Exhibit 10.n
LOAN AGREEMENT
by and between
COURTYARD BY MARRIOTT LIMITED PARTNERSHIP,
as Borrower,
and
▇▇▇▇▇▇ BROTHERS HOLDINGS INC.,
doing business as ▇▇▇▇▇▇ Capital, a
division of ▇▇▇▇▇▇ Brothers Holdings Inc.,
as Lender
Dated as of March 21, 1997
$325,000,000
TABLE OF CONTENTS
Page
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1. DEFINITIONS AND REFERENCES........................................................................2
1.1. Defined Terms.............................................................................2
1.2. Definitions Incorporated by Reference.....................................................23
1.3. Other Definitional Provisions.............................................................24
2. THE LOAN..........................................................................................24
2.1. Making the Loan...........................................................................24
2.2. Mortgage Note.............................................................................25
2.3. Use of Loan Proceeds......................................................................25
2.4. Payment of Principal and Interest.........................................................25
2.5. Prepayment Restrictions; Defeasance.......................................................28
2.6. Partial Release in Connection with a Casualty, Taking or Default before Defeasance Period.33
2.7. Partial Release after Defeasance Period...................................................34
2.8. Yield Maintenance.........................................................................35
2.8.1.................................................................................35
2.8.2.................................................................................35
3. REPRESENTATIONS AND WARRANTIES....................................................................36
3.1. Organization and Power of Borrower........................................................36
3.2. Due Authorization and Execution...........................................................37
3.3. No Consents Required; No Contravention....................................................37
3.4. Title to Properties.......................................................................38
3.5. Ground Leases.............................................................................38
3.6. Utilities.................................................................................39
3.7. No Violations.............................................................................40
3.8. Other Agreements..........................................................................40
3.9. Payment of Taxes..........................................................................40
3.10. Litigation...............................................................................41
3.11. Regulation U.............................................................................41
3.12. Investment Company Act...................................................................41
3.13. Transactions with Affiliates.............................................................41
3.14. Non-Subordination........................................................................42
3.15. Permits and Licenses.....................................................................42
3.16. Patents and Trademarks...................................................................42
3.17. Insurance................................................................................42
3.18. ERISA....................................................................................42
3.19. No Notice of Non-Compliance..............................................................42
3.20. Compliance With Laws.....................................................................43
3.21. Compliance with Environmental Laws.......................................................43
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3.22. Environmental Indemnification by Borrower................................................43
3.23. Concerning Mortgaged Properties; Financial Statements....................................43
3.24. Access...................................................................................44
3.25. No Liens.................................................................................44
3.26. Accuracy of Information..................................................................45
3.27. Mortgages and Security Interests.........................................................45
3.28. Assignments of Leases and Rents..........................................................45
3.29. Foreign Person...........................................................................46
3.30. No Defaults..............................................................................46
3.31. No Fraudulent Conveyance.................................................................46
4. CLOSING; CONDITIONS PRECEDENT.....................................................................46
4.1. Representations, Warranties and Covenants.................................................46
4.2. Borrower's Actions........................................................................47
4.3. Delivery of Documents.....................................................................47
4.3.1.................................................................................47
4.3.2.................................................................................47
4.3.3.................................................................................48
4.3.4.................................................................................48
4.3.5.................................................................................48
4.3.6.................................................................................48
4.3.7.................................................................................49
4.3.8.................................................................................49
4.3.9.................................................................................49
4.3.10................................................................................49
4.3.11................................................................................50
4.3.12................................................................................50
4.3.13................................................................................50
4.3.14................................................................................51
4.3.15................................................................................51
4.3.16................................................................................51
4.3.17................................................................................51
4.3.18................................................................................51
4.4. Evidence of Authorization; Related Documents..............................................51
4.4.1.................................................................................51
4.4.2.................................................................................51
4.4.3.................................................................................52
4.5. Closing Certificate.......................................................................52
4.6. Management Agreement......................................................................52
4.7. Existing Debt.............................................................................52
4.8. Payment of Lender Costs and Origination Fee...............................................52
4.9. FF&E Reserve Account......................................................................52
4.10. General Partner Organizational Documents.................................................53
5. AFFIRMATIVE COVENANTS.............................................................................53
5.1. Timely Payment of Amounts Due.............................................................53
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5.2. Proceeds of the Loan......................................................................53
5.3. Management Agreement; Ground Leases.......................................................53
5.4. Financial and Other Information...........................................................56
5.4.1. Quarterly Financial Statements.................................................56
5.4.2. Borrower's Annual Financial Statements.........................................56
5.4.3. Budgets........................................................................57
5.4.4. Hotel Operating Statistics.....................................................57
5.4.5. Certificates Regarding Defaults................................................58
5.4.6. Proposed Amendments to Partnership Agreement...................................58
5.4.7. Environmental Conditions.......................................................58
5.4.8. Evidence of Tax Payments.......................................................58
5.4.9. Change in MII Cash Management Conditions.......................................58
5.5. Maintenance of Existence, Etc.............................................................58
5.6. Compliance with Applicable Laws...........................................................59
5.7. Maintenance of Books; Inspection of Properties and Books..................................59
5.8. Notice of Litigation; Disputes............................................................59
5.9. Mortgaged Property Operations; Maintenance................................................60
5.10. Separate Existence.......................................................................60
5.11. Cash Management..........................................................................61
5.12. Independent Director.....................................................................62
6. NEGATIVE COVENANTS................................................................................62
6.1. Limitation on Indebtedness................................................................62
6.2. Limitation on Liens.......................................................................62
6.3. Merger or Consolidation; Permitted Reorganization.........................................63
6.4. Single Purpose............................................................................68
6.5. Amendments to Agreements..................................................................69
6.5.1.................................................................................69
6.5.2.................................................................................69
6.6. Distributions.............................................................................69
6.7. Permitted Transfers.......................................................................70
7. EVENTS OF DEFAULT.................................................................................70
7.1. Default; an Event of Default..............................................................70
7.1.1.................................................................................70
7.1.2.................................................................................70
7.1.3.................................................................................70
7.1.4.................................................................................71
7.1.5.................................................................................71
7.1.6.................................................................................71
7.1.7.................................................................................71
7.1.8.................................................................................72
7.1.9.................................................................................73
7.1.10................................................................................73
7.1.11................................................................................73
7.1.12................................................................................73
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7.1.13................................................................................73
7.1.14................................................................................73
7.1.15................................................................................74
7.2. Remedies..................................................................................74
7.2.1.................................................................................74
7.2.2.................................................................................74
7.2.3.................................................................................74
7.2.4.................................................................................75
7.3. Remedies Cumulative.......................................................................75
7.4. Default Interest..........................................................................75
7.5. Default Indemnity.........................................................................75
8. INSURANCE.........................................................................................76
8.1. Maintenance of Insurance..................................................................76
8.2. Payment and Application of Insurance Proceeds.............................................76
8.3. Earthquake Insurance......................................................................76
8.4. Environmental Insurance...................................................................77
9. SECURITIZATION....................................................................................78
9.1. Securitization............................................................................78
9.2. No Assignment by Borrower.................................................................79
9.3. Method of Payment.........................................................................79
10. ASSIGNMENT AND PARTICIPATION.....................................................................79
11. MISCELLANEOUS....................................................................................79
11.1. Limitation on Liability..................................................................79
11.2. Entire Agreement, Amendments.............................................................80
11.3. Notices..................................................................................81
11.4. No Waiver; Cumulative Remedies...........................................................82
11.5. Waiver of Jury Trial.....................................................................82
11.6. Governing Law; Consent to Jurisdiction...................................................82
11.7. Payment of Expenses......................................................................83
11.7.1. ..............................................................................83
11.7.2. ..............................................................................83
11.8. Severability.............................................................................83
11.9. Gender, Etc..............................................................................84
11.10. Headings................................................................................84
11.11. Counterparts; Facsimiles................................................................84
11.12. No Third Party Beneficiary..............................................................84
11.13. No Liability of Lender..................................................................84
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LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of March 21,
1997, by and between COURTYARD BY MARRIOTT LIMITED PARTNERSHIP, a Delaware
limited partnership having its principal office at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower" or the "Borrower"), and ▇▇▇▇▇▇ BROTHERS
HOLDINGS INC., a Delaware corporation, doing business as Lehman Capital, a
division of ▇▇▇▇▇▇ Brothers Holdings Inc., having its principal office at 3
World Financial Center, New York, New York 10285 ("Lender" or the "Lender").
WHEREAS, the Borrower has requested the Lender to make a loan (the
"Loan") to the Borrower, and the Lender has agreed to make the Loan to the
Borrower, for the purposes and on the terms and conditions described herein;
WHEREAS, the Loan is evidenced by that certain Mortgage Note dated as
of the date hereof by the Borrower to the order of the Lender and its successors
and assigns in the principal amount of Three Hundred Twenty-Five Million and
No/100 Dollars ($325,000,000), which is to be secured by, among other things,
first-priority liens on the Borrower's assets, consisting primarily of 50
Courtyard by Marriott Hotels and related assets;
WHEREAS, the parties hereto desire to set forth their agreement
regarding the making of the Loan and the terms and conditions upon which the
Loan shall be made and repaid;
WHEREAS, without limiting any other rights that the Lender has to
assign the Mortgage Note and the other Loan Documents (as hereinafter defined),
the Lender may assign the Mortgage Note and the other Loan Documents, together
with mortgage loans made to other borrowers, to, among others, a Trustee (as
hereinafter defined) for the benefit of the Holders (as hereinafter defined),
who may appoint a Servicer (as hereinafter defined) and, following such
assignment, all rights of the Lender hereunder will inure to the benefit of the
Trustee, for the benefit of the Trust (as hereinafter defined), and to the
Servicer, on behalf of the Trustee, and the term "Lender" as used herein, shall,
following such assignment, include the Trustee and the Servicer, on behalf of
the Trustee; and
WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in Section 1.1 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS AND REFERENCES
1.1. Defined Terms
Unless the context otherwise requires, capitalized terms used herein
shall have the respective meanings specified in this Section 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined).
"Account" means any Local Account, the Manager's Account, any Lockbox
Account, the FF&E Reserve Account, the Cash Collateral Account, the Operating
Account, or any subaccount of any of them, as described in the Cash Management
Procedures attached as Schedule 5.11 hereto.
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"Accounting Period" means (a) initially, each accounting period of
four consecutive weeks having the same beginning and ending dates as the
Manager's corresponding four week accounting periods, except that the last
Accounting Period in a Fiscal Year may be longer than four consecutive weeks
when and to the extent necessary to conform the accounting system to the
Manager's Fiscal Year or to the calendar year, or (b) if the accounting year on
the basis of which the Mortgaged Properties are operated is changed to a
calendar year or a conventional 365-day fiscal year, "Accounting Period" shall
mean each calendar month in such calendar or fiscal year.
"Accounting Quarter" means (a) initially, three (or, in the case of
the last Accounting Quarter in any Fiscal Year, four) consecutive Accounting
Periods, ending on the last day of the third, sixth, ninth and last Accounting
Periods in each Fiscal Year, or (b) if the accounting year on the basis of which
the Mortgaged Properties are operated is changed to a calendar year or a
conventional 365-day fiscal year, "Accounting Quarter" shall mean each of the
fiscal quarters in such calendar or fiscal year (i.e., there shall be four
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consecutive Accounting Quarters of three months each).
"Adjusted Interest Rate" means the rate determined on the Scheduled
Maturity Date as the greater of (i) 9.865% and (ii) the sum of (A) two
percentage points (2%) and (B) the average, calculated by linear interpolation
(rounded to three decimal places), of the yields of the United States Treasury
Constant Maturities with the terms (one longer and one shorter) most nearly
approximating those of U.S. Obligations having maturities as close as possible
to the fifteenth anniversary of the Scheduled Maturity Date, as determined by
the Lender on the basis of Federal Reserve Statistical Release H.15-Selected
Interest rates under the heading U.S. Governmental Security/Treasury Constant
Maturities, or such other recognized source of financial market information as
may reasonably be selected by the Lender, in each case on the last Business Day
of the week immediately prior to the Scheduled Maturity Date.
"Adjusted Operating Expenses" means, for any Reference Period, all
Deductions (as such term is defined in the Management Agreement) incurred or
accrued in the operation of the Mortgaged Properties during such Reference
Period; provided that Adjusted Operating Expenses shall not include any
Subordinated Obligations.
"Affiliate" means, as to any Person, (a) any Person directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding
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equity securities as to the Person in question; (b) any Person ten percent (10%)
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by the Person in question; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the Person in question; (d) if the Person in question is a corporation or
limited liability company, any executive officer, director, member or manager of
the Person in question or of any corporation or limited liability company
directly or indirectly controlling, controlled by, or under common control with
the Person in question; and (e) if the Person in question is a partnership, any
general partner of such partnership. As used in this definition of "Affiliate,"
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Loan Agreement, as it may be amended,
supplemented or modified from time to time.
"Allocated Loan Amount" means the portion of the Loan that is
allocated to a particular Mortgaged Property, as set forth on Schedule 2.4.1
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hereof.
"Assignments of Leases and Rents" means those certain Assignments of
Leases and Rents dated as of the date hereof made by Borrower to the Lender with
respect to each Hotel.
"Authorized Accounting Officer" means the officer of the General
Partner who has primary responsibility for accounting matters, or one of his or
her duly authorized representatives who, as set forth in a written notice of
such officer to the Lender, is duly authorized to act on behalf of such officer
in connection with this Agreement and the other Loan Documents.
"Award" has the meaning ascribed to it in any applicable Mortgage or
Mortgages.
"Bank Debt" has the meaning ascribed to it in Section 2.3(a) hereof.
"Bankruptcy Law" means title 11, United States Code, or any similar
federal, state or foreign law for the relief of creditors.
"Base Rate" means 7.865% per annum.
"Base Rate Interest" means interest on the Mortgage Note at the Base
Rate.
"Borrower" means (a) Courtyard by Marriott Limited Partnership, a
Delaware limited partnership, or (b) any Person that acquires the Hotels and
succeeds to or assumes the obligations of Courtyard by Marriott Limited
Partnership hereunder and under the other Loan Documents pursuant to a Permitted
Reorganization.
"Borrower Documents" has the meaning ascribed to it in Section 3.26
hereof.
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"Business Day" means a day other than (i) a Saturday or a Sunday or
(ii) a day on which federally insured depository institutions in New York State
are required or authorized by law, governmental decree or executive order to be
closed.
"CBMLP" means Courtyard by Marriott Limited Partnership, a Delaware
limited partnership.
"CBM One" means CBM One Corporation, a Delaware corporation that is a
wholly owned subsidiary of Host Marriott and is the general partner of Borrower.
"CPI Percentage" means, for any Fiscal Year, the percentage by which
the "Consumer Price Index for All Urban Consumers (CPI-U); U.S. City Average,
1982-84 = 100, All Items" (or appropriate substitute index if such index is no
longer published) (the "CPI") for December of the preceding Fiscal Year exceeds
the CPI for December 1996.
"Cash Collateral Account" has the meaning specified in Section 4 of
the Cash Management Procedures attached as Schedule 5.11 hereto.
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"Cash Management Procedures" means the provisions of Schedule 5.11
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hereto.
"Casualty" has the meaning ascribed to it in any applicable Mortgage.
"Certificates" has the meaning ascribed to it in Section 9.1 hereof.
"Closing" has the meaning ascribed to it in the first paragraph of
Section 4 hereof.
"Closing Date" means March 21, 1997.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute of similar import, and the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections and all related regulations.
"Collateral" means the "Property" (as defined in each of the
Mortgages, whether individually or taken as a group, as the context may
require), together with such other collateral or property as may be pledged,
liened or encumbered from time to time as security for the Loan under any other
Security Documents.
"Collateral Assignment of Management Agreement" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement, dated
as of the Closing Date, by and among the Borrower, the Manager, and the Lender
in favor of the Lender.
"Consolidated DSCR" means the ratio of (x) the Net Operating Income
for the applicable Reference Period to (y) the aggregate amount of principal and
interest scheduled to be payable on the Mortgage Note during such Reference
Period and on any
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existing or proposed Parent Debt during the 13 full Accounting Periods next
following the date of determination.
"Consolidated Loan to Value Ratio" means the ratio of (x) the sum of
the aggregate principal balance of the Mortgage Note and any existing Parent
Debt or proposed Parent Debt on the date of determination divided by (y) the
aggregate appraised values of the Mortgaged Properties as of a date no more than
12 months prior to the date of determination, which appraisals shall be prepared
on a basis that assumes the Borrower holds a fee simple estate in all Mortgage
Properties that are subject to a Marriott Ground Lease, and shall be reviewed by
an MAI appraiser from a nationally recognized appraisal firm with at least
fifteen years experience appraising similar type properties and otherwise
reasonably acceptable to the Lender, and certified by such MAI appraiser as
having been prepared in accordance with the requirements of the Standards of
Professional Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation.
"Cooperation Agreement" means that certain Cooperation Agreement dated
as of the Closing Date, by and among the Borrower, Host Marriott, the Manager
and the Lender.
"DCR" means Duff & ▇▇▇▇▇▇ Credit Rating Co.
"Debt" means the obligations of the Borrower under the Loan Documents,
together with all interest thereon, and all other sums, including, without
limitation, fees, expenses, commissions, premiums and indemnities, which may or
shall become due under any of the Loan Documents, including the costs and
expenses of enforcing any provision of the Loan Documents that may be
reimbursable hereunder.
"Debt Service Period" means the period commencing on (and including)
the tenth (10th) day of each calendar month (or with respect to the first Debt
Service Period, the period commencing on (and including) the Closing Date) and
ending on (and excluding) the tenth (10th) day of the next succeeding calendar
month.
"Debt Service Release Conditions" means, with respect to any proposed
Release, the following conditions:
(1) If the Post-Release DSCR for the Reference Period applicable to
the proposed Release is less than 2.60:1, the Post-Release DSCR
for the Reference Period applicable to the proposed Release
cannot be less than the greater of (a) 1.935:1 and (b) the Pre-
Release DSCR for such Reference Period; or
(2) If the Post-Release DSCR for the Reference Period applicable to
the proposed Release is greater than or equal to 2.60:1, the
following conditions are satisfied:
(x) the Pre-Release DSCR with respect to the proposed Release
shall not have exceeded the Post-Release DSCR with respect
to the proposed Release by more than .05:1; and
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(y) (i) the sum of the Pre-Release DSCRs with respect to the
proposed Release and the respective Pre-Release DSCRs with
respect to each Prior Reference Period Release during the
Reference Period applicable to the proposed Release shall
not have exceeded (ii) the sum of the Post-Release DSCR with
respect to the proposed Release and the respective Post-
Release DSCRs with respect to each Prior Reference Period
Release by more than .05:1.
In connection with any Release, the Borrower shall perform the foregoing
calculations and provide the Lender with a certificate that the applicable
conditions are satisfied.
"Default" has the meaning ascribed to it in Section 7.1 hereof.
"Default Interest" means (i) interest accruing on any overdue
principal amount of the Mortgage Note at a rate per annum equal to the
difference between the Default Interest Rate minus the Interest Rate, and (ii)
interest accruing on any overdue interest and any other overdue payments under
any Loan Documents at the Default Interest Rate.
"Default Interest Rate" has the meaning ascribed to it in Section 7.4
hereof.
"Defeasance Collateral" has the meaning ascribed to it in Section
2.5(a)(iv)(A) hereof.
"Defeasance Deposit" has the meaning ascribed to it in Section 2.5(g)
hereof.
"Defeasance Period" has the meaning ascribed to it in Section 2.5(a)
hereof.
"Defeasance Security Agreement" has the meaning ascribed to it in
Section 2.5(a)(iv)(A) hereof.
"Defeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) hereof.
"Deferred Incentive Management Fees" means the unpaid balance from
time to time of the Deferred Incentive Management Fees (as defined in the
Management Agreement) following any payments thereof to the Manager pursuant to
Section 5.02 of the Management Agreement; such fees (before payment of the
amount described in Section 2.3(b) hereof) total $6,500,000 as of the Closing
Date.
"Deferred Interest" means the difference between (i) interest accrued
and unpaid on the Mortgage Note (other than any Defeased Note if such Defeased
Note is prepaid in full within ten (10) business days after the Scheduled
Maturity Date) calculated at the Adjusted Interest Rate and (ii) interest paid
on the Mortgage Note (other than any Defeased Note if such Defeased Note is
prepaid in full within ten (10) business days after the Scheduled Maturity Date)
at the Base Rate.
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"Due Date" means the tenth (10th) day of each calendar month, or, if
in any calendar month the tenth (10th) day is not a Business Day, the Business
Day immediately preceding the tenth (10th) day.
"ERISA" means the Employee Retirement Income Security Act of 1974
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, or modified from time to time.
"ERISA Affiliate" means any trade or business under common control (as
it is defined in Section 414(b) or 414(c) of the Code or Section 4001(b)(1) of
ERISA) with Borrower.
"Earthquake Casualty Reserve Account" has the meaning ascribed to it
in Section 8.3 hereof.
"Election" has the meaning ascribed to it in Section 5.3 hereof.
"Eligible Account" means either (i) an account maintained with a
federal or state chartered depository institution or trust company, (a) if the
funds therein are to be retained for more than 40 days, the long-term unsecured
debt obligations of which (or, in the case of a depository institution or trust
company that is the principal subsidiary of a holding company, the long-term
unsecured debt obligations of the holding company of which) are rated by each
Rating Agency in one of its two highest rating categories (or such other ratings
as will not result in the rating of any of the Certificates being reduced below
their respective ratings on the date determination is to be made and as to which
the Rating Agencies may otherwise agree) at the time of the deposit therein, or
(b) if the funds therein are to be retained for less than 40 days, the short-
term unsecured debt obligations of such depository institution or trust company
(or, in the case of a depository institution or trust company that is the
principal subsidiary of a holding company, the long-term unsecured debt
obligations of the holding company of which), as the case may be, are rated not
lower than A-1+ by the applicable Rating Agencies, or (ii) a segregated trust
account maintained with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary capacity
provided that such account is subject to fiduciary funds on deposit regulations
(or internal guidelines) substantially similar to 12 C.F.R. (S)9.10(b), or (iii)
an account in any other insured depository institution reasonably acceptable to
the Lender, so long as prior to the establishment of an account in any such
other depository institution each of the Rating Agencies shall have delivered a
Rating Comfort Letter with respect thereto.
"Engineering Surveys" means those reports of recent date prior to the
Closing Date prepared by Building Evaluation Services & Technology, Inc.
concerning the physical condition of the Hotels.
"Environmental Indemnity Agreement" means the Environmental Indemnity
Agreement, dated as of the date hereof among the Borrower, the General Partner
and the Lender.
"Environmental Laws" has the meaning ascribed to it in the definition
of "Hazardous Materials" herein.
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"Event of Default" has the meaning ascribed to it in Section 7.1
hereof.
"Excess Cash Flow" means, for any Accounting Period, the difference
between (i) Net Operating Income and (ii) the sum of (A) the Monthly Debt
Service Payments, (B) other Debt then due and payable to the Lender pursuant to
this Agreement or any of the other Loan Documents (other than Default Interest,
Deferred Interest and payments required under Section 2.4.4(d) hereof), and (C)
to the extent not duplicative of the foregoing, withdrawals from the Cash
Collateral Account applied for the purposes set forth in clauses (B) through (N)
of Section 4.4 of the Cash Management Procedures or, if Section 6.10 of the Cash
Management Procedures is applicable, clauses (B) through (M) thereof.
"FF&E" means (i) furniture, fixtures, furnishings and equipment and
(ii) FF&E Replacements.
"FF&E Replacements" has the meaning ascribed to such term in the
Management Agreement and, to the extent agreed by the Manager, also includes
alterations (including major repairs), improvements, renewals, and replacements
to the structural, mechanical, electrical, heating, ventilating, air
conditioning, plumbing, and vertical transportation elements of a Hotel.
"FF&E Reserve Account" has the meaning specified in Section 7 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
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"FF&E Reserve Contribution" means the contribution required to be made
pursuant to Section 8.02 of the Management Agreement.
"Final Maturity Date" means April 10, 2017.
"Financial Statements" means the financial statements of the Borrower
furnished to the Lender from time to time pursuant to Section 5.4 hereof.
"Fiscal Year" means the period beginning January 1 of each year
through and including December 31 of such year; provided, however, that, for
purposes of calculating (a) any amount attributable to any Reference Period or
(b) other amounts calculated with reference to the fiscal accounting periods of
the Manager, "Fiscal Year" shall mean the fiscal year of the Manager, as defined
in the Management Agreement.
"Fixed Asset Supplies" means supply items, including linen, china,
glassware, tableware and similar items relating to the Mortgaged Properties.
"Force Majeure" means acts of God, acts of war, civil disturbance, or
governmental action, excluding any casualty customarily covered by insurance.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application as to which Borrower's
independent certified public accountants concur), both as to classification of
items and amounts, within any applicable period and as to prior periods.
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"GP Certificate" means the Restated Certificate of Incorporation of
CBM One.
"General Partner" means CBM One, in its capacity as general partner of
the Borrower, or a Person that becomes the general partner of the Borrower in
connection with a Permitted Reorganization (or the managing member of the
Borrower, if the Borrower is a limited liability company following such
Permitted Reorganization) and enters into the Joinder By General Partner
included following the signature pages of this Agreement.
"Governmental Authority" means any nation, government, state, or
political subdivision of any thereof, including any court or any other entity
exercising executive, legislative, regulatory, judicial, or administrative
functions of, or pertaining to, government.
