Exhibit 10.16
UP TO U.S. $250,000,000
REVOLVING CREDIT AGREEMENT
Dated as of February 29, 1996
Between
HOSPITALITY PROPERTIES TRUST
as Borrower
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and
DLJ MORTGAGE CAPITAL, INC.
as Lender
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TABLE OF CONTENTS
SECTION PAGE
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS........................... 1
1.1. Defined Terms.............................................. 1
1.2. Computation of Time Periods................................ 22
1.3. Accounting Terms........................................... 22
1.4. Certain Terms.............................................. 22
ARTICLE II AMOUNTS AND TERMS OF THE LOANS............................. 22
2.1. The Loans.................................................. 22
2.2. Making the Loans........................................... 23
2.3. [Intentionally Omitted].................................... 24
2.4. Reduction and Termination of the Commitment................ 24
2.5. Repayment.................................................. 24
2.6. Prepayments................................................ 24
2.7. Continuation of Loans at the Eurodollar Rate............... 25
2.8. Interest................................................... 25
2.9. Interest Rate Determination and Protection................. 25
2.10. Increased Costs............................................ 26
2.11. Illegality................................................. 27
2.12. Capital Adequacy........................................... 27
2.13. Payments and Computations.................................. 27
2.14. Taxes...................................................... 28
ARTICLE III LOAN TO VALUE REQUIREMENT; SELECTED
PROPERTIES AND PREPARATION OF MORTGAGE DOCUMENTS........... 29
3.1. [Intentionally Omitted..................................... 29
3.2. Loan to Value Requirement; Selected Properties............. 29
3.3. Preparation and Execution of Mortgage Documents............ 30
ARTICLE IV CONDITIONS OF LENDING...................................... 31
4.1. Conditions Precedent to the Initial Loan................... 31
4.2. Conditions Precedent to Each Loan.......................... 33
4.3. Additional Conditions Precedent to Each Loan
After the Collateralization Date........................... 34
ARTICLE V REPRESENTATIONS AND WARRANTIES............................. 37
5.1. Existence; Compliance with Law............................. 37
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SECTION PAGE
5.2. Power; Authorization; Enforceable Obligations.............. 38
5.3. Taxes...................................................... 39
5.4. Full Disclosure............................................ 40
5.5. Financial Matters.......................................... 40
5.6. Litigation................................................. 41
5.7. Margin Regulations......................................... 41
5.8. Ownership of Borrower and HRPT Advisors;
Subsidiaries............................................... 42
5.9. ERISA...................................................... 43
5.10. Liens...................................................... 44
5.11. [Intentionally Omitted].................................... 44
5.12. No Burdensome Restrictions; No Defaults;
Contractual Obligations.................................... 44
5.13. No Investments............................................. 45
5.14. Government Regulation...................................... 45
5.15. Insurance.................................................. 45
5.16. Employees.................................................. 46
5.17. Force Majeure.............................................. 46
5.18. Use of Proceeds............................................ 46
5.19. Environmental Protection................................... 46
5.20. Contractual Obligations Concerning Assets.................. 48
5.21. Status as REIT............................................. 48
5.22. Real Property.............................................. 48
5.23. Operator and Advisor: Compliance with Law................. 51
5.24. Operating Leases, Management Agreement and
Advisory Agreement......................................... 51
5.25. FF&E Reserves.............................................. 52
ARTICLE VI FINANCIAL COVENANTS........................................ 52
6.1. Limitation on Indebtedness................................. 52
6.2. Limitation on Secured Indebtedness......................... 52
6.3. Interest Expense Coverage.................................. 53
6.4. Maintenance of Tangible Net Worth.......................... 53
6.5. Maintenance of Loan to Value Ratio......................... 53
ARTICLE VII AFFIRMATIVE COVENANTS...................................... 53
7.1. Compliance with Laws, Etc.................................. 53
7.2. Conduct of Business........................................ 53
7.3. Payment of Taxes, Etc...................................... 54
7.4. Maintenance of Insurance................................... 54
7.5. Preservation of Existence, Etc............................. 55
7.6. Access..................................................... 55
7.7. Keeping of Books........................................... 55
7.8. Maintenance of Properties, Etc............................. 55
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SECTION PAGE
7.9. Performance and Compliance with Other Covenants............ 56
7.10. Application of Proceeds.................................... 56
7.11. Financial Statements....................................... 56
7.12. Reporting Requirements..................................... 58
7.13. Leases and Operating Leases................................ 61
7.14. [Intentionally Omitted].................................... 62
7.15. Employee Plans............................................. 62
7.16. [Intentionally Omitted].................................... 62
7.17. Fiscal Year................................................ 62
7.18. Environmental Matters...................................... 62
7.19. [Intentionally Omitted].................................... 63
7.20. REIT Requirements.......................................... 63
7.21. Maintenance of FF&E Reserves............................... 63
7.22. Further Assurances......................................... 63
7.23. Amendment to Management Agreement.......................... 63
ARTICLE VIII NEGATIVE COVENANTS......................................... 64
8.1. Liens, Etc................................................. 64
8.2. Indebtedness............................................... 66
8.3. Lease Obligations.......................................... 67
8.4. [Intentionally Omitted].................................... 68
8.5. Mergers, Stock Issuances, Asset Sales, Etc................. 68
8.6. Investments................................................ 69
8.7. Change in Nature of Business or Organizational
Documents.................................................. 69
8.8. Modification of Material Agreements........................ 69
8.9. Accounting Changes......................................... 70
8.10. Transactions with Affiliates............................... 70
8.11. Environmental Matters...................................... 70
ARTICLE IX EVENTS OF DEFAULT.......................................... 71
9.1. Events of Default.......................................... 71
9.2. Remedies................................................... 74
ARTICLE X MISCELLANEOUS.............................................. 75
10.1. Amendments, Etc............................................ 75
10.2. Notices, Etc............................................... 75
10.3. No Waiver; Remedies........................................ 76
10.4. Costs; Expenses; Indemnities............................... 76
10.5. Right of Set-off........................................... 78
10.6. Binding Effect............................................. 78
10.7. Assignments and Participations............................. 79
10.8. Governing Law; Severability................................ 80
iii
SECTION PAGE
10.9. Submission to Jurisdiction; Service of Process............. 80
10.10. Section Titles............................................. 80
10.11. Execution in Counterparts.................................. 81
10.12. Entire Agreement........................................... 81
10.13. Confidentiality............................................ 81
10.14. Waiver of Jury Trial....................................... 81
10.15. NON-LIABILITY OF TRUSTEES.................................. 81
10.16. Securitization Opinions.................................... 82
10.17. Cooperation With Rating Agencies........................... 82
10.18. Securitization Financials.................................. 83
iv
SCHEDULES
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Schedule 1.1 - Initial Hotels
Schedule 1.1(a) - Letters of Intent
Schedule 3.2 - Mortgaged Property Prioritization Schedule
Schedule 5.8(c) - Subsidiaries
Schedule 5.19 - Environmental Matters
Schedule 5.22(a) - Owned Real Estate
Schedule 5.22(b) - Leased Real Estate
Schedule 5.22(c) - Defects in Improvements
Schedule 8.1 - Existing Liens
v
EXHIBITS
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Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Negative Pledge Agreement
Exhibit D - Form of Opinion of Counsel for the Loan
Parties
Exhibit E - Form of Mortgage
Exhibit F - Form of Assignment Agreement
Exhibit G - Form of Management Agreement
Exhibit H - Form of Operating Lease
Exhibit I - Form of Security Agreement
Exhibit J - Form of Subordination Agreement
Exhibit K - Form of Subordination, Non-Disturbance and
Attornment Agreement
vi
REVOLVING CREDIT AGREEMENT, dated as of the 29th day of February 1996,
between HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust
(the "Borrower") and DLJ MORTGAGE CAPITAL, INC. a Delaware corporation (the
"Lender").
W I T N E S S E T H:
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WHEREAS, the Borrower has requested that the Lender make revolving
credit advances of up to $250,000,000 in aggregate principal amount outstanding
at any one time, for the purposes hereinafter specified; and
WHEREAS, the Lender is willing to make funds available for such
purposes upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following terms
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have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Advisor" means HRPT Advisors or such other Person as shall act as an
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advisor to the Borrower, whether pursuant to the Advisory Agreement, or an
agreement analogous to the Advisory Agreement, with the prior written consent of
the Lender.
"Advisory Agreement" means the Advisory Agreement, dated as of August
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21, 1995, between the Borrower and the Advisor, as amended, supplemented or
modified from time to time in a manner not inconsistent with the terms hereof or
of the Subordination Agreement.
"Affiliate" means, as to any Person, any Subsidiary of such Person and
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any other Person which,
1
directly or indirectly, controls, is controlled by or is under common control
with such Person and includes each officer or director or trustee or general
partner of such Person, and each Person who is the beneficial owner of 10% or
more of any class of voting Stock of such Person. For the purposes of this
definition, "control" means the possession of the power to direct or cause the
direction of management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Revolving Credit Agreement, together with all
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Exhibits and Schedules hereto, as the same may be amended, supplemented or
otherwise modified from time to time.
"Appraisal" means an appraisal using methodologies reasonably
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acceptable to the Lender at the time such appraisal is or was made and performed
by a Recognized Appraiser.
"Approved Hotel Facility" means any Real Estate or Lease comprising
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any of the hotel properties which the Borrower may acquire pursuant to the
Letters of Intent.
"Asset Sale" means any sale, conveyance, transfer, assignment, lease
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or other disposition (including, without limitation, by merger or consolidation
and whether by operation of law or otherwise) by the Borrower or any of its
Subsidiaries to any Person of any Stock of any of its Subsidiaries, any Stock
Equivalents of any of its Subsidiaries or any Mortgaged Property but excluding
Operating Leases.
Asset Sale Proceeds" means payments received by the Borrower or any of
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its Subsidiaries (including, without limitation, any payments received by way of
deferred payment of principal pursuant to a note or receivable or otherwise, but
only as and when received) from any Asset Sale (after repayment of any
Indebtedness other than the Loans secured by the Mortgaged Property subject of
such Asset Sale to the extent such Indebtedness is permitted hereunder), in each
case net of the amount of (i) brokers' and advisors' fees and commissions
payable other than to an Affiliate of the Borrower in connection with such Asset
Sale, (ii) all foreign, federal, state and local taxes payable as a direct
2
consequence of such Asset Sale, (iii) the reasonable fees and expenses
attributable to such Asset Sale, to the extent not included in clause (i),
except to the extent payable to any Affiliate of the Borrower, and (iv) any
amount required to be paid to any Person (other than the Borrower and any of its
Subsidiaries) owning a beneficial interest in the property or assets sold.
"Assignment Agreement" means, with respect to each Mortgaged Property,
--------------------
an agreement substantially in the form of Exhibit F, or such other form as the
Lender shall approve, such approval not to be unreasonably withheld, delayed or
conditioned, executed by the Borrower, the Lender and the Manager, assigning to
the Lender, the Management Agreement relating thereto,
"Base Rate" means, for any period, a fluctuating interest rate per
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annum as shall be in effect from time to time, which rate per annum shall be
equal at all times to the higher of:
(a) the rate of interest announced publicly by Citibank, N.A. in New
York, New York, from time to time, as such bank's prime rate; and
(b) the sum (adjusted to the nearest 1/4 of one percent or, if there
is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i)
one and one-half percent (1 1/2%) per annum plus (ii) the Federal Funds Rate.
----
"Base Rent" means, for any period, the base or fixed rent or
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percentage rent during such period payable by an Operating Lessee pursuant to
the terms of an Operating Lease.
"Business Day" means a day of the year on which banks are not required
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or authorized to close in New York City and a day on which dealings are also
carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the
--------------------
aggregate of all expenditures by such Person and its consolidated Subsidiaries,
except interest capitalized during construction, during such period for
3
property, plant or equipment, including, without limitation, renewals,
improvements, replacements and capitalized repairs, that would be reflected as
additions to property, plant or equipment on a consolidated balance sheet of
such Person and its Subsidiaries prepared in conformity with GAAP. For the
purpose of this definition, the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
any of its Subsidiaries or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the gross amount of such purchase price less
the credit granted by the seller of such equipment being traded in at such time
or the amount of such proceeds, as the case may be.
"Capital Financing Indebtedness" means the principal amount of all
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Indebtedness incurred or assumed in connection with any Capital Expenditures,
all Capitalized Lease Obligations and all other Indebtedness (including purchase
money Indebtedness) incurred solely for the purpose of financing or refinancing
the acquisition of assets or properties.
"Capitalized Lease" means, as to any Person, any lease of property by
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such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in conformity with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
-----------------------------
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in conformity
with GAAP.
"Closing Date" means the first date on which any Loan is made.
------------
"Code" means the Internal Revenue Code of 1986 (or any successor
----
legislation thereto), as amended from time to time.
"Collateral" means all property and interests in property and proceeds
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thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted under any of the Collateral Documents.
4
"Collateral Documents" means, the Negative Pledge Agreements, the
--------------------
Assignment Agreements, the Mortgages, the Security Agreements and any other
document now or hereafter executed and delivered by a Loan Party granting a Lien
on any of its property to secure payment of the Obligations.
"Collateralization Date" has the meaning specified in Section 3.2.
----------------------
"Commitment" has the meaning specified in Section 2.1.
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"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness or Contractual Obligation of another Person, if the purpose or
intent of such Person in incurring the Contingent Obligation is to provide
assurance to the obligee of such Indebtedness or Contractual Obligation that
such Indebtedness or Contractual Obligation will be paid or discharged, or that
any agreement relating thereto will be complied with, or that any holder of such
Indebtedness or Contractual Obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations of a Person include,
without limitation, (a) the direct or indirect guarantee, endorsement (other
than for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of an obligation
of another Person, and (b) any liability of such Person for an obligation of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of a loan, advance, stock purchase, capital contribution or otherwise),
(ii) to maintain the solvency or any balance sheet item, level of income or
financial condition of another Person, (iii) to make take-or-pay or similar
payments, if required, regardless of non-performance by any other party or
parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee)
property, or to purchase or sell services, primarily for the purpose of enabling
the debtor to make payment of such obligation or to assure the holder of such
obligation against loss, or (v) to supply funds to or in any other manner invest
in such other Person
5
(including, without limitation, to pay for property or services
irrespective of whether such property is received or such services are
rendered), if in the case of any agreement described under subclause (i), (ii),
(iii), (iv) or (v) of this sentence the primary purpose or intent thereof is as
described in the preceding sentence. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported.
"Contract" means any contract, agreement, undertaking, indenture,
--------
note, bond, loan, instrument, lease, conditional sales contract, mortgage, deed
of trust, license, franchise, insurance policy, commitment or other arrangement
or agreement.
"Contractual Obligation" of any Person means any obligation,
----------------------
agreement, undertaking or similar provision of any security issued by such
Person or of any Contract (excluding a Loan Document) to which such Person is a
party or by which it or any of its property is bound or to which any of its
properties is subject.
"Default" means any event which with the passing of time or the
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giving of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any successor
---
thereto.
"Dollars" and the sign "$" each mean the lawful money of the United
-------
States of America.
"Environmental Claim" means any accusation, allegation, notice of
-------------------
violation, action, claim, Environmental Lien, demand, abatement or other Order
or direction (conditional or otherwise) by any Governmental Authority or any
other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or restriction, resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material or odor, audible noise
6
or other nuisance, or other Release in, into or onto the environment (including,
without limitation, the air, soil, surface water or groundwater) at, in, by,
from or related to any property owned, operated or leased by the Borrower or any
of its Subsidiaries or any activities or operations thereof; (ii) the
environmental aspects of the transportation, storage, treatment or disposal of
Hazardous Materials in connection with any property owned, operated or leased by
the Borrower or any of its Subsidiaries or their operations or facilities; or
(iii) the violation, or alleged violation, of any Environmental Laws, Orders or
Environmental Permits of or from any Governmental Authority relating to
environmental matters connected with any property owned, leased or operated
by the Borrower or any of its Subsidiaries.
"Environmental Laws" means any federal, state, local or foreign law
------------------
(including common law), statute, code, ordinance, rule, regulation or other
requirement relating in any way to the environment, natural resources, or public
or employee health and safety and includes, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), 42 U.S.C. (S) 9601 et seq., the Hazardous Materials Transportation
-- ---
Act, 49 U.S.C. (S) 1801 et seq., the Federal Insecticide, Fungicide, and
-- ---
Rodenticide Act, 7 U.S.C. (S) 136 et seq., the Resource Conservation and
-- ---
Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., the Toxic Substances Control
-- ---
Act, 15 U.S.C. (S) 2601 et seq., the Clean Air Act, 42 U.S.C. (S) 7401 et seq.,
-- --- -- ---
the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Occupational Safety and
-- ---
Health Act, 29 U.S.C. (S) 651 et seq., and the Oil Pollution Act of 1990, 33
-- ---
U.S.C. (S) 2701 et seq., as such laws have been amended or supplemented, and the
-- ---
regulations promulgated pursuant thereto, and all analogous state and local
statutes.
"Environmental Liabilities and Costs" means, as to any Person, all
-----------------------------------
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim.
7
"Environmental Lien" means any Lien in favor of any Governmental
------------------
Authority arising under any Environmental Law.
"Environmental Permit" means any Permit required under any applicable
--------------------
Environmental Laws or Order and all supporting documents associated therewith.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
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any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control or treated as a single employer with any Loan
Party within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
"ERISA Event" means (i) an event described in Sections 4043(b)(1),
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(2), (3), (5), (6), (8) or (9) of ERISA with respect to a Pension Plan; (ii) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or
partial withdrawal of any Loan Party or any ERISA Affiliate from any
Multiemployer Plan or the insolvency of any Multiemployer Plan; (iv) the filing
of a notice of intent to terminate a Pension Plan or the treatment of a plan
amendment as a termination under Section 4041 of ERISA; (v) the institution of
proceedings by the PBGC to terminate or appoint a trustee to administer a
Pension Plan or Multiemployer Plan; (vi) the failure to make any required
contribution to a Pension Plan; (vii) any other event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; (viii) the imposition of any liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA; (ix) a prohibited transaction (as described in Code Section 4975 or ERISA
Section 406) shall occur with respect to any Plan; or (x) any Loan Party or
ERISA Affiliate shall request a minimum funding waiver from the IRS with respect
to any Pension Plan.
