction Loan with respect to more than one Approved Project, Liens
granted by Hotel owners on
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any such Approved Projects to secure the Indebtedness permitted by
Section 6.7.9 or Guarantees permitted by 6.8.2 of any Hotel Owner of any
other such Approved Projects.
6.10. Investments and Acquisitions. Neither the Borrower nor any of its
Subsidiaries shall have outstanding, acquire or hold any Investment (including
any Investment consisting of the acquisition of any business) (or become
contractually committed to do so), except the following:
6.10.1. Investments of the Borrower in Wholly Owned Subsidiaries
which are Hotel Owners.
6.10.2. Investments in Cash Equivalents.
6.10.3. Guarantees permitted by Section 6.8.
6.10.4. Investments consisting of Equity Contributions in kind
made by Candlewood Member to the Borrower in accordance with Section
12.2 which are promptly thereafter contributed by the Borrower to a
Hotel Owner for an Approved Project.
6.11. Distributions. Neither the Borrower nor any of its Subsidiaries
shall make any Distribution (or become contractually committed to do so), except
the following:
6.11.1. So long as immediately before and after giving effect
thereto no Default exists, Subsidiaries of the Borrower may make
Distributions to the Borrower.
6.11.2. So long as immediately before and after giving effect
thereto no Default exists, the Borrower may make Distributions to its
members but then only in accordance with Section 7 of the LLC Agreement.
6.11.3. So long as immediately before and after giving, effect
thereto no Event of Default exists, the Borrower and the Hotel Owners
may make payments to Candlewood and Candlewood LLC in accordance with
the Material Agreements, subject however to the terms of the Assignment
and Subordination of Administrative Services Agreement, and, if
applicable, the Assignment and Subordination of Franchise Agreements and
the Assignment and Subordination of Management Agreements.
6.11.4. So long as immediately before and after giving effect
thereto no Event of Default exists, the Borrower may make Distributions
to Candlewood Member in respect of excess Equity Contribution amounts in
accordance with Section 12.2.
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6.11.5. So long as immediately before and after giving effect
thereto no Default exists, the Borrower may reimburse Candlewood for the
Transaction Expenses in accordance with Section 12.3.
6.12. Asset Dispositions and Mergers. Neither the Borrower nor any of
its Subsidiaries shall merge or enter into a consolidation or sell, lease,
exchange, sell and lease back, sublease or otherwise dispose of any of its
assets (or become contractually committed to do so), except the following:
6.12.1. The Borrower and any of its Subsidiaries may sell or
otherwise dispose of (a) inventory and Cash Equivalents in the ordinary
course of business, (b) tangible personal property (i) that will be
replaced in the ordinary course of business within 12 months by other
assets of equal or greater value or (ii) that are no longer used or
useful in the business of the Borrower or such Subsidiary; provided,
however that the aggregate fair market value (book value, if greater) of
all assets sold under this clause (b) in any fiscal year shall not be
material and (c) doubtful accounts receivable for collection purposes in
the ordinary course of business.
6.12.2. Any involuntary disposition of all or any portion of an
Approved Project as a result of a casualty or condemnation provided that
the insurance proceeds or condemnation award are used to prepay the Loan
in accordance with Section 4.5.
6.12.3. So long as immediately before and after giving effect
thereto no Default exists and an amount equal to the greater of (x) the
Net Asset Sale Proceeds thereof or (y) one hundred-twenty five percent
(125%) of the Tranche Amount applicable thereto is applied to repay the
Loan as required by Section 4.3, a Hotel Owner may sell or dispose
(including by way of merger) for fair value the Approved Project such
Hotel Owner owns (or such sale may be effectuated by Borrower selling
its ownership interest in the applicable Hotel Owner). If the Net Asset
Sale Proceeds are greater than one hundred twenty five percent (125%)
of the Tranche Amount, the Borrower shall receive a credit in the amount
equal to such excess against the amount of the Loan required to be
repaid from the next asset disposition.
To the extent an Approved Project is sold or disposed of as permitted by Section
6.12.3 and the Borrower has delivered to Lender the greater of the Net Asset
Sale Proceeds or one hundred twenty-five percent (125%) of the applicable
Tranche Amount, the Lender, shall at the Borrower's request and at the
Borrower's cost and expense execute proper instruments releasing any security
interests the Lender may have in any portion of the Loan Security applicable to
such Approved Project.
6.13. Issuance of Membership Interests by Subsidiaries. No Subsidiary
shall issue or sell any membership interests or other evidence of legal or
beneficial ownership to any
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Person other than the Borrower and such membership interests shall be pledged to
the Lender as part of the Loan Security pursuant to the Borrower Pledge
Agreement.
6.14. Intentionally Omitted
6.15. Derivative Contracts. Neither the Borrower nor any of its
Subsidiaries shall enter into any interest rate protection agreement, foreign
currency exchange contract or other financial or commodity derivative contracts.
6.16. Negative Pledge Clauses. Neither the Borrower nor any of its
Subsidiaries shall enter into any agreement, instrument, deed or lease which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of their respective
properties, assets or revenues, whether now owned or hereafter acquired, or
which requires the grant of any collateral for such obligation if collateral is
granted for another obligation, except the following:
6.16.1. This Agreement and the other Loan Documents.
6.16.2. Covenants in documents creating Liens permitted by
Section 6.9 prohibiting further Liens on the assets encumbered thereby.
6.16.3. Senior Construction Loan Documents.
6.17. ERISA, etc. Neither of the Borrower nor any of its Subsidiaries
shall establish a Plan.
6.18. Transactions with Affiliates. Neither the Borrower nor any of its
Subsidiaries shall effect any transaction with any of their respective
Affiliates on a basis less favorable to the Borrower and its Subsidiaries than
would be the case if such transaction had been effected with a non-Affiliate.
Lender consents to the execution and delivery of Management Agreements, the
Franchise Agreements and the Administrative Services Agreement.
6.19. Environmental Laws. Each of the Borrower and its Subsidiaries
shall comply with all Environmental Laws, keep in effect in all material
respects all necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters and remain in compliance in all
material respects therewith all as more particularly provided in the Approved
Project Agreement for each Approved Project.
6.20. Senior Construction Loans. Without the prior consent of the Lender
no Hotel Owner shall enter into or allow any Senior Construction Lender to cross
default or cross collateralize any two or more Senior Construction Loans;
provided, however, if a Senior Construction Lender has made a Senior
Construction Loan with respect to more than one Approved Project, such Senior
Construction Lender shall be permitted to cross-default such
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Senior Construction Loans and cross-collateralize such Senior Construction Loans
among the affected Approved Projects and Hotel Owners. Without the prior consent
of the Lender the Borrower shall not enter into any guarantee, indemnification,
agreement or any other obligation to or in favor of any Senior Construction
Lender or provide any collateral owned by the Borrower as security for any
Senior Construction Loan.
7. Representations and Warranties. In order to induce the Lender to extend
credit to the Borrower hereunder, the Borrower represents and warrants as
follows:
7.1. Organization and Business.
7.1.1. The Borrower. The Borrower is a duly organized and
validly existing limited liability company, in good standing under the
laws of Delaware, with all power and authority necessary to (a) enter
into and perform this Agreement and each other Loan Document to which it
is party, (b) incur the Loan Obligations, (c) grant the Lender the
security interests in the Loan Security owned by it to secure the Loan
Obligations and (d) own its properties and carry on the business now
conducted or proposed to be conducted by it. Certified copies of the
Charter and By-laws of the Borrower have been previously delivered to
the Lender and are correct and complete.