"Gross Revenues" means with respect to a Mortgaged Property or
Mortgaged Properties, for any period, all revenue and income of any kind derived
from the Mortgaged Property or Mortgaged Properties and all departments and
parts thereof, including rentals or other payments from lessees, licensees, or
concessionaires in the Mortgaged Property or Mortgaged Properties (but not
including gross receipts of any such lessees, licenses, or concessionaires
except as may be received by or on behalf of the Borrower as rent), the proceeds
of business interruption insurance and telephone, food and beverage charges, all
determined in accordance with GAAP, excluding all refunds, rebates, discounts,
and credits of a similar nature, given, paid, or returned by the Borrower or the
Manager in the course of obtaining such revenue and income. Nevertheless, any
amounts received, recognized, or realized in the nature of the following shall
not be included as Gross Revenues: (i) applicable sales, use, and excise taxes
or similar governmental charges collected directly from patrons or guests, or as
part of the sales price of any goods, services, or displays (including
occupancy, gross receipts, admission, cabaret, or similar or equivalent taxes);
(ii) gratuities; (iii) Net Sales Proceeds; and (iv) interest earned on any
reserves, including, without limitation, the FF&E Reserve Account.
"Ground Leases" means the leases of Land on which 32 of the Mortgaged
Properties (and a portion of one other Mortgaged Property) are located (31 of
which are Marriott Ground Leases), which ground leases are more fully described
on Schedule B attached hereto and incorporated herein, as the same may be
----------
amended or extended from time to time in accordance with the terms hereof.
"Ground Lease Rental Subordination Agreement" means the Marriott
Ground Lease Rental Subordination Agreement, dated as of the Closing Date, by
the Marriott Ground Lessors in favor of the Lender.
"Ground Lessor" means a Third Party Ground Lessor or a Marriott Ground
Lessor.
"Hazardous Materials" means any substances, materials, or wastes,
whether solids, liquids or gases, that are defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
substantially similar designations in, or otherwise subject to regulation under,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, ("CERCLA"), as
-9-
amended by the Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), 42
U.S.C. (S) 9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. (S)
2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1802 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 9601 et
seq.; the Clean Water Act ("CWA"), 33 U.S.C. (S) 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. (S) 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. (S)
7401 et seq.; or other applicable Laws pertaining to the regulation of
hazardous, toxic or dangerous materials or wastes or the protection of the
environment, including any plans, rules, regulations, orders or ordinances
adopted, or other criteria and guidelines promulgated, pursuant to such laws,
whether now or hereafter in effect (collectively referred to herein as
"Environmental Laws"). Hazardous Materials includes, but is not limited to,
polychlorinated biphenyls (PCBs), petroleum and petroleum products and
byproducts, and asbestos.
"High Yield Lender" means one or more institutional lenders or issuers
of debt securities, including, without limitation, a trustee on behalf of
holders of debt securities, that advance Parent Debt.
"Holders" means the holders of record from time to time of the
Certificates.
"Host Marriott" means Host Marriott Corporation, a Delaware
corporation and the corporate parent of CBM One.
"Hotel" means the hotel operated on any one of the Mortgaged
Properties (or each of them, as the context may require) and "Hotels" means any
two or more of the Mortgaged Properties (or all of them, as the context may
require).
"Improvements" means all buildings, structures, paving, sidewalks,
parking areas, curbing, landscaping, signage, lighting, utilities and other
improvements from time to time located on all or any part of the Land
(including, without limitation, the buildings that are operated as the Hotels),
and any modifications, additions, restorations or replacements of the whole or
any part thereof.
"Impositions" has the meaning ascribed to it in the Mortgages.
"Incentive Management Fees" means the fees designated as "Incentive
Management Fees" under the Management Agreement.
"Indebtedness" of any Person means (a) any liabilities and obligations
of such Person, contingent or otherwise, (i) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures, or similar instruments, (iii) representing the balance deferred and
unpaid of the purchase price of any property or services, except those incurred
in the ordinary course of such Person's business that would constitute
ordinarily a trade payable to trade creditors, (iv) representing the
Subordinated Obligations that remain unpaid, (v) evidenced by bankers'
acceptances, (vi) for the payment of money relating to a capitalized lease
obligation or sale/leaseback obligation (but excluding any obligations under any
Ground Lease in existence on the Closing Date that may be a capitalized lease
obligation), or (vii) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit or (b) any
liabilities and obligations of others of the kind described in the preceding
clause (a) that
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such Person has guaranteed or that are otherwise its legal liability or which
are secured by any assets or property of such Person, including, without
limitation, any obligations to purchase, redeem, or acquire any capital stock or
similar interests.
"Independent Director" means a person who is not, and has not within
the past five years been, (i) an officer, director, employee, partner, member,
stockholder or beneficial-interest holder of the General Partner or the
Borrower; (ii) an officer, director, employee, partner, member, beneficial-
interest holder or stockholder of any "Affiliate" (as defined below) of the
General Partner or the Borrower; (iii) a customer or supplier of the Borrower or
any Affiliate thereof (other than a hotel guest or a customer or supplier that
does not derive more than 10% of its revenues from its activities with the
Borrower or any Affiliate thereof); or (iv) a spouse, parent, sibling, or child
of any person described in (i), (ii), or (iii); provided, however, that a person
shall not be deemed to be a director of an Affiliate solely by reason of such
person being a director of a single-purpose entity that would otherwise be
deemed to be an Affiliate because they are under common control. For the
purpose of this definition alone, "Affiliate" means any person or entity (i)
which owns beneficially, directly or indirectly, more than 10% of the
outstanding shares of common stock of the General Partner or which is otherwise
in control of the General Partner, (ii) of which more than 10% of the
outstanding voting securities are owned beneficially, directly or indirectly, by
any person or entity described in clause (i) above, or (iii) which is controlled
by, or under common control with, any person or entity described in clause (i)
above; the terms "control" and "controlled by" shall have the meanings assigned
to them in Rule 405 under the Securities Act of 1933.
"Information" has the meaning ascribed to it in Section 5.4 hereof.
"Insurance Proceeds" has the meaning ascribed to it in any applicable
Mortgage.
"Interest Rate" means (i) prior to the Scheduled Maturity Date, the
Base Rate and (ii) from and after the Scheduled Maturity Date, the Adjusted
Interest Rate.
"Involuntary Hotel Default" means a Default or Event of Default of the
kind described in Section 7.1.3 or Section 7.1.9 hereof that affects or pertains
to one or more (but not all) of the Hotels then subject to the Lien of any
Mortgage, that is not susceptible of cure after reasonable efforts to cure, is
not caused by the Manager or the Borrower, was not known to the Manager or the
Borrower on or prior to the Closing Date, and either (a) is caused by (i) a
defect in title to the Land underlying the applicable Hotels, (ii) the presence
on, under or adjacent to any Hotel, or the Land on which any Hotel is situated,
of Hazardous Materials, or (iii) violation at any Hotel or the Land on which any
Hotel is situated of any Environmental Law, in each case caused by actions of
third parties or migration of Hazardous Materials from neighboring lands or that
otherwise arises out of conditions beyond Borrower's reasonable ability to
control, or (b) is caused by a change in Law after the date hereof that renders
Borrower's ability to comply with the covenants contained herein and in the
other Loan Documents commercially impracticable.
"Land" means the parcels of land on which the Mortgaged Properties are
located, as more fully described on Schedule A attached hereto.
----------
-11-
"Laws" means any statute or law, or any rules, regulations, orders or
determinations made by any applicable Governmental Authority, including as to
real property, but without limitation, any applicable Environmental Laws and any
zoning, building, subdivision or land use laws, rules, or ordinances.
"Leasehold Hotel" means any Hotel located on Land that is leased by
the Borrower under a Ground Lease, as set forth on Schedule B attached hereto.
----------
"Leases" has the meaning ascribed to it in Section 3.23 hereof.
"Lender" means ▇▇▇▇▇▇ Brothers Holdings Inc., a Delaware corporation,
doing business as ▇▇▇▇▇▇ Capital, a division of ▇▇▇▇▇▇ Brothers Holdings Inc.,
together with its successors and assigns, including, without limitation,
following the assignment and transfer contemplated by Section 9.1 hereof, (a)
the Trustee, on behalf of the Trust, or any of its successors and assigns, and
(b) the Servicer, on behalf of the Trustee.
"Lender Costs" means all of the costs and expenses of the Lender of
the kind described in Section 11.7.1 hereof.
"Lien" means any mortgage, deed of trust, deed to secure debt, lien,
claim, option, security interest, pledge, preference, priority, hypothecation,
installment sale agreement, repurchase agreement or other encumbrance or
security arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, lease or other arrangement intended as, or
having the effect, of security.
"Limited Partners" means the limited partners from time to time of the
Borrower, as duly admitted pursuant to the terms of the Partnership Agreement.
"Loan" means the loan made by the Lender to the Borrower pursuant to
Section 2.1 hereof.
"Loan Amount" means Three Hundred and Twenty-Five Million and No/100
Dollars ($325,000,000).
"Loan Documents" means this Agreement, the Mortgage Note, the
Environmental Indemnity Agreement, the Security Agreement, each of the
Mortgages, and all of the other Security Documents, and any and all other
documents, agreements, certificates, notes or other instruments delivered
pursuant to, or in connection with, the Loan.
"Local Account" has the meaning specified in Section 3 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
-------------
"Lockbox Account" has the meaning specified in Section 6 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
-------------
"Management Agreement" means that certain Management Agreement dated
as of January 4, 1997 by and between the Borrower, as "Owner" and Courtyard
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Management Corporation, a Delaware corporation, as "Manager" (the "Manager"),
with respect to the management of the 50 Hotels.
"Management Leases" means, collectively (i) that certain Lease
Agreement dated as of January 1, 1994 by and between Borrower, as landlord, and
Courtyard Management Corporation, a Delaware corporation, as tenant, with
respect to the management of all the Hotels excluding the Hotel located in
Hartford/Windsor, Connecticut and (i) that certain Lease Agreement dated as of
January 1, 1994 by and between Borrower, as landlord, and Courtyard Management
Corporation, a Delaware corporation, as tenant, with respect to the Hotel
located in Hartford/Windsor, Connecticut.
"Manager" has the meaning ascribed to it in the definition of
"Management Agreement" herein, or any successor thereto, or any other Person who
becomes the manager of one or more of the Hotels in compliance with this
Agreement.
"Manager's Account" has the meaning specified in Section 1.2 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"Marriott Ground Lease" means each of the Ground Leases underlying the
31 Mortgaged Properties described in part A of Schedule B attached hereto.
----------
"Marriott Ground Lessor" means Essex House Condominium Corporation,
Host Restaurants, Inc., Casa ▇▇▇▇▇ of Maryland, Inc. or Newark Properties, Inc.
(each of which is an Affiliate of MII), as lessor under a Marriott Ground Lease,
or any successors or assigns of any thereof.
"Marriott Ground Lease Obligations" means the obligations of the
Borrower to pay rent under the Marriott Ground Leases.
"Master Account" has the meaning ascribed to it in Section 1.2 of the
Cash Management Procedures attached as Schedule 5.11 hereto.
-------------
"MII" means Marriott International, Inc., a Delaware corporation.
"MII Cash Management Conditions" means the following conditions: (i)
the Mortgaged Properties from which Gross Revenues are to be deposited in the
Manager's Account are managed by the Manager under the Management Agreement,
(ii) the Manager is a wholly owned, direct or indirect, subsidiary of MII, and
(iii) the long-term senior unsecured debt of MII has a credit rating assigned by
S&P of at least BBB+ and a credit rating assigned by DCR of at least BBB.
"Monthly Debt Service Payment" has the meaning ascribed to it in
Section 2.4.4 hereof.
"Mortgage Note" means the promissory note described in Section 2.2
hereof; provided, however, that if the principal amount of such promissory note
shall be divided at any time into one or more Defeased Notes and one or more
Undefeased Notes pursuant to Section 2.5(a)(iv)(D) hereof, "Mortgage Note" shall
mean, collectively, all such Undefeased Note(s) and Defeased Note(s).
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"Mortgaged Properties" means the 50 Courtyard by Marriott Hotels owned
by Borrower, including, without limitation, the Borrower's fee or leasehold
interest in the land on which the Hotels are located, the Borrower's ownership
interest in all Improvements, and all FF&E related to the hotel operations
thereon, which Hotels are identified on Schedule 4.3.2 attached hereto.
--------------
"Mortgages" means (a) those certain Indentures (or Fee and Leasehold
Indentures) of Mortgage, Open-End Mortgage, Deed to Secure Debt, Assignment of
Rents and Leases, Security Agreement and Fixture Filing, (b) those certain Deeds
of Trust (or Fee and Leasehold Deeds of Trust), Assignment of Rents and Leases,
Security Agreement and Fixture Filing, or (c) any individual variations thereof
in any state, executed by the Borrower (and, in the case of any Mortgaged
Property that is located on Land that is subject to a Marriott Ground Lease, by
the applicable Marriott Ground Lessor), or, if the Mortgaged Property is owned
by the trustee under a land trust, by such trustee, and delivered to the Lender
or certain trustees for the benefit of the Lender with respect to each of the
Mortgaged Properties, which are to be recorded in the land records of the
jurisdictions in which such Mortgaged Properties are located, as security for
the Loan, (and each of the foregoing shall be referred to herein individually as
a "Mortgage").
"Net Loan Proceeds" has the meaning ascribed to it in Section 2.1
hereof.
"Net Operating Income" means, for any Reference Period (or Accounting
Period, as applicable), the Gross Revenues for such Reference Period (or
Accounting Period, as applicable) minus the Adjusted Operating Expenses for such
Reference Period (or Accounting Period, as applicable).
"Net Sales Proceeds" means the aggregate amount of cash received by
the Borrower in respect of the sale of any Mortgaged Property and related assets
less (i) the sum of all reasonable and customary out-of-pocket payments, fees,
commissions and expenses, plus interest thereon, if applicable (including,
without limitation, fees, commissions and expenses of legal counsel and
investment bankers) paid or payable to third parties and incurred in connection
with such sale, including, without limitation, the Lender, the Trustee (if any),
and the Servicer (if any), and (ii) the amount (estimated reasonably and in good
faith by the Borrower) of income, franchise, sales and other applicable taxes
required to be paid by the Borrower in connection with such sale.
"New Note" has the meaning ascribed to it in Section 2.2 hereof.
"Operating Account" has the meaning specified in Section 6 of the Cash
Management Procedures attached as Schedule 5.11 hereto.
--------------
"Operating Profit Payment Date" means the last Business Day of the
third week in each Accounting Period.
"Origination Fee" means a fee equal to $2,843,750 to be paid by
Borrower to the Lender on the Closing Date.
"Parent" means any Person that directly own, as a partner in or
member[s] of the Borrower, at least 95% of the equity interests in the Borrower.
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"Parent Debt" means Indebtedness for borrowed money in the form of
debt securities or institutional debt from a High Yield Lender incurred by the
Parent of Borrower following a Permitted Reorganization described in clause (i),
(ii) or (iii) of the definition of Permitted Reorganization.
"Parent Debt Intercreditor Agreement" means an Intercreditor Agreement
to be entered into between Lender and any High Yield Lender, at the request of
such High Yield Lender, substantially in the form attached hereto as Exhibit
-------
C-1.
---
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Borrower dated as of August 20, 1986 between CBM One
and the Limited Partners, or, the agreement of limited partnership of Borrower
following a Permitted Reorganization.
"Payment Differential" has the meaning ascribed to it in Section 2.8.2
hereof.
"Permitted Debt" means, as to Borrower:
(i) if no Default or Event of Default has occurred and is
continuing, purchase money Indebtedness and capitalized lease
obligations up to an aggregate amount not in excess of $4 million
outstanding at any one time, in each case, for the purchase or lease
of FF&E in the ordinary course of business (and not inconsistent with
customary industry practices), which Indebtedness may be secured by a
first priority lien on the goods and equipment that have been so
purchased or leased;
(ii) Indebtedness in respect of Subordinated Management
Agreement Obligations pursuant to the Management Agreement or deferred
ground rent payments payable to the Marriott Ground Lessors pursuant
to the Marriott Ground Leases, in each case provided such Indebtedness
is unsecured and subordinated to the Loan pursuant to the Collateral
Assignment of Management Agreement or the Ground Lease Rental
Subordination Agreement, as applicable;
(iii) if no Event of Default has occurred and is continuing,
Indebtedness solely in respect of surety and appeal bonds, performance
bonds and other obligations of a like nature (to the extent that such
incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry
practices; and
(iv) Indebtedness under the promissory note in the original
principal amount of $7,340,744 attached as Exhibit D hereto, under
---------
which no additional advances may be made to the Borrower after amounts
thereunder have been repaid.
"Permitted Debt Intercreditor Agreement" means an Intercreditor
Agreement to be entered into between Lender and a lender of Permitted Debt of
the kind
-15-
described in clause (iv) of the definition thereof, substantially in the form
attached hereto as Exhibit C-2.
-----------
"Permitted Hazardous Substances" means prepackaged office supplies,
cleaning materials, personal grooming items and other items sold for consumer
use or typically used in the operation, maintenance and repair of hotel
properties and other commercial operations in the vicinity of the Mortgaged
Property and heating oil for the Mortgaged Property and fuel for shuttle vans
used in the operation of the Mortgaged Property, which are stored, handled,
transported and disposed of in compliance with applicable Requirements of
Environmental Law.
"Permitted Investments" means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, or which have a scheduled maturity on
or prior to the Business Day preceding the following Due Date, and having at all
times the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a lower rating
would not, in and of itself, result in the withdrawal, downgrading or
qualification of the ratings initially assigned to the Certificates (and
investments will not be disqualified as "Permitted Investments" solely because
they are issued by Lender or an Affiliate of Lender):
(i) direct obligations of, or obligations guaranteed as to
full and timely payment of principal and interest by, the United
States or any agency or instrumentality thereof, provided that such
obligations are backed by the full faith and credit of the United
States of America, and such obligations have a predetermined fixed
amount of principal due at maturity which cannot vary or change;
(ii) direct obligations of, or obligations guaranteed as to
timely payment of principal and interest by, FHLMC, FNMA or the
Federal Farm Credit System, provided that any such obligation is
qualified by each Rating Agency as an investment of funds backing
securities having a long-term unsecured debt rating of "AAA", and such
obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having maturities
of not more than 365 days issued by, any bank or trust company,
savings and loan association or savings bank, provided that the
commercial paper or long-term unsecured debt obligations of such
depository institution or trust company (or in the case of the
principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) are then rated not lower than the highest rating
category of each Rating Agency, in the case of commercial paper, or in
the highest category in the case of long-term debt obligations, or
such lower categories as will not result (as evidenced in writing by
each Rating Agency) in the withdrawal, downgrading or qualification of
the rating then assigned (or, prior to the Securitization, proposed to
be assigned) to the Certificates by
-16-
each Rating Agency, or, in the case of short-term debt obligations
which have maturities of 30 days or less, a rating of "A-1";
(iv) general obligations of, or obligations guaranteed by, any
state of the United States or the District of Columbia receiving long-
term debt ratings by each Rating Agency equal to the highest rating
then assigned (or, prior to the Securitization, proposed to be
assigned) to any Class of Certificates by such Rating Agency or such
lower category as will not result in the withdrawal, downgrading, or
qualification of the rating then assigned (or, prior to the
Securitization, proposed to be assigned) to the Certificates by each
Rating Agency (as evidenced in writing by each Rating Agency), and
such obligations have a predetermined fixed amount of principal due at
maturity which cannot vary or change;
(v) commercial or finance company paper (including both non-
interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after
the date of issuance thereof) that is rated by each Rating Agency in
its highest short-term unsecured rating category, and is issued by a
corporation the outstanding senior debt obligations of which are then
rated by each Rating Agency in its highest short-term unsecured rating
category or its highest long-term unsecured rating category, as
applicable;
(vi) guaranteed reinvestment agreements maturing in 365 days or
less from the date of investment issued by any bank, insurance
company, or other corporation rated in the highest rating category by
each Rating Agency (or, if not rated by each Rating Agency, then any
two nationally recognized rating agencies), provided that any such
agreement must by its terms provide that it is terminable by the
purchaser without penalty in the event any such rating is at any time
lower than such level;
(vii) repurchase obligations maturing in 365 days or less from
the date of investment with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or
trust company (acting as principal) meeting the rating standards
described in (iii) above;
(viii) securities (other than stripped bonds or stripped coupons)
maturing in 365 days or less from the date of investment bearing
interest or sold at a discount that are issued by any corporation
incorporated under the laws of the United States of America or any
state thereof and rated by each Rating Agency in its highest long-term
unsecured rating category; provided, however, that securities issued
by any such corporation will not be Permitted Investments to the
extent that investment therein would cause the outstanding principal
amount of securities issued by such corporation that are then held as
part of any Account, to exceed 20% of the aggregate principle amount
of all Permitted Investments then held in the Accounts;
(ix) any money market funds rated "AAAm" or "AAAm-G" (or
equivalent); and
-17-
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as evidenced in writing by each
Rating Agency;
provided, however, that each such instrument continues to qualify as a "cash
flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in
the nature of interest and that no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
120% of the yield to maturity at par of such underlying investment; and
provided, further, that (a) variable interest on any such investment shall be
based on a single index and vary proportionally with such index, and no such
instrument or investment shall have a rating by the Rating Agencies with the "r"
symbol (or equivalent symbol) attached.
"Permitted Liens" has the meaning ascribed to it in Section 6.2
hereof.
"Permitted Reorganization" means a transaction, satisfying the
requirements of Section 6.3, as a result of which any one or more of the
following occurs: (i) as the result of a merger described in Section 6.3.1, a
new limited partner is admitted to Borrower that, together with the General
Partner of Borrower, which may be a new general partner, holds 100% of the
partnership interests in Borrower; or (ii) a new general partner, replacing the
existing General Partner, is admitted to Borrower; or (iii) the Mortgaged
Properties are transferred to a newly created limited partnership or limited
liability company (in which CBMLP shall hold (directly or indirectly) at least
95% of the outstanding equity interests therein), subject to the Loan Documents,
and such transferee assumes the obligations of Borrower under the Loan
Documents; or (iv) the Borrower enters into a lease, as lessor, of the Mortgaged
Properties that satisfies the requirements of Section 6.3.4.
"Person" means an individual, a partnership, a corporation, a trust,
an unincorporated organization, a joint venture or other business entity, a
limited liability company, or a government or any department, agency or
political subdivision thereof.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as it is defined in ERISA and (a) that
was or is established or maintained by Borrower or any ERISA Affiliate; (b)
under which Borrower or any ERISA Affiliate has contributed or has been
obligated to contribute or to fund or provide benefits, or under which Borrower
or any ERISA Affiliate has any liability; or (c) that provides or promises
benefits to any person who performs or has performed services for Borrower or
any ERISA Affiliate who, because of such services, is or was a participant
therein or entitled to benefits thereunder.
"Post-Release Debt Service" means, with respect to any proposed
Release, the aggregate amount of principal and interest scheduled to be payable
on the Mortgage Note (other than any Defeased Note) during the applicable
Reference Period, after giving effect to the reduction in the principal balance
of the Mortgage Note that is proposed to occur as a result of such Release, as
if such reduction in principal balance had occurred on the first day of such
Reference Period.
-18-
"Post-Release DSCR" means, with respect to any proposed Release, the
ratio of (x) the Net Operating Income for the applicable Reference Period,
calculated on a pro forma basis after giving effect to the proposed Release as
if the proposed Release had occurred on the first day of such Reference Period,
to (y) the Post-Release Debt Service for such Reference Period.
"Pre-Release Debt Service" means, with respect to any proposed
Release, the aggregate amount of principal and interest scheduled to be payable
on the Mortgage Note (other than any Defeased Note) during the applicable
Reference Period, without giving effect to the proposed Release (or other
Releases being made on the date as of which the proposed Release is to be made).
"Pre-Release DSCR" means, with respect to any proposed Release, the
ratio of (x) Net Operating Income for the applicable Reference Period, to (y)
the Pre-Release Debt Service for such Reference Period.
"Prepayment Date" means the date on which any voluntary or involuntary
prepayment of principal (excluding scheduled payments of principal under Section
2.4.4 hereof) is made or required to be made.
"Prime Rate" means the rate that is published from time to time as the
"prime rate" in the Wall Street Journal listing of "Money Rates" and shall be
the average of all such rates in effect at any one time if more than one rate is
quoted. If this index ceases to be published in the Wall Street Journal, an
alternate index of similar nature will be selected by Lender in its reasonable
discretion.
"Prior Reference Period Release" means any Release of a Mortgaged
Property that occurred during a Reference Period with respect to which any
determination is made hereunder.
"Qualified Insurance Companies" means an insurer satisfying the
following requirements:
All primary insurers providing insurance coverage required in Section
1.7.1 of the Mortgages must be authorized to issue insurance in the states in
which the insured Mortgaged Property is located. The insurance described in
clause (i) of Section 1.7.1 of the Mortgages and the insurance coverage
described in clause (iii) and (v) of Section 1.7.1 of the Mortgages, will be
maintained with one or more primary insurers having a claims-paying ability
(published or unpublished) rated by Standard and Poor's Ratings Services of not
less than "AA". If permitted by the laws of the state in which the Hotel is
located, the insurance required by clause (vi) of Section 1.7.1 of the Mortgages
may be provided by a state approved and regulated employer's self-insurance
fund. All primary insurance coverage required by other clauses of Section 1.7.1
of the Mortgages (other than flood insurance and workers' compensation
insurance) shall be provided by one or more insurers having an ▇▇▇▇▇▇ ▇. Best
Company, Inc. rating of "A-/10" or better or "B/5" or better for earthquake
insurers, and the primary insurer for the issuer of the primary insurance
required by clause (ii) of such Section 1.7.1 shall be rated by Standard and
Poor's Ratings Services not less than "A."
"REMIC" has the meaning ascribed to it in Section 2.5 hereof.
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"REVPAR" has the meaning ascribed to it in Section 5.4.4 hereof.