8
"Eurocurrency Liabilities" has the meaning assigned to that term in
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Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
---------------
annum equal to the sum of (a) the rate per annum obtained by dividing (i) the
rate of interest determined by the Lender to be the average (rounded upward to
the nearest whole multiple of 1/16 of 1% per annum, if such average is not such
a multiple) of the rates for Dollar deposits which appear on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such
other page as may replace such page or that service for the purpose of
displaying London interbank offered rates for major banks) (the "Reuters Page"),
as of 11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Loan during such
Interest Period and for a period equal to such Interest Period by (ii) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
-----
Interest Period, plus (b) 1.50%. If the Lender is unable to ascertain the
----
interest rate referred to in (i) above from the Reuters Page, such rate shall be
determined from such financial reporting service or other information as shall
be reasonably determined by the Lender.
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
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reserve percentage applicable two Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
which includes deposits by reference to which the Eurodollar Rate is determined)
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 9.1.
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9
"Existing Facility" means the revolving credit facility in the maximum
-----------------
principal amount of up to $200,000,000 evidenced by that certain Revolving
Credit Agreement dated as of August 22, 1995, as amended and restated pursuant
to that certain Amended and Restated Revolving Credit Agreement dated as of
December 29, 1995, as further amended pursuant to that certain Amendment No. 1
to Amended and Restated Revolving Credit Agreement dated as of February 26,
1996, each by and between the Borrower and the Lender, as the same may hereafter
be amended, modified or supplemented.
"Fair Market Value" means with respect to any Hotel Facility at any
-----------------
date, the value thereof reasonably determined by the Lender by dividing the Base
Rents from such Hotel Property during the previous twelve (12) month period by
ten percent (10%).
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
"FF&E Reserve" has the meaning given to such term in the Management
------------
Agreement attached as Exhibit G hereto or the meaning referenced in the Letters
of Intent.
"Final Maturity Date" means the first anniversary of the Closing Date.
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"Financial Officer's Certificate" has the meaning specified in
-------------------------------
Section 7.11(c).
"Fiscal Quarter" means each of the three month periods ending on
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March 31, June 30, September 30 and December 31.
10
"Fiscal Year" means the twelve month period ending on December 31.
-----------
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination except that, for purposes of Article VI, GAAP shall be determined
on the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements referred to in
Section 5.5.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Material" means any substance, material or waste which is
------------------
regulated by any Governmental Authority of the United States or other national
government, including, without limitation, any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"HMC" means Host Marriott Corporation, a Delaware corporation.
---
"Hotel Facility" means, subject to the provisions of Section 3.2, each
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of (a) the Initial Hotels, and (b) the Approved Hotel Facilities acquired by the
Borrower using the proceeds of (i) a Loan or Loans made by the Lender hereunder
or (ii) a loan or loans made by the Lender under the Existing Facility.
11
"HRPT Advisors" means HRPT Advisors, Inc., a Delaware corporation.
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"Improvements" has the meaning specified in Section 5.22(c).
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"Indebtedness" of any Person means (i) all indebtedness of such Person
------------
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services, (ii) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments, (iii) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (iv) all Capitalized
Lease Obligations of such Person, (v) all Contingent Obligations of such Person,
(vi) all obligations of such Person to purchase, redeem, retire, defease or
otherwise acquire for value any Stock or Stock Equivalents of such Person,
valued, in the case of redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (vii) all obligations of such Person under Interest Rate Contracts,
and (viii) all Indebtedness referred to in clause (i), (ii), (iii), (iv), (v),
(vi) or (vii) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in property (including, without limitation, accounts and general intangibles)
owned by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, (ix) in the case of the Borrower, the
Obligations, and (x) all liabilities of such Person that would be shown on a
balance sheet of such Person prepared in conformity with GAAP.
"Indemnitees" has the meaning specified in Section 10.4.
-----------
"Initial Hotels" means the Real Estate consisting of 37 Courtyard by
--------------
Marriott(R) hotels listed in Schedule 1.1 hereto.
12
"Initial Selected Properties" means such of the Hotel Facilities as
---------------------------
the Lender shall select (consistent with the Mortgaged Property Prioritization
Schedule attached as Schedule 3.2 hereto and made a part hereof) such that on
and after the Collateralization Date, after giving effect to the Mortgage
Documents relating to such Hotel Facilities, the Loan to Value Requirement would
be satisfied.
"Interest Period" means, in the case of any Loan, (i) initially, the
---------------
period commencing on the date such Loan is made and ending one (1) month
thereafter, and (ii) thereafter, a period commencing on the last day of the
immediately preceding Interest Period therefor and ending one (1) month
thereafter; provided, however, that:
-------- -------
(a) if any Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(c) if the Borrower, by written notice to the Lender given no later
than two (2) Business Days prior to the expiration of an Interest Period for any
Loan, requests a one day interest period for such Loan, the Interest Period for
such Loan shall mean a period of one day (the "1 Day Interest Period");
provided that in no event shall any Loan have a 1 Day Interest Period for a
-------- ----
period in excess of thirty (30) consecutive days (the "Limited Period"), and
upon the expiration of the Limited Period in respect of any Loan, such Loan
shall automatically be continued at the one (1) month Interest Period specified
above.
"Interest Rate Contracts" means interest rate swap agreements,
-----------------------
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other
13
agreements or arrangements designed to provide protection against fluctuations
in interest rates.
"Investments" has the meaning specified in Section 8.6.
-----------
"IRS" means the Internal Revenue Service, or any successor thereto.
---
"Leases" means, with respect to the Borrower or any of its
------
Subsidiaries, all of those leasehold estates in real property owned by the
Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or
otherwise modified from time to time to the extent permitted by this Agreement.
"Legal Proceedings" means any judicial, administrative or arbitral
-----------------
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Letters of Intent" means the two (2) letters of intent each dated
-----------------
February 1, 1996, between the Borrower and HMC and Wyndham Hotel Company LTD,
respectively, copies of which are attached as Schedule 1.1(a) hereto.
---------------
"Lending Office" means, with respect to the Lender, the office located
--------------
at ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or such other office of the
Lender as the Lender may from time to time specify to the Borrower.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to secure
payment of any Indebtedness or other obligation, including, without limitation,
any conditional sale or other title retention agreement, the interest of a
lessor under a Capitalized Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing,
under the Uniform Commercial Code or comparable law of any jurisdiction, of any
financing statement naming the owner of the asset to which such Lien relates as
debtor (excluding precautionary filings).
14
"Loan" or "Loans" means the revolving credit loan or loans made or to
---- -----
be made by the Lender to the Borrower pursuant to Article II.
"Loan Documents" means, collectively, this Agreement, the Note, the
--------------
Collateral Documents and each certificate, agreement or document executed by a
Loan Party and delivered to the Lender in connection with or pursuant to any of
the foregoing, as such agreements, documents or instruments may be amended,
modified or supplemented from time to time.
"Loan Party" means the Borrower and each Subsidiary and Affiliate of
----------
the Borrower which executes and delivers a Loan Document.
"Loan to Value Requirement" means the requirement that, at any time on
-------------------------
and after the Collateralization Date, the aggregate principal amount of the
Loans outstanding at such time shall not exceed the lesser of (i) sixty-one
------
percent (61%) of the aggregate of the Fair Market Values for all of the
Mortgaged Properties, and (ii) the aggregate of the Qualified Loan Amounts for
all of the Mortgaged Properties.
"Management Agreement" means an agreement relating to the operation
--------------------
and/or management of a Hotel Facility between the Borrower and the Manager,
substantially in the form of the management agreement and amendments thereto
annexed as Exhibit G hereto or such other form as shall be approved by the
Lender, which approval shall not be unreasonably withheld, delayed or
conditioned.
"Manager" means Courtyard Management Corporation, a wholly owned
-------
subsidiary of Marriott International Inc., or such other manager as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), as manager under the Management Agreement.
"Material Adverse Change" means a material adverse change in any of
-----------------------
(i) the condition (financial or otherwise), business, performance, prospects,
operations or properties of (A) any Loan Party and its Subsidiaries taken as one
enterprise, (B) any Operating Lessee, (C) any Manager, or (D) the Advisor (ii)
the legality, validity or
15
enforceability of any Loan Document or any Operating Lease, Management Agreement
or Advisory Agreement (iii) the perfection or priority of the Liens granted
pursuant to the Collateral Documents, (iv) the ability of the Borrower to repay
the Obligations or of any Loan Party to perform its material obligations under
any Loan Document, (v) the ability of any Operating Lessee to perform
obligations under any Operating Lease, (vi) the ability of any Manager to
perform its obligations under any Management Agreement; (vii) the ability of the
Advisor to perform its obligations under the Advisory Agreement or (viii) the
rights and remedies of the Lender under the Loan Documents.
"Material Adverse Effect" means an effect that results in or causes,
-----------------------
or has a reasonable likelihood of resulting in or causing, a Material Adverse
Change.
"Mortgages" means the mortgages or deeds of trust securing, inter
--------- -----
alia, the Obligations, made or required herein to be made by the Borrower or any
----
of its Subsidiaries in substantially the form of Exhibit E, as such Mortgages
may be amended, supplemented or otherwise modified from time to time.
"Mortgage Documents" means with respect to any Hotel Facility, a
------------------
Mortgage and the other documents and payments including, without limitation, the
Mortgage Payments, specified in Sections 4.2(c)(ii) through (iv) and 4.3(a),
where applicable, in the forms attached hereto, subject to appropriate revisions
for state or property specific requirements.
"Mortgage Payments" means the payments specified in Section
-----------------
4.3(a)(vi).
"Mortgaged Property" means any property subject to a Mortgage in
------------------
favor of the Lender.
"Multiemployer Plan" means, as of any applicable date, a multiemployer
------------------
plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party,
any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make,
or within the six-year period ending at such date, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
16
"Negative Pledge Agreement" means, in respect of each Hotel Facility,
-------------------------
an agreement, in substantially the form of Exhibit C, executed by the Borrower
or the Subsidiary owning such Hotel Facility, as such agreement may be amended,
supplemented or modified from time to time.
"Net Income (Loss)" means, for any Person for any period, the
-----------------
aggregate of net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.
"Net Interest Expense" means, for any Person for any period, gross
--------------------
interest expense in respect of all Indebtedness of such Person and its
Subsidiaries for such period determined on a consolidated basis in conformity
with GAAP, less the following for such Person and its Subsidiaries determined on
----
a consolidated basis in conformity with GAAP: (a) the sum of (i) interest
capitalized during construction for such period, (ii) interest income for such
period, and (iii) gains for such period on Interest Rate Contracts (to the
extent not included in interest income above and to the extent not deducted in
the calculation of such gross interest expense), plus the following for such
----
Person and its Subsidiaries determined on a consolidated basis in conformity
with GAAP: (b) the sum of (i) losses for such period on Interest Rate Contracts
(to the extent not included in such gross interest expense), and (ii) the
amortization of upfront costs or fees for such period associated with Interest
Rate Contracts (to the extent not included in gross interest expense).
"Net Worth" of any Person means at any date the excess of (a) the
---------
total assets of such Person and its Subsidiaries at such date determined on a
consolidated basis in conformity with GAAP over (b) all obligations which in
conformity with GAAP would be included in determining total liabilities as shown
on the liabilities side of a consolidated balance sheet of such Person and its
Subsidiaries at such date.
"Note" means a promissory note of the Borrower payable to the order of
----
the Lender in a principal amount equal to the amount of the Commitment as
originally in effect, in substantially the form of Exhibit A, evidencing
17
the aggregate Indebtedness of the Borrower to the Lender resulting from the
Loans made by the Lender.
"Notice of Borrowing" has the meaning specified in Section 2.2(a).
-------------------
"Obligations" means the Loans and all other advances, debts,
-----------
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, whether or not evidenced by any note, guaranty
or other instrument, arising under this Agreement or under any other Loan
Document, whether or not for the payment of money, loan, guaranty,
indemnification, foreign exchange transaction or Interest Rate Contract or in
any other manner, whether direct or indirect (including, without limitation,
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term "Obligations"
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Borrower under this
Agreement or any other Loan Document.
"Operating Lease" means a lease or sublease relating to any Real
---------------
Estate or Lease, between the Borrower or any of its Subsidiaries, as lessor, and
the Operating Lessee, as lessee, substantially in the form of the lease annexed
as Exhibit H hereto or such other form as shall be approved by the Lender,
which approval shall not be unreasonably withheld, delayed or conditioned.
"Operating Lessee" means any of HMH HPT Courtyard, Inc., a wholly
----------------
owned subsidiary of HMC, Wyndham Hotel Company, LTD. or a wholly owned
subsidiary thereof, or such other lessee as shall be approved by the Lender
(which approval shall not be unreasonably withheld, delayed or conditioned), as
lessee under the Operating Lease.
"Operator" means the Operating Lessee and/or the Manager (as the case
--------
may be) responsible for the operation and management of any Real Estate.
"Order" means any order, injunction, judgment, decree, ruling,
-----
assessment or arbitration award.
18
"Other Taxes" has the meaning specified in Section 2.14(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Pension Plan" means a plan, other than a Multiemployer Plan, which is
------------
covered by Title IV of ERISA or Code Section 412 and which any Loan Party, any
of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Permit" means any permit, approval, authorization, license, variance,
------
registration, permission or consent required from a Governmental Authority under
an applicable Requirement of Law.
"Permitted Lien" means any Lien permitted under Section 8.1 hereof.
--------------
"Person" means an individual, partnership, corporation (including,
------
without limitation, a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a Governmental
Authority.
"Plan" means an employee benefit plan, as defined in Section 3(3) of
----
ERISA, which any Loan Party or any of its Subsidiaries maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Qualified Loan Amount" means, with respect to each Mortgaged
---------------------
Property, the maximum principal amount permitted (i) in respect of the Courtyard
by Marriott Hotels, for a Qualified Loan as such term is defined in the
Management Agreement attached as Exhibit G hereto, and (ii) in respect of any
other Hotel Facilities, pursuant to the applicable terms, if any, of any
Management Agreement or Operating Lease relating thereto.
"Rating Agency" shall mean any nationally recognized statistical
-------------
agency selected by the Lender including, without limitation, Duff & ▇▇▇▇▇▇
Rating Co., Fitch Investors Services, Inc., ▇▇▇▇▇'▇ Investors Services,
19
Inc., and/or Standard and Poors corporation, collectively, and any successor to
any of them; provided, however, that at any time during which the Loans are an
asset of a securitization, "Rating Agency" shall mean the rating agency or
rating agencies that from time to time rate the securities issued in connection
with such securitization.
"Recognized Appraiser" means a qualified and recognized professional
--------------------
appraiser as may be selected or approved by the Lender, having at least five (5)
years' prior experience in performing real estate appraisals in the geographic
area where the property being appraised is located, having a recognized
expertise in appraising properties operated as hotel or other lodging
facilities.
"Real Estate" means all of those plots, pieces or parcels of land now
-----------
owned or hereafter acquired by the Borrower or any of its Subsidiaries (the
"Land"), including, without limitation, those listed on Schedule 5.22(a) and
described in the Mortgages, together with the right, title and interest of the
Borrower or such Subsidiary, if any, in and to the streets, the land lying in
the bed of any streets, roads or avenues, opened or proposed, in front of,
adjoining or abutting the Land to the center line thereof, the air space and
development rights pertaining to the Land and the right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and any fixtures appurtenant thereto.
"Release" means any release, spill, emission, leaking, pumping,
-------
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the indoor or outdoor environment or into or
out of any property.
"Remedial Action" means all actions including, without limitation, any
---------------
Capital Expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat or in
20
any other way address any Hazardous Material or other substance in the indoor
or outdoor environment, (ii) prevent the Release or threat of Release, or
minimize the further Release, of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare or
the indoor or outdoor environment, (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (iv) bring facilities on
any property owned, leased or operated by the Borrower or any of its
Subsidiaries into compliance with all Environmental Laws and Environmental
Permits.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules and regulations, including,
without limitation, federal, state or local securities, antitrust and licensing
laws, all food, health and safety laws, and all applicable trade laws and
requirements, including, without limitation, all disclosure requirements of
Environmental Laws, ERISA and all orders, judgments, decrees or other
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means, with respect to any Person, any of the
-------------------
principal executive officers or general partners of such Person.
"Secured Indebtedness" of any Person means any Indebtedness of such
--------------------
Person for which the obligations thereunder are secured by a Lien on any
assets of such Person.
"Security Agreement" means, with respect to each Hotel Property, an
------------------
agreement in substantially the form of Exhibit I or such other form as shall be
approved by the Lender (which approval shall not be unreasonably withheld,
delayed or conditioned), executed by the Borrower and the other parties thereto,
granting to the Lender a security interest in the Borrower's interest in the
FF&E Reserve.
"Selected Properties" has the meaning specified in Section 3.2.
-------------------
21
"Solvent" means, with respect to any Person, that the value of the
-------
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Stock" means shares of capital stock, beneficial or partnership
-----
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
-----------------
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any stock, whether or not presently convertible, exchangeable or
exercisable.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership or other business entity of which an aggregate of 50% or more of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors, managers, trustees or other controlling persons, is, at the time,
directly or indirectly, owned or controlled by such Person and/or one or more
Subsidiaries of such Person (irrespective of whether, at the time, Stock of any
other class or classes of such entity shall have or might have voting power by
reason of the happening of any contingency).