7.1.2. Subsidiaries. Each Subsidiary of the Borrower (to the
extent the same exist) is a duly organized and validly existing limited
liability company, in good standing under the laws of Delaware, with all
power and authority necessary to (a) enter into and perform each Loan
Document to which it is party, (b) guarantee the Loan Obligations if
applicable, (c) grant the Lender the security interest in the Loan
Security owned by such Subsidiary to secure the Loan Obligations if
applicable and (d) own its properties and carry on the business now
conducted or proposed to be conducted by it. Certified copies of the
Charter and By-laws of each Subsidiary of the Borrower (to the extent
the same exist) have been previously delivered to the Lender and are
correct and complete.
7.1.3. Qualification. Each of the Borrower and its Subsidiaries
(to the extent the same exist) is duly and legally qualified to do
business as a foreign entity and is in good standing in each state or
jurisdiction in which such qualification is required and is duly
authorized, qualified and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on
its business in the places and in the manner in which it is conducted.
7.1.4. Capitalization. No options, warrants, conversion rights,
preemptive rights or other statutory or contractual rights to purchase
shares of membership interests or any legal or beneficial interest in
the Borrower or any Subsidiary now exist, and neither the Borrower nor
any Subsidiary has authorized any such right, and neither
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the Borrower nor any Subsidiary is obligated in any other manner to
issue any such membership interests or any such legal or beneficial
interests.
7.1.5. Intentionally Omitted.
7.1.6. No Prior Business Activity. Prior to the date of this
Agreement other than organizing such Persons and preparing to enter into
the business described in Section 6.2.1 neither the Borrower nor any of
its Subsidiaries have engaged in any prior business activities or
operations of any kind.
7.2. Proforma Financial Statements; Material Agreements.
7.2.1. Proforma Financial Statements and Other Information. The
Borrower has previously furnished to the Lender a copy of the ten-year
financial and operational projections for the Borrower and its
Subsidiaries. In the Borrower's judgment, such financial and operational
projections constitute a reasonable basis as of the date of this
Agreement for the assessment of the future performance of the Borrower
and its Subsidiaries during the periods indicated therein, it being
understood that any projected financial information represents an
estimate, based on various assumptions, of future results of operations
which may or may not in fact occur and Borrower shall have no liability
if actual financial and operational results differ from such
projections.
7.2.2. Material Agreements. The Borrower has previously
furnished to the Lender correct and complete copies, including all
exhibits, schedules and amendments thereto, of the agreements and
instruments, each as in effect on the date hereof (or the forms thereof
for those agreements not yet entered into); listed in Exhibit 7.2.2,
which constitute all agreements and instruments (excluding the Loan
Documents, the Senior Construction Loan Documents and the Charters of
the Borrower's Subsidiaries) material to the Borrower and its
Subsidiaries on a Consolidated basis (the "Material Agreements").
7.3. No Agreements Relating to Indebtedness, Investments, etc. As of the
date of this Agreement neither the Borrower nor any of its Subsidiaries have:
(a) any Indebtedness (other than the Loan).
(b) any Liens or Guarantees (other than the Loan).
(c) any agreements which directly or indirectly require the
Borrower or any Subsidiary to make any Investment.
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7.4. Title to Assets. The Borrower and its Subsidiaries have good and
marketable title to all assets necessary for or used in the operations of their
business as now conducted by them.
7.5. Operations in Conformity With Law, etc. The operations of the
Borrower and its Subsidiaries as now conducted or proposed to be conducted are
not in violation of, nor is the Borrower nor any of its Subsidiaries in default
under, any Legal Requirement presently in effect, except for such violations and
defaults as do not and will not, individually or in the aggregate, result, or
create a material risk of resulting, in any Material Adverse Change. The
Borrower has received no notice of any such violation or default and has no
knowledge of any basis on which the operations of the Borrower or its
Subsidiaries, as now conducted and as currently proposed to be conducted after
the date hereof, would be held so as to violate or to give rise to any such
violation or default. The representations and warranties regarding compliance of
Approved Projects with applicable Legal Requirements in Section 3.2 of each
Approved Project Agreement are true, correct and complete without any material
condition or limitation applicable thereto including to the extent the terms
thereof impose stricter or more specific obligations than are provided above in
this Section 7.5.
7.6. Litigation. No litigation, at law or in equity, or any proceeding
before any court, board or other governmental or administrative agency or any
arbitrator is pending or, to the knowledge of the Borrower threatened which
involves any material risk of any final judgment, order or liability which,
after giving effect to any applicable insurance, has resulted, or creates a
material risk of resulting, in any Material Adverse Change or which seeks to
enjoin the consummation, or which questions the validity, of any of the
transactions contemplated by this Agreement or any other Loan Document. No
judgment, decree or order of any court, board or other governmental or
administrative agency or any arbitrator has been issued against or binds the
Borrower or any of its Subsidiaries which has resulted, or creates a material
risk of resulting, in any Material Adverse Change.
7.7. Authorization and Enforceability. Each of the Borrower and each
other Obligor has taken all necessary company or corporate action required to
execute, deliver and perform this Agreement and each other Loan Document to
which it is party. Each of this Agreement and each other Loan Document
constitutes the legal, valid and binding obligation of each Obligor party
thereto and is enforceable against such Obligor in accordance with its terms,
except for the effect of federal and state bankruptcy, insolvency and similar
laws and general principles of equity.
7.8. No Legal Obstacle to Agreements. Neither the execution and delivery
of this Agreement or any other Loan Document, nor the making of any borrowings
hereunder, nor the incurring or guaranteeing of the Loan Obligations, nor the
securing of the Loan Obligations with the Loan Security, nor the consummation of
any transaction referred to in or contemplated by this Agreement or any other
Loan Document, nor the fulfillment of the terms hereof or thereof or of any
other agreement, instrument, deed or lease contemplated by this
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Agreement or any other Loan Document, has constituted or resulted in or will
constitute or result in:
(i) any breach or termination of the provisions of any
agreement, instrument, deed or lease to which the Borrower, any of its
Subsidiaries or any other Obligor is a party or by which it is bound, or
of the Charter or By-laws of the Borrower, any of its Subsidiaries or
any other Obligor;
(ii) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Borrower, any
of its Subsidiaries or any other Obligor;
(iii) the creation under any agreement, instrument, deed or
lease of any Lien (other than Liens, if any, on the Loan Security which
secure the Loan Obligations) upon any of the assets of the Borrower, any
of its Subsidiaries or any other Obligor; or
(iv) any redemption, retirement or other repurchase obligation
of the Borrower, any of its Subsidiaries or any other Obligor under any
Charter, By-law, agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Borrower, any of its Subsidiaries or any other
Obligor in connection with the execution, delivery and performance of this
Agreement or any other Loan Document, the transactions contemplated hereby or
thereby, the making of any borrowing hereunder, the guaranteeing of the Loan
Obligations or, if applicable, the securing of the Loan Obligations with the
Loan Security (other than filings necessary to perfect the Lender's security
interest in the Loan Security).
7.9. Defaults. Neither the Borrower nor any of its Subsidiaries is in
default under any provision of its Charter or By-laws or of this Agreement or
any other Loan Document. Neither the Borrower nor any of its Subsidiaries is in
default under any provision of any agreement, instrument, deed or lease to which
it is party or by which it or its property is bound so as to result, or create a
material risk of resulting, in any Material Adverse Change.
7.10. Licenses, Permits and Approvals. The Borrower has all patents,
patent applications, patent licenses, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, licenses, franchises,
permits, authorizations, approvals and other rights as are reasonably necessary
for the conduct of the business of the Borrower. All of the foregoing are in
full force and effect in all material respects, the Borrower is in substantial
compliance with the foregoing without any known conflict with the valid rights
of others which has resulted, or creates a material risk of resulting, in any
Material Adverse Change. No event
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has occurred which permits, or after notice or lapse of time or both would
permit, the revocation or termination of any such license, franchise, permit,
authorization, approval or other right or which affects the rights of the
Borrower so as to result, or to create a material risk of resulting, in any
Material Adverse Change.