"Rating Agencies" shall mean (i) prior to the Securitization, Standard
& Poor's Ratings Services, a division of the ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and
▇▇▇▇▇'▇ Investors Services, Inc. (except that, where a particular provision in
any Loan Document specifies one or more Rating Agencies by name, "Rating
Agencies" shall mean the rating agency or rating agencies so specified) and (ii)
after the Securitization, such of the following as actually rate the securities
issued in connection with the Securitization: Standard & Poor's Ratings
Services, a division of the ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., ▇▇▇▇▇'▇ Investors
Service, Inc., Duff & ▇▇▇▇▇▇ Credit Rating Co., Fitch Investors Service, L.P.,
or any other nationally recognized statistical rating agency selected by Lender.
"Rating Comfort Letter" with respect to any event or proposed course
of action or inaction, means a written confirmation from the Rating Agencies
that no rating assigned by such Rating Agencies to any of the Certificates will
be downgraded, qualified or withdrawn, or placed on a credit watch with negative
implications, as a result of such event or proposed action or inaction; provided
that if the Securitization has not taken (or as certified by Lender, will not
take) the form of a transaction rated by the Rating Agencies, then "Rating
Comfort Letter" shall instead mean that the matter in question shall be subject
to the prior approval of the Lender, which approval shall not be unreasonably
withheld, conditioned or delayed.
"Reference Period" means the 13 full consecutive Accounting Periods
(or 12 full consecutive calendar months, if the Fiscal Year is based on four
calendar quarters) ended immediately preceding the date as of which any
determination with respect to a Reference Period is made hereunder and for which
internal financial statements of the Borrower are available. As used herein,
the Reference Period "applicable" to any sale of a Mortgaged Property, Release,
or other event shall mean the Reference Period immediately preceding such event
for which internal financial statements of the Borrower are available.
"Reinvestment Yield" has the meaning ascribed to it in Section 2.8.2
hereof.
"Release" has the meaning ascribed to it in Section 2.5 hereof and
"Released" shall have a correlative meaning.
"Release Date" has the meaning ascribed to it in Section 2.5(a)(i)
hereof.
"Release Price" means, with respect to a specified Hotel, 125% of the
Allocated Loan Amount for such Hotel, less an amount equal to (x) all Scheduled
Principal Payments paid by Borrower multiplied by (y) a fraction, the numerator
-------------
of which shall be the Allocated Loan Amount for such Hotel and the denominator
of which is the Allocated Loan Amount of all of the Hotels; provided, however,
that in no event shall the Release Price for a Hotel be greater than the then
outstanding aggregate principal amount of the Loan.
"Remaining Mortgaged Properties" means the Mortgaged Properties that
will remain subject to the Lien of any Mortgage following a Release or several
Releases to be made on the same day.
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"Requirements of Environmental Law" means, with respect to any
Mortgaged Property, all requirements of Environmental Laws or any other
environmental or ecological laws or regulations related to such Mortgaged
Property, or any portion thereof, including all requirements imposed by any law,
rule, order, or regulation of any federal or state executive, legislative,
judicial, regulatory, or administrative agency, board, or authority, which
relate to (i) pollution or protection of the air, surface water, ground water,
or land; (ii) generation, treatment, storage, disposal, or transportation of
Hazardous Substances; (iii) exposure to Hazardous Substances; or (iv) regulation
of the manufacture, processing, distribution in commerce, use, or storage of
Hazardous Substances.
"Restoration" has the meaning ascribed to it in any applicable
Mortgage.
"S&P" means Standard & Poor's Ratings Services, a division of the
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"SEC" means the Securities and Exchange Commission of the United
States of America.
"Scheduled Maturity Date" means April 10, 2012.
"Scheduled Principal Payment" means the amount designated on Schedule
--------
2.4.4 attached hereto as the payment of principal that is due on a particular
-----
Due Date, which amount shall be adjusted in accordance with Section 2.4.4(c) in
connection with a prepayment or a Release.
"Securitization" has the meaning ascribed to it in Section 9.1 hereof.
"Security Agreement" means that certain Security Agreement dated as of
even date herewith between Borrower and the Lender.
"Security Documents" means, collectively or individually, as the
context may require, the Mortgages, the Collateral Assignment of Management
Agreement, the Assignments of Leases and Rents, the Security Agreement, the
Ground Lease Rental Subordination Agreement, and such other documents as are
executed and delivered by any Person to grant additional security for the
repayment of the Loan.
"Servicer" has the meaning ascribed to it in Section 9.1 hereof.
"Single Purpose" means, with respect to a Person, that such Person,
(A) at all times since its formation, except as otherwise permitted in or
contemplated by the Loan Documents (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its respective equity holders, and all such capital contributions have been
reflected properly in its books and records; (vi) has
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allocated fairly and reasonably any overhead for shared office expenses; (vii)
has identified itself in all dealings with the public, under its own name and as
a separate and distinct entity (provided that nothing shall prohibit such Person
from engaging an agent to represent such Person with respect to tenants,
vendors, and other parties, in accordance with standard industry practice);
(viii) has not identified itself as being a division or part of any other
Person; (ix) has not identified any other Person as being a division or part of
such Person; (x) has corrected any known misunderstanding regarding their
separate identities.(xi) has been adequately capitalized in light of the nature
of its business; (xii) has not assumed or guaranteed the obligations of any
other Person (other than by virtue of being a general partner of such other
Person but only if such other Person is the Borrower and provided, that this
clause shall not be deemed to be violated by reason of joint and several
liabilities arising as a matter of law); and (xiii) has not engaged in any other
business other than as permitted by the Loan Documents (provided, that nothing
shall prohibit a General Partner from acquiring, owning, and disposing of
limited partner interests in any limited partnership, non-managing membership
interests in a limited liability company, or debt securities issued by any
Person, or the stock of a corporation that is not engaged in any activities
other than such activities provided no liabilities or other obligations on the
part of the holder of such investments will arise as a result of such
investments and the only rights of the holder of such investment are the right
to receive payments and the right to vote); (B) such Person agrees to covenants
substantially to the effect of Sections 5.10, 5.12, 6.1, 6.3.1, 6.3.5, 6.4, and
6.5 hereof; and (C) such Person's organizational documents contain restrictions
similar to those contained in Articles THIRD, NINTH, TENTH and ELEVENTH of the
GP Certificate as in effect on the date hereof.
"Subordinated Management Agreement Obligations" means the management
fees or other obligations defined in the Management Agreement as "Secondary
Courtyard Management Fees," "Incentive Management Fees," "Deferred Secondary
Courtyard Management Fees," "Deferred Incentive Management Fees," or
"Termination Fees," or any "Subordinated FF&E Contribution."
"Subordinated Obligations" means all "Subordinated Management
Agreement Obligations," as that term is defined in the Collateral Assignment of
Management Agreement, and all "Subordinated Rental Obligations," as that term is
defined in the Ground Lease Rental Subordination Agreement, as applicable.
"Substantive Non-Consolidation Opinion" means an opinion of counsel
substantially similar to the provisions of the opinion of Borrower's counsel
delivered on the Closing Date to the effect that the assets and liabilities of
the Borrower or the General Partner will not be substantively consolidated with
those of Host Marriott in the event that Host Marriott were to become the
subject of bankruptcy or insolvency proceedings (with such changes as are
necessary to reflect the identity and operations of the parties addressed in
such Substantive Non-Consolidation Opinion).
"Successor Entity" has the meaning ascribed to it in Section 2.5(f)
hereof.
"Taking" has the meaning ascribed to it in any applicable Mortgage.
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"Third Party Ground Lease" means the Ground Lease underlying the
Mortgaged Property that is listed in part B of Schedule B attached hereto and
----------
the Ground Lease of a portion of the Land underlying the Mortgaged Property that
is listed in part C of said Schedule B.
----------
"Third Party Ground Lessor" means a ground lessor under a Third Party
Ground Lease.
"Title Company" has the meaning ascribed to it in Section 4.3.2
hereof.
"Title Insurance Policy" and "Title Insurance Policies" have the
meanings ascribed to such terms in Section 4.3.2 hereof.
"Treasury Rate" has the meaning ascribed to it in Section 2.8.2
hereof.
"Trust" has the meaning ascribed to it in Section 9.1 hereof.
"Trust Fund" has the meaning ascribed to it in Section 11.7.2 hereof.
"Trust and Servicing Agreement" has the meaning ascribed to it in
Section 9.1 hereof.
"Trustee" has the meaning ascribed to it in Section 9.1 hereof.
"U.C.C." or "Uniform Commercial Code" means the Uniform Commercial
Code as in effect in the State of New York or, in the case of any particular
item of real or tangible personal property, in the State in which such property
is located.
"U.S. Obligations" means obligations or securities evidencing an
obligation to pay principal and interest in a full and timely manner not subject
to prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America, or principal-only strips and interest-only strips of
noncallable obligations issued by the U.S. Treasury stripped by an issuer rated
"AAA" (or the equivalent) by the applicable Rating Agencies and REFCORP
securities stripped by the Federal Reserve Bank of New York.
"Undefeased Note" has the meaning ascribed to it in Section
2.5(a)(iv)(D) hereof.
"Yield Maintenance Payment" has the meaning ascribed to it in Section
2.8.1 hereof.
1.2. Definitions Incorporated by Reference
Any term defined in Section 1.1 by reference to another agreement,
instrument or other document shall mean such agreement, instrument or document
as it may be amended, supplemented or modified from time to time, but only to
the extent such amendment, supplement or modification is permitted by the terms
hereof. If any such
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agreement, instrument or other document shall be replaced or superseded in
accordance with the terms hereof (for example, if the Management Agreement is
replaced by an agreement with another manager acceptable to the Lender in
accordance with Sections 7.1.4 or 7.1.8 hereof), the definition incorporated by
reference in Section 1.1 to such agreement, instrument or other document shall
thereafter have the meaning established under the replaced or superseded
document, with any such changes as (a) shall be necessary to conform to the
replacement or superseding agreement, instrument or document or (b) are
otherwise agreed to by the Lender in writing.
1.3. Other Definitional Provisions
The terms defined in Section 1.1 hereof may not comprise all of the
defined terms contained in this Agreement. Capitalized terms not defined in
Section 1.1 hereof shall have the meanings ascribed to them elsewhere herein.
Accounting terms used in this Agreement but not defined herein shall have the
respective meanings given to them under GAAP. The words "hereof," "herein" and
"hereunder" and words of similar character when used in this Agreement shall
refer to this Agreement as a whole and shall not be limited to any particular
provision of this Agreement.
As a matter of convenience herein, rating categories are generally
stated in the nomenclature of Standard & Poor's Ratings Services, it being
understood that, unless otherwise expressly stated to the contrary on Schedule
--------
1.3 attached hereto, the category indicated will instead be deemed to be the
---
actual category of the applicable Rating Agencies; provided that if a specified
rating (or its equivalent) from the applicable Rating Agencies is required
hereunder with respect to an issuer or a security, and Fitch Investors Service,
L.P., as one of the applicable Rating Agencies in connection with a
Securitization, does not rate the issuer or security in question, then such
requirement hereunder shall nevertheless be deemed satisfied so long as Standard
& Poor's Ratings Services and ▇▇▇▇▇'▇ Investors Services, Inc. rate such issuer
or security at or greater than the required rating level.
2. THE LOAN
2.1. Making the Loan
In reliance upon the representations, warranties, covenants and
agreements of Borrower contained herein and in the other Loan Documents, and
upon full satisfaction by Borrower of the terms and conditions precedent set
forth in Article 4 of this Agreement, the Lender agrees to make a loan (the
"Loan") to Borrower, which Loan shall be advanced to Borrower in a single
advance of immediately available funds equal to the Loan Amount less the Lender
Costs and the Origination Fee (the "Net Loan Proceeds"). The Net Loan Proceeds
shall be used solely for the purposes described in Section 2.3 hereof. The Loan
will be secured by, among other things, Mortgages encumbering the Mortgaged
Properties and granting a lien on and security interest in certain other
Collateral under the Mortgages and other Security Documents effecting and
granting a lien on and security interest in such other Collateral, and shall
bear interest at the rates per annum specified in Section 2.4 hereof.
Notwithstanding that Borrower will receive an advance only of the
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Net Loan Proceeds, Borrower shall be required to repay the full Loan Amount in
the manner described herein.
2.2. Mortgage Note
The obligation of Borrower to repay the full Loan Amount, together
with interest thereon, and Yield Maintenance Payments, Defeasance Deposits and
other charges, if any, related thereto, shall be evidenced by that certain
Mortgage Note made by Borrower as of the Closing Date to the order of the Lender
(the "Mortgage Note"), substantially in the form of Exhibit A attached hereto
---------
and incorporated herein, in the original principal amount of Three Hundred
Twenty-Five Million and No/100 Dollars ($325,000,000).
The Borrower hereby irrevocably appoints the Lender and its
successors and assigns, with full power of substitution, as its attorney-in-
fact, solely for the purpose, from time to time in connection with a foreclosure
on any Mortgaged Property following an Event of Default and/or acceleration of
the maturity of the Loan, of executing two or more promissory notes (each, a
"New Note") substantially in the form of Exhibit A, with an aggregate face
---------
principal balance equal to the principal amount then outstanding under the
Mortgage Note (with a notation on each such New Note as to the outstanding
principal amount of the Loan allocated to each such New Note) and marking each
promissory note that is to be replaced with such New Notes (whether the original
Mortgage Note or any Defeased Note or Undefeased Note) "REPLACED" or
"SUPERSEDED." Such power of attorney is a limited power of attorney coupled with
an interest.
2.3. Use of Loan Proceeds
Borrower agrees that the Net Loan Proceeds shall be used solely for
the purpose of:
(a) repaying all existing mortgage indebtedness of the Borrower,
which is secured by mortgages on the Hotels (the "Bank Debt"); and
(b) paying Deferred Incentive Management Fees to the Manager at
Closing in an amount not to exceed $4,200,000; and
(c) funding the FF&E Reserve Account in the aggregate amount of
$7,000,000.00 in excess of the balance in the FF&E Reserve Account immediately
prior to the Closing Date; and
(d) paying any transaction costs required to be paid by Borrower
pursuant to Section 11.7.1 hereof.
The balance of the Net Loan Proceeds may be used by the Borrower for any purpose
whatsoever, including, without limitation, making distributions to its Partners.
2.4. Payment of Principal and Interest
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Section 2.4.1 Payments on the Mortgage Note. All payments made on the
-----------------------------
Mortgage Note shall be made in the manner, and subject to the conditions,
provided in this Agreement and the Mortgage Note. The Mortgage Note shall not
be prepayable except as expressly provided for in this Section 2.4.1, and
Sections 2.5 and 2.6 hereof. On any Due Date occurring on or after the date
that is six (6) months prior to the Scheduled Maturity Date, the Mortgage Note
may be prepaid, at the option of the Borrower, in full or in part, without
penalty or premium. To the extent not previously paid, the entire Debt shall be
due and payable on the Final Maturity Date.
Section 2.4.2 Interest.
--------
(a) Except as set forth in Sections 2.4.4(b) with respect to
interest accruing at the Default Interest Rate, the Debt shall bear interest for
each Debt Service Period at the applicable Interest Rate then in effect and
shall be payable as provided herein.
(b) Calculations of interest shall be made on the basis of a 360-
day year and the actual number of days elapsed during each Debt Service Period.
Section 2.4.3 Payments without Deduction, etc. All payments of the Debt
--------------------------------
to the Lender shall be absolute and unconditional, shall be paid strictly in
accordance with the terms of the Loan Documents without being subject to any
claim, set-off, defense or other right which the Borrower may have against the
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated herein or any other circumstance or happening
whatsoever. The Borrower shall pay such payments to the Lender free and clear
of, and without deduction for, any and all present or future taxes, levies,
imposts, deductions, charges, penalties or withholdings, and any liabilities
with respect thereto, by whomever imposed, other than present or future taxes on
the income of the Lender or franchise taxes imposed on the Lender as a result of
its conducting business in specific jurisdictions. The Borrower shall pay and
indemnify and hold the Lender harmless from and against, any present or future
claim or liability for United States, state or local taxes or assessments on the
ownership by the Lender of the debt obligations of the Borrower evidenced by the
Mortgage Note, or on the principal, interest, fees or other amounts payable
under any Loan Documents or otherwise in respect of the Debt (other than income
or franchise taxes imposed on the Lender or its Affiliates by any jurisdiction).
The obligations of the Borrower hereunder shall survive repayment of the Debt
and termination of the Loan Documents.
Section 2.4.4 Periodic Payments.
-----------------
(a) On the Closing Date, the Borrower shall pay to the Lender
interest on the Mortgage Note at the Base Rate for the period beginning on and
including the Closing Date and ending on but excluding April 10, 1997.
(b) On May 9, 1997 and on each Due Date thereafter, the Borrower
shall pay (i) interest on the outstanding principal of the Mortgage Note at the
Base Rate for the prior Debt Service Period and (ii) the Scheduled Principal
Payment due on the applicable Due Date, subject however to adjustment pursuant
to Section 2.4.4(c) hereof (together, the "Monthly Debt Service Payment").
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At any time while an Event of Default has occurred and is continuing,
the Borrower shall, in addition to the Monthly Debt Service Payment and other
amounts due hereunder, be liable for the payment of interest at the Default
Interest Rate (rather than the Interest Rate) (which interest is payable both
before and after Lender has obtained a judgment with respect to the Loan);
provided, however, that for the purposes of this sentence, an Event of Default
shall be considered to have occurred and be continuing only until such Event of
Default has been cured, including, without limitation, pursuant to the
provisions of Section 7.1.3 hereof, if applicable. The priority of payment of
Default Interest shall be (i) up to and including the Scheduled Maturity Date,
as set forth in Section 4.3 of the Cash Management Procedures attached as
Schedule 5.11 hereto (or, if applicable, Section 6.9 thereof) and (ii) after the
-------------
Scheduled Maturity Date, as set forth in Section 4.4 of the Cash Management
Procedures attached as Schedule 5.11 hereto (or, if applicable, Section 6.10
-------------
thereof). Payment or acceptance of the increased rates provided for in this
Section 2.4.4(b) is not a permitted alternative to timely payment or full
performance by the Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
(c) If any portion of the principal balance of the Loan is prepaid
(i) on or about the Scheduled Maturity Date by the application of payments
received from or with respect to U.S. Obligations held by the Lender on the
Scheduled Maturity Date as a result of a Release of any Mortgaged Property from
the Lien of the Security Documents pursuant to Section 2.5 or, (ii) on or after
the last day of the Defeasance Period, pursuant to the second to last sentence
of Section 2.4.1 hereof, the Scheduled Principal Payment payable on each Due
Date thereafter shall be reduced by a percentage equal to the percentage
reduction in the outstanding principal amount payable under the Mortgage Note
resulting from such prepayment; provided, however, that the Scheduled Principal
Payments due on each Due Date shall in no event be reduced to an amount less
than the amount necessary to fully repay the Loan on or before the date on
which, determined as of the Scheduled Maturity Date (taking into account the
prepayment of the Loan to be made on such date pursuant to Section 2.5 hereof),
the Loan would have been repaid had such prepayment and adjustment not occurred.
(d) In addition to the payments required to be made under Section
2.4.4(b) above, subsequent to the Scheduled Maturity Date and in accordance with
the Cash Management Procedures, the Borrower shall pay to the Lender on each Due
Date (without duplication), until the entire Debt is repaid in full, Excess Cash
Flow for all Accounting Periods for which the Operating Profit Payment Date
occurred during the Debt Service Period relating to such Due Date, which
payments shall be applied in the manner contemplated by clause (N) of Section
4.4 of the Cash Management Procedures (or, if applicable clause (M) of Section
6.10 thereof).
2.4.5 Insufficient Payments
---------------------
In the event that the Borrower fails to pay all amounts due and
payable on the Mortgage Note on any date (including payments from the proceeds
of any sale of Collateral pursuant to any of the Loan Documents or payments from
the Debt Service Reserve maintained pursuant to of the Cash Management
Procedures attached as
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Schedule 5.11 hereto), unless otherwise determined by Lender, all cash paid by
-------------
the Borrower on such date shall be applied in the following order of priority to
the extent of the cash so paid:
FIRST: to pay (a) all amounts that are due and unpaid under Section
11.7.1 hereof and under Section 7.5 hereof, if applicable (b) all costs, if
any, incurred by the Lender in acting on behalf of Borrower as provided in
the Loan Documents and (c), if applicable, all costs and expenses incurred
by the Lender in enforcing this Loan Agreement and any of the other Loan
Documents, including all costs and expenses of the foreclosure and/or sale
of the Collateral or any part thereof or any interest therein, and all
costs and expenses of entering upon, taking possession of, removing,
holding, constructing improvements on, and operating and managing the
Collateral or any part thereof, and all costs and expenses of repairs,
renewals, replacements, additions, betterments, and improvements to the
Collateral, in each case in accordance with the Loan Documents, and all
reasonable attorneys' and accountants' fees and disbursements, including
any appraisals that may reasonably be required by Lender, incurred in
connection with any of the foregoing, together with any compensation
payable under Section 4.3 of any Mortgage;
SECOND: to pay interest at the Base Rate then due and payable on the
Mortgage Note;
THIRD: to pay all amounts of principal due and payable on the
Mortgage Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), until the principal
balance has been reduced to zero;
FOURTH: to pay any Yield Maintenance Payments then due and payable;
FIFTH: to pay any Default Interest then due and payable; and
SIXTH: to pay Deferred Interest, if any (plus interest thereon at
the Adjusted Rate).
2.5. Prepayment Restrictions; Defeasance
(a) At any time during the period commencing on (i) the first Business
Day after the date that is the earlier of (A) two years after the "startup day,"
within the meaning of Section 860G(a)(9) of the Code, of a "real estate mortgage
investment conduit," within the meaning of Section 860D of the Code (a "REMIC"),
that holds the Mortgage Note and (B) three years after the Closing Date, and
ending on (ii) the date that is six (6) months prior to the Scheduled Maturity
Date (such period being sometimes referred to herein as the "Defeasance
Period"), and provided no Event of Default has occurred and is continuing (other
than an Event of Default that will be cured by the release of a Mortgaged
Property or Mortgaged Properties from the Lien of the Security Documents
pursuant to the provisions of Section 7.1.3 hereof) the Borrower may, subject to
the provisions of Section 2.7 below, defease the Lien of the Security Documents
to cause the release of one or more Mortgaged Properties from such Lien (each, a
"Release") by providing the Lender
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with funds in an amount equal to the Defeasance Deposit for that portion of the
Mortgage Note that the Borrower wishes to defease, upon the satisfaction of the
following conditions:
(i) not less than 30 days' notice to the Lender specifying a Due
Date (the "Release Date") on which the Defeasance Deposit is to be made;
(ii) the payment to the Lender of interest accrued and unpaid on the
principal balance of the Mortgage Note and all other Debt due through and
including the Release Date;
(iii) the payment to the Lender of the Defeasance Deposit; and
(iv) the delivery to the Lender of:
(A) a security agreement (the "Defeasance Security
Agreement"), in form and substance satisfactory to the
Lender, creating a first priority perfected security
interest in favor of the Lender in the Defeasance Deposit
and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with Section 2.5(b) (together, the
"Defeasance Collateral");
(B) form(s) of release of the Mortgaged Property or Mortgaged
Properties to be released from the Lien of the Security
Documents (for execution by the Lender) appropriate for
the jurisdiction(s) in which each such Mortgaged Property
is located;
(C) a certificate of the Borrower and the General Partner
signed by a duly authorized officer of the General
Partner certifying that the requirements set forth in
subsections (a) (ii)-(iv) have been satisfied;
(D) in the event only a portion of the Loan evidenced by the
Mortgage Note is the subject of the defeasance, the
Borrower shall execute and deliver all documents
necessary to replace the Mortgage Note with two
substitute promissory notes: one promissory note having a
principal balance equal to the portion of the then-
existing Mortgage Note that is to be defeased by payment
of the Defeasance Deposit (the "Defeased Note") and the
other promissory note having a principal balance equal to
the portion of such Mortgage Note that is not to be
defeased (the "Undefeased Note"). The Mortgage Note in
effect immediately prior to such defeasance shall be
marked "SUPERSEDED AND REPLACED" and will be returned to
the Borrower simultaneously with the issuance of the
Defeased Note and the Undefeased Note. The Defeased Note
and the Undefeased Note shall have exactly the same terms
as the original Mortgage Note (and the Defeased Note
shall be cross-defaulted with the Undefeased Note),
except for the principal
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balance thereof. A Defeased Note cannot be the subject of
any further defeasance. The Undefeased Note may be the
subject of a further defeasance in accordance with the
terms of this Section 2.5;
(E) an opinion of counsel for the Borrower (which in the case
of clauses (i) and (iv)(c) below, may be a "reasoned"
opinion), in form and substance satisfactory to the
Lender, that (i) the transfer of the Defeasance
Collateral in exchange for release(s) of the Mortgaged
Property or Mortgaged Properties to be released will not
constitute an avoidable preference under Section 547 of
the United States Bankruptcy Code in the event of a
filing of a petition for relief under the United States
Bankruptcy Code for or against the Borrower, (ii)
assuming the taking of certain specified actions by the
Lender which the Lender has the power to take, the
Defeasance Collateral has been duly and validly
transferred and assigned to the Lender, (iii) assuming
the taking of certain specified actions by Lender which
the Lender has the power to take, the Lender holds a
first priority perfected security interest in the
Defeasance Collateral, and (iv) if the Securitization has
occurred, (a) such transfer will not result in a deemed
exchange of the Certificates pursuant to Section 1001 of
the Code, (b) such transfer will not, by itself,
adversely affect the status of the Certificates as
indebtedness for federal income tax purposes and (c) such
transfer will not adversely affect the status of the
entity holding the Mortgage Note as a REMIC (assuming for
such purposes that such entity otherwise qualifies as a
REMIC and that the Mortgage Note was transferred to such
REMIC not later than two years prior to the Release
Date);
(F) a certificate of a "Big 6" certified public accounting
firm acceptable to the Lender that the Defeasance
Collateral complies with the requirements set forth in
subsection (b) below;
(G) such other certificates, documents or instruments as the
Lender may reasonably request;
(H) evidence satisfactory to the Lender that the Debt Service
Release Conditions have been satisfied;
(I) payment by the Borrower of all reasonable costs and
expenses of Lender incurred in connection with the
defeasance, including any costs and expenses associated
with a release of the Lien of the Security Documents and
reasonable attorneys' fees and expenses; and
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(J) if the defeasance is made after the Securitization, each of
the Rating Agencies that requires issuance of a Rating
Comfort Letter in connection with a defeasance delivers a
Rating Comfort Letter.