"Subordination Agreement" means an agreement among the Lender, the
-----------------------
Advisor and the Borrower, substantially in the form annexed as Exhibit J, as
amended, supplemented or modified from time to time in a manner not inconsistent
with the terms thereof and hereof.
22
"Tangible Net Worth" of any Person means, at any date, the Net Worth
------------------
of such Person at such date, excluding, however, from the determination of the
--------- -------
total assets of such Person at such date, (i) all goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof,
and other similar intangibles, (ii) all prepaid expenses, deferred charges or
unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets, (iv) treasury stock and capital stock, obligations or
other securities of, or capital contributions to, or investments in, any
Subsidiary of such Person, (v) securities which are not readily marketable, (vi)
cash held in a sinking or other analogous fund established for the purpose of
redemption, retirement, defeasance or prepayment of any Stock or Indebtedness,
(vii) any write-up in the book value of any asset resulting from a revaluation
thereof, and (viii) any items not included in clauses (i) through (vii) above
which are treated as intangibles in conformity with GAAP.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
-------------
Person, and (ii) any Affiliate of such Person with which such Person files or is
eligible to file consolidated, combined or unitary tax returns.
"Tax Return" has the meaning specified in Section 5.3.
----------
"Taxes" has the meaning specified in Section 2.14(a).
-----
"Title Insurance Policies" has the meaning specified in Section
------------------------
4.3(a)(i).
"Total Assets" of any Person means, at any date, the aggregate value
------------
of all assets of such Person, determined on the basis of cost of each such asset
to such Person without reduction for depreciation or adjustments due to asset
reappraisals or otherwise.
"Total Base Rents" means, for any period, the aggregate sum of Base
----------------
Rents for such period payable under any Operating Leases in effect during such
period, determined on a consolidated basis.
23
"Unsecured Indebtedness" of any Person means any Indebtedness of such
----------------------
Person for which the obligations thereunder are not secured by a pledge of or
other encumbrance on any assets of such Person.
1.2. Computation of Time Periods. In this Agreement, in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including".
1.3. Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.
1.4. Certain Terms. (a) The words "herein," "hereof" and
-------------
"hereunder" and other words of similar import refer to this Agreement as a
whole, and not to any particular Article, Section, subsection or clause in this
Agreement. References herein to an Exhibit, Schedule, Article, Section,
subsection or clause refer to the appropriate Exhibit or Schedule to, or
Article, Section, subsection or clause in this Agreement.
(b) The term "Lender" includes its successors and each assignee of
the Lender who becomes a party hereto pursuant to Section 10.7.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Loans. On the terms and subject to the conditions contained
---------
in this Agreement, the Lender agrees to make revolving credit loans (each a
"Loan" and collectively, the "Loans") to the Borrower from time to time on any
Business Day during the period from the date hereof to and including the Final
Maturity Date in an aggregate outstanding amount not to exceed TWO HUNDRED AND
FIFTY MILLION DOLLARS ($250,000,000) (the "Commitment") at any time, to be used
for the purposes identified in Section
24
5.18. Within the limits of the Commitment and subject to the other terms and
conditions hereof, amounts prepaid pursuant to Section 2.6 may be reborrowed
under this Section 2.1 up to and including the Final Maturity Date. No portion
of the Commitment may be borrowed or reborrowed after the Final Maturity Date.
The Loans shall be evidenced by the Note. The Lender is authorized to endorse,
at any time, the date and amount of each Loan and the date and amount of each
payment of principal with respect to the Loans on the schedule annexed to and
constituting a part of the Note, which endorsement shall constitute prima facie
evidence of the accuracy of the information endorsed.
2.2. Making the Loans. (a) Each Loan shall be made on notice, given
----------------
by the Borrower to the Lender not later than 12:00 noon (New York City time) on
the fifth (5th) Business Day prior to the date of the proposed Loan. Each such
notice (a "Notice of Borrowing") shall be in substantially the form of Exhibit
B, specifying therein (i) the date of such proposed Loan, (ii) the amount of
such proposed Loan, (iii) the account or accounts to which the Loan should be
made, and (iv) details of the Approved Hotel Facility for which the proceeds of
the proposed Loan shall be used. Notwithstanding the foregoing, from and after
the Collateralization Date, the Borrower agrees promptly to notify the Lender in
writing that it intends to request a Loan in order to allow adequate time for
the preparation of the Mortgage Documents for the Selected Properties pursuant
to Section 3.3 hereof.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall on the date of the proposed Loan, make available to
the Borrower at the account or accounts specified in the Notice of Borrowing, in
immediately available federal funds, the Loan.
(c) The Borrower may not request more than one (1) Loan per calendar
month.
(d) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify the Lender against any loss, cost or
expense incurred by the Lender as a result of any failure to fulfill on or
before the date specified in any Notice of Borrowing for a proposed Loan the
applicable conditions set forth in Article IV,
25
including, without limitation, any loss (including, without limitation, loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Lender to fund any Loan
to be made by the Lender when such Loan, as a result of such failure, is not
made on such date.
2.3. [Intentionally Omitted].
2.4. Reduction and Termination of the Commitment. The Borrower may,
-------------------------------------------
upon at least three Business Days' prior notice to the Lender, terminate in
whole or reduce in part the unused portions of the Commitment without premium or
penalty; provided, however, that each partial reduction shall be in the
-------- -------
aggregate amount of not less than $10,000,000.
2.5. Repayment. The Borrower shall repay the entire unpaid principal
---------
amount of all and any Loans on the Final Maturity Date.
2.6. Prepayments. (a) The Borrower may, upon at least ten (10)
-----------
Business Days' prior notice to the Lender, stating the proposed date and
aggregate principal amount of the prepayment, prepay the outstanding principal
amount of the Loans in whole or in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid, without premium or
penalty; provided, however, that any prepayment of the Loans bearing interest at
-------- -------
the Eurodollar Rate made other than on the last day of an Interest Period for
the Loans shall be subject to payment by the Borrower to the Lender of any
costs, fees or expenses incurred by the Lender in connection with such
prepayment including, without limitation, any costs to unwind any Eurodollar
Rate contracts or Interest Rate Contracts. Upon the giving of such notice of
prepayment by the Borrower, the principal amount of the Loans specified to be
prepaid shall become due and payable on the date specified for such prepayment.
(b) If at any time the aggregate principal amount of Loans
outstanding at such time exceeds the Commitment, the Borrower shall forthwith
prepay the Loans then outstanding in an amount equal to such excess, together
with accrued interest.
26
(c) The Borrower shall forthwith prepay the Loans upon receipt by the
Borrower or its Subsidiaries of Asset Sale Proceeds in connection with an Asset
Sale of a Mortgaged Property in an amount equal to such Asset Sale Proceeds,
together with accrued interest to the date of such prepayment on the principal
amount prepaid
2.7. Continuation of Loans at the Eurodollar Rate At the end of any
---------------------------------------------
Interest Period with respect to the Loans, unless the Borrower has given notice
pursuant to Section 2.6(a), the Loans will automatically be continued for an
additional Interest Period at the Eurodollar Rate for such Interest Period.
2.8. Interest. The Borrower shall pay interest on the unpaid
--------
principal amount of each Loan from the date thereof until the principal amount
thereof shall be paid in full at a rate per annum equal at all times during the
applicable Interest Period for each Loan to the Eurodollar Rate for such
Interest Period, payable on the last day of such Interest Period and on the
Final Maturity Date; provided, however, that during the continuance of an Event
-----------------
of Default, all Loans shall bear interest, payable on demand, at a rate per
annum equal at all times to 2% above the Eurodollar Rate in effect until the
maturity of the Loans or the end of such Interest Period, whichever occurs
first, and thereafter at the greater of (x) 2% per annum above the Base Rate in
effect from time to time and (y) 2% per annum above the rate per annum required
to be paid on the Loans immediately prior to the date on which such Event of
Default occurred.
2.9. Interest Rate Determination and Protection. (a) The Eurodollar
------------------------------------------
Rate for each Interest Period for Loans shall be determined by the Lender two
Business Days before the first day of such Interest Period.
(b) The Lender shall give prompt notice to the Borrower of the
applicable interest rate determined by the Lender for purposes of Section 2.9.
(c) If, (i) the Lender determines, which determination shall be
conclusive in the absence of manifest error, that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar Rate"
27
are not being provided in the relevant amounts or for the relevant maturities
for purposes of determining the rates of interest for the Loans as provided
herein, or (ii) the Lender determines, which determination shall be conclusive
in the absence of manifest error, that the Eurodollar Rate for any Interest
Period therefor will not adequately reflect the cost to the Lender of making the
Loans or funding or maintaining the Loans for such Interest Period, the Lender
shall forthwith so notify the Borrower, whereupon
(i) each Loan will automatically, on the last day of the then
existing Interest Period therefor, convert so as to accrue interest at an
interest rate per annum equal to the Base Rate in effect from time to time; and
(ii) the obligations of the Lender to make Loans at the Eurodollar
Rate shall be suspended until the Lender shall notify the Borrower that the
Lender has determined that the circumstances causing such suspension no longer
exist; provided that, during the period of such suspension, the obligations of
-------- ----
the Lender to make Loans at the Eurodollar Rate shall convert to obligations to
make Loans at the Base Rate in effect from time to time.
2.10. Increased Costs. If, due to either (i) the introduction of or
---------------
any change in or in the interpretation of any law or regulation (other than any
change by way of imposition or increase of reserve requirements included in
determining the Eurodollar Rate Reserve Percentage) or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining any
Loans at the Eurodollar Rate, then the Borrower shall from time to time, upon
demand by the Lender, pay to the Lender additional amounts sufficient to
compensate the Lender for such increased cost. A certificate as to the amount
of such increased cost, submitted to the Borrower by the Lender, shall be
conclusive and binding for all purposes, absent manifest error. If the Borrower
so notifies the Lender within five Business Days after the Lender notifies the
Borrower of any increased cost pursuant to the foregoing provisions of this
Section 2.10,
28
the Borrower may either (A) prepay in full all Loans bearing
interest at the Eurodollar Rate then outstanding in accordance with Section
2.6(b) and, additionally, reimburse the Lender for such increased cost in
accordance with this Section 2.10, or (B) require the Lender to, and the Lender
shall, convert all Loans bearing interest at the Eurodollar Rate into Loans
bearing interest at the Base Rate in effect from time to time, and additionally,
reimburse the Lender for such increased cost in accordance with this Section
2.10, provided that in the event that the election in (B) is made by the
-------- ----
Borrower, the Lender's obligations to make Loans hereunder shall thereafter be
deemed to be obligations to make Loans at the Base Rate in effect from time to
time.
2.11. Illegality. Notwithstanding any other provision of this
----------
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for the Lender or its
Lending Office to make Loans at the Eurodollar Rate or to continue to fund or
maintain Loans at the Eurodollar Rate, then, on notice thereof and demand
therefor by the Lender to the Borrower (i) the obligation of the Lender to make
or to continue the Loans bearing interest at the Eurodollar Rate shall
terminate, (ii) the Borrower shall forthwith prepay in full all Loans then
outstanding, together with interest accrued thereon (and until paid in full, all
such Loans bearing interest at the Eurodollar Rate then outstanding shall accrue
interest at an interest rate per annum equal to the Base Rate in effect from
time to time) provided that, the Borrower shall not be required to prepay such
-------- ----
Loans if the Borrower, within five Business Days of such notice and demand,
requires the Lender to convert such Loans to Loans bearing interest at the Base
Rate in effect from time to time.
2.12. Capital Adequacy. If (i) the introduction of or any change in
----------------
or in the interpretation of any law or regulation, (ii) compliance with any law
or regulation, or (iii) compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by the Lender or any corporation controlling the Lender and the
Lender reasonably determines that such amount is based upon
29
the existence of the Lender's Commitment and Loans and its other commitment and
loans of this type, then, upon demand by the Lender, the Borrower shall pay to
the Lender, from time to time as specified by the Lender, additional amounts
sufficient to compensate the Lender in the light of such circumstances, to the
extent that the Lender reasonably determines such increase in capital to be
allocable to the existence of the Lender's Commitment and Loans. A certificate
as to such amounts submitted to the Borrower by the Lender shall be conclusive
and binding for all purposes absent manifest error.
2.13. Payments and Computations. (a) The Borrower shall make each
-------------------------
payment hereunder and under the Note not later than 12:00 noon (New York City
time) on the day when due, in Dollars, to the Lender at its address referred to
in Section 10.2 in immediately available funds without set-off or counterclaim,
to be applied in accordance with the terms of this Agreement. Payment received
by the Lender after 12:00 noon (New York City time) shall be deemed to be
received on the next Business Day.
(b) All computations of interest shall be made by the Lender on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable. Each determination by the Lender of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, that if such extension would cause payment of interest on or
-------- -------
principal of any Loan to be made in the next calendar month, such payment shall
be made on the next preceding Business Day.
2.14. Taxes. (a) Any and all payments by the Borrower under each
-----
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
30
withholdings, and all liabilities with respect thereto, excluding taxes measured
by the Lender's net income, and franchise taxes imposed on the Lender, by the
jurisdiction under the laws of which the Lender is organized or any political
subdivision thereof and taxes measured by the Lender's net income, and franchise
taxes imposed on the Lender, by the jurisdiction of the Lender's Lending Office
or any political subdivision thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the Lender (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including, without limitation, deductions applicable to additional
sums payable under this Section 2.14) the Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law, and (iv) the Borrower shall deliver to the Lender evidence of
such payment to the relevant taxation or other authority.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made under any Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, any Loan Document (collectively, "Other Taxes").
(c) The Borrower will indemnify the Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.14) paid by
the Lender and any liability (including, without limitation, for penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Lender makes
written demand therefor.
31
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Lender, at its address referred to in
Section 10.2, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.14 shall survive the payment in full of the Obligations.
ARTICLE III
LOAN TO VALUE REQUIREMENT;
SELECTED PROPERTIES AND PREPARATION
OF MORTGAGE DOCUMENTS
3.1. [Intentionally Omitted].
3.2. Loan to Value Requirement; Selected Properties. Any Loans
----------------------------------------------
outstanding on December 31, 1996, or advanced on or after January 1, 1997 (the
"Collateralization Date"), shall be secured as hereinafter provided. Borrower
shall (a) on or before the Collateralization Date, and (b) at any time after the
Collateralization Date, if the Lender determines in its reasonable discretion
that the Loan to Value Requirement has not been or, after giving effect to any
Loans that the Borrower intends to request, would not be satisfied, promptly
upon the Lender's request, deliver to the Lender, Mortgage Documents with
respect to such of the Hotel Properties as the Lender shall select (the
"Selected Properties"), such that, after giving effect to such Mortgage
Documents the Loan to Value Requirement would be satisfied. The parties
acknowledge and agree that certain of the Hotel Properties may have been or
hereafter be granted as collateral security for the Existing Facility pursuant
to the terms thereof and that to the extent mortgage documents are executed and
delivered in respect of any Hotel Facility as security for the Existing
Facility, such Hotel Facility shall be deemed to no longer be a Hotel Facility
for the purposes of this Agreement, to the intent that no Hotel Facility shall
be granted as collateral for both the purposes of loans obtained pursuant to
this Agreement and the Existing Facility. The Lender agrees that
32
it shall select such Hotel Properties consistent with the priorities set forth
in the Mortgaged Property Prioritization Schedule attached as Schedule 3.2
hereto and made a part hereof provided that, within each of the First through
-------- ----
Ninth Priority States, Lender may select Hotel Properties in any order Lender
may determine, provided further that, if the Lender shall select a Hotel
---------------------
Property in a particular state, the Lender shall then prioritize such state for
its selection of future Selected Properties.
3.3. Preparation and Execution of Mortgage Documents. (a) On
-----------------------------------------------
December 1, 1996 if any portion of the Loans is outstanding as of such date and
thereafter immediately after Lender determines that the Loan to Value
Requirement has not been (or will not after giving effect to Loans requested by
the Borrower be) satisfied, the Lender shall commence the preparation of the
Mortgage Documents for the Selected Properties including, without limitation,
the Initial Selected Properties, and the parties shall cooperate and diligently
proceed to prepare such Mortgage Documents (including, without limitation,
ordering commitments for the title insurance policies, ALTA surveys and UCC-
searches, obtaining estoppel certificates and retaining counsel, including local
counsel for purposes of reviewing the Mortgage Documents and rendering opinions
with respect to such documents in form and substance acceptable to the Lender as
set forth in Section 4.3(a)(ii)).
(b) The Borrower, on behalf of itself and each of its Subsidiaries,
hereby appoints the Lender its attorney-in-fact to execute, acknowledge and
deliver for and in the name of the Borrower or any of its Subsidiaries, as
applicable, any and all of the Mortgage Documents for the Initial Selected
Properties and/or the Selected Properties which the Borrower or any of its
Subsidiaries fails to execute, acknowledge and/or deliver in accordance with the
terms hereof, and this power, being coupled with an interest, shall be
irrevocable as long as any part of the Obligations remains unpaid.
33
ARTICLE IV
CONDITIONS OF LENDING
4.1. Conditions Precedent to the Initial Loan. The obligation of the
----------------------------------------
Lender to make the initial Loan is subject to satisfaction of the conditions
precedent that the entire maximum principal amount of the Existing Facility
shall have been advanced to the Borrower and that the Lender shall have
received, on the Closing Date, the following, each dated the Closing Date unless
otherwise indicated, in form and substance reasonably satisfactory to the
Lender:
(a) The Note to the order of the Lender.
(b) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying (i) the resolutions of its Board of Trustees or Directors,
as appropriate, approving each Loan Document to which it is a party, (ii) all
documents evidencing other necessary trust or corporate action, as appropriate,
and required governmental and third party approvals, licenses and consents with
respect to each Loan Document to which it is a party and the transactions
contemplated thereby, (iii) a copy of its and each of its Subsidiaries'
declaration of trust, certificates of incorporation and By-Laws, as appropriate,
as of the Closing Date, and (iv) the names and true signatures of each of its
officers who has been authorized to execute and deliver any Loan Document or
other document required hereunder to be executed and delivered by or on behalf
of such Person.