7.11. Tax Returns. To the extent required to make such filings, each of
the Borrower and its Subsidiaries has filed all material tax and information
returns which are required to be filed by it and has paid, or made adequate
provision for the payment of, all taxes which have or may become due pursuant to
such returns or to any assessment received by it, other than taxes and
assessments being contested by the Borrower and its Subsidiaries in good faith
by appropriate proceedings and for which adequate reserves have been taken in
accordance with GAAP. Neither the Borrower nor any of its Subsidiaries knows of
any material additional assessments or any basis therefor. The Borrower
reasonably believes that the charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
(if any) are adequate.
7.12. No Pension Plans. Neither the Borrower nor any of its Subsidiaries
have any Plan.
7.13. Environmental Compliance. As of the date of this Agreement each of
the Borrower and its Subsidiaries is in compliance in all material respects with
Environmental Laws.
7.14. Government Regulation; Margin Stock. Neither the Borrower nor any
of its Subsidiaries, nor any Person controlling the Borrower or any of its
Subsidiaries or under common control with the Borrower or any of its
Subsidiaries, is subject to any statute or regulation which regulates the
incurring by the Borrower or any of its Subsidiaries of any Indebtedness as
contemplated by this Agreement and the other Loan Documents. Neither the
Borrower nor any of its Subsidiaries owns any margin stock.
7.15. Accuracy of Submitted Information. All information provided to the
Lender by or on behalf of the Borrower or any of its Subsidiaries with respect
to any such Person, the Loan, any proposed project, any Approved Project, or any
Senior Construction Loan was true and correct in all material respects as of the
date provided, and, to the extent subsequently updated or corrected, shall be
true and correct in all material respects as of each Closing Date.
7.16. Disclosure. Neither this Agreement nor any other Loan Document nor
any financial statement, report, notice, mortgage, assignment or certificate
furnished or to be furnished to the Lender by or on behalf of the Borrower or
any of its Subsidiaries in connection with the transactions contemplated hereby
or by such Loan Document contains any untrue statement of material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
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7.17. Adverse Market Change. Since December 31, 1998, no material
adverse change has occurred in the financial condition or operations of the
Borrower or Candlewood (provided, however, that notwithstanding anything else
herein to the contrary, the representation as to Candlewood is made only as of
the date hereof and as of the date of the initial advance of the Loan and not
as of any subsequent date).
8. Defaults.
8.1. Events of Default. Each of the following events are referred to as
an "Event of Default
8.1.1. Payment. The Borrower or any other Obligor shall fail to
make any payment in respect of: (a) interest or any fee on or in respect
of any of the Loan Obligations owed by it as the same shall become due
and payable, and such failure shall continue for a period of five (5)
Business Days, or (b) any amount other than principal, interest or fees
in respect of any Loan Obligation owed by it as the same shall become
due and payable, and such failure shall continue for a period of five
(5) days after written notice from the Lender to the Borrower of such
failure or (c) the principal of the Loan Obligations owed by it as the
same shall become due, whether at maturity or by acceleration or
otherwise.
8.1.2. Other Covenants. The Borrower or any Hotel Owner shall
fail to comply with any of Sections 6.3, 6.9 or 6.12 by not maintaining
required insurance coverages, allowing unpermitted Liens or transferring
assets and such failure shall continue for a period of ten (10) days
after written notice from the Lender to the Borrower of such failure.
Except with respect to the provisions of Section 6.6 and except with
respect to any Senior Construction Loan, the Borrower, any of its
Subsidiaries or any other Obligor shall fail to perform or observe any
other covenant, agreement, term or provision to be performed or observed
by it under this Agreement or any other Loan Document, and such failure
shall not be rectified or cured to the satisfaction of the Lender within
thirty (30) days after notice thereof by the Lender to the Borrower;
provided, however, if the Borrower has diligently commenced a cure of
such failure of performance and such cure cannot with the exercise of
reasonable diligence be completed within such thirty (30) day period,
then provided the Borrower continues to diligently prosecute such cure
to completion the Borrower shall have such additional time as is
reasonably needed to complete such cure not to exceed in all events an
additional thirty (30) days for an aggregate cure period of sixty (60)
days.
8.1.3. Representations and Warranties. Any representation or
warranty of or with respect to the Borrower, any of its Subsidiaries or
any other Obligor made to the Lender in, pursuant to or in connection
with this Agreement or any other Loan Document, or in any financial
statement, report, notice, or certificate delivered to the
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Lender by the borrower, any of its Subsidiaries or any other Obligor in
connection herewith or therewith, shall be false in any material respect on the
date as of which it was made.
8.1.4. Senior Construction Loans Cross Default, etc.
(i) Unless a forbearance agreement between the
applicable Senior Construction Lender and such Hotel Owner is in
effect, any Hotel Owner shall fail to make any payment when due
(after giving effect to any applicable grace periods) in respect
of any Senior Construction Loan; or
(ii) Unless a forbearance agreement between the
applicable Senior Construction Lender and such Hotel Owner is in
effect, any Hotel Owner shall fail to perform or observe any
other terms of any Senior Construction Loan Document and such
failure shall continue, without having been duly cured, waived
or consented to, beyond the period of grace, if any, specified
in such agreement or instrument, and such failure shall permit
the acceleration of the applicable Senior Construction Loan; or
(iii) all or any part of any Senior Construction Loan
shall be accelerated or shall become due or payable prior to its
stated maturity (except with respect to voluntary prepayments
thereof for any reason whatsoever; or
(iv) any Senior Construction Lender shall attempt to
foreclose on an Approved Project or any portion thereof or to
take similar action under any Lien on any property of any Hotel
Owner securing any Senior Construction Loan.
8.1.5. Other Borrower or Candlewood Obligations to the Lender
Cross Default. The Borrower shall fail to pay when due, or to perform or
observe any term of any other agreement (not a Loan Document) with or
obligation (not a Loan Obligation) to the Lender or any Affiliate of the
Lender and such failure shall continue, without having been duly cured,
waived or consented to, beyond the period of grace, if any, specified in
such agreement or applicable to such obligation.
8.1.6. Ownership; Liquidation; etc.
(a) the Borrower shall cease to own all membership interests in
the Hotel Owners except to the extent provided by Section 6.12.2; or
(b) any Hotel Owner shall cease to own its applicable Approved
Project except to the extent permitted by Sections 6.12.2 or 6.12.3; or
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(c) Except as permitted pursuant to Article 12 of the LLC
Agreement, Candlewood Member shall cease to own membership interests in
the Borrower equal to at least fifty percent (50%) of the membership
interests in the Borrower or Candlewood Member shall cease to be a
wholly owned subsidiary of Candlewood, except in each case in connection
with a sale or disposition of substantially all of Candlewood's assets
(including by means of a stock sale or by way of merger, consolidation
or other corporate reorganization); or
(d) Candlewood shall cease (i) to be the administrator under the
Administrative Services Agreement or (ii) to be the manager under all
Management Agreements with the Hotel Owners, or Candlewood LLC shall
cease to be the franchisor under all Franchise Agreements with the Hotel
Owners, except in each case in connection with a sale or disposition of
substantially all of Candlewood's assets (including by means of a stock
sale or by way of merger, consolidation or other corporate
reorganization); or
(e) the Borrower or any of its Subsidiaries or any other Obligor
(except for a Hotel Owner which has sold its Approved Project in
accordance with Sections 6.12.2 or 6.12.3) shall initiate any action to
dissolve, liquidate or otherwise terminate its existence.