(b) If, following the Release of the subject Mortgaged Property or
Mortgaged Properties, less than all of the Mortgaged Properties shall have been
released, the Lender shall use the Defeasance Deposit to purchase U.S.
Obligations that provide payments on or prior to, but as close as possible to,
all successive Due Dates after the Release Date that would be required with
respect to an assumed promissory note in a principal amount equal to (except as
provided in the last sentence of this paragraph) the Release Price(s) of the
Mortgaged Property or Mortgaged Properties to be released from the Lien of the
Security Documents on such Release Date. Such assumed promissory note shall be
in the same form (including with respect to term, interest rate and scheduled
amortization) as the Mortgage Note but shall provide for a mandatory prepayment
thereof in full on the Scheduled Maturity Date, including through the
application by the Lender of U.S. Obligations pursuant to the provisions of
Section 2.5(h) hereof. In order to secure the Release, in addition to the U.S.
Obligations referred to in the preceding sentence, the Borrower may, at its
election, purchase U.S. Obligations for delivery to the Lender that provide
additional payments of the type referred to herein in order to satisfy the Debt
Service Release Conditions. If any Mortgaged Property is released pursuant to
this Section 2.5 as a result of a Casualty or a Taking subsequent to a the first
day of the Defeasance Period, the payments provided for in this subsection (b)
shall be equal to the greater of (A) the Allocated Loan Amount and (B) the
lesser of (x) the Release Price that would otherwise be required to secure a
Release of the Mortgaged Property and (y) the sum of the Net Sales Proceeds
received by Borrower from the sale of the Mortgaged Property or the part thereof
that remains following the Casualty or Taking plus the remaining Award or
Insurance Proceeds not previously applied to repayment of the Loan or
Restoration.
(c) If, as a result of the Release of the subject Mortgaged Property or
Mortgaged Properties, all of the Mortgaged Properties shall have been released,
the Lender shall use the Defeasance Deposit to purchase U.S. Obligations that
provide, together with any U.S. Obligations purchased in connection with any
prior Releases of Mortgaged Properties, payments on or prior to, but as close as
possible to, all successive Due Dates after the Release Date that would be
required with respect to an assumed promissory note in a principal amount equal
to the aggregate outstanding principal balance of the Mortgage Note and accrued
and unpaid interest thereon as of the Release Date. Such assumed promissory
note shall be in the same form (including with respect to term and interest
rate) as the Mortgage Note but shall provide for a mandatory prepayment thereof
in full on the Scheduled Maturity Date, including through the application by the
Servicer of U.S. Obligations pursuant to the provisions of Section 2.5(h)
hereof.
(d) The Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Obligations may be made directly to the Lender and
applied to satisfy the obligations of Borrower under the Mortgage Note. In
connection with any total defeasance of the Loan, any portion of the Defeasance
Deposit that exceeds the amount necessary to purchase U.S. Obligations required
by Section 2.5(c) shall be remitted to the Borrower reasonably promptly
following the purchase of such U.S. Obligations. In connection with
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any partial defeasance of the Loan, any portion of the Defeasance Deposit that
exceeds the amount necessary to purchase the U.S. Obligations required by
Section 2.5(b) shall be retained by Lender in an Eligible Account as additional
collateral for the Loan, and shall be invested in Permitted Investments,
Borrower hereby granting to Lender a security interest in such account and in
such Permitted Investments.
(e) Upon compliance with the requirements of this Section 2.5, each
Mortgaged Property to be Released shall be Released from the Lien of the
Security Documents and shall not be deemed a Mortgaged Property hereunder, and
the U.S. Obligations shall constitute substitute collateral, which, together
with the Collateral covered by all other Security Documents applicable to the
remaining Mortgaged Properties, shall secure the Debt.
(f) If all the Mortgaged Properties have been Released, the Borrower may
assign its obligations under the Mortgage Note, together with the U.S.
Obligations, to a successor entity (the "Successor Entity") designated by the
Lender and shall thereupon be released fully from all of its obligations under
the Loan Documents except that the Borrower shall continue to be liable (i) for
damages caused by any material inaccuracy in any of the representations and
warranties made in Article 3 of this Agreement (which shall survive, as of the
date made or deemed made, for so long as any portion of the Debt is
outstanding), (ii) under Sections 7.5, Sections 11.5, 11.6 and 11.7.1 (provided,
however, that such Sections shall survive only as to matters arising out of
circumstances in existence before such assumption by the Successor Entity),
(iii) under the Environmental Indemnity Agreement (which shall terminate only in
accordance with its terms) and (iv) under the Cooperation Agreement (which shall
terminate only in accordance with its terms). In such event, the opinion of
counsel provided for in clause (a)(iv)(E) of this Section 2.5 shall provide
that, upon such assignment, the Defeasance Collateral will not be part of the
estate of the Borrower under Section 541 of the United States Bankruptcy Code.
In consideration of the payment of $1,000 by the Borrower, such Successor Entity
shall assume the Borrower's obligations under the Mortgage Note and the
Defeasance Security Agreement, the Borrower shall be relieved of its obligations
thereunder, and the Debt shall not be deemed outstanding for any purpose of this
Agreement. If required by the applicable Rating Agencies, the Borrower shall
also deliver or cause to be delivered a Substantive Consolidation Opinion with
respect to the Successor Entity in form and substance satisfactory to the Lender
and the applicable Rating Agencies.
(g) For purposes of this Section 2.5, "Defeasance Deposit" shall mean an
amount in cash equal to the sum of (x) (i) with respect to a Release referred to
in Section 2.5(c), all costs and expenses (including the purchase price)
incurred or to be incurred in the purchase of U.S. Obligations necessary to make
the payments required under Section 2.5(c); or (ii) with respect to a partial
release referred to in Section 2.5(b), the sum of (A) the Release Price of the
Mortgaged Property or Mortgaged Properties (or, if applicable, such lesser
amount as is due under the last sentence of Section 2.5(b)) being released plus
----
(B) all costs and expenses (including the purchase price) incurred or to be
incurred in the purchase of U.S. Obligations necessary to make the payments
required under Section 2.5(b), to the extent the amount in clause (A) is
insufficient for such purpose; plus (C) all costs and expenses (including the
----
purchase price) incurred or to be incurred in the purchase of such additional
U.S. Obligations as may be required to make additional monthly payments
sufficient to cause the Debt Service Release Conditions to be satisfied,
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and (y) in all cases, any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the Mortgage Note,
the creation of the Defeased Note and the Undefeased Note if applicable, any
transfer of the Defeased Note, or otherwise required to accomplish the
agreements of Section 2.5(a)(iv)(I).
(h) If the payment of accrued and unpaid interest and principal of the
Mortgage Note and any other Debt has not been made in full by the Scheduled
Maturity Date, payments from or with respect to U.S. Obligations then held by
the Lender and such payments received by the Lender thereafter shall be applied
on the Scheduled Maturity Date, or, if later, on the date such payment is
received (i) first, to payment of accrued and unpaid interest (other than
Default Interest) on the Mortgage Note, (ii) second, to prepayment of the
Scheduled Principal Payments due on each Due Date, in the inverse order of their
scheduled maturities, and (iii) third, to payment of Default Interest, if any.
(i) Notwithstanding the provisions of Section 2.5(a) setting forth the
time period during which a Mortgaged Property may be defeased, but subject to
Section 2.6, the Borrower may defease the Lien of the Security Documents to
cause the release of a Mortgaged Property for the purpose set forth in Section
7.1.3 prior to the date set forth in such Section 2.5(a) if it provides to the
Lender an opinion in form and substance, and from a firm, acceptable to the
Lender in the exercise of its sole discretion, that such release will not
adversely affect the status of the entity holding the interest in the Mortgage
Note as a REMIC (assuming for such purpose that such entity otherwise qualifies
as a REMIC).
2.6. Partial Release in Connection with a Casualty, Taking or Default
before Defeasance Period
In the event that, prior to (a) the first day of the Defeasance Period, a
Mortgaged Property has suffered a total or substantial Taking or Casualty (in
each case, as to which Restoration is not required or permitted under the
applicable Mortgage) or (b) a Securitization, a Default of the type described in
Section 7.1.3 occurs that can be cured by a Release of a Mortgaged Property from
the lien of the Security Documents, the Borrower shall cause the Release of such
Mortgaged Property from the Lien of the Security Documents upon the satisfaction
of the following conditions:
(a) the Borrower shall provide not less than 30 days' notice to the
Lender specifying a Due Date on which the amount set forth in clause (c) below
is to be provided to the Lender, which notice shall be accompanied by a
certificate of the Borrower and the General Partner, signed by a duly authorized
officer of the General Partner, to the effect that no Default or Event of
Default has occurred and is continuing (or, in the case of a Default or Event of
Default that shall be cured or avoided by the Release of the affected Mortgaged
Property, describing the nature of such Default or Event of Default, and
certifying that such Default or Event of Default shall be cured by such Release)
and that such Release will comply with all applicable requirements of this
Section 2.6;
(b) the Borrower shall pay to the Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of Lender incurred in
connection with the prepayment,
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including any costs and expenses associated with a release of the Lien of the
Security Documents and reasonable attorneys' fees and expenses;
(c) the Borrower shall pay to the Lender, to be applied to prepayment of
the Scheduled Principal Payments due on each Due Date, in the inverse order of
their scheduled maturities, an amount equal to (1) in the case of a prepayment
pursuant to clause (b) of the first paragraph of this Section 2.6, the Release
Price and the Yield Maintenance Payment for such Mortgaged Property or (2) in
the case of a Release pursuant to clause (a) of the first paragraph of this
Section 2.6, an amount equal to the greater of (a) and (b), in which (a) is the
Allocated Loan Amount for such Mortgaged Property and (b) is the lesser of (x)
the Release Price for such Mortgaged Property and (y) the sum of the Net Sales
Proceeds received by Borrower from the sale of the Mortgaged Property or the
part thereof that remains following the Taking or Casualty, plus the remaining
Award or Insurance Proceeds not previously applied to repayment of the Loan or
Restoration;
(d) the Borrower shall deliver to the Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
and
(e) if the Release is being requested in order to avoid an Event of
Default pursuant to Section 7.1.3 hereof, the Borrower shall deliver to the
Lender evidence reasonably satisfactory to the Lender that the Debt Service
Release Conditions have been satisfied.
2.7. Partial Release after Defeasance Period
On any Due Date occurring on or after the last day of the Defeasance
Period, upon the sale of any Mortgaged Property to any Person, the Borrower may
cause the Release of such Mortgaged Property from the Lien of the Security
Documents upon the satisfaction of the following conditions:
(a) the Borrower shall provide not less than 30 days' notice to the Lender
specifying a Due Date on which the amount set forth in clause (c) below is to be
provided to the Lender, which notice shall be accompanied by a certificate of
the Borrower and the General Partner, signed by a duly authorized officer of the
General Partner, to the effect that no Default or Event of Default has occurred
and is continuing (or, in the case of a Default or Event of Default that shall
be cured or avoided by the Release of the affected Mortgaged Property,
describing the nature of such Default or Event of Default, and certifying that
such Default or Event of Default shall be cured by such Release) and that such
Release will comply with all applicable requirements of this Section 2.7;
(b) the Borrower shall pay to the Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date;
(c) the Borrower shall pay to the Lender, to be applied to prepayment of
the Scheduled Principal Payments due on each Due Date, in the inverse order of
their scheduled maturities, an amount equal to the Release Price of such
Mortgaged Property; provided, however, that (A) if a Mortgaged Property is
released pursuant to this
-34-
Section 2.7 as a result of a Casualty or a Taking as to which Restoration is not
required or permitted under the applicable Mortgage, such payment shall be an
amount equal to the greater of (a) and (b), in which (a) is the Allocated Loan
Amount for such Mortgaged Property and (b) is the lesser of (x) the Release
Price for such Mortgaged Property and (y) the sum of the Net Sales Proceeds
received by Borrower from the sale of the Mortgaged Property or the part thereof
that remains following the Taking or Casualty plus the remaining Award or
Insurance Proceeds not previously applied to repayment of the Loan or
Restoration;
(d) the Borrower shall deliver to the Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
and
(e) unless the Release is being made in connection with a Casualty or
Taking (as to which Restoration is not required or permitted under the
applicable Mortgage), the Borrower shall deliver to the Lender evidence
reasonably satisfactory to the Lender that the Debt Service Release Conditions
have been satisfied.
Sales of personal property at a Mortgaged Property in the ordinary
course of business may be made pursuant to Section 1.23 of the applicable
Mortgage without regard to Sections 2.5, 2.6 or 2.7 hereof.
2.8. Yield Maintenance
2.8.1.
If all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default or if a Mortgaged Property is released for the purpose set forth in
Section 7.1.3 after the Closing Date but prior to the Securitization, Borrower
shall be required to pay a prepayment premium (the "Yield Maintenance Payment")
on the Mortgage Note equal to the greater of (A) 1% of the amount of the
principal prepayment that is to be applied to the Mortgage Note and (B) the
present value as of the end of the applicable Debt Service Period, discounted at
the Reinvestment Yield, of a series of payments each equal to the Payment
Differential on each of the remaining Due Dates prior to and including the
Scheduled Maturity Date, after giving effect to the regularly scheduled payment
of principal that is to be made on the Prepayment Date. No Yield Maintenance
Payment shall be required in connection with prepayments made on or after the
last day of the Defeasance Period.
2.8.2.
Promptly following such a prepayment, the Lender shall notify Borrower
of the amount and basis of determination of the applicable Yield Maintenance
Payment promptly upon determining the Treasury Rate, as contemplated below.
Absent manifest error, the Borrower shall not dispute Lender's calculations
hereunder.
For purposes of this Section 2.8, the following terms shall have the
meanings ascribed to them below:
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"Payment Differential" means, an amount equal to (x) the Base Rate,
minus the Reinvestment Yield, divided by (y) 12, and multiplied by (z) the
amount of the principal prepayment.
"Reinvestment Yield" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"Treasury Rate" is equal to the lesser of (A) the annual yield on the
United States Treasury issue (primary issue) with a maturity date closest
to the Final Maturity Date and (B) the yield on the United States Treasury
issue (primary issue) with a maturity equal to the remaining average life
of the Mortgage Note, with each such yield being based on the bid price for
such issue as published in The Wall Street Journal on the date that is 14
-----------------------
days prior to (x) the applicable Prepayment Date set forth in the notice of
prepayment provided by the Borrower or (y) the date of acceleration by the
Lender (or if such bid price is not published on that date, the next
preceding date on which such bid price is so published).
3. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and the other Loan
Documents and to make the Loan to Borrower, Borrower makes the following
representations and warranties:
3.1. Organization and Power of Borrower
Borrower (i) is (and at all relevant times has been) duly organized
and validly existing as a limited partnership in good standing under the laws of
the State of Delaware, (ii) has full power and authority to enter into, execute,
deliver and perform the Management Agreement, the Ground Leases, this Agreement,
the Mortgage Note, and the other Loan Documents and to consummate the
transactions contemplated hereby and thereby, (iii) has full power and authority
to mortgage or assign all of its right, title and interest in and to the
Mortgaged Properties and the other Collateral, (iv) has full power and authority
to transact the business in which it is now engaged, or proposes to engage, (v)
has power and authority and is duly qualified to transact such business as a
foreign limited partnership under the laws of all jurisdictions in which the
Mortgaged Properties are located, and in all jurisdictions where the nature of
Borrower's business or the character of properties owned, leased, operated or
otherwise held by Borrower makes such qualification necessary and (vi) is a
special purpose entity established for the sole purpose of owning and operating
the Mortgaged Properties or causing the Mortgaged Properties to be operated.
All of the partnership interests in the Borrower have been duly and validly
authorized and issued and are owned as follows: the General Partner owns a 1.3%
limited partner interest and a 5% general partner interest in the Borrower and
the Limited Partners (other than the General Partner) own a 93.8% limited
partner interest in the Borrower, in each case, free and clear of any liens,
encumbrances, equities or claims. The General Partner (i) is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, (ii) has full power and authority to execute, deliver, and perform
this Agreement and the other Loan Documents to which it is a party, whether for
itself or on behalf of Borrower, (iii) is duly qualified to transact business as
a
-36-
foreign corporation in good standing under the laws of each jurisdiction which
requires such qualification, except when the failure to be so qualified,
considering all such failures in the aggregate, would not be reasonably likely
to have a material adverse effect on the financial condition, business or
results of operations of the General Partner or the Borrower or on the
ownership, use or value of any of the Hotels and (iv) is not engaged in any
business other than acting as the general partner of the Borrower. Borrower has
its principal place of business, principal office and office where it keeps its
records and other documents and instruments relating to the Hotels (except for
certain records, documents and instruments kept at the Hotels) at its address
set forth in Section 11.3.
3.2. Due Authorization and Execution
The execution, delivery and performance by the Borrower and the
General Partner of this Agreement and each of the other Loan Documents has been
duly authorized by all requisite actions by and on behalf of Borrower and the
General Partner and are within the partnership or corporate power of the
Borrower and the General Partner, as the case may be, and this Agreement and all
other Loan Documents executed and delivered by Borrower or the General Partner
have been duly executed by the Borrower and the General Partner and constitute
the valid and binding obligations of the Borrower and the General Partner,
enforceable against the Borrower and the General Partner in accordance with
their respective terms, subject to the effects of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws
relating to or affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding in equity or at law).
3.3. No Consents Required; No Contravention
Except for consents and approvals that have already been obtained
and are in full force and effect, no consent, license, approval or authorization
of, or registration or declaration with, any Governmental Authority, commission,
bureau, agency or other Person is required in connection with the execution,
delivery and performance of this Agreement, the Mortgage Note, or any of the
other Loan Documents or the consummation of the transactions contemplated hereby
and thereby. Neither the execution and delivery by the Borrower or the General
Partner of this Agreement nor of the other Loan Documents, the consummation of
the transactions contemplated hereby or thereby, nor the fulfillment by the
Borrower or the General Partner of, or compliance by the Borrower or the General
Partner with, the terms and conditions of this Agreement or the Loan Documents:
(a) will result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any Laws or any judgment, decree
or order binding on Borrower or the General Partner or their respective
properties or assets;
(b) will conflict with or result in any breach or violation of any
of the terms, conditions or provisions of the organizational documents of the
Borrower or the General Partner; or
(c) will result in a breach or violation of or constitute a default
under any existing material agreement or instrument to which the Borrower or the
General Partner
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or their respective assets are a party or by which the Borrower or the General
Partner are bound (except under agreements relating to the Bank Debt that will
be terminated, released or fulfilled at or prior to the Closing).
3.4. Title to Properties
Borrower has, and shall continue to have, good and marketable title
to the Mortgaged Properties, including good and marketable fee simple or
leasehold title, as applicable, in and to the Land, and good and marketable
title in and to the Improvements located thereon, in each case free and clear of
all Liens except for Permitted Liens, and Borrower has, and shall continue to
have, good title to its interest in all other assets that serve as Collateral
for the Loan (which, in the case of assets leased by Borrower, shall mean a good
and valid leasehold interest in such assets), free and clear of all Liens except
Permitted Liens. The Permitted Liens do not and will not materially and
adversely affect (i) the ability of Borrower to pay in full the principal and
interest when due on the Mortgage Note or (ii) the use of the Mortgaged
Properties for the use currently being made thereof or the operation of the
Mortgaged Properties as they currently are being operated. Borrower has no
interest in real property other than the Mortgaged Properties, including the
Land and Improvements related thereto. Each Hotel constitutes one or more
separate tax lots that do not share tax liability with other real property
except property that is (a) owned in full by Borrower or a Ground Lessor and (b)
encumbered by a Lien in favor of the Lender securing the Loan.
3.5. Ground Leases
(i) The Ground Leases have been duly executed by, and are in full
force and effect as between the parties thereto.
(ii) Borrower is not in default under any Ground Lease and, to the
best of Borrower's knowledge, there are no defaults by any
other party thereunder.
(iii) The Borrower and the General Partner further represent and
warrant that (i) a true and complete copy of each Ground Lease
and all amendments and supplements thereto has been delivered
to the Lender, (ii) no such Ground Lease has been supplemented
or modified in any way except as set forth in Schedule 3.5A
-------------
attached hereto, and each Ground Lease constitutes the entire
agreement with the landlord thereunder such that there are no
understandings, representations, warranties or promises not
fully set forth therein, (iii) to the best of its knowledge,
there is no existing default or event which with the passage
of time and/or the giving of notice would constitute a default
under any of the Ground Leases by any party thereto, (iv) the
continuation, validity and enforceability of the Ground Leases
will not be affected by the transactions contemplated by this
Agreement or the other Loan Documents, (v) each such Ground
Lease is either superior to any mortgage encumbering the fee
interest in such Hotel or there is an existing and effective
nondisturbance agreement in place with any holder of such fee
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mortgage that would have the effect of causing such Ground
Lease to remain superior to such fee mortgage upon its
foreclosure, and (vi) except as set forth on Schedule 3.5B, the
-------------
landlord under such Ground Lease has no right or option to
purchase the tenant's leasehold estate or to purchase any
leasehold mortgagee's interest in such Hotel.
(iv) Each Ground Lease or a memorandum thereof has been duly
recorded.
(v) Each Ground Lease permits the interest of the Borrower as
lessee thereunder to be encumbered by the related Mortgage.
(vi) The Borrower's interest in each Ground Lease may be subjected
to a leasehold mortgage.
(vii) Except as set forth in Schedule 3.5C, each Ground Lease
-------------
requires the lessor thereunder to give notice of any default by
the Borrower, as lessee, to the mortgagee under any leasehold
mortgage relating to such Ground Lease (including the Mortgage)
and provides the mortgagee a reasonable opportunity (including,
where necessary, sufficient time to gain possession of the
interest of Borrower thereunder) to cure any default under such
Ground Lease that is curable after the receipt of notice of any
such default, before the lessor thereunder may terminate such
Ground Lease.
(viii) The term of each Ground Lease (including all renewal options of
the Borrower, as lessee) extends to a date not earlier than
April 10, 2022.
(ix) Except as set forth in Schedule 3.5D, each Ground Lease
-------------
permits the Borrower, as lessee, to apply all Insurance
Proceeds either (A) to the repair or restoration of all or part
of the related Mortgaged Property, and the Lender, or its
designee, to hold and disburse such Insurance Proceeds as the
repair or restoration progresses, or (B) to the prepayment or
defeasance of the Mortgage Note.
3.6. Utilities
(i) All utility services and facilities (including water, sanitary
sewer, storm sewer, gas and electrical services and facilities) necessary for
the present and proposed use of the Hotels are available to the Hotels and,
except as shown on the surveys or title reports for the Hotels, enter the Hotels
either through adjoining public streets or through private lands pursuant to
valid, unsubordinated, perpetual, enforceable and recorded public or private
easements; (ii) all utility connections for the Hotels have been completed,
installed and paid for; (iii) except as shown on the surveys or title reports
for the Hotels and except for encroachments that would not reasonably be
expected to materially and adversely affect the operation of the applicable
Mortgaged Property, no Improvements on the Land are located upon any public
utility lines or upon any private utility lines serving property other than the
Hotels, or encroach upon any property adjoining the Hotels or
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encroach upon any utility easements or rights-of-way; and (iv) neither Borrower
nor the General Partner has received any notice from any utility that any
utility services utilized by the Hotels will be revoked or otherwise terminated.
3.7. No Violations
No notices of any material violation of law or municipal ordinances or
of federal, state, county or municipal or other governmental agency regulations,
orders or requirements relating to the Collateral have been entered against or
received by the Borrower or, to Borrower's knowledge, the Manager, and the
Borrower has no reason to believe that any such notice may or will be entered or
received.
3.8. Other Agreements
Neither the Borrower, nor the General Partner is a party to any
agreement, instrument, indenture, or other contract or subject to any charter or
other restriction that could materially adversely affect, or threaten to
materially adversely affect, its business, operations, prospects, properties,
assets or condition (financial or otherwise). No material default by Borrower
or the General Partner has occurred or is continuing (nor has there occurred any
continuing event which, with giving of notice or the passage of time or both,
would constitute such a default) under any material contracts, material
agreements or material orders to which the Borrower, or the General Partner, as
the case may be, is a party or by which it is bound and, to the knowledge of
Borrower, no material default by a third party has occurred or is continuing
(nor has there occurred any continuing event which, with the giving of notice or
the passage of time, or both, would constitute such a default) under any such
contracts, agreements or orders. No holder of any indebtedness of Borrower or
the General Partner has given notice of any default thereunder, and no
liquidation or dissolution of Borrower, or the General Partner, and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower, or the General Partner or any of their
properties, is pending or, to the knowledge of Borrower or the General Partner,
threatened against them or their properties.
3.9. Payment of Taxes
(i) Borrower and the General Partner have filed or have caused to be
filed all federal, state, local, and foreign income, excise, property and other
tax returns with respect to their operations, that are required to be filed,
(ii) all such returns are true and correct in all material respects, and (iii)
Borrower and the General Partner have paid or caused to be paid in full all
taxes as shown on such returns or on any assessment received by them, to the
extent that such taxes have become due. Except as so disclosed, the amounts
reserved as a liability for income and other taxes that may become payable are
sufficient for the payment of all such unpaid taxes of Borrower or the General
Partner, whether or not disputed, for which Borrower or the General Partner may
be liable in its own right or as a transferee of the assets of, or as successor
to, any other person or entity.