(c) A copy of the declaration of trust or articles or certificate of
incorporation, as appropriate, of each Loan Party and of each of its
Subsidiaries (if any) which is not a Loan Party certified as of a recent date by
the Secretary of State of the state of formation of such Loan Party or
Subsidiary, together with certificates of such official attesting to the good
standing of each such Loan Party and Subsidiary.
(d) Favorable opinions of ▇▇▇▇▇▇▇▇ & Worcester and Piper & Marbury,
counsel to the Loan Parties, in substantially the forms attached as Exhibit D,
---------
and as to such other matters as the Lender may reasonably request.
34
(e) A Negative Pledge Agreement in respect of each of the Hotel
Facilities including, without limitation, any Approved Hotel Facilities to be
acquired with the proceeds of the initial Loan, duly executed and acknowledged
by the Borrower or its Subsidiary, as applicable.
(f) A copy of the Operating Lease and Management Agreement in respect
of each Hotel Facility, each certified by a Responsible Officer.
(g) Evidence that the insurance required by the terms of the
Collateral Documents and by Section 7.4 is in full force and effect.
(h) A written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any significant
environmental, health and safety violations, hazards or liabilities to which the
Borrower or any of its Subsidiaries may be subject, which report shall
demonstrate, to the reasonable satisfaction of the Lender, that the Borrower and
its Subsidiaries and their operations are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any material
Environmental Liabilities and Costs.
(i) Such additional documents, information and materials as the
Lender may reasonably request.
(j) The Lender shall have received evidence satisfactory to it that
all costs and accrued and unpaid fees and expenses (including, without
limitation, legal fees and expenses) required to be paid to the Lender under
Section 10.4, to the extent then due and payable, have been paid.
(k) A certificate, signed by a Responsible Officer of the Borrower,
stating that the statements set forth in Section 4.2 (a) and (b) are true and
correct on the Closing Date, after giving effect to the Loans being made on the
Closing Date.
(l) A copy of the Advisory Agreement certified by a Responsible
Officer.
35
(m) The Subordination Agreement duly executed and acknowledged by the
Borrower and the Advisor.
Notwithstanding the foregoing paragraphs (f), (g) and (h), the Lender
agrees that, until the Collateralization Date, the Lender shall, with respect to
the Approved Hotel Facilities, rely solely on the due diligence to be performed
by the underwriters and their counsel in connection with the proposed offering
of up to 13,800,000 common shares of beneficial interest of the Borrower.
4.2. Conditions Precedent to Each Loan. The obligation of the Lender
---------------------------------
to make any Loan (including the Loan being made by the Lender on the Closing
Date) shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such Loan,
before and after giving effect thereto and to the application of the proceeds
therefrom (and the acceptance by the Borrower of the proceeds of such Loan shall
constitute a representation and warranty by the Borrower that on the date of
such Loan such statements are true):
(i) The representations and warranties of the Borrower contained in
Article V. and of each Loan Party in the other Loan Documents are correct on and
as of such date as though made on and as of such date; and
(ii) No Default or Event of Default will result from the Loans
being made on such date.
(b) The making of the Loans on such date does not violate any
Requirement of Law and is not enjoined, temporarily, preliminarily or
permanently.
(c) The Lender shall have received, on or before such date, in
respect of any Hotel Facility including, without limitation, any Approved Hotel
Facilities to be acquired with the proceeds of the Loan, for which the same have
not been delivered pursuant to Section 4.1(e), (f), (g) and (h) respectively:
36
(i) a Negative Pledge Agreement duly executed and acknowledged by
the Borrower or its Subsidiary, as applicable;
(ii) A copy of the Operating Lease and Management Agreement in
respect of such Hotel Facility, each certified by a Responsible Officer;
(iii) Evidence that the insurance required by the terms of the
Collateral Documents and by Section 7.4 is in full force and effect; and
(iv) A written report of an investigation by an environmental
consultant, reasonably acceptable to the Lender, addressing any significant
environmental, health and safety violations, hazards or liabilities to which the
Borrower or any of its Subsidiaries may be subject, which report shall
demonstrate, to the reasonable satisfaction of the Lender, that the Borrower and
its Subsidiaries and their operations are in compliance in all material respects
with all applicable Environmental Laws and are not subject to any material
Environmental Liabilities and Costs.
Notwithstanding the foregoing subparagraphs (ii), (iii) and (iv), the
Lender agrees that, until the Collateralization Date, the Lender shall, with
respect to the Approved Hotel Facilities, rely solely on the due diligence to be
performed by the underwriters and their counsel in connection with the proposed
offering of up to 13,800,000 common shares of beneficial interest of the
Borrower.
(d) The Borrower shall have paid the reasonable fees and out of
pocket expenses of counsel to the Lender and local counsel, in connection with
the preparation, execution, review and delivery of the Loan Documents delivered
pursuant to this Section 4.2.
(e) The Lender shall have received such additional documents,
information and materials as the Lender may reasonably request.
4.3. Additional Conditions Precedent to Each Loan After the
------------------------------------------------------
Collateralization Date. The obligation of the Lender to make any Loan on or
-----------------------
after the Collateralization Date shall be subject to the further conditions
precedent that:
(a) The Lender shall have received, on or before such date, duly
executed and acknowledged Mortgages for each
37
of the Selected Properties including, without limitation, the Initial Selected
Properties, in such amounts as shall be reasonably acceptable to the Lender,
securing all of the Indebtedness and the Obligations as such terms are defined
and more particularly described therein, together with:
(i) commitments for title insurance policies (the "Title Insurance
Policies") issued by a title company acceptable to the Lender, in such form and
amounts as are reasonably acceptable to the Lender, insuring that each such
Mortgage is a valid first priority Lien on such Selected Properties subject only
to such exceptions to title as shall be acceptable to the Lender in its
reasonable discretion and containing such endorsements and affirmative insurance
as the Lender may reasonably require and as are obtainable in the applicable
jurisdiction, and true copies of each document, instrument or certificate
required by the terms of each such policy or Mortgage to be, or have been,
filed, recorded, executed or delivered in connection therewith;
(ii) opinions reasonably satisfactory to the Lender of counsel and/or
local counsel retained by the Borrower with respect to the due execution and
delivery, validity and enforceability of the Mortgage Documents and such other
matters as may be reasonably required by the Lender;
(iii) duly executed UCC-1 Financing Statements under the applicable
Uniform Commercial Code to be filed in connection with such Mortgages in form
and substance reasonably satisfactory to the Lender, to perfect the Lien created
by the applicable Mortgages;
(iv) (A) duly executed and acknowledged landlord consents from all
lessors under all the Leases comprising Selected Properties, in form and
substance reasonably satisfactory to the Lender, (B) duly executed and
acknowledged non-disturbance and attornment agreements with the mortgagees,
ground lessors and sublessors of property subject to Leases comprising Selected
Properties, in form and substance reasonably satisfactory to the Lender, (C)
duly executed and acknowledged consents from all mortgagees,
38
ground lessors and sublessors of property subject to Leases comprising Selected
Properties, in form and substance reasonably satisfactory to the Lender, (D)
duly executed and acknowledged estoppel certificates, dated not earlier than 30
days prior to the date of the Loan, from each landlord, ground lessor, sublessor
and lessee of a Selected Property, in form and substance reasonably satisfactory
to the Lender, (E) duly executed and acknowledged subordination, non-disturbance
and attornment agreements (in recordable form) from each lessee (other than the
Borrower or its Subsidiary) of a Selected Property, unless such lessee's lease,
by its terms, is subject and subordinate to the Lien of the applicable Mortgage
provided that, notwithstanding the foregoing, a subordination, non-disturbance
and attornment agreement in the form attached as Exhibit K hereto and made a
---------
part hereof or such other form as shall be approved by the Lender (which
approval shall not be unreasonably withheld, delayed or conditioned), duly
executed and acknowledged by the Borrower or its Subsidiary and the Operating
Lessee shall be required in respect of each such Selected Property, and (F)
evidence satisfactory to the Lender that all such consents and agreements, and a
memorandum of each Lease comprising a Selected Property, have been filed or
recorded in all appropriate public records or delivered to the title company
providing title insurance thereon, as the case may be;
(v) current ALTA surveys and surveyor's certification as to all such
Selected Properties, each in form and substance reasonably satisfactory to the
Lender; and
(vi) payment to the Lender, or as the Lender may direct, of all title
insurance premiums, documentary, stamp or intangible taxes, recording fees and
mortgage taxes payable in connection with the recording of any of the Loan
Documents or the issuance of the Title Insurance Policies;
(vii) an Assignment Agreement in respect of any Management Agreement
for such Selected Property duly executed by the Borrower or its Subsidiary, as
applicable, and the Manager;
39
(viii) a Security Agreement in respect of the FF&E Reserves for such
Selected Property duly executed by the Borrower or its Subsidiary, as
applicable, the Operating Lessee and, if applicable, the Manager;
(ix) Financing Statements (Form UCC-1) under the Uniform Commercial
Code of all jurisdictions as may be necessary or, in the reasonable opinion of
the Lender, desirable to perfect the Lien created by the Security Agreement for
such Selected Property; copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, listing all effective financing statements which
name the Borrower or any Subsidiary of the Borrower (under its present name or
any previous name) as debtor and which are filed in the jurisdictions referred
to above, together with copies of such other financing statements (none of which
shall cover the Collateral purported to be covered by the Security Agreement);
and
(x) collateral assignments of such other security obtained by the
Borrower from any Operating Lessee as security for the performance of such
Operating Lessee's obligations under its Operating Lease (including, without
limitation, the security described in paragraphs 12(e) and (i) of the Letter of
Intent between the Borrower and Wyndham Hotel Company, LTD.), each in form and
substance reasonably satisfactory to the Lender.
(b) The Borrower shall have paid the reasonable fees and out of
pocket expenses of counsel to the Lender and local counsel, in connection with
the preparation, execution, review and delivery of the Mortgage Documents.
(c) All costs and accrued and unpaid fees and expenses (including,
without limitation, legal fees and expenses) required to be paid to the Lender
under Section 10.4 and any Mortgage Payment, to the extent then due and payable,
have been paid.
(d) The Lender shall have received such additional documents,
information and materials as the Lender may reasonably request.
40
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
5.1. Existence; Compliance with Law. Each Loan Party and each of its
------------------------------
Subsidiaries (i) is a real estate investment trust or a corporation, as
specified herein, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation; (ii) is duly qualified or
licensed and in good standing under the laws of each jurisdiction where such
qualification is necessary, except for failures which in the aggregate have no
Material Adverse Effect; (iii) has all requisite power and authority and the
legal right to own, pledge and mortgage its properties, to lease (as lessee) the
properties that it leases as lessee, to lease or sublease (as lessor) the
properties it owns and/or leases (as lessee) and to conduct its business as now
or currently proposed to be conducted; (iv) is in compliance with its
declaration of trust or certificate of incorporation and by-laws, as
appropriate; (v) is in compliance with all other applicable Requirements of Law
except for such non-compliances as in the aggregate have no Material Adverse
Effect; and (vi) has all necessary licenses, permits, consents or approvals from
or by, has made all necessary filings with, and has given all necessary notices
to, each Governmental Authority having jurisdiction, to the extent required for
such ownership, leasing and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which in the aggregate have no
Material Adverse Effect.
5.2. Power; Authorization; Enforceable Obligations. (a) The
---------------------------------------------
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions contemplated
hereby:
(i) are within such Loan Party's corporate or trust powers, as
appropriate;
41
(ii) have been or, at the time of delivery thereof pursuant to
Article III or IV, will have been duly authorized by all necessary
corporate or trust action, as appropriate, including, without limitation,
the consent of any trustees or stockholders where required;
(iii) do not and will not (A) contravene any Loan Party's or any of
its Subsidiaries' respective declaration of trust, certificate of
incorporation or by-laws or other comparable governing documents, (B)
violate any other applicable Requirement of Law (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), or any order or decree of any Governmental
Authority or arbitrator, (C) conflict with or result in the breach of, or
constitute a default under, or result in or permit the termination or
acceleration of, any material Contractual Obligation of any Loan Party or
any of its Subsidiaries, or (D) result in the creation or imposition of
any Lien upon any of the property of any Loan Party or any of its
Subsidiaries, other than those in favor of the Lender pursuant to the
Collateral Documents; and
(iv) do not require the consent of, authorization by, approval of,
notice to, or filing or registration with, any Governmental Authority or
any other Person, other than those which have been or will be, prior to
the Closing Date, obtained or made and copies of which have been or will
be delivered to the Lender pursuant to Section 4.1 and/or Article III
hereof, and each of which on the Closing Date will be in full force and
effect, and any consents, authorizations, approvals of, notices to or
filings or registrations required to be delivered under Article III or IV
hereof.
(b) This Agreement has been, and each of the other Loan Documents
will have been upon delivery thereof pursuant to Article III or IV hereof, duly
executed and delivered by each Loan Party thereto. This Agreement is, and the
other Loan Documents will be, when delivered hereunder, the legal, valid and
binding obligation of each Loan Party thereto, enforceable against it in
accordance
42
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
5.3. Taxes. All federal, state, local and foreign tax returns,
-----
reports and statements (collectively, the "Tax Returns") which, to the best
knowledge and belief of the Borrower, are required to be filed by the Borrower
or any of its Tax Affiliates have been filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns, are required to be
filed, all such Tax Returns are true and correct in all material respects, and
all taxes, charges and other impositions due and payable have been timely paid
prior to the date on which any fine, penalty, interest, late charge or loss may
be added thereto for non-payment thereof, except where contested in good faith
and by appropriate proceedings if adequate reserves therefor have been
established on the books of the Borrower or such Tax Affiliate in conformity
with GAAP. If applicable, proper and accurate amounts have been withheld by the
Borrower and each of its respective Tax Affiliates from their respective
employees (if any) for all periods in full and complete compliance with the tax,
social security and unemployment withholding provisions of applicable federal,
state, local and foreign law and such withholdings have been timely paid to the
respective Governmental Authorities. None of the Borrower or any of its Tax
Affiliates has (i) executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any charges other than
those that in the aggregate would have no Material Adverse Effect; (ii) agreed
or been requested to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise other than those that in
the aggregate would have no Material Adverse Effect; or (iii) any obligation
under any written tax sharing agreement.
5.4. Full Disclosure. (a) No written statement prepared or
---------------
furnished by or on behalf of any Loan Party or any of its Affiliates in
connection with any of the Loan Documents or the consummation of the
transactions contemplated thereby, and no financial statement delivered pursuant
hereto or thereto, contains any untrue statement of
43
a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. All facts known to the
Borrower which are material to an understanding of the financial condition,
business, properties or prospects of the Borrower and its Subsidiaries taken as
one enterprise have been disclosed to the Lender.
5.5. Financial Matters. (a) The balance sheet of the Borrower as of
-----------------
December 31, 1995, and the related statement of income, retained earnings and
cash flow of the Borrower for the period from February 7, 1995 (inception) to
December 31, 1995, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, and the combined
statements of assets, liabilities and net investment and advances of the Initial
Hotels and the Approved Hotel Facilities that are Courtyard by Marriott hotels
as of December 30, 1994 and as of December 29, 1995, and the related combined
statements of revenues and expenses excluding income taxes for the fiscal year
ended December 29, 1995, certified by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, copies of which have
been furnished to the Lender, fairly present the financial condition of the
Borrower and the combined assets, liabilities and net investment and advances of
the Initial Hotels and such Approved Hotel Facilities as of such dates and the
consolidated results of the operations of the Borrower and the revenues and
expenses excluding income taxes, and cash flows of the Initial Hotels and such
Approved Hotel Facilities for the period ended on such dates, all in conformity
with GAAP.
(b) Since December 31, 1995, there has been no Material Adverse
Change and there have been no events or developments that in the aggregate have
had a Material Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries had at December
31, 1995 any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment which is not
reflected in the balance sheet at such date referred to in subsection (a) above
or in the notes thereto.
(d) The unaudited pro forma balance sheets of the Borrower and in
respect of the Initial Hotels (the "Pro Forma Balance Sheets"), copies of which
have been delivered to the Lender, have been prepared with respect to the
Borrower as of December 31, 1995, and with respect to the
44
Initial Hotels, as of December 29, 1995, and reflect as of such dates, the pro
forma financial condition of the Borrower and of the Initial Hotels.
(e) The Borrower is, and on a consolidated basis the Borrower and
its Subsidiaries are, Solvent.
5.6. Litigation. There are no pending or, to the knowledge of the
----------
Borrower, threatened actions, investiga tions or proceedings affecting the
Borrower or, to the knowledge of the Borrower, any Operator or any of their
respective properties or revenues before any court, Governmental Authority or
arbitrator, other than those that in the aggregate, if adversely determined,
would have no Material Adverse Effect. The performance of any action by (a) any
Loan Party required or contemplated by any of the Loan Documents or (b) any
Operator required or contemplated by any Operating Lease or Management Agreement
is not (in the case of (b) only, to the knowledge of the Borrower) restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse condition has been imposed by any Governmental Authority or arbitrator
upon any of the foregoing transactions contemplated by the aforementioned
documents.