8.1.7. Enforceability, etc. Any Loan Document shall cease for
any reason (other than the scheduled termination thereof in accordance
with its terms) to be enforceable in all material respects in accordance
with its terms or in full force and effect; or any party (other than the
Lender) to any Loan Document shall so assert in a judicial or similar
proceeding; or the security interests created by this Agreement or any
other Loan Documents shall cease to be enforceable with respect to any
material portion of the collateral for this Loan and of the same effect
and Priority purported to be created hereby.
8.1.8. Judgments. A final judgment shall be rendered against
Borrower or its Subsidiaries (a) which, with other outstanding final
judgments against the Borrower and its Subsidiaries, exceeds an
aggregate of $100,000 in excess of applicable insurance coverage shall
be rendered against the Borrower or any of its Subsidiaries, or (b)
which grants injunctive relief that results, or creates a material risk
of resulting, in a Material Adverse Change and in either case if (i)
within 30 days after entry thereof, such judgment shall not have been
discharged or execution thereof stayed pending appeal or (ii) within 30
days after the expiration of any such stay, such judgment shall not have
been discharged.
8.1.9. Bankruptcy, etc. The Borrower, any of its Subsidiaries or
any other Obligor shall:
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(i) commence a voluntary case under the Bankruptcy Code
or authorize, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(ii) (i) have filed against it a petition commencing an
involuntary case under the Bankruptcy Code that shall not have
been dismissed within 60 days after the date on which such
petition is filed, or (ii) file an answer or other pleading
within such 60-day period admitting or failing to deny the
material allegations of such a petition or seeking, consenting
to or acquiescing in the relief therein provided, or (iii) have
entered against it an order for relief in any involuntary case
commenced under the Bankruptcy Code;
(iii) seek relief as a debtor under any applicable law,
other than the Bankruptcy Code, of any jurisdiction relating to
the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief;
(iv) have entered against it an order by a court of
competent jurisdiction (i) finding it to be bankrupt or
insolvent, (ii) ordering or approving its liquidation or
reorganization as a debtor or any modification or alteration of
the rights of its creditors or (iii) assuming custody of, or
appointing a receiver or other custodian for, all or a
substantial portion of its property; or
(v) make an assignment for the benefit of, or enter into
a composition with, its creditors, or appoint, or consent to the
appointment of, or suffer to exist a receiver or other custodian
for, all or a substantial portion of its property.
8.1.10. Debt Service Coverage. Failure to comply with the
provisions of Section 6.6; provided, however, that the failure to meet
the debt service test described in the immediately preceding sentence
shall not constitute an Event of Default hereunder if on the thirtieth
(30th) day after such failure (the "Retest Date"), at least seventy five
percent (75 %) of the total number of Hotel Owners included in the
immediately prior debt service test satisfy such debt service test when
tested over the thirty (30) day period (instead of a one-year period)
immediately preceding the Retest Date:
8.2. Certain Actions Following an Event of Default. If any one or more
Events of Default shall occur and be continuing, then in each and every such
case:
8.2.1. Terminate Obligation to Make Loan Advances. The Lender
may terminate the obligation of the Lender to make any further advances
of the Loan under
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the Loan Documents by furnishing notice of such termination to the
Borrower; provided, however, that if a Bankruptcy Default shall have
occurred, the obligations of the Lender to make any further advances of
the Loan under the Loan Documents shall automatically terminate.
8.2.2. Specific Performance; Exercise of Rights. The Lender may
proceed to protect and enforce its rights by suit in equity, action at
law and/or other appropriate proceeding, either for specific performance
of any covenant or condition contained in this Agreement or any other
Loan Document (including, without limitation, the right to foreclose
under any Mortgage and Security Agreement) or in any instrument or
assignment delivered to the Lender pursuant to this Agreement or any
other Loan Document, or in aid of the exercise of any power granted in
this Agreement or any other Loan Document or any such instrument or
assignment.
8.2.3. Acceleration. The Lender may by notice in writing to the
Borrower declare all or any part of the unpaid balance of the Loan
Obligations then outstanding to be immediately due and payable, and
thereupon such unpaid balance or part thereof shall become so due and
payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived; provided, however, that
if a Bankruptcy Default shall have occurred, the unpaid balance of the
Loan Obligations shall automatically become immediately due and payable.
8.2.4. Enforcement of Payment; Loan Security; Setoff. The Lender
may proceed to enforce payment of the Loan Obligations in such manner as
it may elect, and to realize upon any and all rights in the Loan
Security. The Lender may offset and apply toward the payment of the Loan
Obligations (and/or toward the curing of any Event of Default) any
Indebtedness from the Lender to the respective Obligors, including any
Indebtedness represented by deposits in any account maintained with the
Lender, regardless of the adequacy of any security for the Loan
Obligations. The Lender shall have no duty to determine the adequacy of
any such security in connection with any such offset.
8.2.5. Right to Cure Senior Construction Loan Default. If an
event of default occurs and while such event of default is continuing
under any Senior Construction Loan, the Lender shall have the right (but
not any obligation) to act to cure such event of default including
without limitation all of the following rights:
(i) to make, at the Lender's option, any defaulted
payment required to be made in respect of the defaulted Senior
Construction Loan by the Borrower.
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(ii) to perform, at the Lender's option, any defaulted
non-monetary obligation of the Borrower in respect of the
defaulted Senior Construction Loan by the Borrower.
(iii) to intervene or otherwise participate, at the
Lender's option, in any legal or equitable proceeding related to
the defaulted Senior Construction Loan.
8.2.6. Cumulative Remedies. To the extent not prohibited by
applicable law which cannot be waived, all of the Lender's rights
hereunder and under each other Loan Document shall be cumulative.
8.3. Interest and Late Charges with respect to Defaults. The Borrower
agrees that (i) all expenditures by the Lender that the Borrower or any other
Obligor is obligated to pay under any of the Loan Documents, other than advances
of principal of the Loan, which are not reimbursed by the Borrower or such other
Obligor promptly upon demand, (ii) all Loan Obligations under any Loan Documents
after maturity and (iii) all Loan Obligations under any Loan Document should an
Event of Default occur, from the date fifteen (15) days after the sooner of (x)
the date any such expenditure or Loan Obligation is due or (y) the date of any
Event of Default, shall bear interest at the maximum rate of interest then
permitted by law or twenty-one percent (21%), whichever shall be less, until
all such expenditures or Loan Obligations are repaid in full to the Lender. In
addition, the Lender may collect a "late charge" to cover the extra expense
involved in handling delinquent payments which shall not exceed the lesser of
(a) an amount equal to five percent (5%) of any Loan Obligation which is not
paid within five (5) days of the due date thereof, or (ii) the maximum rate of
interest then permitted by law.
8.4. Annulment of Defaults. Once an Event of Default has occurred, such
Event of Default shall be deemed to exist and be continuing for all purposes of
the Loan Documents until the Lender shall have waived such Event of Default in
writing, stated in writing that the same has been cured to such Lender's
reasonable satisfaction or entered into an amendment to this Agreement which by
its express terms cures such Event of Default, at which time such Event of
Default shall no longer be deemed to exist or to have continued except with
respect to interest at the default rate or late charges in accordance with
Section 8.3 which shall continue in effect unless expressly and specifically
waived in writing. No such action by the Lender shall extend to or affect any
subsequent Event of Default or impair any rights of the Lender upon the
occurrence thereof. The making of any loan advance during the existence of any
Default or Event of Default shall not constitute a waiver thereof.