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3.10. Litigation
There is no legal or governmental action, suit or proceeding
(including any condemnation proceeding) pending to which the Borrower or the
General Partner is a party or of which any property of the Borrower or the
General Partner is subject which, if determined adversely to the Borrower or the
General Partner, as the case may be, would individually or in the aggregate have
a material adverse effect on the Mortgaged Properties, or on the financial
position, business or results of operations of the Borrower or the General
Partner or that might affect in any material respect the transactions
contemplated by this Agreement and, to the knowledge of the Borrower and the
General Partner, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
3.11. Regulation U
Neither Borrower, nor the General Partner is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as now and
from time to time hereafter in effect, and no proceeds of the Loan will be used
for any purpose (and neither Borrower nor the General Partner acting on its
behalf has taken or will take any action, which might cause this Agreement or
any Loan Document to violate said Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System (in each case as in effect on
the date hereof or as the same may hereinafter be in effect)).
3.12. Investment Company Act
Neither Borrower, nor the General Partner is an "investment company"
or a company "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended and none is an open-ended
investment company, unit trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.
3.13. Transactions with Affiliates
Excluding all transactions contemplated by the Loan Documents, no
officer of Borrower, and no other Affiliate of Borrower or of any such officer,
is currently a party to any transaction with Borrower, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, purchase or lease of real or personal property
from, or otherwise requiring payments to, any such officer or Affiliate, except
on terms that are fair and reasonable and no less favorable to Borrower than
would be expected in arms-length transactions with third parties where neither
party is under duress or under any extraordinary compulsion to enter into such
contract, agreement or arrangement.
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3.14. Non-Subordination
The obligations of Borrower under this Agreement, the Mortgage Note,
and each of the other Loan Documents, and the indebtedness evidenced by the
Mortgage Note, are not subordinated in right of payment or otherwise to any
other obligation of Borrower or to any rights of others.
3.15. Permits and Licenses
No proceedings are pending or, to the best of Borrower's and the
General Partner's knowledge, threatened seeking the revocation or suspension of
any permits, licenses or approvals issued with respect to the Hotels the
revocation of which might reasonably be expected to result in any material
adverse change in the business, operations, prospects, properties, assets or
condition (financial or otherwise) of Borrower or any of the Hotels. No such
permits, licenses or approvals shall be altered or amended, nor shall Borrower
or the General Partner make any attempt to alter or amend the same, in any
materially adverse respect, without the prior written consent of the Lender.
The Borrower and the General Partner have all material permits, licenses and
authorizations necessary to conduct their respective businesses in the same
manner as currently conducted and currently planned to be conducted.
3.16. Patents and Trademarks
Borrower owns or possesses the right to use all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and rights
with respect to the foregoing, necessary to own and operate its properties and
to carry on its business as presently conducted and presently planned to be
conducted without conflict with any rights of others.
3.17. Insurance
Borrower has obtained all insurance policies required by Section 8
hereof and by each of the Mortgages, in each case with Qualified Insurance
Companies and all such policies are in full force and effect.
3.18. ERISA
Neither Borrower nor the General Partner has any employees, and
neither Borrower nor the General Partner maintains or sponsors any Plan.
Neither Borrower nor the General Partner is obligated to make contributions on
behalf of the employees of any Person to any Plan.
3.19. No Notice of Non-Compliance
Neither the Borrower nor the General Partner nor, to the Borrower's
knowledge, the Manager has received any notice from any insurance company which
has issued a policy with respect to the Hotels or from any State Board of Fire
Underwriters (or any other body exercising similar functions) requiring the
performance of any repairs,
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alterations or other work, which repairs, alterations or other work have not
been completed at the Hotels. Neither Borrower nor the General Partner has
received any notice of default or breach which has not been cured under any
covenant, condition, restriction, right-of-way, reciprocal easement agreement or
other easement or agreement affecting the Hotels which is to be performed or
complied with by it.
3.20. Compliance With Laws
Borrower and each Hotel is in compliance with all Laws, except for
such non-compliance as would not reasonably be expected, singly or in the
aggregate, to materially and adversely affect any Hotel or the business,
operations, prospects, assets, properties or condition (financial or otherwise)
of Borrower.
3.21. Compliance with Environmental Laws
To the best of Borrower's and the General Partner's knowledge, there
are no Hazardous Materials other than Permitted Hazardous Substances present at
any of the Mortgaged Properties, and Borrower and each of the Mortgaged
Properties is in compliance in all material respects with, all applicable
Environmental Laws, except for such matters as may be described in the Phase I
environmental reports delivered to Lender prior to the Closing Date (and, in the
case of the Mortgaged Property in San Antonio, Texas, the Phase II environmental
report delivered to Lender) prior to the Closing Date. There are not pending
(and, to the best of Borrower's knowledge, there are not threatened), any
actions, suits, claims, legal proceedings or any other proceedings claiming or
involving the presence on, at or under the Mortgaged Properties, or any part
thereof, of any Hazardous Materials or claiming violation of Environmental Laws
relating to the Mortgaged Properties or any part thereof, and neither the
Borrower nor, to its knowledge, the Manager has received, directly or
indirectly, formal or informal notice of any complaint, order directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Authority or any other person or
entity relating to the foregoing.
3.22. Environmental Indemnification by Borrower
Borrower and the General Partner agree to execute in favor of the
Lender, its successors and assigns, the Environmental Indemnity Agreement. No
Person, other than the Lender and its successors and assigns (including a
purchaser at foreclosure or grantee of an assignment or deed in lieu thereof),
shall have any rights under, or be considered a beneficiary of, the
Environmental Indemnity Agreement.
3.23. Concerning Mortgaged Properties; Financial Statements
(a) All certifications, permits, licenses and approvals required for
the legal use, occupancy and operation of each Hotel as a hotel including any
applicable liquor license, certificate of completion and occupancy permit, have
been obtained and are in full force and effect; (b) Engineering Surveys have
been performed for each of the Hotels and, except as set forth in the
Engineering Surveys, the Hotels and other Improvements are in sound condition
and repair consistent with the conditions required of them under the Management
Agreement and neither Borrower nor the General Partner has knowledge
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that any such Engineering Survey contains any material inaccuracy or omission;
(c) there are no proceedings pending or, to the best of Borrower's or the
General Partner's knowledge, threatened for the total or partial condemnation of
or affecting, any Hotel; (d) the Hotels are not subject to any leases, licenses
or other use or occupancy agreements other than the Ground Leases and leases of
equipment in the ordinary course of business that would not cause the
limitations on leasing contained in the Management Agreement or in any of the
Loan Documents to be violated (the "Leases"); (e) other than the Manager
pursuant to the Management Agreement and hotel guests from time to time, no
Person has any possessory interest in any Hotel or right to occupy any portion
thereof except under and pursuant to the provisions of the Leases; (f) Borrower
does not have on the date hereof any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments which in each case are known to Borrower
and which, in Borrower's opinion, are reasonably likely to result in a material
adverse effect on the Hotels or the operation thereof, except as referred to or
reflected or provided for in the financial statements heretofore furnished to
the Lender or as otherwise disclosed to the Lender herein; (g) since the last
date of such financial statements, (i) Borrower has not entered into any
material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business, except
as disclosed to the Lender and (ii) there has not been any material adverse
change in the condition (financial or otherwise), business, net worth or results
of operations of the Borrower or the condition (financial or otherwise) of the
Hotels; and (h) except as described on Schedule 3.23 attached hereto, no
-------------
Mortgaged Property is located in a flood hazard area as defined by the Federal
Insurance Administration (and all Mortgaged Properties described in Schedule
--------
3.23 are covered by flood insurance satisfying the requirements of the
----
applicable Mortgage).
3.24. Access
Each Hotel has access and is contiguous to publicly dedicated streets,
roads or highways, or if not so contiguous, access to and from each Hotel and
publicly dedicated streets, roads or highways is available through private lands
pursuant to valid, perpetual, enforceable and recorded public or private
easements or rights-of-way; and pedestrian and vehicular access to and from each
Hotel via the easements or rights-of-way is not limited or restricted in any
unreasonable manner (except that with respect to the Leasehold Hotels only, the
duration of any such easements may not be perpetual but are at least coterminous
with the terms of the applicable Ground Leases, including all renewal options
whether or not presently exercised).
3.25. No Liens
There are no Liens of any type with respect to any of the Hotels,
except the Liens created by the Loan Documents and the Permitted Liens. There
has been no construction or other activities at any of the Hotels within such
periods of time as would permit the imposition of any mechanics' or
materialmen's Liens on any of the Hotels except as set forth on Schedule 3.25.
-------------
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3.26. Accuracy of Information
To the best knowledge of the Borrower and the General Partner, neither
the Loan Documents nor any document, agreements, instrument, schedule,
certificates, statements, or cash flow schedules (collectively, the "Borrower
Documents") furnished by the Borrower, MII, the Manager, the General Partner or
Host Marriott to the Lender contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. Since the furnishing of the Borrower Documents, there has been no
change nor any development or event involving a prospective change known to the
Borrower or the General Partner which would render any of the Borrower Documents
untrue or misleading in any material respect.
3.27. Mortgages and Security Interests
When executed and delivered, and, if necessary under applicable laws,
recorded, the Mortgages will create valid mortgage, deed of trust, or similar
Liens upon the Mortgaged Properties, the Land underlying them (which, in the
case of Land leased under a Third Party Ground Lease, will be a Lien on the
Borrower's leasehold interest in the Land, in all other cases, will be a Lien on
the Borrower's or Marriott Ground Lessor's, as applicable, fee simple interest
in the Land and, in the case of Land leased under a Marriott Ground Lease, will
also be a Lien on the Borrower's leasehold interest in the Land), and the
Improvements and valid security interests in the fixtures located thereon, and
the Mortgages and accompanying financing statements (if any) will be recorded
and filed in such places as may be required and, where appropriate, applicable
mortgage, transfer, recording and UCC taxes and fees will be paid, such that the
Mortgages will constitute valid first priority mortgage, deed of trust, or
similar Liens on the Land and Mortgaged Properties and will create valid
perfected first priority security interests of record with respect to the
respective Mortgaged Property and related Collateral (except Collateral as to
which a security interest cannot be created and perfected by a Mortgage or the
filing of a financing statement under the U.C.C.), subject only to the Permitted
Liens.
When executed and delivered, and, if necessary under applicable laws,
when appropriate filings of financing statements are made, the Security
Agreement by and between the Borrower and the Lender will create valid first
priority security interests with respect to the Collateral named therein, which
security interests shall be perfected to the extent that security interests in
such Collateral can be perfected by the filing of a financing statement under
the U.C.C.
3.28. Assignments of Leases and Rents
When executed and delivered by the Borrower and the other parties
thereto, the Assignments of Leases and Rents will create a valid assignment of
the Collateral described therein. The Assignments of Leases and Rents, and
accompanying financing statements (if any) will be recorded by the Title Company
and filed in such places as may be required so that all such documents will
create valid assignments of record with respect to the Collateral described
therein, subject only to the Permitted Liens.
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3.29. Foreign Person
The Borrower is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986 and any regulations promulgated thereunder
(including temporary or proposed regulations).
3.30. No Defaults
No Default or Event of Default exists hereunder or under the other
Loan Documents.
3.31. No Fraudulent Conveyance
Borrower (i) is entering into this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby in good faith and
with no actual intent to disturb, hinder, delay, or defraud any present or
future creditor of the Borrower, the General Partner or any other Person, and
(ii) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. After giving effect to the transactions contemplated
by the Loan Documents, the fair salable value of the Borrower's assets exceeds
and will, immediately following the execution and delivery of the Loan
Documents, exceed the Borrower's total liabilities, including subordinated,
unliquidated, disputed or contingent liabilities known to the Borrower. The
fair salable value of the Borrower's assets is and will, immediately following
the execution and delivery of the Loan Documents, be greater than the Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
known to the Borrower or its debts as such debts become absolute and matured.
The Borrower's assets do not and, immediately following the execution and
delivery of the Loan Documents will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. The
Borrower does not intend to, and does not believe it will, incur debts and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of the Borrower).
4. CLOSING; CONDITIONS PRECEDENT
The Loan shall be made at a closing (the "Closing") on the Closing
Date. Without limiting the foregoing, the obligation of the Lender to make the
Loan to Borrower and to proceed with the Closing is subject to the satisfaction
on or before the Closing Date of each and all of the following conditions (and
the occurrence of the Closing shall be conclusive evidence that all such
conditions have been satisfied in full or knowingly waived):
4.1. Representations, Warranties and Covenants
The representations and warranties of the Borrower and its General
Partner made in this Agreement or in any other Loan Document shall have been
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date, with the same effect as if
such representations and warranties were
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made on the Closing Date. As of the Closing Date, the Borrower and the General
Partner shall each have performed and complied in all material respects with all
covenants and agreements required by this Agreement or by any other Loan
Document to be performed or complied with by the Borrower and the General
Partner as of such date.
4.2. Borrower's Actions
The Borrower shall have taken all actions under the laws of any
state having jurisdiction over the Borrower necessary to effectuate the
transactions contemplated by this Agreement and by the other Loan Documents.
4.3. Delivery of Documents
The Borrower shall have delivered to the Lender the following
documents, instruments and agreements, each of which shall be in form and
substance reasonably satisfactory to the Lender:
4.3.1.
All Loan Documents, fully executed by the Borrower and, as
applicable, the General Partner, including the following;
(i) This Agreement;
(ii) The Mortgage Note;
(iii) Each of the Mortgages;
(iv) The Environmental Indemnity Agreement;
(v) The Collateral Assignment of Management Agreement (and
the Manager's consent to same);
(vi) The Security Agreement;
(vii) Each of the Assignments of Leases and Rents; and
(viii) The Cooperation Agreement.
4.3.2.
Mortgagee's forms of title insurance policies (each a "Title
Insurance Policy" and, collectively, the "Title Insurance Policies"), or marked-
up commitments evidencing such policies, each in form and content reasonably
acceptable to the Lender, and each in an amount not less than the Allocated Loan
Amount applicable to the particular Mortgaged Property (as specified in part A
of Schedule 4.3.2 attached hereto), with premiums fully paid, insuring that (i)
--------------
each Mortgage constitutes a valid first priority mortgage or similar lien on,
and security interest in, the Land and the Improvements and all rights
appurtenant thereto described therein, in each case free and clear of all
defects
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and encumbrances other than as set forth in Exhibit B to the applicable
---------
Mortgage, and containing, to the extent such coverage is available in the state
in which the particular Mortgaged Property is located, (A) full coverage (by
affirmative insurance) against liens of mechanics, materialmen, laborers, and
any other Persons who might claim statutory or other common law liens relating
to services performed prior to Closing; (B) no survey exceptions other than
those set forth in Exhibit B to each Mortgage; (C) such other endorsements as
---------
the Lender may deem reasonably necessary to insure that any off-site easements
benefiting any of the Mortgaged Properties are valid and enforceable in
accordance with their terms; (D) a "tie-in" endorsement aggregating the
insurance amount indicated for the applicable Mortgaged Property with the
amounts indicated for other Mortgaged Properties; and (E) such other
endorsements as listed for the state in which the applicable Mortgaged Property
is located in part B of Schedule 4.3.2 attached hereto. Such Title Insurance
--------------
Policies shall be issued by Commonwealth Land Title Insurance Company or any
other nationally recognized title insurance company (the "Title Company")
reasonably satisfactory to the Lender.
4.3.3.
Evidence reasonably satisfactory to the Lender that the requirements
set forth in Sections 8.1 and 8.3 hereof have been complied with and that all
policies of insurance required by Section 8.1 and 8.3 are in full force and
effect;
4.3.4.
Evidence reasonably satisfactory to the Lender that funds necessary
to pay all taxes related to the Mortgages and all other recording and filing
fees and other expenses necessary in connection with the recordation of the
Mortgages and the perfection of the security interests under all of the other
Security Documents have been paid to the Title Company, or to other Persons
reasonably satisfactory to the Lender, for payment to the applicable taxing
authorities or recording officials;
4.3.5.
A certificate of the Borrower, dated as of the Closing Date
(together with copies of the documents referred to therein) certifying that: (i)
attached thereto is a true and complete copy of the Partnership Agreement,
together with all amendments thereto, (ii) the Partnership Agreement has not
been amended since the date of the last amendment attached to the certificate,
and (iii) the Partnership Agreement is in full force and effect;
4.3.6.
A certified copy of the GP Certificate, certified as of a date no
more than two weeks before the Closing Date by the Delaware Secretary of State
as being a true and complete copy of such certificate, as on file in such State,
and a certificate of a duly authorized officer of the General Partner, dated as
of the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the GP
Certificate, together with all amendments, if any, thereto, (ii) attached
thereto is a true and complete copy of the General Partners' bylaws, together
with all amendments, if any, thereto, (iii) the GP Certificate organizational
documents and bylaws have not been amended since the date of the last amendment
attached to such
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officer's certificate, (iv) the GP Certificate and bylaws are in full force and
effect and (v) attached thereto are currently effective resolutions of the
General Partner's board of directors authorizing the consummation of the
transactions contemplated hereby by the General Partner on its own behalf and as
the sole general partner of Borrower.
4.3.7.
A certified copy of the certificate of limited partnership of the
Borrower, certified as of a date no more than two weeks prior to the Closing
Date by the Delaware Secretary of State as being a true and complete copy of
such certificate as on file in such state, and a certificate of a duly
authorized officer of the General Partner of Borrower, dated as of the Closing
Date (together with copies of the documents referred to therein) certifying
that: (i) attached thereto are true and complete copies of the Borrower's
certificate of limited partnership, together with all amendments thereto, (ii)
the certificate of limited partnership has not been amended since the date of
the last amendment attached to the certificate, and (iii) the certificate of
limited partnership is in full force and effect;
4.3.8.
Original fictitious name certificates, certificates of existence
and, if available, certificates of good standing for the Borrower, the Manager,
and the General Partner from the Secretary of State's office (or equivalent) in
each state in which a Mortgaged Property is located, to the extent qualification
of such Person to do business in such state is necessary to lawfully operate the
Mortgaged Properties therein, each dated as of a date recent to the Closing
Date.
4.3.9.
Certificates of each of the Borrower and the Manager (which may be
included in the Collateral Assignment of Management Agreement), each dated as of
the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the
Management Agreement, together with all amendments thereto, (ii) the Management
Agreement has not been amended since the date of the last amendment attached to
the certificate, (iii) the Management Agreement is in full force and effect,
(iv) no notice of default under the Management Agreement has been given or
received by such party, and neither such party nor, to the best knowledge of
such party, the other party is in default with respect to any obligation under
the Management Agreement, (v) such party does not claim to have any defense,
counterclaim or right of offset with respect to any of its obligations under the
Management Agreement, (vi) the term of the Management Agreement, exclusive of
renewal rights, ends on the last day of the Manager's 2017 fiscal year, (vii)
the number and length of renewal options is as set forth therein, and (viii) the
full amount of any deferred payments owing thereunder is as set forth therein.
4.3.10.
As-built surveys for each Hotel that conform to the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys and that meet the
accuracy standards of an Urban Land Survey, each such survey to be prepared by a
surveyor
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registered in the state in which the Hotel shown on the survey is located, and
to contain a certificate from the surveyor to the Lender and the Title Company,
dated within 90 days immediately preceding the Closing Date, in form and content
reasonably acceptable to the Lender and the Title Company. Each survey shall
show (i) the boundaries of the applicable Land, (ii) the location and dimension
of all Improvements located on the Land, (iii) the location and identity of all
visible or recorded easements and rights-of-way across or serving the Land, (iv)
that the Improvements comply with all setback requirements and zoning
restrictions, except for violations that do not materially adversely affect the
Hotels or as to which the Lender is affirmatively insured under the applicable
Title Insurance Policy, (v) that the Improvements do not encroach on adjoining
property or on any easement or right of way, except for encroachments that do
not materially adversely affect the Hotels or as to which the Lender is
affirmatively insured under the applicable Title Insurance Policy, (vi) that
there are no encroachments on the Land, except for encroachments that do not
materially adversely affect the Hotels or as to which the Lender is
affirmatively insured under the applicable Title Insurance Policy, (vii) that
the Land is not located within any flood plain area (unless flood insurance
reasonably satisfactory to the Lender is provided), and (viii) any other matters
that the Lender may reasonably require;
4.3.11.
A report of the Title Company or a professional records-search firm
stating that a search of the public records in each state and county in which a
Hotel is located, disclosed no conditional sales contracts, chattel mortgages,
leases of personalty, financing statements or title retention agreements, that
affect any Hotel or Land or any other Collateral assigned or pledged to the
Lender, except such matters as may be listed in such report, and such matters
must be reasonably acceptable to the Lender;
4.3.12.
A copy of the certificate of occupancy for each Hotel and the
Improvements located on each parcel of Land, or evidence satisfactory to the
Lender that no certificate of occupancy is required by applicable Laws, and a
copy of all licenses and permits required for the legal operation of each Hotel
and all other Improvements located on each parcel of Land, or evidence
satisfactory to the Lender that no other licenses or permits are required by
applicable Laws or that the absence of particular licenses or permits will not
have a materially adverse effect on the business, properties, prospects, assets
or condition (financial or otherwise) of the Hotels;
4.3.13.
The Engineering Surveys for all of the Hotels, which shall show that
no material defects or conditions affect any of the Hotels, other than defects
or conditions as to which reserves reasonably acceptable to the Lender have been
established, and as to which remedial action reasonably acceptable to the Lender
will be performed in due course;
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4.3.14.
Seismic studies showing probable maximum loss with respect to each
Mortgaged Property located in California;
4.3.15.
Current reports prepared by an environmental surveying firm
reasonably satisfactory to the Lender and in form and scope reasonably
satisfactory to the Lender;
4.3.16.
An appraisal satisfactory to the Lender prepared with respect to
each Hotel by an appraiser acceptable to Lender showing the appraised values for
the Hotels;
4.3.17.
Estoppel certificates from the Third Party Ground Lessors; and
4.3.18.
Letters from the holders of the Bank Debt showing the amounts
necessary to pay such indebtedness in full as of the Closing Date, together with
evidence that the Title Company has received into escrow from such holders all
instruments of release, in recordable form, necessary to release any Liens
securing such debt immediately following the Closing.
4.4. Evidence of Authorization; Related Documents
The Lender shall also have received:
4.4.1.
A certificate of the corporate secretaries of the Manager the
General Partner and each Marriott Ground Lessor certifying as to the incumbency
and genuine signature of each officer of such corporation executing any of the
Loan Documents or other statements, reports, certificates and documents called
for by the terms of the Loan Documents and who will otherwise act under the Loan
Documents for and on behalf of Borrower or any such corporation, including
specimen signatures of each individual that will be signing any of the Loan
Documents on behalf of the Borrower or the General Partner, which specimen
signatures shall be certified by an appropriate officer to be a true specimen
thereof (and the signature, authority and incumbency of the certifying officer
shall be similarly certified).
4.4.2.
One or more written opinions addressed to the Lender, dated as of
the Closing Date, from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., special counsel to the Borrower
and the General Partner, in form and substance reasonably acceptable to the
Lender;
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4.4.3.
A favorable written opinion addressed to the Lender, dated as of the
Closing Date, from local counsel to the Borrower in each state in which one or
more of the Hotels is located, substantially to the effect set forth in Exhibit
-------
B attached hereto.
-
4.5. Closing Certificate
The Lender shall have received a certificate of Borrower and the
General Partner signed by a duly authorized officer of the General Partner,
dated as of even date herewith, stating that:
(i) The representations and warranties of Borrower and the General
Partner contained in each of the Loan Documents to which Borrower or the General
Partner is a party, and in all certificates, documents and instruments delivered
by Borrower or the General Partner pursuant to the Loan Documents are true and
correct in all material respects on and as of the Closing Date; and
(ii) All conditions precedent to be performed by the Borrower or the
General Partner have been satisfied as of the Closing Date.
4.6. Management Agreement
The Management Leases shall have been terminated and the Management
Agreement shall be in full force and effect.
4.7. Existing Debt
All actions necessary to repay the Bank Debt, and to release all
mortgages or other Liens relating thereto, shall have been taken, and the Lender
shall have received evidence reasonably satisfactory to the Lender to that
effect.
4.8. Payment of Lender Costs and Origination Fee
The Lender shall pay, out of the gross proceeds of the Loan at the
Closing, (i) the Origination Fee and (ii) all Lender Costs, the amounts of which
are known to the Lender at such time, or withhold a reasonable amount of funds
from the Loan Amount at Closing to pay Lender Costs after the Closing. In the
event that the amounts paid or withheld by the Lender at the Closing are
insufficient to pay all such Lender Costs, the Borrower shall promptly, upon
demand, provide additional funds to the Lender to pay such Lender Costs.
4.9. FF&E Reserve Account
The FF&E Reserve Account shall have been funded on the Closing Date
in the amount of $7,000,000 in excess of the balance therein immediately prior
to the Closing.
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4.10. General Partner Organizational Documents
The GP Certificate shall have been amended in a manner satisfactory
to Lender and there shall have been duly elected to the Board of Directors of
the General Partner an Independent Director.
5. AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any amount of principal, interest,
Yield Maintenance Payment, or any other charges relating to the Loan shall be
outstanding, or so long as there exist any other charges owing on or under this
Agreement, the Mortgage Note, or any other Loan Document, Borrower shall:
5.1. Timely Payment of Amounts Due
Duly pay or cause to be paid, when due, the principal of, interest
on, Yield Maintenance Payments, if any, and other amounts payable under or in
connection with this Agreement, the Mortgage Note and each other Loan Document
in accordance with the terms hereof and thereof, at the times and places and in
the manner provided herein or therein.