5.7. Margin Regulations. The Borrower is not engaged in the business
------------------
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Loan will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
5.8. Ownership of Borrower and HRPT Advisors; Subsidiaries. (a) The
-----------------------------------------------------
authorized capital stock of the Borrower consists of 100,000,000 common shares
of beneficial interest, $0.01 par value per share, of which 12,600,000 shares
are issued and outstanding on the date hereof, and 100,000,000 preferred shares
of beneficial interest, without par value, none of which shares are issued and
outstanding on the date hereof. On the date hereof all of the outstand ing
capital stock of the Borrower is validly issued, fully paid and non-assessable
and at least 250,000 shares of such stock is owned beneficially and of record by
HRPT Advisors
45
free and clear of all Liens as of the date of this Agreement. Other than as
described in the Registration Statement relating to the proposed offering of up
to 13,800,000 common shares of beneficial interest in the Borrower, no
authorized but unissued shares, no treasury shares and, to the best knowledge of
the Borrower, no other outstanding shares of capital stock of the Borrower are
subject to any option, warrant, right of conversion or purchase or any similar
right. Other than as described in the Registration Statement relating to the
proposed offering of up to 13,800,000 common shares of beneficial interest in
the Borrower, there are no agreements or understandings with respect to the
voting, sale or transfer of any shares of capital stock of the Borrower, or to
the best knowledge of the Borrower, any agreement restricting the transfer or
hypothecation of any such shares.
(b) The authorized capital stock of HRPT Advisors consists of 100,000
shares of common stock, $0.01 par value per share, of which 1,000 shares are
issued and outstanding as of the date hereof. All of the outstanding capital
stock of HRPT Advisors has been validly issued, is fully paid and non-assessable
and at least 51% of such stock is owned, in the aggregate, beneficially and of
record by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, free and clear of all Liens
as of the date of this Agreement. No authorized but unissued shares, no
treasury shares and, to the best knowledge of the Borrower, no other outstanding
shares of capital stock of HRPT Advisors are subject to any option, warrant,
right of conversion or purchase or any similar right. There are no agreements
or understandings with respect to the voting, sale or transfer of any shares of
capital stock of HRPT Advisors, or to the best knowledge of the Borrower, any
agreement restricting the transfer or hypothecation of any such shares.
(c) Set forth on Schedule 5.8(c) hereto is a complete and accurate
list showing, as of the date hereof, all Subsidiaries of the Borrower and, as to
each such Subsidiary, the jurisdiction of its incorporation, the number of
shares of each class of Stock authorized, the number outstanding on the date
hereof and the percentage of the outstanding shares of each such class owned
(directly or indirectly) by the Borrower. No Stock of any Subsidiary of the
Borrower is subject to any outstanding option, warrant,
46
right of conversion or purchase or any similar right. All of the outstanding
capital Stock of each such Subsidiary has been validly issued, is fully paid and
non-assessable and is owned by the Borrower, free and clear of all Liens.
Neither the Borrower nor any such Subsidiary is a party to, or has knowledge of,
any agreement restricting the transfer or hypothecation of any shares of Stock
of any such Subsidiary, other than the Loan Documents. As of the date hereof,
the Borrower does not own or hold, directly or indirectly, any capital stock or
equity security of, or any equity interest in, any Person other than such
Subsidiaries.
5.9. ERISA. (a) There are no Multiemployer Plans.
-----
(b) Each Plan and any related trust intended to qualify under Code
Section 401 or 501 has been determined by the IRS to be so qualified and to the
best knowledge of the Borrower nothing has occurred which would cause the loss
of such qualification.
(c) None of the Borrower, any of its Subsidiaries or any ERISA
Affiliate, with respect to any Pension Plan, has failed to make any contribution
or pay any amount due as required by Section 412 of the Code or Section 302 of
ERISA or the terms of any such plan, and all required contributions and benefits
have been paid in accordance with the provisions of each such plan.
(d) There are no pending or, to the knowledge of the Borrower,
threatened claims, actions or proceedings (other than claims for benefits in the
normal course), relating to any Plan other than those that in the aggregate, if
adversely determined, would have no Material Adverse Effect.
(e) No Pension Plan has any unfunded accrued benefit liabilities, as
determined by using reasonable actuarial assumptions utilized by such plan's
actuary for funding purposes. Within the last five years none of the Borrower,
any of its Subsidiaries or any ERISA Affiliate has caused a Pension Plan with
any such liabilities to be transferred outside of its "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA).
47
(f) No Plan provides for continuing health, disability, accident or
death benefits or coverage for any participant or his or her beneficiary after
such partici pant's termination of employment (except as may be required by
Section 4980B of the Code and at the sole expense of the participant or the
beneficiary) which would result in the aggregate under all Plans in a liability
in an amount which would have a Material Adverse Effect.
5.10. Liens. There are no Liens of any nature whatsoever on any
-----
Hotel Facilities of the Borrower or any of its Subsidiaries other than those
permitted by Section 8.1. The forms of the Collateral Documents attached hereto
are sufficient to grant to the Lender fully perfected first priority Liens in
and to the Collateral subject only to Permitted Liens.
5.11. [Intentionally Omitted]
5.12. No Burdensome Restrictions; No Defaults; Contractual
----------------------------------------------------
Obligations. (a) Neither the Borrower nor any of its Subsidiaries is in
-----------
default beyond the expiration of any applicable notice or grace period under or
with respect to any Contractual Obligation owed by it and, to the knowledge of
the Borrower, no other party is in default beyond the expiration of any
applicable notice or grace period under or with respect to any Contractual
Obligation owed to the Borrower or to any of its Subsidiaries, other than those
defaults which in the aggregate have no Material Adverse Effect.
(b) No Event of Default or Default has occurred and is continuing.
(c) There is no Requirement of Law that has not been complied with by
the Borrower, the compliance with which by the Borrower or any of its
Subsidiaries would have a Material Adverse Effect.
(d) No Subsidiary of the Borrower is subject to any Contractual
Obligation restricting or limiting its ability to transfer its assets to the
Borrower or to declare or make any dividend payment or other distribution on
account of any shares of any class of its Stock or its ability to purchase,
redeem, or otherwise acquire for value
48
or make any payment in respect of any such shares or any shareholder rights.
5.13. No Investments. Except as permitted by Section 8.6, none of
--------------
the Borrower or any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person or maintains any Investment.
5.14. Government Regulation. Neither the Borrower nor any of its
---------------------
Subsidiaries is an "investment com pany" or an "affiliated person" of, or
"promoter" or "prin cipal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended, or subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or any other federal or state statute or
regulation such that its ability to incur Indebtedness is limited, or its
ability to consummate the transactions contemplated hereby or by any other Loan
Document, or the exercise by the Lender of rights and remedies hereunder or
thereunder, is impaired. The making of the Loans by the Lender, the application
of the proceeds and repayment thereof by the Borrower and the consummation of
the transactions contemplated by the Loan Documents will not violate any
provision of any of the foregoing or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
5.15. Insurance. All policies of insurance of any kind or nature
---------
owned by or issued to the Borrower or any of its Subsidiaries, or issued in
respect of any real property owned or leased by the Borrower or any of its
Subsidiaries including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation and employee health and welfare insurance, are
in full force and effect and are of a nature and provide such coverage as
(except earthquake coverage) is sufficient and as is customarily carried by
------
companies of the size and character of such Person. None of the Borrower or any
of its Subsidiaries has been refused insurance for which it applied or had any
policy of insurance terminated (other than at its request). Lender confirms and
agrees that the policies of insurance owned by or issued to the Operating Lessee
in respect of any Hotel Facility shall be sufficient
49
for the purposes of this representation provided that the same comply with the
terms of the Operating Lease relating thereto.
5.16. Employees. Neither the Borrower nor any of its Subsidiaries
---------
has any employees and none of them has ever engaged employees.
5.17. Force Majeure. Neither the business nor the properties of the
-------------
Borrower or any of its Subsidiaries are currently suffering from the effects of
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), other than those which in the
aggregate have no Material Adverse Effect.
5.18. Use of Proceeds. The proceeds of the Loans are being used by
---------------
the Borrower or its Subsidiaries solely to pay the purchase price of Approved
Hotel Facilities and for the payment of related transaction costs, fees and
expenses.
5.19. Environmental Protection. Except as disclosed on Schedule
------------------------
5.19:
(a) all real property leased, owned or operated by the Borrower or any
of its Subsidiaries is free from contamination by any Hazardous Material which
could reasonably be expected to subject the Borrower or any of its Subsidiaries
to Environmental Liabilities and Costs that could in the aggregate have a
Material Adverse Effect;
(b) the operations of the Borrower and each of its Subsidiaries, and
the operations at any real property leased, owned or operated by the Borrower or
any of its Subsidiaries are in material compliance in all respects with all
applicable Environmental Laws;
(c) neither the Borrower nor any of its Subsidiaries have liabilities
with respect to Hazardous Materials, and no facts or circumstances exist which
could give rise to liabilities with respect to Hazardous Materials which could
reasonably be expected to subject the Borrower or any of its Subsidiaries to
Environmental Liabilities and
50
Costs that could in the aggregate have a Material Adverse Effect;
(d) (i) the Borrower and its Subsidiaries and, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have obtained, currently
maintained and have all Environmental Permits necessary for their operations and
are in material compliance with such Environmental Permits, except to the extent
that the failure to obtain or maintain such Permits or to be in compliance
therewith would not, in the aggregate, have a Material Adverse Effect, (ii)
there are no Legal Proceedings pending nor, to the best knowledge of the
Borrower and its Subsidiaries, threatened to revoke, or alleging the violation
of, such Environmental Permits, other than Legal Proceedings which, if adversely
determined, would not, in the aggregate, have a Material Adverse Effect and
(iii) neither the Borrower nor any of its Subsidiaries or, to the best knowledge
of the Borrower and its Subsidiaries, the Operators have received any notice
from any Governmental Authority to the effect that there is lacking any
Environmental Permit required in connection with the current use or operation of
any property leased, owned or operated by the Borrower or any of its
Subsidiaries;
(e) neither the Borrower's nor any of its Subsidiaries' current
facilities and operations, nor, to the best knowledge of the Borrower and its
Subsidiaries, any Operator or predecessor of the Borrower or any of its
Subsidiaries, nor any of their past facilities and operations, nor any owner of
premises leased or operated by the Borrower and its Subsidiaries, are subject to
any outstanding written Order or Contract, including Environmental Liens, with
any Governmental Authority or other Person, or to any federal, state, local,
foreign or territorial investigation respecting (i) Environmental Laws, (ii)
Remedial Action, (iii) any Environmental Claim, or (iv) the Release or
threatened Release of any Hazardous Material, the compliance with which, in any
case, is reasonably likely to have a Material Adverse Effect;
(f) neither the Borrower, nor any of its Subsidiaries or, to the best
knowledge of the Borrower and its Subsidiaries, any of the Operators are subject
to any pending Legal Proceeding alleging the violation of any Environmental Law
which, if adversely determined is
51
reasonably likely to have a Material Adverse Effect, nor, to the best knowledge
of the Borrower and its Subsidiaries, are any such proceedings threatened;
(g) neither the Borrower nor any of its Subsidiaries nor, to the best
knowledge of the Borrower and its Subsidiaries, any Operators or predecessor of
the Borrower or any of its Subsidiaries, nor any owner of prem ises leased by
the Borrower or any of its Subsidiaries, have filed any notice under federal,
state or local, territorial or foreign law indicating past or present treatment,
storage, or disposal of or reporting a Release of Hazardous Material into the
environment, in the case of any Operator, with respect to Hotel Facilities only;
(h) none of the operations of the Borrower or any of its Subsidiaries
or, to the best knowledge of the Borrower and its Subsidiaries, of any Operators
or predecessor of the Borrower or any of its Subsidiaries, or of any owner of
premises leased by the Borrower or any of its Subsidiaries, involve or
previously involved the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 (in effect
as of the date of this Agreement) or any state, local, territorial or foreign
equivalent, in the case of any Operator, with respect to Hotel Facilities only;
and
(i) there is not now, nor has there been in the past, on, in or under
any real property leased or owned by the Borrower or any of its Subsidiaries (i)
any underground storage tanks or surface tanks, dikes or impoundments, (ii) any
asbestos-containing materials, (iii) any polychlorinated biphenyls, or (iv) any
radioactive substances, the existence of which, in any case, is reasonably
likely to have a Material Adverse Effect.
5.20. Contractual Obligations Concerning Assets. Except with respect
-----------------------------------------
to the Approved Hotel Facilities and as described in the Letter of Intent
between the Borrower and HMC, as of the date of this Agreement, neither the
Borrower nor any of its Subsidiaries owns or holds, or is obligated under or a
party to, any option, right of first refusal, or other contractual right to
purchase or acquire, or any Contractual Obligation to effect an Asset Sale of,
any asset
52
or property owned or leased by the Borrower or any of its Subsidiaries.
5.21. Status as REIT. The Borrower is organized in conformity with
--------------
the requirements for qualification as a real estate investment trust under the
Code. Borrower has met all of the requirements for qualification as a real
estate investment trust under the Code for its fiscal year ended December 31,
1995. The Borrower is in a position to qualify for its current fiscal year as a
real estate investment trust under the Code and its proposed methods of
operation will enable it to so qualify.
5.22. Real Property. (a) The Borrower and its Subsidiaries own
-------------
good, clean and marketable fee simple absolute title to all of the Real Estate
purported to be owned by them in fee simple, which Real Estate is at the date
hereof described in Schedule 5.22(a), and good, clean and marketable title to,
or valid leasehold interests in, all other properties and assets purported to be
owned by the Borrower or any of its Subsidiaries, including, without limitation,
valid leasehold interests pursuant to the Leases and all property reflected in
the latest balance sheet referred to in Section 5.5(a), except for such property
as has been disposed of since that date without violation of any of the
provisions hereof, and none of such properties and assets, including, without
limitation, the Real Estate and the Leases, is subject to any Lien, except Liens
granted to the Lender pursuant to the Loan Documents or permitted hereunder or
thereunder. The Borrower and its Subsidiaries have received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and have duly effected all
recordings, filings and other actions reasonably necessary to establish, protect
and perfect the Borrower's and its Subsidiaries' right, title and interest in
and to all such property.
(b) All real property leased at the date hereof by the Borrower or
any of its Subsidiaries, as lessee, is listed on Schedule 5.22(b), setting forth
information regarding the commencement date, termination date, renewal options
(if any) and annual base rents for each year until the Final Maturity Date, in
each case as in effect on the date hereof. To the best knowledge of the
Borrower, each of
53
such leases is valid and enforceable in accordance with its terms and is in full
force and effect. The Borrower has delivered to the Lender true and complete
copies of each of such leases and all documents affecting the rights or
obligations of the Borrower or any of its Subsidiaries which is a party thereto,
including, without limitation, any non-disturbance and recognition agreements,
subordination agree ments, attornment agreements and agreements regarding the
term or rental of any of the leases.
(c) Except as disclosed on Schedule 5.22(c) and those which in the
aggregate have no Material Adverse Effect, (i) all components of all
improvements included within the real property owned or leased by the Borrower
or any of its Subsidiaries (collectively, "Improvements"), including, without
limitation, the roofs and structural elements thereof and the heating,
ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste
water, storm water, paving and parking equipment, systems and facilities
included therein, are in good working order and repair; (ii) all water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the real property owned or
leased by the Borrower or any of its Subsidiaries are installed and operating
and are sufficient to enable the real property owned or leased by the Borrower
and its Subsidiaries to continue to be used and operated in the manner currently
being used and operated, and none of the Borrower or any of its Subsidiaries has
any knowledge of any factor or condition that could result in the termination or
material impairment of the furnishing thereof. No Improvement or portion
thereof is dependent for its access, operation or utility on any land, building
or other Improvement not included in the real property owned or leased by the
Borrower or any of its Subsidiaries.
(d) All Permits required to have been issued or appropriate to enable
all real property owned or leased by the Borrower or any of its Subsidiaries to
be lawfully occupied and used for all of the purposes for which they are
currently occupied and used have been lawfully issued and are in full force and
effect, other than those which in the aggregate have no Material Adverse Effect.
54
(e) Neither the Borrower nor, to its knowledge, any Operator has
received any notice, or has any knowledge, of (i) any pending, threatened or
contemplated condemnation proceeding affecting any real property owned or leased
by the Borrower or any of its Subsidiaries or any part thereof, or (ii) any
proposed termination or impairment of any parking at any such owned or leased
real property or (iii) any sale or other disposition of any real property owned
or leased by the Borrower or any of its Subsidiaries or any part thereof in lieu
of condemnation, in each case, other than those which in the aggregate have no
Material Adverse Effect.
(f) No material portion of any real property owned or leased by the
Borrower or any of its Subsidiaries has suffered any material damage by fire or
other casualty loss which has not heretofore been completely repaired and
restored to its original condition or which will not be completely repaired or
restored to its original condition within twelve (12) months from the date
hereof. No portion of any real property, that is not covered by adequate flood
insurance, owned or leased by the Borrower or any of its Subsidiaries is located
in a special flood hazard area as designated by any Federal Governmental
Authorities.
5.23. Operator and Advisor: Compliance with Law.
------------------------------------------
(a) To the best knowledge of the Borrower and its Subsidiaries, each
Operator (i) has full power and authority and the legal right to own, lease (or
sublease), manage and operate (as applicable) the Hotel Facilities it operates
and to conduct the business in which it is currently engaged with respect to any
real property owned or leased by the Borrower or any of its Subsidiaries, (ii)
is duly qualified or licensed and is in good standing under the laws of each
jurisdiction where its ownership, lease (or sublease), management or operation
of any real property owned or leased by the Borrower or any of its Subsidiaries
requires such qualification, and (iii) is in compliance with all Requirements of
Law applicable to the real property owned or leased by the Borrower or any of
its Subsidiaries operated or managed by it, or applicable to the operation or
management thereof, except to the extent that the failure to comply therewith is
not reasonably likely to have, in the aggregate, a Material Adverse Effect.
55
(b) To the best knowledge of Borrower and its Subsidiaries, the
Advisor (i) has full power and authority and legal right to conduct the business
in which it is presently engaged and to perform its obligations under the
Advisory Agreement, (ii) is duly qualified or licensed and is in good standing
under the laws of each jurisdiction where the conduct of its business requires
such qualification, and (iii) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith is not reasonably
likely to have, in the aggregate, a Material Adverse Effect.