8.5. Waivers. Subject to Section 8.6, to the extent that such waiver is
not prohibited by the provisions of applicable law that cannot be waived, each
of the Borrower and the other Obligors waives:
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(i) all presentments, demands for performance, notices
of nonperformance (except to the extent required by this
Agreement or any other Loan Document), protests, notices of
protest and notices of dishonor;
(ii) any requirement of diligence or promptness on the
part of the Lender or in the enforcement of its rights under
this Agreement or any other Loan Document;
(iii) any and all notices of every kind and description
which may be required to be given by any statute or rule of law;
and
(iv) any defense (other than indefeasible payment in
full) which it may now or hereafter have with respect to its
liability under this Agreement or any other Loan Document or
with respect to the Loan Obligations.
8.6. Candlewood Right to Cure. The Lender agrees that simultaneously
with the giving to the Borrower of any Notice of a Default hereunder, the Lender
will use reasonable efforts to give a duplicate copy thereof to Candlewood.
Candlewood shall have the same period after the sending of a notice to it for
remedying the Default as is given to the Borrower under this Agreement. Any cure
by Candlewood pursuant to the terms of this Section 8.6 shall have the same
effect as if cured by the Borrower.
9. Expenses; Indemnity.
9.1. Expenses. Whether or not the transactions contemplated hereby shall
be consummated, the Borrower will pay:
(a) all reasonable expenses of the Lender (including the
out-of-pocket expenses related to the Loan and reasonable fees and
disbursements of the counsel to the Lender) in connection with the
preparation, drafting, negotiation, execution and duplication of this
Agreement and each other Loan Document, the transactions contemplated
hereby and thereby and amendments, waivers, consents and other
operations hereunder and thereunder;
(b) all title insurance premiums, survey costs, recording and
filing fees and transfer and documentary stamp and similar taxes at any
time payable in respect of this Agreement, any other Loan Document, any
Loan Security or the incurrence of the Loan Obligations;
(c) all reasonable due diligence costs, servicing costs,
consultants' fees including fees of inspection engineers as provided in
Section 5.2.5, costs of credit reports, appraisal costs and travel
expenses of, or incurred by, the Lender with respect to the Loan, any
contemplated hotel project and any Approved Project; and
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(d) all other reasonable expenses incurred by the Lender, or the
holder of any Loan Obligation in connection with the enforcement of any
rights hereunder or under any other Loan Document or any work-out
negotiations relating to the Loan Obligations, including costs of
collection and reasonable attorneys' fees and expenses; provided,
however, if the Borrower prevails in any litigation with Lender
regarding any enforcement action then the Borrower shall not be required
to pay the expenses of enforcement and collection related to such action
to the Lender.
9.2. General Indemnity. The Borrower shall indemnify the Lender and hold
it harmless from any liability, loss or damage resulting from the violation by
the Borrower of Section 2.6. In addition, the Borrower shall indemnify, the
Lender, each of the Lender's directors, officers, employees, agents, Loan
Participants, if any, and each Person, if any, who controls the Lender (each of
the Lender and such directors, officers, employees, agents, Loan Participants
and control Persons is referred to as an "Indemnified Party") and hold each of
them harmless from and against any and all claims, damages, liabilities and
reasonable expenses (including reasonable fees and disbursements of counsel with
whom any Indemnified Party may consult in connection therewith and all
reasonable expenses of litigation or preparation therefor) which any Indemnified
Party may incur or which may be asserted against any Indemnified Party in
connection with (a) the Indemnified Party's compliance with or contest of any
subpoena or other process issued against it in any proceeding related to this
Agreement, the Loan Documents, the transactions contemplated thereby or the
Approved Projects that involves Candlewood, Candlewood Member, Candlewood LLC,
the Borrower or any of its Subsidiaries or their Affiliates, (b) any litigation
or investigation involving Candlewood, Candlewood Member, Candlewood LLC, the
Borrower, any of its Subsidiaries or their Affiliates, or any officer, director
or employee thereof, (c) the existence or exercise of any security rights with
respect to the Loan Security in accordance with the Loan Documents, or (d) this
Agreement, any other Loan Document or any transaction contemplated hereby or
thereby; provided, however, that the foregoing indemnity shall not apply (i) to
litigation commenced by the Borrower against the Lender which seeks enforcement
of any of the rights of the Borrower hereunder or under any other Loan Document
and is determined adversely to the Lender in a final nonappealable judgment or
(ii) to the extent such claims, damages, liabilities and expenses result from
the Indemnified Party's own gross negligence or willful misconduct. THE BORROWER
EXPRESSLY ACKNOWLEDGES THAT IT MAY BE REQUIRED TO INDEMNIFY PERSONS AGAINST
THEIR OWN NEGLIGENCE.
10. Successors and Assigns; Lender Assignments and Participations.
10.1. Successors and Assigns. Any reference in this Agreement or any
other Loan Document to any of the parties hereto shall be deemed to include the
successors and assigns of such party, and all covenants and agreements by or on
behalf of the Borrower, the other Obligors or the Lender that are contained in
this Agreement or any other Loan Document shall bind and inure to the benefit of
their respective successors and assigns; provided, however,
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that (a) the Borrower, its Subsidiaries and the other Obligors, including
Candlewood (other than in connection with a sale or disposition by Candlewood of
substantially all of its assets (including by means of a sale of stock or by way
of a merger, consolidation or other corporation reorganization)), may not assign
their rights or obligations under this Agreement or any other Loan Document, and
(b) the Lender shall be not entitled to assign its rights or obligations
hereunder except as set forth below in this Section 10.
10.2. Assignments by the Lender.
10.2.1. 0perations; Agent. Subject to this Section 10.2, in the
event that the Lender is no longer the sole Lender or wishes to assign a
portion of the Loan as provided in this Section 10.2, the Borrower and
the Lender shall amend this Agreement in a mutually acceptable manner to
add customary operations, agency, assignment and other multi-lender
provisions.
10.2.2. Assignees and Assignment Procedures. The Lender may, in
compliance with applicable laws in connection with such assignment,
assign to one or more Persons (each, an "Assignee") all or a portion of
its interests, rights and obligations under this Agreement and the other
Loan Documents, constituting all or any portion of the Loan which has
been advanced and is at the time owing to the Lender. The Lender may
assign to any person that is an Affiliate of the Lender (including to
the Loan Joint Venture) all or any portion of the Lender's interests in
the Loan Documents constituting all or any portion of the Loan whether
or not advanced, provided, however, that the Lender shall remain liable
for all of the obligations of the Lender hereunder notwithstanding any
such assignment. Without the Borrower's consent the Lender may not
assign any portion of the Loan which remains unadvanced to any Person
that is not an Affiliate of the Lender. The parties to each such
permitted assignment shall execute and deliver an assignment and
acceptance. From and after the effective date specified in each such
permitted assignment and acceptance (which effective date shall be at
least five Business Days after the execution thereof unless waived by
the Lender) and subject to the possible need to amend this Agreement as
provided in Section 10.2.1:
(i) the Assignee shall be a party hereto and, to the
extent provided in such assignment and acceptance, have the
rights and obligations of a Lender under this Agreement and
(ii) the assigning Lender shall, to the extent provided
in such assignment and acceptance be released from its
obligations under this Agreement (and, in the case of an
assignment and acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but
shall continue
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to be entitled to the benefits of Sections 3.3 and 9, as well
as to any fees accrued for its account hereunder and not yet
paid).