5.2. Proceeds of the Loan
Apply the Net Loan Proceeds solely for the purposes set forth in
Section 2.3 hereof.
5.3. Management Agreement; Ground Leases
Duly and punctually pay all sums required to be paid by Borrower
under the Management Agreement and each Ground Lease and otherwise perform in
all material respects the obligations contemplated to be performed by it under
the Management Agreement and each Ground Lease, subject to the provisions of the
Collateral Assignment of Management Agreement and the Ground Lease Rental
Subordination Agreement, and will, with due diligence and in a reasonable and
prudent manner, enforce its rights under the Management Agreement and each
Ground Lease to the extent failure to perform or protect its rights thereunder
might materially and adversely affect the business, operations, prospects,
assets, properties or condition (financial or otherwise) of Borrower. Without
limiting the foregoing, Borrower agrees that:
(a) Borrower shall at all times promptly and faithfully keep,
perform and comply with, or cause to be kept, performed and complied with,
prior to the expiration of any applicable grace period, the provisions of
the Management Agreement and of each Ground Lease to be complied with by
it.
(b) Borrower shall give the Lender prompt notice of any notice of
default given to or received from the Manager under the Management
Agreement or the lessor under any Ground Lease, which notice shall include
a copy of such notice whether or not the Lender may be entitled to such
notice directly from the Manager
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or such lessor. Borrower shall promptly furnish to the Lender upon the
Lender's reasonable request any and all information concerning the
performance by it of the provisions of the Management Agreement and of any
Ground Lease and shall permit the Lender or its representative at all
reasonable times to make investigation or examination concerning the
performance by it of the provisions of the Management Agreement and of each
Ground Lease. Within ten (10) days after receipt by Borrower, Borrower
shall deliver to the Lender a copy of any notice, communication, plan,
specification or other instrument or document received or given by it in
any way relating to or affecting the Management Agreement or any Ground
Lease which may materially concern or affect the rights of the Borrower
under the Management Agreement or the rights or estate of the lessor or the
lessee in or under a Ground Lease or the Land leased thereby.
(c) If any legal action or proceeding shall be instituted to
terminate the Management Agreement or to evict Borrower under, or
terminate, any Ground Lease, or for any other purpose materially affecting
the Management Agreement or any Ground Lease, Borrower will, promptly upon
service thereof on or to it, deliver to the Lender a copy of each petition,
summons, complaint, notice of motion, order to show cause and of all other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Borrower will consult with the Lender before
instituting suit against the Manager or any lessor under a Ground Lease.
(d) Notwithstanding any other provision of this Agreement, of the
Management Agreement, or of any Ground Lease, if Borrower shall fail so to
do, the Lender may (but shall not be obligated to) take any such action as
the Lender reasonably deems required to prevent, mitigate or cure, in whole
or in part, any default by Borrower under the Management Agreement or any
Ground Lease, provided that the Lender shall have first given the Borrower
prior written notice of the Lender's intent so to act and a reasonable time
for the Borrower to act to prevent or cure such default and the Borrower
shall have failed so to act, unless the Lender, in its reasonable judgment
determines that there is inadequate time for either such notice or delay in
order to protect the Lender's interest in its security in the Management
Agreement or any such Ground Lease; and upon the receipt by the Lender from
the Borrower, the Manager, or a lessor under a Ground Lease of any written
notice of default by the Borrower under the Management Agreement or any
Ground Lease, the Lender may rely thereon, and such notice shall constitute
full authority and protection to the Lender for any action taken by the
Lender or its agents in good faith reliance thereon (provided the Lender
shall have given the notice of intent to take such action as required in
this paragraph (d)). All expenses, including reasonable attorneys' fees,
incurred by the Lender to prevent, mitigate or cure any such default, or to
sustain the Lien of the Lender on or security interest in the Management
Agreement or the applicable Mortgaged Property, or the priority thereof,
together with interest thereon at the Default Interest Rate, shall be
deemed secured by the Security Documents and shall be payable within
fifteen (15) days after demand. Nothing in this paragraph (d) shall limit
the Borrower's right under the Management Agreement or any Ground Lease to
contest issues concerning requirements of law or other similar matters to
the extent permitted by the Management Agreement or any Ground Lease.
Without limiting the foregoing, the Lender shall, upon ten (10) days' prior
written notice to Borrower (except in the case
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of an emergency) have the absolute and immediate right (but shall not be
obligated) to enter in and upon the Mortgaged Properties or any part
thereof to such extent and as often as the Lender, in its reasonable
judgment, deems necessary or desirable to prevent or cure any such default
or condition reasonably believed by the Lender to constitute a material
default by the Borrower.
(e) Borrower shall give the Lender prompt notice of the commencement
of, and consult with the Lender in connection with the conduct of, any
arbitration or appraisal proceeding under and pursuant to the provisions of
the Management Agreement or any Ground Lease.
(f) Borrower shall do, or cause to be done, all things necessary to
preserve and keep unimpaired its rights under the Management Agreement and
its rights as lessee under each Ground Lease and will enforce the material
obligations of the Manager under the Management Agreement and of each
lessor under a Ground Lease to the end that it may enjoy all of the rights
granted to it thereunder.
(g) Borrower or the Manager shall establish and maintain with the
Lender, on a consolidated basis with respect to all of the Mortgaged
Properties, the FF&E Reserve Account, and from time to time, in accordance
with Section 8.02B of the Management Agreement, contribute to the FF&E
Reserve Account with respect to each of the Mortgaged Properties the
amounts required by the Management Agreement (subject to the terms of the
Collateral Assignment of Management Agreement). The FF&E Reserve Account
shall be administered in accordance with Section 7 of the Cash Management
Procedures attached as Schedule 5.11 hereto.
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(h) Borrower acknowledges that, pursuant to Section 365 of the
Bankruptcy Code, it is possible (although not intended hereby) that a
trustee in bankruptcy of the lessor under a Ground Lease (or the lessor
under a Ground Lease as a debtor-in-possession) could reject a Ground
Lease, in which case Borrower as lessee under such Ground Lease could have
the election described in Section 365(h) of the Bankruptcy Code (which
election, as it may be amended or revised from time to time, and together
with any comparable right under any other state or federal law relating to
bankruptcy, reorganization or other relief for debtors, whether now or
hereafter in effect, is called the "Election") to treat such Ground Lease
as terminated by such rejection or, in the alternative, to remain in
possession for the balance of the term of such Ground Lease and any renewal
or extension thereof that is enforceable by the lessee under such Ground
Lease under applicable non-bankruptcy law. Borrower shall not terminate or
permit termination of a Ground Lease by exercise of the Election without
the prior written consent of the Lender and any such Election (without the
prior written consent of the Lender) shall be null and void. Because the
Ground Leases are a significant part of the Lender's security for the Loan,
the Lender does not anticipate that it would consent to termination of any
Ground Lease and shall not under any circumstances be obliged to give such
consent. Borrower acknowledges and agrees that the Election is in the
nature of a remedy and is not a property interest which can exist separate
from the Ground Lease. Therefore, it agrees that exercise of the Election
in favor of preserving the right to possession under any Ground Lease shall
not be deemed to constitute a
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taking or sale of the affected Mortgaged Property or Mortgaged Properties
by the Lender and shall not entitle the Borrower to any credit against the
Lender.
5.4. Financial and Other Information
Furnish to the Lender the Financial Statements, notices, and other
items described below in this Section 5.4 (the "Information") at the times
indicated. Whenever any Financial Statements, notice or other item shall be
stated to be due on a day other than a Business Day, such Financial Statement,
notice or other item shall be due on the next succeeding Business Day. All
Financial Statements relating to earnings and expenses shall set forth
separately, or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP. The Borrower will furnish the Lender, at least
once each year, a schedule of the dates on which each Accounting Period in such
Fiscal Year ends, and will notify Lender promptly of any changes in such
Accounting Periods.
5.4.1. Quarterly Financial Statements
Within 15 days after the filing thereof by Borrower, copies of the
reports, if any, filed by Borrower on Form 10-Q for so long as Borrower is
subject, without exemption, to financial reporting obligations under Section 13
of the Securities Exchange Act of 1934, as amended. For any Accounting Quarter
for which Borrower is not subject to such reporting obligations, Borrower shall
furnish to Lender, as soon as practicable, and in any event within 60 days after
the end of each Accounting Quarter (other than the last Accounting Quarter in
any Fiscal Year), an unaudited consolidated balance sheet of Borrower as at the
end of such Accounting Quarter and unaudited consolidated statement of income
and expense of Borrower for each such Accounting Quarter, and for that part of
the Fiscal Year to date, and an unaudited consolidated statement of cash flow of
the Borrower for that part of the Fiscal Year to date, all in the form that
would be required of Borrower if Borrower were required to file quarterly
reports with the SEC on Form 10-Q, setting forth in each case, in comparative
form, the corresponding figures for the corresponding period(s) of the preceding
Borrower Fiscal Year, which statements shall, as a whole, fairly present the
financial position of Borrower as at the end of the periods indicated and the
results of the operations of Borrower for such periods and which shall be
certified by an Authorized Accounting Officer as having been prepared under his
or her supervision in accordance with GAAP, subject to year-end audit
adjustments, and stating that such Authorized Accounting Officer knows of no
facts inconsistent with such Financial Statements and that such Financial
Statements, as a whole, fairly present the financial position of Borrower as of
the end of the periods indicated and the results of the operations of Borrower
for such periods. Any financial statements furnished pursuant to this Section
shall be accompanied by a certificate of an Authorized Accounting Officer
stating that, to his or her knowledge, no Default or Event of Default has
occurred and is continuing or, if a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, the period of its
existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.2. Borrower's Annual Financial Statements
Within 15 days after the filing thereof by Borrower, copies of the
reports, if any, filed by Borrower on Form 10-K for so long as Borrower is
subject, without exemption, to financial reporting obligations under Section 13
of the Securities Exchange Act of 1934,
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as amended. For any Fiscal Year for which Borrower is not subject to such
reporting obligations, Borrower shall furnish to Lender, as soon as practicable,
and in any event within 120 days after the end of each Fiscal Year of Borrower,
a consolidated balance sheet of Borrower as at the end of such Fiscal Year and a
consolidated statement of income, partners' capital or deficit and consolidated
cash flow of Borrower for such Fiscal Year, setting forth in each case, in
comparative form, the corresponding figures for the preceding Fiscal Year,
prepared in accordance with GAAP, and in the form that would be required of
Borrower if Borrower were required to file annual reports with the SEC on Form
10-K. Such Financial Statements or reports on Form 10-K, as the case may be,
shall be accompanied by (A) (1) an audit report and opinion in respect of such
Financial Statements of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., L.L.P. or other independent
certified public accountants of recognized national standing selected by
Borrower and reasonably acceptable to the Lender, which report and opinion shall
be unqualified as to the scope of the audit and reasonably satisfactory to the
Lender, and (2) the written statement of the accountants described in clause (1)
that, in making the examination necessary for their report and opinion on such
Financial Statements, they have obtained no knowledge of any condition, event or
act that constitutes a Default or Event of Default, or, if such accountants
shall have obtained such knowledge, a statement as to the nature and status
thereof, and (B) a certificate of an Authorized Accounting Officer, stating that
(1) such Financial Statements have been prepared under his or her supervision in
accordance with GAAP and that he or she knows of no facts inconsistent with such
Financial Statements and (2) to his or her knowledge, no Default or Event of
Default has occurred is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, the period of
its existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.3. Budgets
The consolidated annual itemized operating budget for the combined
Mortgaged Properties and a capital expenditure budget for each Mortgaged
Property, each in the form generally prepared by the Manager, promptly following
agreement with the Manager on each such budget, and quarterly and year-to-date
comparisons of actual and budgeted income and expenses, concurrently with the
delivery of the related Financial Statements.
5.4.4. Hotel Operating Statistics
(a) On or before the date that is 30 days after the end of each
Accounting Period, (i) with respect to any Accounting Period ending on or before
the earlier of a Securitization or the end of Fiscal Year 1997, a detailed
profit and loss statement for each Hotel for such Accounting Period and for the
period from the beginning of the current Fiscal Year to the end of such
Accounting Period; and (ii) with respect to all Accounting Periods, statements
setting forth (x) the gross sales and Net Operating Income for each Hotel for
the immediately preceding 13 Accounting Periods; and (y) occupancy rates,
average daily room rates and revenues-per-available-room ("REVPAR") for each
Hotel for such Accounting Period and the immediately preceding 13 Accounting
Periods; and
(b) On a quarterly basis, on or before the date that is 60 days
after the date of each Accounting Quarter (other than the last Accounting
Quarter in any Fiscal
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Year), (i) detailed profit and loss statements, which shall include the average
occupancy rates, average daily room rates and REVPAR, for each Hotel for the
period from the beginning of the current Fiscal Year to the end of such
Accounting Quarter; and (ii) the balance of the Reserve as of the end of such
Accounting Quarter, and
(c) On an annual basis, within 120 days following the end of each
Fiscal Year, (i) detailed profit and loss statements, which shall include the
average occupancy rates, average daily room rates and REVPAR, for each Hotel for
such Fiscal Year ; and (ii) the balance of the Reserve as of the end of such
Fiscal Year.
5.4.5. Certificates Regarding Defaults
Within five (5) Business Days after any officer of the General
Partner obtains knowledge of any Default or Event of Default, a statement of
such officer specifying the nature of such Default or Event of Default, the
period of existence thereof, and the action that Borrower has taken or proposes
to take with respect thereto.
5.4.6. Proposed Amendments to Partnership Agreement
Not less than ten (10) days prior to the execution thereof, a true
and complete copy of any proposed amendment to the Partnership Agreement (other
than amendments of a ministerial nature that will not have any adverse impact on
the Lender, the value of the Collateral, the validity or priority of the
Lender's security interest therein, or any of the Lender's rights or remedies
under the Loan Documents).
5.4.7. Environmental Conditions
Within five (5) Business Days after any officer of the General
Partner obtains knowledge of or discovers any occurrence or condition on any
real property adjoining or in the vicinity of any Hotel that might reasonably be
expected to cause such Hotel or the Land on which it is located to be subject to
any investigation or cleanup pursuant to any Environmental Law which could
reasonably be expected to lead or result in a material adverse effect upon the
business, operations, prospects, assets, properties or condition (financial or
otherwise) of Borrower or any Hotel, written notice thereof describing the
nature thereof and the actions, if any, that Borrower proposes to take to
address it.
5.4.8. Evidence of Tax Payments
Concurrently with the delivery of Financial Statements required by
Sections 5.4.1 and 5.4.2, Borrower shall provide to the Lender evidence of the
payment of all real estate taxes that were due and payable on the Mortgaged
Properties during the preceding Accounting Quarter.
5.4.9. Change in MII Cash Management Conditions
The Borrower will notify the Lender within 5 Business Days after it
learns that any MII Cash Management Condition is no longer satisfied.
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5.5. Maintenance of Existence, Etc.
At all times (a) maintain its principal place of business, principal
office, and office where it keeps its records and other documents and
instruments, relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in Section 11.3 hereof or such other address of which the Lender may be
given written notice not less than thirty (30) days prior to the date on which a
change of location is to occur; (b) obtain and maintain in full force and effect
all authorizations, consents, approvals, licenses, exemptions and other actions
by, and all registrations, qualifications, designations, declarations and other
filings, if any, with, any governmental or administrative board, body,
commission, authority, bureau, or agency necessary (i) in connection with the
execution and delivery of this Agreement, the Mortgage Note, and the other Loan
Documents, the consummation of the transactions contemplated herein or therein,
and the performance of or compliance with the terms and conditions thereof, or
(ii) to ensure the legality, validity and enforceability hereof or thereof; and
(c) maintain in effect its existence pursuant to the Partnership Agreement
(other than as a result of a Permitted Reorganization) and cause the General
Partner to (and by signing this Agreement on behalf of Borrower the General
Partner agrees to) (x) maintain its corporate, partnership or other existence in
effect and in good standing (other than as a result of a Permitted
Reorganization) and (y) comply with all requirements of Law material to the
conduct of its business (including continuing to be qualified to engage in
business in each jurisdiction where such qualification is required) and the
performance of the obligations of Borrower or the General Partner under the Loan
Documents to which Borrower or the General Partner is a party.
5.6. Compliance with Applicable Laws
Comply in all material respects with all requirements of Law
applicable to the conduct of its business (including continuing to be registered
or qualified to do business in each jurisdiction where such registration or
qualification is required), the operation of the Mortgaged Properties, and the
performance of the obligations of Borrower under the Loan Documents to which
Borrower is a party, including Environmental Laws, rules, regulations and orders
of any governmental authority.
5.7. Maintenance of Books; Inspection of Properties and Books
Keep and maintain adequate and proper records and books of account,
in which complete entries are made in accordance with GAAP and in accordance
with all applicable laws and regulations, and permit authorized representatives
of the Lender to discuss the business, operations, prospects, assets, properties
and condition (financial or otherwise) of Borrower with its officers and
employees and, at reasonable times and on reasonable notice (except during the
existence of an Event of Default, in which case no notice shall be required) to
examine its books of account and other records and make copies thereof or
extracts therefrom, all at such reasonable times as the Lender may request.
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5.8. Notice of Litigation; Disputes
Give written notice to the Lender within five (5) Business Days after
learning of:
(i) Any action, suit or proceeding instituted against Borrower or
any action, suit or proceeding instituted by Borrower in any federal or state
court or before any commission or other regulatory body (federal, state or
local, domestic or foreign), or any such proceedings threatened against Borrower
(including (i) any proceeding initiated by any party with respect to the
presence or release, or alleged presence or release, of any Hazardous Materials
at, on, under, from or about any Hotel or the Land on which any Hotel is located
and (ii) any claim made or threatened by any third party against Borrower or any
such Hotel or Land relating to any loss or injury resulting from any Hazardous
Materials) an adverse determination of which could reasonably be expected to
lead to or result in a material adverse effect upon the business, operations,
prospects, assets, properties or condition (financial or otherwise) of Borrower
or any Hotel, in each case containing the details thereof;
(ii) The filing, recording or assessment of any Federal, state or
local tax lien against it, or any of its assets, an adverse determination of
which could reasonably be expected to lead to or result in a material adverse
effect upon the business, operations, prospects, assets, properties or condition
(financial or otherwise) of Borrower or any Hotel;
(iii) Any dispute between Borrower and any Governmental Authority
or other Person which, if adversely determined, could reasonably be expected to
materially interfere with the normal business operations of Borrower or any
Mortgaged Property.
Borrower shall permit the Lender to join and participate as a party,
if the Lender so elects, in any legal proceedings or actions initiated with
respect to any Mortgaged Property or the Land on which any Mortgaged Property is
located in connection with any Environmental Law or Hazardous Materials.
5.9. Mortgaged Property Operations; Maintenance
At all times, (a) conduct continuously and operate actively its
business at the Mortgaged Properties (subject to temporary cessation of, or
other limitations on, its activities due to strikes, lockouts, casualties,
events of Force Majeure, or other causes beyond the reasonable control of the
Borrower, provided prompt written notice thereof is given to the Lender); (b)
keep in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Mortgaged Properties; (c)
operate each of the Mortgaged Properties in a manner consistent with the quality
of operations, from time to time, of hotels in the Courtyard by Marriott hotel
system managed by the Manager or its Affiliates; (d) maintain the Mortgaged
Properties in good and clean order and condition such that the utility and
operation of the Mortgaged Properties will not be affected in any material and
adverse respect, subject to ordinary wear and tear and damage caused by fire or
other Casualty; (e) make or cause to be made all necessary or appropriate
repairs, replacements and renewals to the Mortgaged Properties in the manner and
within the periods required by the Management Agreement and the applicable
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Mortgages; and (iii) not commit or permit any waste to the Mortgaged Properties
or any part thereof.
5.10. Separate Existence
Borrower and the General Partner shall each (i) maintain their books
and records and bank accounts separate from any other person or entity (except
that, for accounting and reporting purposes, the General Partner (and, if Host
Marriott should acquire a sufficient direct or indirect ownership interest in
the Borrower to require consolidation under GAAP, the Borrower) may be included
in the consolidated financial statements of Host Marriott in accordance with
generally accepted accounting principles); (ii) maintain an arm's length
relationship with their partners, Affiliates and any other party furnishing
services to either of them; (iii) maintain its books, records, resolutions and
agreements as official records; (iv) conduct their business in their own name
and through their own authorized officers and agents (except that all of the
Properties are operated and are expected to continue to be operated under the
name "Courtyard by Marriott," which is a trademark of MII); (v) prepare and
maintain their financial statements, accounting records and other corporation or
partnership documents separate from those of any other Person (except for
inclusion of the General Partner (and, if Host Marriott should acquire a
sufficient direct or indirect ownership interest in the Borrower to require
consolidation under GAAP, the Borrower) in consolidated financial statements of
Host Marriott); (vi) pay their own liabilities out of their own funds and other
assets; (vii) observe all partnership or corporate formalities, as applicable,
necessary to maintain their identities as entities separate and distinct from
one another and from Host Marriott and all other Affiliates; (viii) participate
in the fair and reasonable allocation of any and all overhead expenses and other
common expenses for facilities, goods or services provided to multiple entities;
(ix) use its own stationery, invoices and checks (except when acting in a
representative capacity); (x) hold and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
Person (except for inclusion of the General Partner (and, if Host Marriott
should acquire a sufficient direct or indirect ownership interest in the
Borrower to require consolidation under GAAP, the Borrower) in consolidated
financial statements of Host Marriott); and (xi) hold its assets in its own
name.
5.11. Cash Management
Borrower will comply with, and will direct the Manager to comply with,
the provisions of the Cash Management Procedures attached as Schedule 5.11
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hereto, which shall govern the collection and application of Gross Revenues,
Awards, and Insurance Proceeds and the administration of the Local Accounts, the
Manager's Account, the Cash Collateral Account, the Operating Account, and the
Lockbox Account (and, by making the Loan, the Lender agrees that it shall
administer the Cash Collateral Account, the Operating Account, the Lockbox
Account and, after a Lockbox Event (as described in the Cash Management
Procedures) has occurred, the Manager's Account, in accordance with the
provisions of the Cash Management Procedures attached as Schedule 5.11 hereto).
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5.12. Independent Director
Borrower shall ensure that the General Partner shall have an
Independent Director acceptable to the Lender at all times, or if the
Independent Director has resigned, that the General Partner shall not take any
action which may not be taken pursuant to the organizational documents of the
General Partner without the consent of the Independent Director.
6. NEGATIVE COVENANTS
Borrower agrees that, so long as this Agreement shall remain in
effect, or so long as there exists any principal, interest or Yield Maintenance
Payment due or outstanding under the Mortgage Note, or any other unpaid charges
or amounts under this Agreement or under any other Loan Document, then:
6.1. Limitation on Indebtedness
Borrower, General Partner and the Parent (if any) shall not incur,
create or assume any Indebtedness of any kind, provided that Borrower or the
General Partner may incur, create or assume any Permitted Debt and the Parent
may incur, create or assume Parent Debt, provided that the Borrower, the General
Partner or the Parent (as applicable) and the High Yield Lender (in the case of
Parent Debt) or the lender of the Indebtedness (in the case of Permitted Debt)
comply with the "Appointment of Advisor" requirements set forth in Section 4 of
Exhibit C-1 attached hereto, as applicable. The Parent may incur, create or
-----------
assume Parent Debt only to the extent that, immediately after the incurrence of
such Parent Debt, the Consolidated DSCR for the preceding 13 full Accounting
Periods for which financial statements are then available, calculated on a pro
forma basis to give effect to the incurrence of such Parent Debt, would be at
least 1.35 to 1.0 and the Consolidated Loan to Value Ratio would be no greater
than 79.0%. In the case of Parent Debt, at the High Yield Lender's request, the
Lender shall enter into a Parent Debt Intercreditor Agreement substantially in
the form attached hereto as Exhibit C-1, and in the case of Permitted Debt of
-----------
the kind referred to in clause (iv) of the definition thereof, the Lender shall
enter into a Permitted Debt Intercreditor Agreement substantially in the form
attached hereto as Exhibit C-2.
-----------
6.2. Limitation on Liens
Borrower shall not create, assume or suffer to exist, any Lien of any
kind, upon any of its properties, assets or Collateral, whether now owned or
hereafter acquired, except: (i) the Liens of the Mortgages and other Security
Documents; (ii) Liens for taxes, assessments and other governmental charges not
yet due and payable or due and payable, but not yet delinquent, or that are
being contested in good faith by appropriate proceedings and as to which
adequate deposits have been made with the Lender as required by this Section
6.2; (iii) deposits or pledges to secure the payment of workmen's compensation,
unemployment insurance or other social security benefits or obligations, or to
secure the performance of trade contracts, leases, public or statutory
obligations, surety or appeal bonds or other obligations of a like general
nature incurred in the ordinary course of business; (iv) landlords', mechanics',
materialmen's, warehousemen's, carriers', or other like Liens arising in the
ordinary course of business securing obligations which are not
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overdue for a period longer than 30 days, or which are being contested in good
faith by appropriate proceedings which are being diligently pursued (with
deposits having been made with the Lender as required by this Section 6.2) or as
to which the Liens are bonded to the satisfaction of the Lender; (v) easements,
rights of way, zoning, similar restrictions, and other similar encumbrances or
title defects that, singly or in the aggregate, do not in any case materially
detract from the value of the property subject thereto (as such property is used
by the Borrower); (vi) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount, and for a period not resulting in
an Event of Default; (vii) Liens securing capitalized lease obligations insofar
as such Liens cover assets acquired pursuant to such capitalized lease
obligations and such capitalized lease obligations constitute Permitted Debt;
and (vii) Liens securing assets acquired pursuant to purchase money
Indebtedness, which Indebtedness constitutes Permitted Debt (each a "Permitted
Lien" and collectively "Permitted Liens").