5.24. Operating Leases, Management Agreement and Advisory Agreement.
-------------------------------------------------------------
Each of the Operating Leases and Management Agreements in respect of the Hotel
Facilities and the Advisory Agreement is in full force and effect and is a
legally valid and binding obligation of the Borrower or its Subsidiaries and the
other parties thereto, subject to such exceptions which are not reasonably
likely to have, in the aggregate, a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries has mortgaged, pledged or otherwise
encumbered any of the Operating Leases, Management Agreements or Advisory
Agreements or its rights thereunder including, without limitation, its right to
obtain rental, interest or other payments under the Operating Leases, other than
by way of such mortgages, pledges or encumbrances in favor of the Lender.
Neither the Borrower nor any of its Subsidiaries has collected any rents
becoming due under any Operating Lease more than 30 days in advance. All rent
and other sums and charges payable by any Operating Lessee under each Operating
Lease to which it is a party are current, no notice of default or termination
under any such Operating Lease is outstanding, to the knowledge of the Borrower
no termination event or condition or uncured default on the part of the
Operating Lessee exists under any Operating Lease, and to the knowledge of the
Borrower no event of default has occurred which, with the giving of notice or
the lapse of time or both, would constitute such a default or termination event
or condition or uncured default on the part of the Borrower or its Subsidiaries
or the Operators (as the case may be), subject to such exceptions which are not
reasonably likely to have, in the aggregate, a Material Adverse Effect. As to
all of the Leases, Borrower and each of its Subsidiaries has performed all of
its repair and maintenance obligations (if any) and, to the best knowledge
56
and belief of Borrower, each Operating Lessee under each Operating Lease to
which it is a party has performed all of its repair and maintenance obligations,
subject to such exceptions which are not reasonably likely to have, in the
aggregate, a Material Adverse Effect.
5.25. FF&E Reserves. An FF&E Reserve has been established in respect
-------------
of each Initial Hotel and is currently funded as required by the terms of the
Operating Lease and/or the Management Agreement relating thereto. An FF&E
Reserve shall be established in respect of each Approved Hotel Facility from and
after the date of the acquisition thereof, which FF&E Reserve shall be currently
funded as required by the terms of the Operating Lease and/or the Management
Agreement relating thereto
ARTICLE VI
FINANCIAL COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
unless the Lender otherwise consents in writing the Borrower agrees with the
Lender that:
6.1. Limitation on Indebtedness. The Borrower shall maintain during
--------------------------
each Fiscal Quarter on a consolidated basis, a ratio, expressed as a percentage,
of (a) the total Indebtedness for borrowed money (including, without limita
tion, the Obligations and all Capitalized Lease Obligations) of the Borrower and
its Subsidiaries to (b) Total Assets of the Borrower and its Subsidiaries not in
excess of fifty-six percent (56%).
6.2. Limitation on Secured Indebtedness. The Borrower shall maintain
----------------------------------
during each Fiscal Quarter on a consolidated basis a ratio, expressed as a
percentage, of (a) total Secured Indebtedness (including, without limita tion,
Obligations and all Capitalized Lease Obligations) of the Borrower and its
Subsidiaries to (b) Total Assets of the Borrower and its Subsidiaries not in
excess of fifty-six percent (56%).
6.3. Interest Expense Coverage. The Borrower shall maintain at the
-------------------------
end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on
September 30, 1995, a ratio of (a) Total Base Rents for such Fiscal Quarter to
(b) Net Interest Expense for such Fiscal Quarter, of not less than 2:1.
57
6.4. Maintenance of Tangible Net Worth. The Borrower shall maintain
---------------------------------
during each Fiscal Quarter a Tangible Net Worth of not less than $200,000,000.
6.5. Maintenance of Loan to Value Ratio. On and after the
----------------------------------
Collateralization Date, the Borrower shall maintain during each Fiscal Quarter
the Loan to Value Requirement.
ARTICLE VII
AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Commitment remain
outstanding, unless the Lender otherwise consents in writing, the Borrower
agrees with the Lender that:
7.1. Compliance with Laws, Etc. The Borrower shall comply, and shall
-------------------------
cause each of its Subsidiaries and, with respect to Hotel Facilities only, each
Operator to comply, in all material respects with all Requirements of Law,
Contractual Obligations, commitments, instruments, licenses, permits and
franchises, including, without limitation, all Permits; provided, however, that
-------- -------
the Borrower shall not be deemed in default of this Section 7.1 if all such non-
compliances in the aggregate have no Material Adverse Effect.
7.2. Conduct of Business. The Borrower shall (a) conduct, and shall
-------------------
cause each of its Subsidiaries to conduct, its business in the ordinary course,
such business being to acquire, own and lease hotels to unaffiliated tenants;
and (b) perform and observe, and cause each of its Subsidiaries to perform and
observe, all the terms, cove nants and conditions required to be performed and
observed by it under its Contractual Obligations (including, without limitation,
to pay all rent and other charges payable under any lease and all debts and
other obligations as the same become due), and do, and cause its Subsidiaries to
do, all things necessary to preserve and to keep unimpaired its rights under
such Contractual Obligations; provided, however, that, in the case of each of
-------- -------
clauses (a) and (b), the Borrower shall not be deemed in default of this Section
7.2
58
if all such failures in the aggregate have no Material Adverse Effect.
7.3. Payment of Taxes, Etc. The Borrower shall pay and discharge,
---------------------
and shall cause each of its Subsidiaries to pay and discharge, before the same
shall become delinquent, all lawful governmental claims, taxes, assessments,
charges and levies, except where contested in good faith, by proper proceedings,
if adequate reserves therefor have been established on the books of the Borrower
or the appropriate Subsidiary in conformity with GAAP; provided, however, that
-------- -------
the Borrower shall not be deemed in default of this Section 7.3 if all such
uncontested non-payments in the aggregate have no Material Adverse Effect and,
with respect to any Mortgaged Property, the Borrower and each such Subsidiary
otherwise complies with the provisions of the Mortgage in respect thereof.
7.4. Maintenance of Insurance. The Borrower shall maintain, or shall
------------------------
cause the Operators to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower or such Subsidiary
operates and as otherwise satisfactory to the Lender, in its sole judgment
exercised reasonably, and, in any event, all insurance required by any
Collateral Document. All such insurance shall name the Lender as additional
insured or loss payee, as the Lender shall determine. The Borrower will furnish
to the Lender from time to time such information as may be reasonably requested
as to such insurance. The Lender acknowledges that (i) no earthquake insurance
has been obtained with respect to any Hotel Facilities in California and (ii)
insurance maintained by the Operating Lessee in respect of any Hotel Facility
shall be sufficient for the purposes of this covenant provided that such
insurance complies with the terms of the Operating Lease relating thereto.
7.5. Preservation of Existence, Etc. The Borrower shall preserve and
------------------------------
maintain, and shall cause each of its Subsidiaries to preserve and maintain, its
existence (except as permitted under Section 8.5) and its rights (charter and
statutory) and franchises, except to the extent
59
that the failure to preserve and maintain such rights and/or franchises would
not have a Material Adverse Effect.
7.6. Access. The Borrower shall upon reasonable advance notice, at
------
any reasonable time and from time to time, permit the Lender, or any agents or
representatives of the Lender, to (a) examine and make copies of and abstracts
from the records and books of account of the Borrower and each of its
Subsidiaries, (b) visit the properties of the Borrower and each of its
Subsidiaries, (c) discuss the affairs, finances and accounts of the Borrower and
each of its Subsidiaries with any of their respective officers or directors, and
(d) communicate directly with the Borrower's independent certified public
accountants. The Borrower shall authorize its independent certified public
accountants to disclose to the Lender any and all financial statements and other
information of any kind, including, without limitation, copies of any management
letter, or the substance of any oral information that such accountants may have
with respect to the business, financial condition, results of operations or
other affairs of the Borrower or any of its Subsidiaries.
7.7. Keeping of Books. The Borrower shall keep, and shall cause each
----------------
of its Subsidiaries to keep, proper books of record and account, in accordance
with GAAP, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Borrower and each such
Subsidiary.
7.8. Maintenance of Properties, Etc. The Borrower shall maintain and
------------------------------
preserve, and shall cause each of its Subsidiaries and each Operator to maintain
and preserve, (i) all of its Hotel Facilities in good working order and
condition, and (ii) all rights, permits, licenses, approvals and privileges
(including, without limitation, all Permits) which are used or useful or
necessary in the conduct of its business, in the case of an Operator, with
respect to Hotel Facilities only; provided, however, that the Borrower shall not
-----------------
be deemed in default of this Section 7.8 if all such failures in the aggregate
have no Material Adverse Effect.
7.9. Performance and Compliance with Other Covenants. The Borrower
-----------------------------------------------
shall perform and comply with, and
60
shall cause each of its Subsidiaries to perform and comply with, each of the
covenants and agreements set forth in any Contractual Obligation to which it or
any of its Subsidiaries is a party; provided, however, that the Borrower shall
-----------------
not be deemed in default of this Section 7.9 if all such failures in the
aggregate have no Material Adverse Effect.
7.10. Application of Proceeds. The Borrower shall use the entire
-----------------------
amount of the proceeds of the Loans as provided in Section 5.18.
7.11. Financial Statements. The Borrower shall furnish to the
--------------------
Lender:
(a) as soon as available and in any event within 45 days after the
end of each Fiscal Quarter of each Fiscal Year (other than the last Fiscal
Quarter of such Fiscal Year), consolidated balance sheets of the Borrower and
its Subsidiaries as of the end of such quarter and consolidated statements of
income, retained earnings and cash flow of the Borrower and its Subsidiaries for
the period commencing at the end of the previous Fiscal Year and ending with the
end of such Fiscal Quarter, all prepared in conformity with GAAP and certified
by the chief financial officer of the Borrower as fairly presenting the
financial condition and results of operations of the Borrower and its
Subsidiaries at such date and for such period, subject to normal year-end audit
adjustments, together with (i) a certificate of said officer stating that no
Default or Event of Default has occurred and is continuing or, if a Default or
an Event of Default has occurred and is continuing, a statement as to the nature
thereof and the action which the Borrower proposes to take with respect thereto,
(ii) a schedule in form reasonably satisfactory to the Lender of the
computations used by the Borrower in determining compliance with all financial
covenants contained herein, and (iii) a written discussion and analysis by the
management of the Borrower of the financial statements furnished in respect of
such Fiscal Quarter;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such year and consolidated statements of income,
61
retained earnings and cash flow of the Borrower and its Subsidiaries for such
Fiscal Year, all prepared in conformity with GAAP and certified, in the case of
such consolidated financial statements, without qualification as to the scope of
the audit or as to the Borrower being a going concern by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or
other independent public accountants of recognized national standing, together
with (i) a certificate of such accounting firm stating that in the course of the
regular audit of the business of the Borrower and its Subsidiaries, which audit
was conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that a
Default or Event of Default has occurred and is continuing, or, if in the
opinion of such accounting firm, a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, (ii) a schedule in form
reasonably satisfactory to the Lender of the computations used by such
accountants in determining, as of the end of such Fiscal Year, the Borrower's
compliance with all financial covenants contained herein, and (iii) a written
discussion and analysis by the management of the Borrower of the financial
statements furnished in respect of such Fiscal Year;
(c) as soon as available and in any event within 60 days after the
end of each fiscal quarter of each fiscal year, in each case of any Operating
Lessee (other than the last fiscal quarter of such fiscal year) consolidated
balance sheets and statements of income and cash flow in respect of such
Operating Lessee for such fiscal quarter, all prepared in conformity with GAAP
and certified by the chief financial officer or chief accounting officer (or
such officer's authorized designee) of the Operating Lessee, duly authorized, as
fairly presenting the consolidated financial conditions and results of
operations of such Operating Lessee at such date and for such period, subject to
normal year-end adjustments, together with a certificate of said officer stating
that no Default or Event of Default has occurred and is continuing under the
relevant Operating Lease(s) (said certification, the "Financial Officer's
Certificate");
(d) as soon as available, and in any event within 105 days after the
end of each fiscal year of any Operating Lessee, consolidated balance sheets and
statements of
62
income, retained earnings and cash flow in respect of such Operating Lessee for
such fiscal year, all prepared in conformity with GAAP and certified without
qualification as to the scope of the audit by independent public accountants of
recognized national standing, together with a Financial Officer's Certificate;
(e) within thirty (30) days after the end of each Accounting Period
(as defined in the Management Agreement) or if there is no Management Agreement,
within thirty (30) days after the end of each calendar month, an unaudited
operating statement in respect of each Hotel Facility, including occupancy
percentages and average rate, accompanied by a Financial Officer's Certificate;
(f) promptly after the same are received by the Borrower, a copy of
each management letter provided to the Borrower by its independent certified
public accountants which refers in whole or in part to any inadequacy, defect,
problem, qualification or other lack of fully satisfactory accounting controls
utilized by the Borrower or any of its Subsidiaries or any Operating Lessee.
7.12. Reporting Requirements. The Borrower shall furnish to the
----------------------
Lender:
(a) prior to any Asset Sale, a notice (i) describing the assets being
sold and (ii) stating the estimated Asset Sales Proceeds in respect of such
Asset Sale;
(b) as soon as available and in any event within 30 days prior to the
end of each Fiscal Year, an annual budget of the Borrower and its Subsidiaries
for the succeeding Fiscal Year, displaying on a quarterly basis anticipated
balance sheets, forecasted Capital Expenditures, working capital requirements,
rent revenues, contributions by Operating Lessees to any FF&E Reserves, interest
income, net income, cash flow and sales, all on a consolidated basis;
(c) promptly and in any event within 30 days after the Borrower, any
of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any
ERISA Event has occurred, a written statement of the chief financial
63
officer or other appropriate officer of the Borrower describing such ERISA Event
or waiver request and the action, if any, which the Borrower, its Subsidiaries
and ERISA Affiliates propose to take with respect thereto and a copy of any
notice filed by or with the PBGC or the IRS pertaining thereto;
(d) promptly and in any event within 10 days after receipt thereof, a
copy of any adverse notice, determination letter, ruling or opinion the
Borrower, any of its Subsidiaries or any ERISA Affiliate receives from the PBGC,
DOL or IRS with respect to any Plan, other than those which, in the aggregate,
do not have any reasonable likelihood of resulting in a Material Adverse Change;
(e) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting the Borrower, any of its Subsidiaries or any Operator
(subject to the Borrower having received notice or knowledge thereof), except
those which in the aggregate, if adversely determined, would have no Material
Adverse Effect;
(f) promptly and in any event within five (5) Business Days after the
Borrower becomes aware of the existence of (i) any Default or Event of Default,
(ii) any breach or non-performance of, or any default under any Operating Lease,
Management Agreement, Advisory Agreement or any Contractual Obligation which is
material to the business, prospects, operations or financial condition of the
Borrower and its Subsidiaries taken as one enterprise, or (iii) any Material
Adverse Change or any event, development or other circumstance which has
reasonable likelihood of causing or resulting in a Material Adverse Change,
telephonic or telecopied notice in reasonable detail specifying the nature of
such Default, Event of Default, breach, non-performance, default, event,
development or circumstance, including, without limitation, the anticipated
effect thereof, which notice (if by telephone) shall be promptly confirmed in
writing within five days;
(g) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to its security holders generally, and copies
of all reports and registration statements which the Borrower or any of its
64
Subsidiaries files with the Securities and Exchange Commission or any national
securities exchange or the National Association of Securities Dealers, Inc.;
(h) upon the request of the Lender copies of all federal, state and
local tax returns and reports filed by the Borrower or any of its Subsidiaries
in respect of taxes measured by income (excluding sales, use and like taxes);
(i) promptly and in any event within five days of the Borrower or any
Subsidiary learning of any of the fol lowing, written notice to the Lender of
any of the following:
(i) the Release or threatened Release of any Hazardous Material on or
from any property owned, operated or leased by the Borrower of any of its
Subsidiaries and any written order, notice, permit, application or other
written communication or report received by the Borrower, any of its
Subsidiaries or any Operator in connection with or relating to any such
Release or threatened Release, unless such Release or threatened Release is
not reasonably likely to have a Material Adverse Effect;
(ii) any notice or claim to the effect that the Borrower, any of its
Subsidiaries or any Operator is or may be liable to any Person as a result
of the Release or threatened Release of any Hazardous Material into the
environment that could reasonably be expected to have a Material Adverse
Effect;
(iii) receipt by the Borrower, any of its Subsidiaries or any
Operator of notification that any real or personal property of the Borrower
or any of its Subsidiaries is subject to an Environmental Lien that could
reasonably be expected to have a Material Adverse Effect;
(iv) any Remedial Action taken by the Borrower, any of its
Subsidiaries or (if known to the Borrower) any Operator or any other Person
in response to any Hazardous Material on, under or about any real property
owned, operated or leased by the Borrower or any of its Subsidiaries,
unless such Remedial Action is
65
not reasonably likely to have a Material
Adverse Effect;
(v) receipt by the Borrower, any of its Subsidiaries or any Operator
of any notice of violation of, or knowledge by the Borrower, any of its
Subsidiaries or any Operator that there exists a condition which may result
in a violation by the Borrower, any of its Subsidiaries or any Operator of,
any Environmental Law, unless such violation is not reasonably likely to
have a Material Adverse Effect;
(vii) the commencement of any judicial or administrative proceeding
or investigation alleging a violation of any Environmental Law; or
(viii) any proposed acquisition of stock, assets or real property, or
any proposed leasing of property by the Borrower or any of its
Subsidiaries, unless such action is not reasonably likely to have a
Material Adverse Effect;
(j) upon written request by the Lender, a report providing an update
of the status of any Environmental Claim, Remedial Action or any other issue
identified in any notice or report required pursuant to this Section 7.12;
(k) promptly, such additional financial and other information
respecting the financial or other condition of any Operators, the Advisor or the
Borrower or any of its Subsidiaries or the status or condition of any real
property owned or leased by the Borrower or its Subsidiaries, or the operation
thereof which the Borrower is entitled to or can otherwise reasonably obtain, as
the Lender from time to time reasonably request; and
(l) such other information respecting the business, properties,
condition, financial or otherwise, or operations of the Borrower, any of its
Subsidiaries or any Operators as the Lender may from time to time reasonably
request.