10.2.3. Substitution of Notes. Within five Business Days after
receipt of notice, the Borrower, at its own expense, shall execute and
deliver to the Lender (in exchange for the surrendered Note if such Note
must be surrendered or reissued as a result of such assignment) a new
Note to a permitted Assignee in a principal amount equal to the portion
of the Loan assigned to and assumed by such Assignee pursuant to an
assignment and acceptance. If the assigning Lender has retained a
portion of the Loan, the Borrower shall also execute and deliver to the
Lender a new note to the order of the Lender in a principal amount equal
to the portion of the Loan retained by the Lender.
10.2.4. Further Assurances. The Borrower and its Subsidiaries
shall sign such documents and take such other actions from time to time
reasonably requested by a permitted Assignee to enable it to share in
the benefits of the rights created by the Loan Documents.
10.2.5. Miscellaneous. Notwithstanding anything in this Section
10.2 to the contrary, no transfer or assignment by the Lender of all or
any portion of its interests, rights and obligations under this
Agreement and the Loan Documents shall be effective until the identity
of the transferee or assignee is registered on the books and records
maintained by the Borrower or any agent of the Borrower. A certificate
that such registration has been completed shall be promptly provided by
the Borrower to the Lender and any assignee or successor thereof and
such certificate shall constitute conclusive evidence of such
registration and the effectiveness of such transfer or assignment.
10.3. Loan Participants. The Lender may, without the consent of the
Borrower or any Obligor, in compliance with applicable laws in connection with
such participation, sell to one or more Persons (each a "Loan Participant")
participations in all or a portion of its interests, rights and obligations
under this Agreement and the other Loan Documents (including all or a portion
of, the Loan and the Note held by it); provided, however, that:
(a) the Lender's obligations under this Agreement shall remain
unchanged;
(b) such Lender shall remain solely responsible to the Borrower
for the performance of such obligations;
(c) the Loan Participant shall be entitled to the benefit of the
cost protection and indemnification provisions contained in Sections 3.3
and 9, but shall not be entitled to receive any greater payment
thereunder than the selling Lender would have been
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entitled to receive with respect to the interest so sold if such
interest had not been sold; and
(d) the Borrower shall continue to deal solely and directly with
the Lender in connection with the Lender's rights and obligations under
this Agreement and, under any agreements between the Lender and such
Loan Participant, the Lender shall retain the sole right with respect to
the enforcement of the obligations of the Obligors relating to the Loan
and the approval of any amendment, modification or waiver of any
provision of this Agreement.
11. Confidentiality. The Lender, the Borrower, its Subsidiaries and the
Obligors shall not make any disclosure of confidential information furnished to
it by any of the others unless such information shall have become public (other
than as a result of a breach of this Section 11), except:
(a) in connection with operations under or the enforcement of
this Agreement or any other Loan Document to Persons who have a
reasonable need to be furnished such confidential information and who
agree to comply with the restrictions contained in this Section 11 with
respect to such information;
(b) pursuant to any statutory or regulatory requirement or any
mandatory court order, subpoena or other legal process;
(c) to any parent or corporate Affiliate of such Person or to
any Loan Participant, proposed Loan Participant or proposed Assignee;
provided, however, that any such Person shall agree to comply with the
restrictions set forth in this Section 11 with respect to such
information;
(d) to its independent counsel, auditors and other professional
advisors with an instruction to such Person to keep such information
confidential; and
(e) with the prior written consent of the Person to whom such
confidential information applies, to any other Person.
12. Certain Special Provisions.
12.1. Single Purpose Entity. In addition to the restrictions in the
covenants in Section 6, the Borrower agrees, with and for the benefit of and as
a material inducement to the Lender without which the Lender would not enter
into this Agreement or make the Loan, that the Borrower and its Subsidiaries
will comply with the following provisions:
12.1.1. Definition. Each of the Borrower and each of its
Subsidiaries is, and will hereafter continue to be, a duly formed and
existing Single Purpose Entity. The
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term "Single Purpose Entity" means a Person that (i) was organized
solely for the purposes of (a) acquiring and directly holding and owning
all ownership interests in a Approved Project, in the case of each Hotel
Owner, or (b) in the case of the Borrower acquiring and directly holding
and owning all membership interests in all Hotel Owners; (ii) does not
have any assets other than those related to its interest in the Approved
Projects or the Hotel Owners, as the case may be; (iii) in the case of
each Hotel Owner, does not have any Indebtedness other than the Loan and
the applicable Senior Construction Loan and as otherwise permitted under
this Agreement or the other Loan Documents; (iv) in the case of the
Borrower, does not have any Indebtedness other than the Loan and as
otherwise permitted under this Agreement or the other Loan Documents;
(v) has its own separate books and records and has its own accounts, in
each case which are separate and apart from the books and records and
accounts of any other Person; (vi) does not conduct any business other
than (A) in the case of each Hotel Owner, the ownership, management and
operation of an Approved Project and activities incidental thereto and
(B) in the case of the Borrower, the ownership of all membership
interests in all Hotel Owners and acting as the manager of all Hotel
Owners and activities incidental thereto, which business in each such
case generates all of the gross income of such Person; and (vii) holds
itself out as being an entity separate and apart from any other Person.
12.1.2. Independent Existence. All customary formalities
regarding the separate and independent existence of each of the Borrower
and each Hotel Owner from any and all other Persons have been at all
times since its respective formation and will hereafter continue to be
observed.
12.1.3. Separate Assets. The Borrower does not now have and will
not directly hereafter own any assets constituting real property or
tangible personal property other than (i) indirectly through its
ownership of the membership interests in Hotel Owners and (ii) the
Investments permitted by Section 6.10. Each Hotel Owner does not now
have and will not own any assets other than the Approved Project
applicable to such Hotel Owner. The assets of the Borrower have not at
any time been commingled, and hereafter will not be commingled, with the
assets of any Hotel Owner, any other Affiliate of the Borrower or any
other Person. The assets of each Hotel Owner have not at any time been
commingled, and hereafter will not be commingled, with the assets of the
Borrower, any Affiliate of the Borrower, any other Affiliate of such
Hotel Owner, or any other Person. No assets have been, nor hereafter
will be, transferred between (i) the Borrower and its Affiliates or (ii)
any Hotel Owner and its Affiliates, in each case without fair
consideration and proper documentation. Neither the Borrower nor any of
the Hotel Owners will maintain its assets in such a manner that it will
be costly or difficult to segregate, ascertain or identify its
individual assets from those of (a) any member, principal, Subsidiary or
Affiliate of the Borrower, (b) any member, principal or Affiliate of any
Hotel Owner or (c) any other Person. Notwithstanding anything to the
contrary contained herein, in the exercise of its duties
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as manager of the Borrower, as provided in the LLC Agreement, or as
manager for any Hotel Owner, as provided in the Management Agreement,
simultaneously or promptly after Candlewood incurs expenses on behalf of
the Borrower or any Hotel Owner Candlewood may, provided such expenses
are incurred in accordance with the terms of the LLC Agreement or the
Management Agreement, as applicable, and are within the applicable
budgets therefor, obtain full reimbursement from the Borrower or such
Hotel Owner.
12.1.4. Separate Records. Each of the Borrower and each Hotel
Owner shall accurately maintain its respective financial statements and
accounting records, separate from those of any Affiliate of the
Borrower, any other Hotel Owner, any Affiliate of any Hotel Owner and
any other Person. Each of the Borrower and each Hotel Owner will
accurately maintain its own bank accounts, payroll and separate books of
account. The Borrower's financial statements have not been, and will not
in the future be, prepared or presented on a Consolidated basis with
those of any other Person other than the Hotel Owners as provided in
this Agreement except as required by GAAP. The financial statements of
each Hotel Owner have not been, and will not in the future be, prepared
or presented on a Consolidated basis with those of any other Person
other than the Borrower and the other Hotel Owners as provided in this
Agreement except as required by GAAP.