In the event Borrower contests the payment of a tax, assessment or
other governmental charge pursuant to clause (ii) above or contests a
landlords', mechanics', materialmen's, warehousemen's, carriers', or other like
Lien pursuant to clause (iv) above, Borrower, prior to the commencement of such
contest and prior to the date such payment would otherwise be due and payable,
shall deposit with the Lender (or, following the assignment contemplated by
Section 9.1 hereof, deposit with the Servicer) an amount equal to 125% of the
amount of the contested payment, to be held in a segregated subaccount of the
Cash Collateral Account. Upon the conclusion of such contest and upon written
request by Borrower accompanied by supporting documentation, the Lender (or the
Servicer) shall disburse from the deposit made by Borrower with the Lender (or
the Servicer) any amounts required to be paid by Borrower and shall remit the
excess to Borrower, all as contemplated by Section 5.11 hereof. Notwithstanding
the foregoing, the Lender (or the Servicer) may pay over to the appropriate
Person any or all of the funds on deposit with the Lender (or the Servicer)
when, in the Lender's (or the Servicer's) reasonable judgment, the entitlement
of such Person to such funds is firmly established or if necessary to avoid the
foreclosure of a Lien that secures the contested payment.
6.3. Merger or Consolidation; Permitted Reorganization
Neither Borrower nor the General Partner shall be a party to any
merger or consolidation, except in connection with a Permitted Reorganization
that satisfies the requirements of this Section 6.3 (and the General Partner in
each of the Permitted Reorganizations described in this Section 6.3 (or in
connection with the Permitted Reorganization contemplated by Section 6.3.4
hereof, the lessee's general partner or managing member) shall be at least 95%
owned, directly or indirectly, by Host Marriott, except that the General Partner
may be controlled directly or indirectly by another Person if, but only if, (a)
such Person is a nationally recognized hotel operator acceptable to Lender and
(b) each of the Rating Agencies delivers a Rating Comfort Letter with respect
thereto).
6.3.1 With respect to a Permitted Reorganization of the kind
described in clause (i) of the definition thereof, Borrower shall be entitled to
merge with a newly formed Single Purpose entity that has never conducted any
business, holds no assets, and has no liabilities, provided that:
(i) Borrower is the surviving entity in such merger;
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(ii) the General Partner shall be either CBM One or a newly formed
Single Purpose entity that has never conducted any business,
holds no assets other than its partnership interests in Borrower
(and other assets permitted by the proviso following clause
(xiii) of the definition of "Single Purpose") and has no
liabilities other than those arising out of its general partner
interest in Borrower and liabilities arising under the
Partnership Agreement and any liabilities of CBM One, arising
prior to the consummation of such merger, that it has assumed or
for which it has agreed to indemnify CBM One that relate solely
to CBM One being the general partner of Borrower;
(iii) following the consummation of such merger, all of the
partnership interests in Borrower are held by the Parent and the
General Partner;
(iv) counsel to Borrower shall have provided to Lender, and, if the
Securitization has occurred, the applicable Rating Agencies, an
opinion to the effect that, upon the bankruptcy of the Parent or
any Person that owns, directly or indirectly, a 50% or more
equity interest in the Parent or the General Partner, a court
would not have valid legal grounds to order the substantive
consolidation of the assets and liabilities of Borrower or the
General Partner with those of the Parent or such other parties,
which opinion shall be similar in form and substance to the
Substantive Non-Consolidation Opinion delivered to Lender on the
Closing Date;
(v) prior to and following the consummation of such merger, no
Default or Event of Default shall have occurred and be
continuing; and
(vi) following the consummation of such merger, the Borrower shall be
a Single Purpose entity.
6.3.2 The Borrower shall be entitled to engage in a Permitted
Reorganization of the kind described in clause (ii) of the definition thereof,
provided that:
(i) the new General Partner shall be a newly formed Single Purpose
entity that has never conducted any business, holds no assets
other than its partnership interests in Borrower (and other
assets permitted by the proviso following clause (xiii) of the
definition of "Single Purpose") and has no liabilities other
than those arising out of its general partner interest in
Borrower and liabilities arising under the Partnership Agreement
and any liabilities of CBM One (or other predecessor General
Partner), arising prior to the consummation of such transaction,
that it has assumed or for which it has agreed to indemnify CBM
One (or such other predecessor) and that relate solely to CBM
One or such other predecessor General Partner being the general
partner of Borrower;
(ii) counsel to Borrower shall have provided to Lender, and, if the
Securitization has occurred, the applicable Rating Agencies an
opinion to the effect that, upon the bankruptcy of the Parent or
any Person that
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owns directly or indirectly a 50% or more equity interest in the
Parent or the General Partner, a court would not have valid
legal grounds to order the substantive consolidation of the
assets and liabilities of Borrower or the General Partner with
those of the Parent or such other parties, which opinion shall
be similar in form and substance to the Substantive Non-
Consolidation Opinion delivered to Lender on the Closing Date;
and
(iii) prior to and following the consummation of such transaction, no
Default or Event of Default shall have occurred and be
continuing.
6.3.3 CBMLP shall be entitled to engage in a Permitted Reorganization
of the kind described in clause (iii) of the definition thereof, provided that:
(i) all of the Mortgaged Properties then owned by CBMLP are
transferred to a newly created Single Purpose entity that has
never engaged in any business and prior to such Permitted
Reorganization has no assets other than cash and no liabilities,
which transferee shall be the Borrower following such Permitted
Reorganization;
(ii) the transferee of the Mortgaged Properties shall have assumed,
by a writing reasonably satisfactory in form and substance to
the Lender, all of the obligations of Borrower under this
Agreement and the other Loan Documents;
(iii) counsel to CBMLP and such transferee shall have delivered to
Lender an opinion of counsel, substantially similar in scope and
substance to the opinion delivered pursuant to Section 4.4.2,
modified as appropriate to reflect the consummation of the
Permitted Reorganization and the change in the Borrower and
General Partner;
(iv) local counsel to such transferee in each state in which a Hotel
is then located shall have delivered an opinion to Lender
substantially to the effect set forth in the opinions delivered
pursuant to Section 4.4.3, modified as appropriate to reflect
the consummation of the Permitted Reorganization and the change
in the Borrower and General Partner;
(v) such transferee shall have delivered Title Insurance Policies to
Lender satisfying the requirements of Section 4.3.2;
(vi) such transferee shall have provided evidence reasonably
satisfactory to the Lender that all policies of insurance
required by Sections 8.1 and 8.3 are in full force and effect;
(vii) such transferee and the new General Partner (or managing member
of such transferee if it is a limited liability company) shall
have furnished to the Lender the certificates and documents
required by Sections 4.3.4 through 4.3.8;
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(viii)prior to and following the consummation of such Permitted
Reorganization, no Default or Event of Default shall have
occurred and be continuing; and
(ix) following the consummation of such Permitted Reorganization, the
General Partner (or managing member of such transferee if it is
a limited liability company) shall be a Single Purpose entity
that holds no assets other than its partnership interest in
Borrower (and other assets permitted by the proviso following
clause (xiii) of the definition of "Single Purpose").
6.3.4 CBMLP shall be entitled to engage in a Permitted Reorganization
of the kind described in clause (iv) of the definition thereof, provided that:
(i) the lessee of the Mortgaged Properties leased in such
transaction shall be a newly created Single Purpose entity that
has never engaged in any business and prior to such Permitted
Reorganization has no assets other than cash and no liabilities,
and shall be controlled by a Person with substantial experience
in the ownership or operation of lodging facilities;
(ii) the general partner of the lessee, if it is a partnership, or
managing member of the lessee, if it is a limited liability
company, shall be a newly formed Single Purpose entity that has
never conducted any business, has no assets other than its
general partner interest in the lessee (and other assets
permitted by the proviso following clause (xiii) of the
definition of "Single Purpose") and has no liabilities other
than those arising out of its general partner interest in the
lessee, if it is a partnership;
(iii) such lease shall provide rental payments that are sufficient to
pay all scheduled monthly installments of principal and interest
hereunder; and shall be a triple net lease requiring the lessee
to fund all real estate taxes, insurance, expenses of operating
the Mortgaged Properties, and deposits into the FF&E Reserve
Account, shall terminate, at the election of the Lender, if the
Loan is not repaid in full on or before the Scheduled Maturity
Date, shall provide that, in the event of termination as a
result of an Event of Default or failure of the Borrower to
repay the Loan on or before the Scheduled Maturity Date, the
Mortgaged Properties and all FF&E used in connection therewith
shall be surrendered to the Borrower, shall require that the
lessee continue to be a Single Purpose entity, and shall contain
covenants on the part of the lessee substantially similar to
those set forth in Sections 5.3 (as it applies to the Management
Agreement), 5.6, 5.7, 5.8, 5.9, 5.10, 5.11 (with respect to the
procedures for administering the Gross Revenues from the
Mortgaged Properties subject to the lease), 5.12, 6.1, 6.2, 6.3,
6.4 and 6.5 hereof, to the extent applicable to the lessee;
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(iv) the lessee shall assume the obligations of Borrower under the
Management Agreement and the Manager shall agree to attorn to
the lessor if the lease is terminated;
(v) the rights of the lessee under the lease shall be expressly
subordinate to the Loan and any refinancing thereof and, at the
election of any purchaser of the Mortgaged Properties following
an Event of Default and foreclosure under any Mortgage, any
refinancings thereof;
(vi) the obligations of the lessee under such lease shall be secured
by security interests in all personal property, tangible and
intangible, of the lessee (including all FF&E and Fixed Asset
Supplies and Gross Revenues received by such lessee) on terms
substantially identical to those in the Security Documents;
(vii) the lessee shall have granted to the Borrower a right to
purchase, at fair market value, all FF&E and Fixed Asset
Supplies used in the Mortgaged Properties;
(viii)the Borrower shall have assigned all of its rights under such
lease and related security instruments to the Lender as
additional collateral for the obligations of Borrower hereunder;
(ix) counsel to such lessee shall have delivered to Lender an opinion
of counsel, substantially similar in scope and substance to the
opinion delivered pursuant to Section 4.4.2, modified as
appropriate to reflect the terms of the Permitted
Reorganization;
(x) counsel to such lessee shall have provided to Lender, and, if
the Securitization has occurred, the applicable Rating Agencies
an opinion to the effect that, upon the bankruptcy of the parent
of the lessee's general partner (or managing member) or upon the
bankruptcy of any partner or member of lessee that is not a
Single Purpose entity, a court would not have valid legal
grounds to order the substantive consolidation of the assets and
liabilities of the lessee or its general partner (or managing
member) with those of such parent or other entity, which opinion
shall be similar in form and substance to the Substantive Non-
Consolidation Opinion delivered to Lender on the Closing Date;
(xi) prior to and following the consummation of such Permitted
Reorganization, no Default or Event of Default shall have
occurred and be continuing; and
(xii) the Rating Agencies shall have delivered a Rating Comfort
Letter.
6.3.5 At all times after the consummation of a Permitted
Reorganization, the General Partner and, in the case of a Permitted
Reorganization described in Section 6.3.4, the general partner or managing
member of the lessee of the Mortgaged Properties, as applicable, shall have at
least one director who is an Independent Director,
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other than as a result of the resignation or removal of an Independent Director,
so long as the General Partner or such general partner or managing member, as
the case may be, is then diligently searching for a new Independent Director.
6.4. Single Purpose
Borrower shall not have or create any subsidiaries other than pursuant
to a Permitted Reorganization. The General Partner shall not engage in any
business or operate for any purpose other than as a general or limited partner
of the Borrower (provided that the General Partner may hold assets permitted by
the proviso following clause (xiii) of the definition of "Single Purpose") and
shall at all times be a Single Purpose entity; provided, however, that it is
understood that, notwithstanding the provisions of clauses (ii), (iii), (v) and
(vi) of the definition of "Single Purpose" contained herein (as such clauses
relate to the period from the date of formation of the General Partner and the
Borrower, as applicable, to the date hereof), (A) separate financial statements
for the General Partner have not heretofore been produced on a regular basis,
but the financial records of the General Partner have been and will remain
adequate to permit production of such separate financial statements (including
balance sheets and statements of income and changes in financial position) for
past periods if it hereafter becomes necessary to produce such financial
statements, and separate financial statements for the General Partner will
hereafter be prepared on an annual basis; (B) because of the limited nature of
the General Partner's operations it has not at all times heretofore maintained
separate deposit accounts in its own name, but it has recently established and
will maintain such accounts, consistent with the covenants contained in Section
5.10(i) hereof; (C) certain transaction and overhead costs incurred by the
Borrower, the General Partner and/or Host Marriott may not heretofore have been
allocated, but such costs hereafter will be fairly allocated; (D) except for (1)
obligations of the Borrower for which it is liable in its capacity as General
Partner and (2) any accrued obligations to Affiliates in connection with the
allocation of costs for shared overhead and office expenses, the General Partner
neither has nor expects to have any debt obligations, and (E) prior to 1989, the
Borrower was not able to make all payments required under the Bank Debt as they
became due, and the Borrower incurred approximately $13 million in liability to
Host Marriott in connection with (or in lieu of) advances by Host Marriott under
a guaranty of the Bank Debt, for which the Borrower remains liable and which
constitutes Permitted Debt of the kind referred to in clause (iv) of the
definition of that term herein. Neither Borrower nor the General Partner will:
(i) seek or consent to any dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets; (ii) fail to correct
any known misunderstanding regarding its separate identity; (iii) commingle its
funds or other assets with those of any other Person (except as specifically
contemplated by the Cash Management Procedures); (iv) assume or guarantee or
become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person (other than as
permitted by the Loan Documents); (v) acquire obligations or securities of its
partners or shareholders, as the case may be; (vi) pledge any of its assets for
the benefit of any other Person other than the Lender (except for purchase money
security interests or as otherwise permitted by the Loan Documents); (vii) make
any loans to any other Person (except advances of Permitted Debt by the General
Partner or its Affiliates to the Borrower); (viii) identify its partners or
shareholders, as the case may be, or any of its Affiliates as a division or part
of it (except for inclusion of the Borrower and the General Partner in
consolidated financial statements of Host Marriott); (ix) engage (either as
transferor or transferee) in any
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material transaction with any Affiliate other than for fair value and on terms
similar to those obtainable in arms-length transactions with unaffiliated
parties, or engage in any transaction with any Affiliate involving any intent to
hinder, delay or defraud any entity; (x) engage in any business activity or
operate for any purpose other than as stated in Section 2.03 of its Partnership
Agreement and Article THIRD of the GP Certificate, as applicable, in each case
as in effect on the date hereof or (xi) without the consent of all its directors
or all the directors of its General Partner, as applicable, including the
consent of an Independent Director, file a bankruptcy or insolvency petition or
otherwise institute bankruptcy proceedings. Borrower will not acquire any assets
not related to the business and operation of the Hotels.
6.5. Amendments to Agreements
6.5.1.
Borrower shall not, without the consent of the Lender, (i) amend,
modify or alter the terms of the Partnership Agreement in any manner that would
violate the restrictions set forth in Section 6.4 above, (ii) admit a General
Partner other than pursuant to a Permitted Reorganization, (iii) cancel,
release, terminate or surrender the Management Agreement or any Ground Lease, or
permit any cancellation, release, termination or surrender of the Management
Agreement or any Ground Lease or (iv) amend, modify or alter the terms of the
Management Agreement or any Ground Lease in any material respect; provided that
Borrower shall be entitled to cancel, release, terminate, surrender, amend,
modify or alter the Management Agreement in connection with the replacement of
the Manager if, before the date on which the Manager ceases to be the Manager of
any Hotel, (a) Borrower causes such Hotel to come under management by a
nationally recognized hotel operator acceptable to the Lender, (b) such Hotel
continues to be part of a comparable nationally recognized hotel system
acceptable to the Lender, and (c) if the Securitization has occurred, each of
the Rating Agencies delivers to the Lender a Rating Comfort Letter with respect
thereto; and provided further that Borrower may cancel, release, terminate,
surrender, amend, modify or alter any Ground Lease (x) in connection with the
sale of the Hotel situated on the Land that is subject to such Ground Lease and
(y) in compliance with the Loan Documents.
6.5.2.
Neither Borrower nor the General Partner shall enter into or consent
to any termination, amendment, waiver or supplement of any of the provisions of
the General Partner's organizational or governing documents without the consent
of the Lender (other than in connection with a Permitted Reorganization).
6.6. Distributions
Borrower shall make no distributions of cash or other assets to the
General Partner or the Limited Partners if an Event of Default has occurred and
is continuing under Section 7.1.1 hereof.
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6.7. Permitted Transfers
Borrower shall not transfer, pledge, hypothecate or assign any of the
Mortgaged Properties except (a) to the Lender, (b) in connection with a
Permitted Reorganization or (c) in connection with the simultaneous Release of
such Mortgaged Property pursuant to Section 2.5, Section 2.6 or Section 2.7
hereof.
7. EVENTS OF DEFAULT
7.1. Default; an Event of Default
The occurrence of any of the following events beyond any applicable
notice and cure period set forth in this Section 7.1 shall be an "Event of
Default" hereunder (and the occurrence of any of the following which, with the
giving of notice or the passage of time, or both, would become an Event of
Default shall, prior to the giving of such notice or the passage of such time,
be a "Default" hereunder).
7.1.1.
Borrower shall fail to pay, when due, any principal or interest on the
Mortgage Note or any Yield Maintenance Payment or Defeasance Deposit that may be
due.
7.1.2.
Borrower shall fail to pay, when due, any other amount due under or
pursuant to the Mortgage Note, this Agreement, or any of the other Loan
Documents (other than principal, interest, and any Yield Maintenance Payments or
Defeasance Deposits).
7.1.3.
Borrower shall fail to perform or observe in any material and adverse
respect any of the covenants and agreements of Borrower set forth in this
Agreement, or any representation and warranty made by the Borrower in this
Agreement or in any of the other Loan Documents shall fail to have been true in
any material and adverse respect when made and, in either case, such failure
shall continue uncured, following the Borrower's receipt of written notice
thereof from the Lender, for a period of more than (i) 10 days with respect to
any failure or breach of covenant relating to the payment of taxes or the
maintenance of insurance, or (ii) 30 days, with respect to all other such
failures or breaches; provided that, with respect to clause (ii) above, it shall
not be an Event of Default hereunder if (a) such failure is curable but is not
reasonably capable of being cured within such 30-day cure period and Borrower
shall have promptly commenced to cure such failure (including by consummation of
a sale of the affected Hotel(s) and the payment of the applicable Release Price,
Defeasance Deposit and Yield Maintenance Payment, if any) and thereafter shall
diligently pursue such cure to completion, but in no event later than 180 days
after the date on which the Borrower received such written notice from the
Lender.
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7.1.4.
The Manager shall cease to be Manager of all of the Hotels then owned
by Borrower or the Management Agreement shall terminate with respect to one or
more Hotels then owned by the Borrower, unless, before the date on which the
Manager ceases to be the Manager of any such Hotel, or the Management Agreement
terminates with respect to any such Hotel, (a) Borrower causes such Hotel to
come under management by a nationally recognized hotel operator acceptable to
the Servicer, (b) such Hotel continues to be part of a comparable nationally
recognized hotel system acceptable to the Servicer, and (c) if the
Securitization has occurred, each of the Rating Agencies delivers to the Lender
a Rating Comfort Letter with respect thereto and the foregoing does not result
in a default under any Parent Debt.
7.1.5.
Borrower or the General Partner shall default in its payment of any
Indebtedness with an aggregate principal amount in excess of $3,500,000.
7.1.6.
If at any one time there shall be any final nonappealable judgment or
judgments rendered by any court or Governmental Authority not covered by
insurance aggregating in excess of $7,500,000 against Borrower or the General
Partner, which shall not have been satisfied, fully stayed or bonded within 60
days after the entry thereof.
7.1.7.
Either of the following shall occur with respect to the Borrower or
the General Partner or, if applicable, a lessee after a Permitted Reorganization
contemplated by Section 6.3.4:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Borrower or the
General Partner or such lessee or the general partner of such lessee
as bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Borrower or the General Partner or such
lessee or the general partner of such lessee under any Bankruptcy Law,
and such decree or order shall have continued undischarged and
unstayed for a period of 60 consecutive days; or a decree, judgment or
order of a court of competent jurisdiction appointing a receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency for the
Borrower or the General Partner or such lessee or the general partner
of such lessee, or any substantial part of the property of the
Borrower or the General Partner or such lessee or the general partner
of such lessee, or for the winding up or liquidation of the affairs of
the Borrower or the General Partner or such lessee or the general
partner of such lessee, shall have been entered, and such decree,
judgment, or order shall have remained in force undischarged and
unstayed for a period of 60 days; or
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(b) the Borrower or the General Partner or such lessee or the
general partner of such lessee shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer
or consent seeking reorganization under any Bankruptcy Law, or shall
consent to the filing of any such petition, or shall consent to the
appointment of a custodian, receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency of it or any substantial part of its
assets or property, or shall make a general assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or shall, within the meaning of any Bankruptcy Law,
become insolvent, fail generally to pay its debts as they become due,
or take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.
7.1.8.
Unless (a) the Borrower causes all of the Hotels then owned by the
Borrower to come under management by another nationally recognized hotel
operator acceptable to the Lender, and (b) such Hotels are operated as part of a
comparable nationally recognized hotel system acceptable to the Lender, and (c)
if the Securitization has occurred, each of the Rating Agencies delivers to the
Lender a Rating Comfort Letter with respect thereto:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Manager as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Manager under any Bankruptcy Law, and
such decree or order shall have continued undischarged and unstayed
for a period of 60 consecutive days; or a decree, judgment or order of
a court of competent jurisdiction appointing a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency for the Manager, or
any substantial part of the property of the Manager, or for the
winding up or liquidation of the affairs of the Manager shall have
been entered, and such decree, judgment, or order shall have remained
in force undischarged and unstayed for a period of 60 days; or
(b) the Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any Bankruptcy Law, or shall consent to
the filing of any such petition, or shall consent to the appointment
of a custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing.
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7.1.9.
An Event of Default shall occur under any other Loan Document.
7.1.10.
If a Securitization has not yet occurred, Borrower shall default in a
material respect under the Cooperation Agreement after the giving of any
required notice and/or the expiration of any required cure period.
7.1.11.
The General Partner (i) shall cease to be the general partner of
Borrower (other than in connection with a Permitted Reorganization), (ii) so
long as it shall be the General Partner of Borrower, shall fail to have at least
one director who is an Independent Director, other than as a result of the
resignation or removal of an Independent Director, so long as the General
Partner is then diligently searching for a new Independent Director, (iii)
shall terminate, liquidate or dissolve (other than in connection with a
Permitted Reorganization), or shall cease to be controlled by Host Marriott or
one or more other Persons with substantial experience in the ownership and
operation of hotels (including any successor to a substantial portion of the
lodging business of Host Marriott), (iv) shall engage, directly or indirectly,
in any business or activity except serving as general partner of Borrower
(provided that the acquisition, ownership, and disposition of assets of the kind
permitted by the proviso following clause (xiii) of the definition of "Single
Purpose" shall not be an Event of Default) or (v) shall not be at least 95%
owned, directly or indirectly, by Host Marriott, except that it shall not be an
Event of Default under this Section 7.1.11(v) if the General Partner (a) is at
least 95% owned by a nationally recognized hotel operator acceptable to Lender
and (b) each of the Rating Agencies delivers a Rating Comfort Letter with
respect thereto).
7.1.12.
Borrower acquires any assets not related to the business and operation
of the Hotels (other than a direct or indirect interest in a residual class
certificate issued pursuant to the Securitization).
7.1.13.
The declaration by any Marriott Ground Lessor of its intent to
terminate any Marriott Ground Lease as a result of any event of default
thereunder or the occurrence of an event of default under any Ground Lease other
than a Marriott Ground Lease.
7.1.14.
A holder of Permitted Debt described in clause (iv) of the definition
of Permitted Debt holds any assets other than any Permitted Debt, incurs any
liabilities other than (a) liabilities for administrative expenses incurred in
the ordinary course of business and (b) liabilities for income taxes or
otherwise fails to be a Single Purpose entity.
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7.1.15.
An event of default occurs under the lease created pursuant to Section
6.3.4.
7.2. Remedies
If an Event of Default shall have occurred and be continuing, the
Lender shall have the right, in its sole discretion, by written notice to the
Borrower (except upon the occurrence of an Event of Default under Section 7.1.7
affecting Borrower, in which case all principal and accrued interest thereon
will be immediately due and payable on the Mortgage Note without any declaration
or other act on the part of the Lender) to take one or more of the following
actions:
7.2.1.
To declare the principal of and all amounts accrued but unpaid under
the Mortgage Note, this Agreement and the other Loan Documents, together with
any associated Yield Maintenance Payment, to be immediately due and payable, and
such amounts shall thereupon become immediately due and payable, without
presentment, demand, protest or notice of any kind, other than any notice
specifically required by this Section 7.2, all of which are hereby expressly
waived by Borrower.
7.2.2.
Pursue such rights and remedies against the Borrower, or otherwise, as
are provided under and pursuant to this Agreement, the Mortgages or any of the
other Loan Documents and as may be available to the Lender at law or in equity;
provided, however, that the Lender shall not be entitled to initiate foreclosure
proceedings unless five (5) Business Days' prior written notice of such
intention is given to Borrower and the Manager and, where applicable, the
Marriott Ground Lessors.
7.2.3.