7.13. Leases and Operating Leases. The Borrower shall provide the
---------------------------
Lender with a copy of each lease of real property to which the Borrower or any
Subsidiary of the
66
Borrower is then a party, whether as lessor or lessee. The Borrower shall, and
shall cause each of its Subsidiaries to, (i) comply in all material respects
with all of their respective obligations under all of their respective Leases
and Operating Leases now or hereafter held respectively by them with respect to
real property, including, without limitation, the Leases set forth in Schedule
5.22(b); (ii) not modify, amend, cancel, extend or otherwise change in any
materially adverse manner any of the terms, covenants or conditions of any such
Leases or Operating Leases; (iii) provide the Lender with a copy of each notice
of default under any Lease or Operating Leases received by the Borrower or any
Subsidiary of the Borrower immediately upon receipt thereof and deliver to the
Lender a copy of each notice of default sent by the Borrower or any Subsidiary
of the Borrower under any Operating Lease or Lease simultaneously with its
delivery of such notice under such Operating Lease or Lease; (iv) notify the
Lender, not later than 30 days prior to the date of the expiration of the term
of any Lease, of the Borrower's or any Subsidiary of the Borrower's intention
either to renew or to not renew any such Lease, and, if the Borrower or any
Subsidiary of the Borrower intends to renew such Lease, the terms and conditions
of such renewal; and (v) maintain each Operating Lease in full force and effect
in all material respects and enforce the material obligations of the Operating
Lessee thereunder, in a timely manner.
7.14. [Intentionally Omitted].
7.15. Employee Plans. For each Plan and any related trust hereafter
--------------
adopted or maintained by a Loan Party or any of its ERISA Affiliates intended to
qualify under Code Section 125, 401 or 501, the Borrower shall (i) seek, and
cause such of its ERISA Affiliates to seek, and receive determination letters
from the IRS to the effect that such plan is so qualified; and (ii) cause such
plan to be so qualified.
7.16. [Intentionally Omitted].
7.17. Fiscal Year. The Borrower shall maintain as its Fiscal Year
-----------
the twelve month period ending on December 31 of each year.
67
7.18. Environmental Matters. (a) The Borrower shall comply and
---------------------
shall cause each of its Subsidiaries and, with respect to Hotel Facilities only,
each Operator to comply in all material respects with all applicable
Environmental Laws currently or hereafter in effect.
(b) If the Lender at any time has a reasonable basis to believe that
there may be a material violation of any Environmental Law by Borrower any of
its Subsidiaries or any Operator related to any Hotel Facility, or real property
adjacent thereto, then Borrower agrees, upon request from the Lender, to provide
the Lender, at Borrower's expense, with such reports, certificates, engineering
studies or other written material or data as the Lender may reasonably require
so as to reasonably satisfy the Lender that Borrower or such Subsidiary or
Operator is in material compliance with all applicable Environmental Laws.
Furthermore, the Lender shall have the right upon prior notice (except in the
case of an emergency) to inspect during normal business hours any real property
owned, operated or leased by Borrower or any of its Subsidiaries if at any time
the Lender has a reasonable basis to believe that there may be such a material
violation of Environmental Law.
(c) The Borrower shall, and shall cause each of its Subsidiaries and,
with respect to Hotel Facilities only, each Operator to, take such Remedial
Action or other action as required by Environmental Laws, as any Governmental
Authority requires, except to the extent contested in good faith and by proper
proceedings, or as is appropriate and consistent with good business practice.
7.19. [Intentionally Omitted].
7.20. REIT Requirements. The Borrower shall operate its business at
-----------------
all times so as to satisfy all requirements necessary to qualify as a real
estate investment trust under Section 856 through 860 of the Code. The Borrower
will maintain adequate records so as to comply with all record-keeping
requirements relating to the qualification of the Borrower as a real estate
investment trust as required by the Code and applicable regulations of the
Department of the Treasury promulgated thereunder and will properly prepare and
timely file with the IRS all returns and reports required thereby. The Borrower
will
68
request from its shareholders all shareholder information required by the
Code and applicable regulations of the Department of Treasury promulgated
thereunder.
7.21. Maintenance of FF&E Reserves. The Borrower shall cause the
----------------------------
Operator to maintain FF&E Reserves in respect of each Hotel Facility, pursuant
to the terms of the Operating Lease and/or Management Agreement relating thereto
and shall direct the Operator to deliver to the Lender simultaneously with
delivery to the Borrower or its Subsidiaries, copies of any reports, statements
or other information required to be supplied to the Borrower or its Subsidiary
under any Operating Lease or Management Agreement for any Hotel Facility. The
Borrower shall not commingle, or permit the commingling of, other funds with the
funds in the FF&E Reserves except to the extent permitted by the Management
Agreement or Operating Lease, as applicable.
7.22. Further Assurances. At any time upon the request of the
------------------
Lender, the Borrower will, promptly and at its expense, execute, acknowledge and
deliver such further documents and do such other acts and things as the Lender
may reasonably request to provide for payment of the Loans made hereunder and
interest thereon in accordance with the terms of this Agreement.
7.23 Amendment to Management Agreement. The Borrower shall use all
---------------------------------
reasonable efforts to procure the following within three months of the date
hereof: (i) an amendment to the definition of "Qualified Loan" in any existing
Management Agreement and to any other applicable provisions of any existing
Management Agreement including, without limitation, Section 6.09 thereof, to the
effect that all and any Loans made pursuant to or outstanding under this
Agreement on and after the Collateralization Date, shall comply with the
requirements of such definition and that in the context of cross
collateralization of the Hotel Facilities that are Courtyard by Marriott Hotels,
the test for Qualified Loans shall be applied on a consolidated basis for all
such Hotel Facilities to be mortgaged as collateral for the Loans hereunder, and
(ii) a written and binding agreement from the Management Company that,
notwithstanding any provision to the contrary set forth in any Assignment
Agreement, if this Agreement shall be amended, modified or
supplemented without the prior written consent of the
69
Management Company, provided that all Loans made by the Lender hereunder comply
with the requirements for Qualified Loans, as the same are set forth in the
Management Agreement and may be amended pursuant to subparagraph (i) above, such
amendment, modification or supplement shall not disqualify the Loans from being
Qualified Loans and Lender shall remain entitled to the benefits of the
provisions of any existing Assignment Agreements and to the provisions of the
Management Agreement intended for the benefit of a Qualified Lender as such term
is defined in the Management Agreement.
ARTICLE VIII
NEGATIVE COVENANTS
As long as any of the Obligations or Commitment remain outstanding,
without the written consent of the Lender, the Borrower agrees with the Lender
that:
8.1. Liens, Etc. The Borrower shall not create or suffer to exist,
----------
and shall not permit any of its Subsidiaries to create or suffer to exist, any
Lien upon or with respect to any of its or such Subsidiary's properties, whether
now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income therefrom, except for the following and the
Lender hereby consents to the following liens notwithstanding the provisions of
any Negative Pledge Agreement:
(a) Liens created pursuant to the Loan Documents;
(b) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons
incurred by the Borrower or any of its Subsidiaries in the ordinary course
of business which secure its obligations to such Person; provided, however,
-----------------
that (i) the Borrower or such Subsidiary is not in default with respect to
such payment obligation to such Person, (ii) the Borrower or such
Subsidiary is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision is made for the payment
thereof, or
70
(iii) all such failures in the aggregate have no Material Adverse Effect;
(c) Liens (excluding Environmental Liens) securing taxes, assessments
or governmental charges or levies; provided, however, that (i) neither the
-----------------
Borrower nor any of its Subsidiaries is in default in respect of any
payment obligation with respect thereto unless the Borrower or such
Subsidiary is in good faith and by appropriate proceedings diligently
contesting such obligation and adequate provision is made for the payment
thereof, and (ii) all such failures in the aggregate have no Material
Adverse Effect;
(d) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or
use of the property or assets of the Borrower or any of its Subsidiaries or
impair, in any material manner, the use of such property for the purposes
for which such property is held by the Borrower or any such Subsidiary;
(e) Liens in favor of landlords securing operating leases permitted by
Section 8.3;
(f) Liens existing on the date of this Agreement and disclosed on
Schedule 8.1;
(g) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(h) Any attachment or judgment Lien not constituting an Event of
Default under Section 9.1(f);
(i) Any (i) interest or title of a lessor or sublessor under any
Capitalized Lease or any operating
71
lease not prohibited by this Agreement, (ii) restriction or encumbrance
that the interest or title of such lessor or sublessor may be subject to,
or (iii) subordination of the interest of the lessee or sublessee under
such lease to any restriction or encumbrance referred to in the preceding
clause (ii);
(j) Liens arising from filing UCC financing statements relating solely
to leases permitted by this Agreement;
(k) Deposits in the ordinary course of business to secure liabilities
to insurance carriers, lessors, utilities and other service providers;
(l) Purchase money security interests (including mortgages,
conditional sales, Capitalized Leases and any other title retention or
deferred purchase devices) in personal property of the Borrower or any of
its Subsidiaries in an amount not exceeding $200,000 in respect of each
Hotel Facility, existing or created at the time of acquisition thereof or
within 60 days thereafter.
(m) Any Lien securing the renewal, extension or refunding of any
Indebtedness or other Obligation secured by any Lien permitted by this
Section 8.1 provided that such renewal, extension or refunding is otherwise
permitted by this Agreement and the amount of such Indebtedness or other
Obligation secured by such Lien and the assets subject to such Lien are not
increased.
(n) Any Lien securing Indebtedness permitted pursuant to Section
8.2(v) and 8.2(vi).
8.2. Indebtedness. (a) The Borrower shall not create, incur or
------------
suffer to exist, or permit any of its Subsidiaries to create, incur or suffer to
exist, any Indebtedness, or incur, assume, endorse, be or become liable for, or
guarantee, directly or indirectly, or permit or suffer to exist, any Contingent
Obligation, except:
72
(i) Indebtedness and Contingent Obligations in respect of the
Obligations or evidenced by a Loan Document;
(ii) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or claims for labor, materials,
inventory, services, supplies and rentals incurred, or for goods or
services purchased, in the ordinary course of business consistent with the
past practice of the Borrower and its Subsidiaries;
(iii) Indebtedness of the Borrower consisting of fees and expenses
referred to in Section 4.1(n) and 4.2(f);
(iv) Indebtedness of the Borrower or any of its Subsidiaries under
Capital Financing Indebtedness in respect of each Hotel Facility in an
aggregate amount for such Hotel Facility not exceeding $200,000.00 at any
one time outstanding; and
(v) Indebtedness of the Borrower or any of its Subsidiaries
comprising pre-existing Indebtedness secured by Real Estate and any
personal property located thereon, which the Borrower or any of its
Subsidiaries assumes in connection with the acquisition of such Real
Estate, in an aggregate amount not exceeding $25,000,000.
(vi) Indebtedness of the Borrower or any of its Subsidiaries arising
pursuant to the Existing Facility.
(b) The Borrower shall not cancel, or permit any of its Subsidiaries
to cancel, any claim or Indebtedness owed to it except for adequate
consideration and in the ordinary course of business.
8.3. Lease Obligations. The Borrower shall not, and shall not permit
-----------------
any of its Subsidiaries to, become or remain liable as lessee or guarantor or
other surety with respect to any lease, whether an operating lease or a
Capitalized Lease, of any property (whether real or personal or mixed), whether
now owned or hereafter acquired, which (i) the Borrower or any of its
Subsidiaries has sold or
73
transferred or is to sell or transfer to any other Person, or (ii) the Borrower
or any of its Subsidiaries intends to use for substantially the same purposes as
any other property which has been or is to be sold or transferred by that entity
to any other Person in connection with such lease.
8.4. [Intentionally Omitted].
8.5. Mergers, Stock Issuances, Asset Sales, Etc. (a) The Borrower
------------------------------------------
shall not sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its assets or properties, and shall not, and shall not
permit any of its Subsidiaries to, (i) merge with any Person, or (ii)
consolidate with any Person other than (A) the merger of a Subsidiary of the
Borrower into a wholly-owned Subsidiary of the Borrower that is a Loan Party, or
(B) the merger of a wholly-owned Subsidiary of the Borrower into the Borrower.
(b) The Borrower shall not transfer, or permit any of its
Subsidiaries to issue or transfer, any Stock or Stock Equivalents of any
Subsidiary other than any such issuance or transfer (i) by a Subsidiary of the
Borrower to a wholly-owned Subsidiary of the Borrower that is a Loan Party or
(ii) by a wholly-owned Subsidiary of the Borrower to the Borrower.
(c) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset Sale
(other than an Asset Sale with respect to Mortgaged Properties as to which
subsection (d) below shall apply) without the prior written consent of the
Lender, such consent not to be unreasonably withheld or delayed.
(d) The Borrower shall not and shall not permit any of its
Subsidiaries to effect, enter into, consummate or suffer to exist any Asset Sale
with respect to any Mortgaged Property without (y) the prior written consent of
the Lender, such consent not to be unreasonably withheld or delayed, and (z)
prepayment of the Loans pursuant to Section 2.6(c).
74
In the event that an Asset Sale of a Mortgaged Property is entered
into in violation of any of the provisions of this Section 8.5(d), in addition
to the other rights and remedies of the Lender hereunder, the Borrower shall
forthwith prepay the Loans upon receipt by the Borrower of its Subsidiaries of
the Asset Sale Proceeds relating thereto, in an amount equal to such Asset Sale
Proceeds, together with accrued interest to the date of such prepayment on the
principal amount prepaid.
8.6. Investments. The Borrower shall not, directly or indirectly,
-----------
make or maintain, or permit any of its Subsidiaries to make or maintain, any
loan or advance to any Person or own, purchase or otherwise acquire, or permit
any of its Subsidiaries to own, purchase or otherwise acquire, any Stock, Stock
Equivalents, other equity interest, obligations or other securities of, or all
or substantially all of the assets of, any Person or all or substantially all of
the assets constituting the business of a division, branch or other unit
operation of any Person, or enter into any joint venture or partnership with, or
make or maintain, or permit any of its Subsidiaries to make or maintain, any
capital contribution to, or otherwise invest in, any Person or incorporate or
organize any Subsidiary which was not in existence on the Closing Date (any such
transaction being an "Investment"), except Investments consisting of (a) the
Stock of wholly-owned Subsidiaries of the Borrower, (b) cash equivalent
securities in the ordinary course of business or (c) the purchase of the
Approved Hotel Facilities.
8.7. Change in Nature of Business or Organizational Documents(a) The
--------------------------------------------------------
Borrower shall not make, and shall not permit any of its Subsidiaries to make,
any material change in the nature or conduct of its business as carried on at
the date hereof.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its declaration of trust, certificate of incorporation or
by-laws other than for amendments which in the aggregate have no Material
Adverse Effect.
8.8. Modification of Material Agreements. The Borrower shall not,
-----------------------------------
and shall not permit any of its
75
Subsidiaries to, (i) alter, rescind, terminate, amend, supplement, waive or
otherwise modify any provision of or permit any breach or default to exist under
the Advisory Agreement without the prior written consent of the Lender; or (ii)
alter, amend, modify, rescind, terminate, supplement or waive any of their
respective rights under, or fail to comply in all material respects with, any of
its material obligations arising under any Operating Lease or Management
Agreement; provided, however, that, with respect to any such failure to comply
-----------------
with any such obligations, the Borrower shall not be deemed in default of this
Section 8.8 if all such failures in the aggregate would have no Material Adverse
Effect; and provided, further, that in the event of any material breach or event
-----------------
of default by a Person other than the Borrower or any of its Subsidiaries, the
Borrower shall promptly notify the Lender of any such breach or event of default
and take all such action as may be reasonably necessary in order to endeavor to
avoid having such breach or event of default have a Material Adverse Effect.
8.9. Accounting Changes. The Borrower shall not make, nor permit any
------------------
of its Subsidiaries to make, any change in accounting treatment and reporting
practices or tax reporting treatment, except as required by GAAP or law and
disclosed to the Lender.
8.10. Transactions with Affiliates. The Borrower shall not, and
----------------------------
shall not permit any of its Subsidiaries, to enter into any transaction directly
or indirectly with or for the benefit of any Affiliate of the Borrower
(including, without limitation, employment contracts or contracts involving the
payment of management or consulting fees, guaranties and assumptions of
obligations of any such Affiliate) except for (A) transactions in the ordinary
course of business on a basis no less favorable to the Borrower or such
Subsidiary as would be obtained in a comparable arm's length transaction with a
Person not an Affiliate, and (B) salaries and other employee compensation and
benefits to officers or directors of the Borrower or any of its Subsidiaries
commensurate with current compensation and benefit levels.
8.11. Environmental Matters. (a) The Borrower shall not, and shall
---------------------
not permit any of its Subsidiaries or any Operator, or, to the extent
practicable, any other
76
Person to dispose of any Hazardous Material by placing it in or on the ground or
waters of any property owned, operated or leased by the Borrower or any of its
Subsidiaries, except as in compliance with all applicable Environmental Laws
currently and hereinafter in effect; provided, however, that the Borrower shall
-----------------
not be deemed in default of this provision if all such disposals in the
aggregate would have no Material Adverse Effect.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries or any Operator, or, to the extent practicable, any other Person
to, dispose or to arrange for the disposal of any Hazardous Material on any
property owned, operated or leased by any other Person, except as in compliance
with all applicable Environmental Laws currently and hereinafter in effect;
provided, however, that the Borrower shall not be deemed in default of this
-------- -------
provision if all such disposals in the aggregate would have no Material Adverse
Effect.