12.1.5. Separate Liabilities. The Borrower and each Hotel Owner
has at all times since its respective formation paid, and hereafter will
continue to pay, its own liabilities from its own separate assets.
12.1.6. Separate Identification. Each of the Borrower and each
Hotel Owner has at all times since its respective formation identified
itself, and will continue to identify itself, in all dealings with the
public, under the Borrower's or such Hotel Owner's own name and as
separate and distinct entities. Each of the Borrower and each Hotel
Owner has not, at any time since its respective formation identified
itself, and will not identify itself, as being a division or a part of
any other Person. Each of the Borrower and each Hotel Owner has not, at
any time since its respective formation, identified, and will not
identify, any other Person, as being a division or part of it. Neither
the Borrower nor any of the Hotel Owners will (i) mislead other Persons
as to the identity of the entity with which such Person is transacting
business, or (ii) suggest that the Borrower or any Hotel Owner is
responsible for the debts of any other Person (including any principal,
member or Affiliate of the Borrower or any Hotel Owner) unless Hotel
Owner is so responsible as herein permitted.
12.1.7. Adequate Capitalization. Each of the Borrower and each
Hotel Owner have been at all times since its respective formation, and
hereafter will continue to be, adequately capitalized in light of the
nature of its respective business.
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12.2. Candlewood Member's Equity Contribution. Candlewood may cause
Candlewood Member to make all or a portion of any Equity Contribution by
contributing to the Borrower land, improvements, if any, constituting the
project site where the applicable Approved Project for which an Equity
Contribution is being made is to be located and personal property both tangible
and intangible related to such Approved Project provided such personal property
is used in connection with such Approved Project. Any portion of any Equity
Contribution for an Approved Project consisting of such land, improvements and
personal property shall be valued at the lesser of (x) Candlewood's (or, if
applicable, Candlewood Member's) cost of acquiring such land and improvements
and, if applicable, constructing such improvements and acquiring such personal
property and (y) the amounts budgeted for such land, improvements and personal
property in the budget approved by the Lender detailing the Total Project Cost
for such Approved Project. In the event that the value of any such land,
improvements and personal property contributed by Candlewood Member exceeds the
amount of the Equity Contribution required of Candlewood Member pursuant to
Section 5.2.7 with respect to an Approved Project then, as mutually agreed by
Candlewood Member and the Lender, either (i) the Tranche Amount for such
Approved Project will be reduced by such excess and Candlewood Member may count
such excess towards any later required Equity Contribution and the applicable
Tranche Amount with respect to such later required Equity Contribution shall be
increased by the amount of such excess or (ii) Candlewood Member shall be
entitled to receive a cash distribution from the Borrower in an amount equal to
such excess, provided, however, that so long as no Event of Default has occurred
and is continuing, if Candlewood Member has not received credit or cash for such
later required Equity Contribution pursuant to this sentence within thirty (30)
days of making any excess Equity Contribution, the Lender shall make an advance
of the Loan Amount to the Borrower for such purpose so long as the other terms
of this Agreement are met. If at any time after one year from the date of the
initial advance of the Loan the total number of Approved Projects for which a
Tranche of the Loan is committed to be or has been advanced hereunder is or
becomes less than ten (10), then Candlewood shall, prior to any further advances
of the Loan by the Lender and if so requested by the Lender, have caused
Candlewood Member to make an additional Equity Contribution to the Borrower to
increase the total Equity Contribution made by Candlewood Member to the Borrower
to an amount equal to fifteen percent (15%) of Total Project Costs of all
Approved Projects. Any amounts available from such increase in the Equity
Contribution by Candlewood Member shall be applied to prepay the Loan Amount in
accordance with Section 4.4.
12.3. Certain Transaction and Due Diligence Expenses. Prior to the date
hereof Candlewood has provided an expense deposit of $150,000 to the Lender to
be applied towards the Lender's costs and expenses of documenting the Loan and
entering into this Agreement including the expenses described in Section 9.1.
Candlewood shall reimburse the Lender for any such expenses the Lender
reasonably incurs in connection with documenting the Loan and entering into this
Agreement above the amount of such deposit. All such costs and expenses are
referred to herein as the "Transaction Expenses". Reasonably promptly after the
date of this Agreement the Lender shall provide the Borrower with an accounting
of how such deposit
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was used and shall return any unused portion thereof to Candlewood. Candlewood
shall be entitled to be reimbursed by the Borrower for the Transaction Expenses
at the times and limited in amount as follows: an amount equal to ten percent
(10%) of the Transaction Expenses will be included in the Total Project Cost of
an Approved Project for the first ten (10) Approved Projects and the Borrower
shall reimburse such amount to Candlewood from the first funding of the Senior
Construction Loan applicable to each such Approved Project. If during the term
of this Agreement less than ten (10) Approved Projects are funded, then
Candlewood shall not be entitled to be reimbursed by the Borrower for any
remaining portion of the Transaction Expenses not reimbursed as provided in the
immediately preceding sentence and the Borrower shad not owe Candlewood for any
such unreimbursed portion of the Transaction Expense. Candlewood shall also be
responsible for and shall reimburse the Borrower and the Lender on demand for
any reasonable due diligence costs and expenses incurred by the Borrower or the
Lender with respect to any proposed hotel project which does not become an
Approved Project or for which the conditions to an advance of the Loan are not
satisfied. In an effort to mine overlapping due diligence efforts and expenses
of the Borrower, the Senior Construction Lenders and the Lender, the Lender
shall periodically consult with Candlewood prior to incurring any material due
diligence expenses individually or in the aggregate.
12.4. Subordination of Collateral with respect to Approved Projects. The
Lender agrees with and for the benefit of the Borrower that any Loan Security
provided to the Lender by any Hotel Owner shall be subject and subordinate to
the terms and provisions of the applicable Senior Construction Loan Documents
with respect to such Hotel Owner. The Lender shall execute and deliver all
documentation reasonably required by any Senior Construction Lender with
respect to the applicable Approved Project to evidence such subordination.
12.5. Brokers, Investment Bankers and other Advisors. The Borrower
represents and warrants to the Lender that no investment banker, broker,
advisor, agent, consultant or finder has been engaged by it, advised it, brought
about or was otherwise involved in any manner in connection with the Loan or any
aspect thereof. The Borrower and/or the applicable Hotel Owner shall be solely
responsible and shall pay for any fees or commissions owed to any third party
investment bankers, brokers, advisors, agents, consultants or finders with
respect to any Approved Project. The Borrower shall defend, indemnify and hold
harmless the Lender from any claims from any such Person for any fees or
commission with respect to any of the foregoing matters.
12.6. Total Project Costs. It is expected by the Borrower and the Lender
that a Total Project Cost for an Approved Project may exceed the total budget
for such Approved Project approved by the applicable Senior Construction Lender
because the Total Project Cost includes reserves, fees and start up costs which
may not be included by such Senior Construction Lender in establishing its
budget, the required equity and the amount of the Senior Construction Loan for
such Approved Project.
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13. Notices. All notices or other communications required or permitted to be
given hereunder shall be in writing and delivered by hand or mailed, postage
prepaid, by registered or certified mail, return receipt requested or by a
nationally recognized overnight courier for delivery the next Business Day.
Notices shall be deemed given (a) when delivered if delivered by hand, (b) three
(3) Business Days after mailing by registered or certified mail or (c) the next
Business Day following deposit with a nationally recognized overnight courier.
All notices shall be addressed:
If to the Borrower, to:
Candlewood Hotel Company Fund I, LLC
c/o Candlewood Hotel Company, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. Fix
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Lender, to:
Boston Capital Institutional Advisors LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Esq.