If the Event of Default involves the Borrower's failure to pay any
tax, assessment, encumbrance or other imposition binding on the Borrower or any
of the Collateral or to perform its obligation to furnish insurance hereunder,
or to perform or observe any other covenant, condition or term in any Loan
Document or in the Management Agreement or any Ground Lease, the Lender may, at
its option, without waiving or affecting any of its other rights or remedies
hereunder, pay, perform or observe the same, and, in connection therewith, the
Lender shall be entitled to rely on any representations and statements of the
ground lessor under any such Ground Lease or of the Manager under the Management
Agreement in regard to alleged breaches or violations thereof, and all payments
made or costs or expenses incurred by the Lender in connection therewith shall
be repaid by Borrower to the Lender within fifteen (15) days after demand
therefor, together with interest at the Default Interest Rate, and shall be
added to and become a part of the Indebtedness secured by the Mortgages and
other Security Documents. The Lender is hereby empowered to enter and to
authorize others to enter upon any Land and all Improvements located on any Land
for the purpose of performing or
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observing any such defaulted covenant, condition or term, without thereby
becoming liable to Borrower or any Person in possession holding under Borrower.
7.2.4.
Appoint as a matter of right, without notice, to the fullest extent
permitted under applicable law, a receiver for the Borrower or for all or any
part of the Collateral, whether such receivership be incidental to a proposed
sale of the Collateral or otherwise. All disbursements made by the receiver and
the expenses of receivership, shall be added to and be a part of the principal
amount of the obligations secured by the Security Documents, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured thereby, the entire amount of
said sum, including such disbursements and expenses, shall bear interest at the
Default Interest Rate, be secured by the Security Documents and shall be due and
payable within fifteen (15) days after demand therefor.
7.3. Remedies Cumulative
Each of the rights, powers, and remedies provided herein are intended
and are hereby deemed to be cumulative, concurrent and in addition to, and not
in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. No waiver of any Event of Default in one
instance shall constitute a waiver of any other or any succeeding Event of
Default, except to the extent provided in such waiver.
7.4. Default Interest
In addition to the provisions of Section 2 hereof, if Borrower shall
fail to make payment when and as due of any amounts due hereunder (whether at
the stated date for payment, or earlier upon an acceleration hereunder),
Borrower shall pay, to the fullest extent permitted by applicable law, interest
to the Lender on such past due amounts beginning on the date such payment
becomes past due at a per annum rate of interest (the "Default Interest Rate")
equal to the greater of (a) the Interest Rate in effect from time to time plus
two percentage points (2%) and (b) the Prime Rate. The Borrower acknowledges
that its obligation to pay Default Interest may be separated from the other
obligations of the Borrower hereunder, and may be held or transferred separately
from the other obligations of the Borrower hereunder.
7.5. Default Indemnity
Borrower hereby agrees to, and shall, indemnify and hold harmless the
Lender, against the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) which they may sustain or incur as a
consequence of any Default or Event of Default hereunder and in the enforcement
of the Lender's rights and remedies in connection therewith. Lender shall
provide to Borrower a satisfactory statement, signed by an officer of Lender and
supported, where applicable, by documentary evidence, explaining the amount of
all such costs or expenses. Any amounts that Borrower must pay to Lender under
this Section 7.5 shall bear interest at the Default Interest Rate
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and shall be due fifteen (15) days after demand therefor accompanied by
documentation sufficient to establish the amount of Borrower's liability, and
shall be added to and become a part of the Indebtedness secured by the Mortgages
and other Security Documents.
8. INSURANCE
8.1. Maintenance of Insurance
Borrower shall maintain at all times with Qualified Insurance
Companies (a) comprehensive general liability insurance, including broad form
property damage, blanket contractual liability coverage, and coverage for
personal injuries (including death resulting therefrom) containing minimum
limits per occurrence of not less than $20,000,000 (including umbrella
coverage), which insurance shall name the Lender, as an additional insured and
(b) all policies of insurance required under each of the Mortgages, which
policies shall name the Lender, as an additional insured or loss payee, as
applicable, as their interests may appear. Each policy of insurance required
hereunder shall require the insurer to give not less than thirty (30) days'
prior written notice to the Lender in the event of cancellation of such policy
for any reason whatsoever (ten (10) days in the case of non-payment of premium)
and, with respect to property insurance, shall provide that the interest of the
additional insureds or loss payees thereunder shall not be impaired or
invalidated by any act or neglect of Borrower or the owner of any of the insured
property or by the occupation of the premises wherein such property is located
for purposes more hazardous than are permitted by such policy. If Borrower
fails to provide and pay for such insurance, the Lender may, at Borrower's
expense, procure the same, but shall not be required to do so, and any amounts
reasonably expended by the Lender to do so, together with interest at the
Default Interest Rate shall become part of the debt secured by the Security
Documents.
8.2. Payment and Application of Insurance Proceeds
Insurance proceeds payable with respect to damage to or destruction of
any Mortgaged Property or the Improvements related thereto, including damage by
earthquake, if covered by the policy described in clause (a) of Section 8.3
hereof, if in effect, shall be applied in accordance with the terms of the
applicable Mortgage. All other insurance proceeds shall be payable in
accordance with the provisions of the applicable policy.
8.3. Earthquake Insurance
With respect to the Mortgaged Properties located in California,
Borrower agrees to purchase by June 1, 1997, from a Qualified Insurance Company,
a blanket policy of insurance (which policy may also provide coverage for hotels
managed by MII and its Affiliates other than the Mortgaged Properties), if
available at commercially reasonable rates, insuring all of such Mortgaged
Properties against damage by earthquake in an aggregate insured amount not less
than $10,000,000 and having a deductible of not more than five percent (5%) of
the total insured value or as commonly carried by operators of similar
properties and to maintain such insurance in effect thereafter. Pending the
initial
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purchase of such insurance, Borrower shall, no later than April 1, 1997,
establish an escrow account, as a subaccount of the Cash Collateral Account, in
the amount of $1,000,000, which shall be returned to the Borrower at such time
as the required policy is procured (or applied to cover losses from earthquake
if any Mortgaged Property located in California is damaged by earthquake prior
to the time such policy is procured). If such insurance is not available on
commercially reasonable terms, or at any time hereafter is no longer available
on commercially reasonable terms, is canceled by the insurer, or otherwise is
not in effect , the Borrower will promptly obtain from a qualified seismic
engineering firm, with respect to the Mortgaged Properties located in
California, a 100-year study, using reasonable efforts to obtain such report
prior to expiration of the applicable insurance, of the probable maximum loss
(with a scope at least as broad as those performed and delivered in connection
with the Closing pursuant to Section 4.3.14) from earthquakes, which firm and
the scope of which study shall be reasonably acceptable to the Rating Agencies
and the Lender, and promptly upon the issuance of the report of such firm
deposit into a segregated reserve account maintained with the Lender, which
shall be a subaccount of the Cash Collateral Account (the "Earthquake Casualty
Reserve Account"), an amount of cash equal to the aggregate probable maximum
losses at all of the Mortgaged Properties located in California, as stated in
such report, (i) which deposit shall be retained by the Lender for distribution
to Borrower to repair uninsured damage caused by earthquake at any one or more
of the California Mortgaged Properties or for application to repayment of the
Loan, in the same manner and on the same conditions as if the amounts on deposit
from time in the Earthquake Casualty Reserve Account constituted Insurance
Proceeds on deposit in the Insurance Proceeds Subaccount and the necessary
repairs constituted "Restoration" under Section 1.8 of the applicable Mortgage.
All amounts on deposit in the Earthquake Casualty Reserve Account shall be
returned to Borrower upon payment in full of all amounts due under the Loan
Documents or at such time as Borrower obtains the earthquake insurance required
by this Section 8.3.
8.4. Environmental Insurance
With respect to the Mortgaged Property located in San Antonio, Texas,
environmental insurance with limits and coverage reasonably acceptable to Lender
from an insurance company having a minimum A.M. Best Rating of B+/VIII and an
S&P rating of not less than "AA," for an initial period of not less than ten
(10) years after the Closing Date, which shall be renewed annually so as to
remain in effect for the full term of the Loan; provided, however, that if such
insurance is not available from an insurer having an S&P rating of "AA" then
such insurance shall be obtained from an Insurer having the highest S&P rating
available among insurers that issue such insurance; and provided further that,
if such insurance is at any time not available at commercially reasonable rates,
the Borrower may cease carrying such coverage if, but only if, each of the
Rating Agencies shall have delivered a Rating Comfort Letter.
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9. SECURITIZATION
9.1. Securitization
The Borrower and the General Partner shall use commercially
reasonable best efforts to cooperate with the Lender in its activities in
connection with the sale of the Loan as a whole loan or any securitization of
the Loan (the "Securitization"), including obtaining ratings by the Rating
Agencies. The Securitization will involve the issuance of rated single- or
multi-class securities secured by or evidencing ownership interests in the Loan
Documents (the "Certificates"). The Borrower acknowledges and agrees that, in
connection with the Securitization, (a) this Agreement, the Mortgage Note, the
Security Documents and the other Loan Documents may be assigned, pursuant to the
assignment, to a trustee (the "Trustee"), as trustee under a trust and servicing
agreement (the "Trust and Servicing Agreement") in form substantially similar to
those commonly used in rated commercial mortgage-backed securities offerings and
(b) pursuant to the Trust and Servicing Agreement, a professional loan servicer
of recognized standing (the "Servicer") would be appointed to service the Loan,
this Agreement and the Loan Documents as provided therein. The addresses of the
Trustee and the Servicer will be provided to the Borrower and the Ground Lessors
in writing before the Securitization is consummated. Upon such assignment, the
Trustee shall for all purposes be the sole Lender hereunder and the sole
mortgagee or beneficiary under the Mortgages (and all references herein to the
"Lender" shall be deemed to refer to the Trustee) and shall, together with the
Servicer, among other things, (i) have the sole and exclusive benefit of and the
right and power to exercise, or to direct the exercise of, all the rights and
remedies of the Lender hereunder and under the Security Documents, including the
right to inspect the Collateral, to receive notices and financial information,
to grant or withhold consents or approvals, to benefit from indemnities, to
receive, hold and apply proceeds or any other amount or property provided by the
Borrower hereunder, and, upon the occurrence and during the continuation of an
Event of Default, to take any action required or permitted of the Lender with
respect thereto, all in the Trustee's own name, and to exercise all other rights
and remedies of the Lender hereunder and under the Security Documents, and (ii)
be bound by all the terms hereof which apply to the Lender. The Borrower hereby
acknowledges the foregoing and agrees to be bound to the Trustee, upon such
assignment, recognizing the Trustee as the Lender hereunder as if the Trustee
were named in this Agreement as the Lender, recognizing that the Servicer shall
be entitled to act on behalf of the Trustee and the Holders under and as
provided in the Trust and Servicing Agreement and shall be entitled to and shall
receive all notices, financial and other information, agreements and other
documents to be delivered to the Lender or the Trustee hereunder or under any of
the other Loan Documents and accepting and agreeing to all of the terms
reasonably set forth in the Trust and Servicing Agreement and the exhibits
thereto, all of which shall be secured under the Security Documents. Upon such
assignment, the Borrower's obligations to the Lender specified in this Agreement
shall be satisfied by the Borrower's tendering full and timely payment or
performance thereof to the Trustee or, if directed by the Trustee, to the
Servicer. With respect to the delivery of documents and other written material,
the Trustee and the Servicer shall have only the obligations expressly required
of the Lender herein or in the other Loan Documents or of the Trustee or the
Servicer in the Trust and Servicing Agreement. All rights and remedies of the
Trustee as the Lender hereunder, including all indemnities running to the
Lender, shall also operate for the benefit of the Servicer and the Holders, as
provided in the Trust and Servicing Agreement, and shall be
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exercised by the Trustee and the Servicer in accordance with and subject to the
terms and conditions set forth in the Trust and Servicing Agreement. The
Borrower acknowledges and agrees that, until the Borrower has received notice
from the Trustee to the contrary, and subject to the terms and conditions set
forth in the Trust and Servicing Agreement to the contrary, all deliveries and
notifications to be made by the Borrower to the Trustee, as Lender, pursuant to
this Agreement or any other Loan Document shall be made to the Servicer only and
not to the Trustee.
9.2. No Assignment by Borrower
The rights and obligations of Borrower under this Agreement are
personal to Borrower and, accordingly, Borrower shall not assign this Agreement
or any other Loan Document or any other right, interest, or obligation of
Borrower hereunder or thereunder, either in whole or in part, to any Person
whatsoever, other than in connection with a Permitted Reorganization.
9.3. Method of Payment
Following the assignment contemplated by Section 9.1 hereof, Borrower
shall make or cause to be made all payments under the Mortgage Note, and any
other payments required to be made by the Borrower to or on behalf of the Lender
hereunder or pursuant to any other Loan Document, to the Servicer by application
of the provisions of the Cash Management Procedures attached as Schedule 5.11
-------------
hereto or by wire transfer through the Federal Reserve Bank of New York of
immediately available funds in lawful tender of the United States of America, in
accordance with instructions provided by the Servicer, which payments shall be
held and applied by the Servicer in accordance with the Trust and Servicing
Agreement.
10. ASSIGNMENT AND PARTICIPATION
Notwithstanding anything to the contrary set forth herein or in any
other Loan Document, Lender and any assignee of Lender shall have the right at
any time and from time to time to (a) assign (and thereafter, at any time and
from time to time, repurchase) all or any portion of its rights and obligations
with respect the Loan, including, without limitation, all or any portion of the
outstanding principal balance of the Loan and thereafter be released from its
rights and obligations as Lender in respect of such portion of the Loan (except
to the extent such portion of the Loan is repurchased by the Lender or such
assignee), and (b) sell participations in the Loan. If requested by Lender,
Borrower shall execute and deliver a written acknowledgment acknowledging the
assignment of all or a portion of the Loan to an assignee.
11. MISCELLANEOUS
11.1. Limitation on Liability
Notwithstanding any contrary provision in any of the Loan Documents,
it is hereby expressly agreed that, except as otherwise provided in this Section
11 or in any
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Section of any Loan Document that is substantially similar to this Section 11,
there shall be no recourse to the assets of Borrower or any of its Partners
(other than against the Collateral and any other property given as security for
the payment of the Mortgage Note) for (i) the payment of principal, interest,
Yield Maintenance Payments or other charges under this Agreement or the Mortgage
Note or for any other amount that is or may become due and owing to the Lender
by Borrower under this Agreement or any of the other Loan Documents or (ii) the
performance or discharge of any covenant or undertaking hereunder or under the
other Loan Documents, and in the event of any Event of Default hereunder or
thereunder, the Lender agrees to proceed solely against the Collateral and any
other property given as security for payment of the Mortgage Note, and the
Lender shall not seek or claim recourse against Borrower or the General Partner
(other than against the Collateral and any other property given as security for
payment of the Mortgage Note) for any deficiency or for any personal judgment
after a foreclosure of the lien of any of the Mortgages or other Security
Documents or for the performance or discharge of any covenants or undertakings
of Borrower hereunder or under any of the other Loan Documents (except that
Borrower may be made a party to a proceeding to the extent legally necessary for
the conduct of a foreclosure or the exercise of other similar remedies under the
Mortgages or other Security Documents). Notwithstanding the foregoing, nothing
contained in this Section 11 shall relieve Borrower or the General Partner of
any personal liability for any loss, cost, expense, damage or liability arising
or resulting from (A) any breach of any representation or warranty made in this
Agreement that was materially incorrect when made and that was made with
fraudulent intent, (B) any amount paid or distributed to the General Partner,
the Limited Partners, the Manager or any Affiliate of any of them in violation
of the provisions of the Loan Documents, (C) fraud or breach of trust, including
misapplication of Loan proceeds or any Insurance Proceeds or Awards or other
sums that are part of the Collateral that may come into the possession or
control of Borrower or the General Partner or any Affiliate of any of them or
(D) liability of such Person under the Environmental Indemnity Agreement. It is
hereby expressly agreed that neither the General Partner nor any director,
officer, shareholder, partner or employee of Borrower or the General Partner,
nor the legal or personal representative, successor or assign of any of the
foregoing, nor any other principal of Borrower or the General Partner, whether
disclosed or undisclosed, shall have any personal liability under this Agreement
or any of the other Loan Documents, except as personal liability may be
specifically imposed upon the General Partner in accordance with clauses (A),
(B), (C) and (D) of this Section 11, and in no event shall any limited partner
of Borrower have any liability whatsoever with respect to the Loan or any
monetary obligations with respect thereto, or any of the matters described in
clause (A), (B), (C) or (D) above. It is the intention of the parties hereto
that this Section 11 shall govern every other provision of the Loan Documents
and that the absence of explicit reference to this Section 11 in any provision
of the Loan Documents or the absence of any Section similar to this Section 11
in any Loan Document shall not be construed to deny the application of this
Section 11 to such provision, notwithstanding the presence of explicit reference
to this Section 11 in other provisions of the Loan Documents.
11.2. Entire Agreement, Amendments
This Agreement, including the Schedules and Exhibits hereto and the
other instruments and documents referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and
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supersedes all prior oral or written agreements, commitments or understandings
with respect to such matters. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed by both parties.
11.3. Notices
All notices, requests and demands to or upon the respective parties
hereto shall be in writing (except as is otherwise specifically provided in this
Agreement) and shall be deemed to have been duly given or made when received (or
when delivery thereof is refused by the intended recipient) if mailed by first-
class registered or certified mail, return receipt requested, postage prepaid,
or sent by facsimile transmission, with confirmation of receipt or delivery, or
sent by nationally recognized overnight courier, delivery charges prepaid or
delivered by hand, in each case addressed or directed as follows (or to such
other address or facsimile transmission number as may be hereafter designated in
writing by the respective parties hereto):
If to Borrower: Courtyard By Marriott Limited Partnership
c/o Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dept. 923
Attention: Law Dept.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Courtyard by Marriott Limited Partnership
c/o Host Marriott Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dept. 908
Attention: Asset Management
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dept. 52/293
Attention: Assistant General Counsel,
Development
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Lender: ▇▇▇▇▇▇ Brothers Holdings Inc.
doing business as ▇▇▇▇▇▇ Capital, a
division of ▇▇▇▇▇▇ Brothers Holdings Inc.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Commercial Mortgage Loan Surveillance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.4. No Waiver; Cumulative Remedies
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto unless made in writing and signed by the party
against whom enforcement of such waiver is sought and then only to the extent
expressly specified therein. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
11.5. Waiver of Jury Trial
Each of the parties hereto (i) covenants and agrees not to elect
trial by jury of any issue triable of right by a jury and (ii) waives any rights
to trial by jury to the full extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily, by each party hereto, and this waiver is intended to encompass
individually each instance and each issue as to which the right to a jury trial
would otherwise accrue. The parties are hereby authorized to submit this
Agreement to any court having jurisdiction over the subject matter so as to
serve as conclusive evidence of the other party's herein contained waiver of the
right to jury trial. Further, each party hereto certifies that no representative
of the other party (including such other party's counsel) has represented,
expressly or otherwise, to that party, that the other party will not seek to
enforce this waiver by the such certifying party of the right to a jury trial.
11.6. Governing Law; Consent to Jurisdiction
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (but not including the choice of law rules
thereof). In the event of any litigation arising out of this Loan Agreement,
Borrower agrees that the substantive law of the State of New York shall apply.
Borrower hereby consents to jurisdiction within the State of New York for
purposes of such litigation and agrees that service of process may be made, and
personal jurisdiction over Borrower obtained, by serving a copy of the summons
and complaint upon Borrower, at the notice address set forth herein, in
accordance with the applicable laws of the State of New York. Nothing herein
contained, however, shall prevent any owner or holder of the Mortgage Note from
bringing any action or exercising any right against any security or against
Borrower,
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personally, or against any property of Borrower, within any other jurisdiction
or state. Initiating such proceeding or taking such action in any other
jurisdiction or state shall not, however, constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of the parties hereunder.
11.7. Payment of Expenses
11.7.1.
Borrower shall pay all expenses incurred by Lender in connection with
this Agreement and in the preparation for, and consummation of, the transactions
provided for herein and in connection with the enforcement hereof, and Borrower
shall pay all costs of conveyances, initial Servicer fee and Trustee fee,
initial rating fees and ongoing activity of any special Servicer incurred as a
result of an Event of Default, bank charges relating to the operation of the
Operating Account, the Lockbox Account, the FF&E Reserve Account, the Cash
Collateral Account, the Manager's Account and any Local Account, after the
Securitization has occurred, its proportionate share of initial and annual
surveillance fees, if any, of the Rating Agencies, any processing fees,
reasonable attorney's fees and disbursements, auditor's fees, costs of
appraisals, environmental reports, and engineering reports, all title insurance
premiums, all notary fees, all filing and application fees to any federal, state
or local agencies, all sales, stamp, documentary, transfer, and other taxes and
fees applicable to the transactions contemplated by this Agreement and the
instruments and documents called for hereunder and all other costs and charges
incurred by the parties in connection with such transactions. In addition, the
Borrower shall reimburse the Lender for any expenses incurred by the Lender to
the extent provided in Section 4.8 hereof.
11.7.2.
Except as provided in Section 11.7.1, if the Securitization occurs,
the Servicer Fee (as defined in the Trust and Servicing Agreement) and the
Trustee Fee (as defined in the Trust and Servicing Agreement) and any other
amounts required to be paid to the Servicer or the Trustee under the Trust and
Servicing Agreement in reimbursement of expenses of the Servicer or the Trustee
shall be paid by the Lender or the Trust Fund (the "Trust Fund") created under
the Trust and Servicing Agreement.
11.8. Severability
In the event that any term or provision of this Agreement or of any
other Loan Document or the application thereof to any Person or circumstance
shall, to any extent, be held to be invalid or unenforceable, the remainder of
such term or provision or the application thereof to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and shall be enforced to the fullest extent permitted by law.
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11.9. Gender, Etc.
Whenever used herein and where the context so requires, the singular
shall include the plural, the plural shall include the singular, and the use of
the masculine, feminine or neuter gender shall include all genders; and the word
"including" shall mean "including, without limitation."
11.10. Headings
The Article, Section and Subsection headings of this Agreement are
for convenience of reference only, and shall not limit or otherwise affect any
of the terms hereof.
11.11. Counterparts; Facsimiles
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together shall constitute one and the
same instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto. In the
event the parties hereto exchange signature pages of this Agreement by
facsimile, they agree to send the original executed counterparts of this
Agreement to one another by overnight delivery service, but the facsimile
signatures shall in any event be binding.
11.12. No Third Party Beneficiary
The parties do not intend the benefits of this Agreement to inure to
any third party other than the Trust (and the Servicer and Trustee on behalf of
the Trust), upon assignment hereof by the Lender to the Trustee, on behalf of
the Trust, as contemplated by Section 9.1 hereof. Notwithstanding anything
contained herein or in the Mortgage Note or any other Loan Document to the
contrary, or any conduct or course of conduct by any or all of the parties
hereto, before or after signing this Agreement or any of the other Loan
Documents, nothing herein shall be construed as creating any right, claim or
cause of action against the Lender, or any of the Lender's officers, directors,
agents or employees, in favor of any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrower any other
person or entity other than Borrower.
11.13. No Liability of Lender
The relationship between Borrower and the Lender is, and shall at
all times remain, solely that of borrower and lender, and the Lender will not
undertake or assume any responsibility or duty to Borrower to review, inspect,
supervise, pass judgment upon, or inform Borrower of any matter in connection
with any phase of Borrower's business, operations, or condition, financial or
otherwise. Borrower shall rely entirely upon its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment, or
information supplied to Borrower by the Lender in connection with any such
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matter is for the protection of the Lender, and neither Borrower nor any third
party is entitled to rely thereon.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed on their behalf as of the day and year
first above written.
BORROWER:
COURTYARD BY MARRIOTT LIMITED
PARTNERSHIP
ATTEST: By: CBM One Corporation,
general partner
By: By:
--------------------------- ----------------------
Its: Its:
-------------------------- ---------------------
[SEAL] LENDER:
ATTEST: ▇▇▇▇▇▇ BROTHERS HOLDINGS INC.,
doing business as ▇▇▇▇▇▇ Capital, a division
of ▇▇▇▇▇▇ Brothers Holdings Inc.
By: By:
--------------------------- ----------------------
Its: Its:
-------------------------- ---------------------
[SEAL]
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JOINDER BY GENERAL PARTNER
IN SEPARATENESS COVENANTS
As an inducement to the Lender named in the foregoing Loan Agreement
to make the loan contemplated therein CBM One Corporation, a Delaware
corporation and the general partner of Courtyard By Marriott Limited
Partnership, hereby agrees to comply with the requirements of Sections 5.10,
5.12, 6.1, 6.3, 6.4, and 6.5 of the Loan Agreement and agrees, following the
assignment of the Loan Agreement by the Lender named therein to the Trustee
named therein, such Trustee will be entitled to enforce the obligations of the
undersigned under such Sections 5.10, 6.1, 6.4, and 6.5 of the Loan Agreement.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized officer.
Dated: ___________ __, 1997 CBM ONE CORPORATION
By:
-----------------------
Name:
Title:
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LIST OF SCHEDULES
Schedule A Description of the Land
Schedule B Ground Leases
Schedule 1.3 Rating Categories
Schedule 2.4.1 Allocated Loan Amounts
Schedule 2.4.4 Amortization of Loan
Schedule 3.5A Modifications of Ground Leases
Schedule 3.5B Options to Purchase Under Ground Leases
Schedule 3.5C Notices of Default Under Ground Leases
Schedule 3.5D Application of Insurance Proceeds
Schedule 3.23 Flood Hazard Areas
Schedule 3.25 Liens
Schedule 4.3.2 Hotels; Title Insurance Amounts; Endorsements
Schedule 5.11 Cash Management Procedures
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LIST OF EXHIBITS
Exhibit A Form of Mortgage Note
Exhibit B Form of Local Counsel Opinion
Exhibit C-1 Form of Parent Debt Intercreditor Agreement
Exhibit C-2 Form of Permitted Debt Intercreditor Agreement
Exhibit D Form of Permitted Debt Note
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