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. Each of the following events shall be an
-----------------
Event of Default:
(a) The Borrower shall fail to pay any principal (including, without
limitation, mandatory prepayments of principal) of, or interest on, any
Loan, any fee, any other amount due hereunder or under the other Loan
Documents or other of the Obligations when the same becomes due and
payable; or
(b) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or by any Loan Party (or any of its officers) in
writing in connection with any Loan Document shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Articles VI or VIII or in any Collateral
Document,
77
or (ii) any other term, covenant or agreement contained in this Agreement
or in any other Loan Document if such failure under this clause (ii) shall
remain unremedied for fifteen (15) days after the date on which written
notice thereof shall have been given to the Borrower by the Lender; or
(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness of such Loan Party
or Subsidiary (excluding Indebtedness evidenced by the Note) beyond the
period of grace (not to exceed 30 days), if any, with respect thereto
(whether the same becomes due and payable by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall become or be declared to be
due and payable, or any Loan Party or any of its Subsidiaries shall be
required to repurchase or offer to repurchase such Indebtedness, prior to
the stated maturity thereof; or
(e) Any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against
any Loan Party or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a custodian, receiver, trustee or other similar official for
it or for any substantial part of its property and, in the case of any such
proceedings instituted against any Loan Party or any of its Subsidiaries
(but not instituted by it), either such proceedings shall remain
undismissed or unstayed for a period of sixty (60) days or any of the
actions sought in such proceedings shall occur; or any
78
Loan Party or any of its Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (e); or
(f) One or more judgments or orders for the payment of money in an
aggregate amount in excess of $100,000 to the extent not fully covered by
insurance shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order, or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(g) An ERISA Event shall occur which, in the reasonable determination
of the Lender, is reasonably likely to have a Material Adverse Effect; or
(h) The Borrower or any of its Subsidiaries shall have entered into
any consent or settlement decree or agreement or similar arrangement with
an Governmental Authority or any judgment, order, decree or similar action
shall have been entered against the Borrower or any of its Subsidiaries or
any Operator, in any case based on or arising from the violation of or
pursuant to any Environmental Law, or the generation, storage,
transportation, treatment, disposal or Release of any Hazardous Material
and such judgment, order, decree or similar action is reasonably likely to
have a Material Adverse Effect; or
(i) Any material provision of any Collateral Document after delivery
thereof under Article IV shall for any reason cease to be valid and binding
on any Loan Party thereto, or any Loan Party shall so state in writing; or
(j) Any Collateral Document after delivery thereof pursuant to Article
IV shall, for any reason, cease to create a valid Lien on any of the
Collateral purported to be covered thereby or such Lien shall cease to be a
perfected and first priority Lien, or any Loan Party shall so state in
writing; or
79
(k) There shall occur a Material Adverse Change or an event which is
reasonable likely to have a Material Adverse Effect; or
(l) The Lender shall have determined in good faith, and shall have so
given notice to the Borrower, that the Borrower has at any time ceased to
be in a position to qualify, or has not qualified, as a real estate
investment trust for any of the purposes of the provisions of the Code
applicable to real estate investment trusts; provided that no Event of
Default under this subsection shall be deemed to have occurred and be
continuing if, within 10 days after notice of any such determination is
given to the Borrower, the Borrower shall have furnished the Lender with an
opinion of the Borrower's tax counsel (who shall be reasonably satisfactory
to the Lender) to the effect that the Borrower is then in a position to so
qualify, or has so qualified, as the case may be, which opinion shall not
contain any material qualification unsatisfactory to the Lender; or
(m) HRPT Advisors shall cease at any time to (A) hold beneficially and
of record at least 250,000 of the issued and outstanding common shares and
each other class of equity securities of the Borrower (adjusted for any
division, reclassification or stock dividend in respect of Common Shares),
or (B) hold the power to direct or cause the direction of the management
and policies of the Borrower; or
(n) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall cease at any time to
(A) hold beneficially and of record, in the aggregate, at least 51% of the
issued and outstanding common shares and each other class of equity
securities of HRPT Advisors (adjusted for any division, reclassification or
stock dividend in respect of Common Shares), or (B) hold the power to
direct or cause the direction of the management and policies of HRPT
Advisors; or
(o) HRPT Advisors shall cease to be the sole Advisor to Borrower
pursuant to and in accordance with the Advisory Agreement, without the
Lender's prior written consent or the Advisory Agreement shall be
80
materially amended, supplemented or modified without the Lender's prior
written consent; or
(p) Advisor shall default in the observance or performance of any
material provision of the Subordination Agreement; or
(q) Any Manager shall default in the observance or performance of any
material provision of a Management Agreement and such defaults, in the
aggregate, are reasonably likely to have a Material Adverse Effect; or
(r) Any Operating Lessee shall default in the observance or
performance of any material provision of an Operating Lease and such
defaults, in the aggregate, are reasonably likely to have a Material
Adverse Effect.
9.2. Remedies. If there shall occur and be continuing any Event of
--------
Default, the Lender (i) may by notice to the Borrower, declare the obligation of
the Lender to make Loans to be terminated, whereupon the same shall forthwith
terminate, and (ii) may by notice to the Borrower, declare the Loans, all
interest thereon and all other amounts and Obligations payable under this
Agreement to be forthwith due and payable, whereupon the Note, all such interest
and all such amounts and Obligations (to the extent permitted by applicable
law), shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that upon the occurrence of the Event
-----------------
of Default specified in subparagraph (e) above, (A) the obligation of the Lender
to make Loans shall automatically be terminated and (B) the Loans, all such
interest and all such amounts and Obligations shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower. In addition to the
remedies set forth above, the Lender may exercise any remedies provided for by
the Collateral Documents in accordance with the terms thereof or any other
remedies provided by applicable law.
81
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement nor consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Lender, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
10.2. Notices, Etc. All notices and other communications provided
------------
for hereunder shall be in writing (including, without limitation, telegraphic,
telex, telecopy or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered by hand.
If to the Borrower, at its address at:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
(telecopy number: ▇▇▇-▇▇▇-▇▇▇▇)
(telephone number: ▇▇▇-▇▇▇-▇▇▇▇);
with a copy to:
▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
(telecopy number: ▇▇▇-▇▇▇-▇▇▇▇)
(telephone number: ▇▇▇-▇▇▇-▇▇▇▇).
If to the Lender, at its address at
▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Director
(telecopy number: ▇▇▇-▇▇▇-▇▇▇▇)
(telephone number: ▇▇▇-▇▇▇-▇▇▇▇)
82
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(telecopy number: ▇▇▇-▇▇▇-▇▇▇▇)
(telephone number: ▇▇▇-▇▇▇-▇▇▇▇)
or, as to the Borrower or the Lender, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and communications shall, when mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective three (3) Business Days after being deposited
in the mails, delivered to the telegraph company, confirmed by telex answerback,
telecopied with confirmation of receipt, delivered to the cable company or
delivered by hand to the addressee, respectively, except that notices and
communications to the Lender pursuant to Article II shall not be effective until
received by the Lender.
10.3. No Waiver; Remedies. No failure on the part of the Lender to
-------------------
exercise, and no delay in exercising, any right hereunder or under any Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay
----------------------------
to the Lender or as the Lender may direct, on demand, all costs and expenses of
the Lender (including, without limitation, the fees and out-of-pocket expenses
of counsel, retained by the Lender) in connection with the modification,
amendment or enforcement (whether through negotiation, legal proceedings or
otherwise) of this Agreement and the other Loan Documents.
(b) The Borrower agrees to indemnify and hold harmless the Lender and
its Affiliates, and the directors, officers, employees, agents, attorneys,
consultants and advisors of or to any of the foregoing (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the
83
conditions set forth in Article IV) (each of the foregoing being an
"Indemnitee") from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements
and expenses of any kind or nature (including, without limitation, fees and
disbursements of counsel to any such Indemnitee and experts, engineers and
consultants and the costs of investigation and feasibility studies) which may be
imposed on, incurred by or asserted against any such Indemnitee in connection
with or arising out of any investigation, litigation or proceeding, whether or
not any such Indemnitee is a party thereto, whether direct, indirect, or
consequential and whether based on any federal, state or local law or other
statutory regulation, securities or commercial law or regulation, or under
common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of or based upon or attributable to this Agreement,
any other Loan Document, any document delivered hereunder or thereunder, any
Obligation, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) arising from any misrepresentation
or breach of warranty under Section 5.19 or any Environmental Claim or any
Environmental Lien or any Remedial Action arising out of or based upon anything
relating to real property owned, leased or operated by the Borrower or any of
its Subsidiaries and the facilities or operations (collectively, the
"Indemnified Matters"); provided, however, that the Borrower shall not have any
obligation under this Section 10.4(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of that Indemnitee, as determined by a court of competent jurisdic
tion in a final non-appealable judgment or order.
(c) If the Lender receives any payment of principal of any Loan other
than on the last day of an Interest Period relating to such Loan, as a result of
any payment made by the Borrower or acceleration of the maturity of the Note
pursuant to Section 9.2 or for any other reason, the Borrower shall, upon demand
by the Lender, pay to the Lender all amounts required to compensate the Lender
for any additional losses, costs or expenses which it may reasonably incur as a
result of such payment, including, without limitation, any loss (including,
without limitation, loss of anticipated profits), cost or expense incurred by
reason of
the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund or maintain such Loan.
(d) The Borrower shall indemnify the Lender for, and hold the Lender
harmless from and against, any and all claims for brokerage commissions, fees
and other compensation made against the Lender for any broker, finder or
consultant with respect to any agreement, arrangement or understanding made by
or on behalf of any Loan Party or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
(e) The Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including, without
limitation, pursuant to this Section 10.4) or any other Loan Document shall (i)
survive payment of the Obligations and (ii) inure to the benefit of any Person
who was at any time an Indemnitee under this Agreement or any other Loan
Document.
(f) The provisions of this Section 10.4 shall survive any termination
of this Agreement.
10.5. Right of Set-off. Upon the occurrence and during the
----------------
continuance of any Event of Default the Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all of the
Obligations now or hereafter existing whether or not the Lender shall have made
any demand under this Agreement or any Note or any other Loan Document and
although such Obligations may be unmatured. The Lender agrees promptly to
notify the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
-------- -------
validity of such set-off and application. The rights of the Lender under this
Section are in addition to the other rights and remedies (including, without
limitation, other rights of set-off) which the Lender may have.
10.6. Binding Effect. This Agreement shall become effective when it
--------------
shall have been executed by the
85
Borrower and the Lender and thereafter shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lender.
10.7. Assignments and Participations. (a) The Lender may sell,
------------------------------
transfer, negotiate or assign to one or more other financial institutions all or
a portion of its Commitment, the Loans owing to it and an interest in the Note
held by it and a commensurate portion of its rights and obligations hereunder
and under the other Loan Documents subject to the proviso to subparagraph (c)
below.
(b) The Lender may sell participations to one or more banks or other
Persons in or to all or a portion of its rights and obligations under the Loan
Documents (including, without limitation, all or a portion of the Commitment,
the Loans owing to it and the Note held by it). In the event of the sale of any
participation by the Lender, (i) the Lender's obligations under the Loan
Documents (including, without limitation, the Commitment) shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Lender shall remain
the holder of such Note and Obligations for all purposes of this Agreement, and
(iv) the Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement.
(c) Each participant shall be entitled to the benefits of Sections
2.10, 2.12 and 2.14 as if it were a Lender; provided, however, that anything
-------- -------
herein to the contrary notwithstanding, the Borrower shall not, at any time, be
obligated to pay to any participant of any interest of the Lender, under Section
2.10, 2.12 or 2.14, any sum in excess of the sum which the Borrower would have
been obligated to pay Lender in respect of such interest had such assignment not
been effected or had such participation not been sold.
(d) The Borrower shall cooperate with Lender, at no cost or expense
to the Borrower, and any other party to whom the Lender may assign or sell
participations (or
86
negotiate for such assignment or sale) in all or a portion of the Commitment,
the Loans owing to it and an interest in the Note. Such cooperation of the part
of the Borrower shall include but shall not be limited to the execution and
delivery of (i) amendments, modifications and/or supplements to one or more Loan
Documents, in form and substance as may be required by Lender, and (ii) the
execution and delivery of one or more additional promissory notes, at no cost or
expense to the Borrower; provided however, that such promissory notes,
----------------
amendments, modifications and/or supplements do not materially increase the
obligations of the Borrower or materially diminish the rights of the Borrower
under the Loan Documents.
10.8. Governing Law; Severability. This Agreement and the Note and
---------------------------
the rights and obligations of the parties hereto and thereto shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
10.9. Submission to Jurisdiction; Service of Process. (a) Any legal
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action or proceeding with respect to this Agreement or the Note or any document
related thereto may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The parties hereto hereby irrevocably waive any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of forum non conveniens, which any of them may now or
--------------------
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
(b) The Borrower irrevocably consents to the service of process of
any of the aforesaid courts in any such action or proceeding by the mailing of
copies thereof
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by registered or certified mail, postage prepaid, to the borrower at its address
provided herein.
(c) Nothing contained in this Section 10.9 shall affect the right of
the Lender or any holder of the Note to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction.
10.10. Section Titles. The Section titles contained in this
--------------
Agreement are and shall be without sub stantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
10.11. Execution in Counterparts. This Agreement may be executed in
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any number of counterparts and by differ ent parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
10.12. Entire Agreement. This Agreement, together with all of the
----------------
other Loan Documents and all certificates and documents delivered hereunder or
thereunder embody the entire agreement of the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof.
10.13. Confidentiality. The Lender agrees to keep information
---------------
obtained by it pursuant hereto and the other Loan Documents confidential in
accordance with the Lender's customary practices and agrees that it will only
use such information in connection with the transactions contemplated by this
Agreement and not disclose any of such information other than (i) to the
Lender's employees, representatives and agents who are or are expected to be
involved in the evaluation of such information in connection with the
transactions contemplated by this Agreement and who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to the Lender, as the case may be,
on a non-confidential basis from a source other than the Borrower, (iii) to the
extent disclosure is required by law, regulation or judicial order or requested
or required by bank regulators or auditors, or (iv) to assignees or
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participants or potential assignees or participants who agree to be bound by the
provisions of this sentence.
10.14. Waiver of Jury Trial. Each of the parties hereto waives any
--------------------
right it may have to trial by jury in respect of any litigation based on, or
arising out of, under or in connection with this Agreement or any other Loan
Document, or any course of conduct, course of dealing, verbal or written
statement or action of any party hereto.
10.15. NON-LIABILITY OF TRUSTEES. THE DECLARATION OF TRUST OF THE
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BORROWER, DATED MAY 12, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS
THERETO ("THE DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME
"HOSPITALITY PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION
COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO
TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE BORROWER SHALL BE HELD
TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM
AGAINST, THE BORROWER. ALL PERSONS DEALING WITH THE BORROWER, IN ANY WAY, SHALL
LOOK ONLY TO THE ASSETS OF THE BORROWER FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.
10.16. Securitization Opinions. In the event the Loans become the
-----------------------
subject of a securitization underwritten by the Lender or any of its Affiliates,
the Borrower shall, provided it receives at least fifteen (15) Business Days
written notice of the Lender's request therefor, deliver on or at any time after
the Collateralization Date, a 10(b)(5) opinion and a nonconsolidation opinion,
each at the Borrower's sole cost and expense, in form and substance and
delivered by counsel acceptable to the Lender and the Rating Agency, as may be
required by the Lender and/or the Rating Agency in connection with such
securitization. The Borrower shall undertake all actions (including structural
reorgani zation including, without limitation, transferring assets to a
special/single purpose and bankruptcy remote entity, if appropriate) necessary
to enable its counsel to issue the opinion. The Borrower's failure to deliver
the opinions required hereby or otherwise comply with the provisions of this
Section 10.16 and the following Sections 10.17 through 10.18, shall constitute
an "Event of Default" hereunder.
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10.17. Cooperation With Rating Agencies. The Borrower covenants and
--------------------------------
agrees that in the event the Lender decides to include the Loans as an asset of
a securitization effective on or at any time after the Collateralization Date,
the Borrower shall upon the Lender's written request (a) proceed to establish,
so as to be effective only on or at any time after the Conversion Date as the
Lender may require, a cash management system and escrow accounts as required by
the Rating Agencies or the Lender, whereby all revenues shall be deposited
directly into an account in the name of the Lender to pay real estate taxes,
insurance premiums, monthly debt service and capital improvement reserves, with
the excess being available to the Borrower for its use, (b) gather any
environmental or engineering information required by the Rating Agency in
connection with such a securitization, (c) at the Lender's request, meet with
representatives of the Rating Agency to discuss the business and operations of
the Mortgaged Properties, and (d) cooperate with the requests of the Lender or
the Rating Agency in connection with all of the foregoing.
10.18. Securitization Financials. The Borrower covenants and agrees
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that, upon the Lender's written request therefor in connection with a
securitization effective on or at any time after the Collateralization Date, in
which the Loans are to be included as an asset, the Borrower shall promptly
deliver audited financial statements and related documentation prepared by an
independent certified public accountant that satisfy securities laws and
requirements for use in a public registration statement (which may include up to
three (3) years of historical audited financial state ments). Notwithstanding
anything to the contrary in Sections 10.16, 10.17 and this Section 10.18, the
Lender agrees that the Loans shall not be included as an asset of a
securitization which is effective on or before the Final Maturity Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
HOSPITALITY PROPERTIES TRUST
By:
------------------------------
Name:
Title:
DLJ MORTGAGE CAPITAL, INC.
By:
------------------------------
Name:
Title:
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