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with an additional copy to:
Massachusetts Mutual Life Insurance Company
Real Estate Finance Group
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
if to Candlewood, to:
Candlewood Hotel Company, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. Fix
Any party may from time to time change its address by providing notice to the
other parties in accordance with the requirements of this Section 13.
14. Liability of the Lender.
14.1. No Relationship with Vendors. Neither this Agreement nor any other
Loan Document shall be construed to make the Lender liable to materialmen,
contractors, craftsmen, laborers, vendors or others for goods or services
delivered by them for any Approved Project or for debts or claims accruing to
such Persons against the Borrower or any Hotel Owner, and it is distinctly
understood and agreed that there is no contractual relation, either express or
implied, between the Lender and any materialmen, subcontractors, craftsmen,
laborers, vendors or any other Persons supplying any work, labor or materials
for an Approved Project.
14.2. No Rights of Third Parties. All conditions to the performance of
the obligations of the Lender under this Agreement, including the obligation to
make advances of the Loan, are imposed solely and exclusively for the benefit of
the 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 the
Lender will make or refuse to make advances of the Loan in the absence of strict
compliance with any or all such conditions. No Person other than the Borrower
shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any and all of which may be freely waived in whole or in part by the
Lender at any time if in its sole discretion it deems it desirable to do so. In
particular, the Lender makes no representations and assumes no obligations to
any Person concerning the quality of the development, design or construction of
any Approved Project or the absence therefrom of defects.
15. General Provisions.
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15.1. Course of Dealing; No Implied Waivers; Amendments. No course of
dealing between any Lender on the one hand, and the Borrower or any other
Obligor, on the other hand, shall operate as a waiver of any of the Lender's
rights under this Agreement or any other Loan Document or with respect to the
Loan Obligations. In particular, no delay or omission on the part of the Lender
in exercising any right under this Agreement or any other Loan Document or with
respect to the Loan Obligations shall operate as a waiver of such right or any
other right hereunder or thereunder. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
No waiver, consent, amendment or discharge with respect to this Agreement or any
other Loan Document shall be binding unless it is in writing and, with respect
to waivers or discharges, signed by the Lender, and with respect to other
changes, signed by the Lender and such of the Borrower, its Subsidiaries, the
Obligor and any other Persons who are parties to such Loan Document and any
oral waiver, change or discharge of any term or provision of this Agreement
shall be without authority and of no force or effect.
15.2. Defeasance. When all Loan Obligations (other than those referenced
in the proviso of the last sentence of this Section 15.2) have been paid and
performed in full and if at the time the Lender is no longer committed to extend
any credit to the Borrower hereunder or under any other Loan Document, this
Agreement and the other Loan Documents shall terminate and, at the Borrower's
written request, accompanied by such certificates and other items as the Lender
shall reasonably deem necessary, the Loan Security shall revert to the Obligors
and the right, title and interest of the Lender therein shall terminate.
Thereupon, on the Obligors' demand and at their cost and expense, the Lender
shall execute proper instruments, acknowledging satisfaction of and discharging
this Agreement and the other Loan Documents, and shall redeliver to the Obligors
any Loan Security then in its possession; provided, however, that Sections 3.3,
11 and 15 and the indemnity provisions in the Environmental Indemnity Agreement
shall survive the termination of this Agreement and the termination of the other
Loan Documents.
15.3. Intentionally Omitted.
15.4. Certain Obligor Acknowledgments. Each of the Borrower and the
other Obligors acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents.
(b) the Lender has no fiduciary relationship with or duty to the
Obligors arising out of or in connection with this Agreement or any
other Loan Document, and the relationship between the Lender on the one
hand, and the Obligors, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor.
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(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby or thereby
among the Obligors and the Lender.
15.5. Venue; Service of Process; Certain Waivers. Each of the Borrower,
the other Obligors, and the Lender:
(a) Irrevocably submits to the nonexclusive jurisdiction of the
state courts of The Commonwealth of Massachusetts and to the
nonexclusive jurisdiction of the United States District Court for the
District of Massachusetts for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or any other Loan
Document or the subject matter hereof or thereof.
(b) Waives to the extent not prohibited by applicable law that
cannot be waived, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such proceeding brought in any of the
above-named courts, any claim that it is not subject personally to the
jurisdiction of such court, that its property is exempt or immune from
attachment or execution, that such proceeding is brought in an
inconvenient forum, that the venue of such proceeding is improper, or
that this Agreement or any other Loan Document, or the subject matter
hereof or thereof, may not be enforced in or by such court.
(c) Consents to service of process in any such proceeding in any
manner at the time permitted by Chapter 223A of the General Laws of The
Commonwealth of Massachusetts and agrees that service of process by
registered or certified mail, return receipt requested, at its address
specified in or pursuant to Section 13 is reasonably calculated to give
actual notice.
(d) Waives to the extent not prohibited by applicable law that
cannot be waived any right it may have to claim or recover in any such
proceeding any special, exemplary, punitive or consequential damages.
15.6. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW THAT CANNOT BE WAIVED, EACH OF THE BORROWER, THE OTHER OBLIGORS AND THE
LENDER WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY LOAN OBLIGATION OR IN
ANY WAY CONNECTED WITH THE DEALINGS OF THE LENDER, THE BORROWER OR ANY OTHER
OBLIGOR IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. Each of the
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Borrower and the other Obligors acknowledges that it has been informed by the
Lender that the foregoing sentence constitutes a material inducement upon
which the Lender has relied and will rely in entering into this Agreement and
any other Loan Document. The Lender, the Borrower or any other Obligor may file
an original counterpart or a copy of this Agreement with any court as written
evidence of the consent of the Borrower, the other Obligors, and the Lender to
the waiver of their rights to trial by jury.
15.7. Interpretation; Governing Law; etc. Time is (and shall be) of the
essence in this Agreement and the other Loan Documents. All covenants,
agreements, representations and warranties made in this Agreement or any other
Loan Document or in certificates delivered pursuant hereto or thereto shall be
deemed to have been relied on by the Lender, notwithstanding any investigation
made by the Lender on its behalf, and shall survive the execution and delivery
to the Lender hereof and thereof. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of any other
provision hereof, and any invalid or unenforceable provision shall be modified
so as to be enforced to the maximum extent of its validity or enforceability.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof. This Agreement and the other
Loan Documents constitute the entire understanding of the parties with respect
to the subject matter hereof and thereof and supersede all prior and
contemporaneous understandings and agreements, whether written or oral. This
Agreement may be executed in any number of counterparts which together shall
constitute one instrument. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of laws rules) of The
Commonwealth of Massachusetts.
[THE REST OF THIS PAGE IS INTENTIONALLY BLANK.]
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[Loan Agreement]
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first written above.
BORROWER:
CANDLEWOOD HOTEL COMPANY FUND I, LLC
By /s/ ▇▇▇▇▇▇ ▇. FIX
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. Fix
Title: Authorized Signatory
LENDER:
BOSTON CAPITAL INSTITUTIONAL ADVISORS
LLC
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
EXHIBIT 7.2.2
Material Agreements.
1. Administrative Services Agreement dated as of June 1, 1999 between Candlewood
and the Borrower ("Administrative Services Agreement").
2. Form of Franchise Agreement to be entered into between Candlewood LLC and
each Hotel Owner ("Franchise Agreement").
3. Form of Management Agreement to be entered into between Candlewood and each
Hotel Owner ("Management Agreement").
4. The LLC Agreement.
5. Form of Reservations Service Agreement to be entered into between Lexington
Services Associates, Ltd. ("Lexington") and each Hotel Owner ("Reservations
Service Agreement").