security interest in favor of, Lender, as security for Borrower’s obligations to Lender from time to time pursuant to the Note and the other Loan Documents;
WHEREAS, Borrower and Lender intend these recitals to be a material part of this Agreement; and
WHEREAS, all things necessary to make this Agreement the valid and legally binding obligation of Borrower in accordance with its terms, for the uses and purposes herein set forth, have been done and performed.
NOW THEREFORE, to secure the payment of the principal of, prepayment premium (if any) and interest on the Existing Notes and all other obligations, liabilities or sums due or to become due under the Existing Mortgages, the Payment Guaranty, the Existing Notes or any other Loan Document, including, without limitation, interest on said obligations, liabilities or sums (said principal, premium, interest and other sums being hereinafter referred to as the “Debt”), and the performance of all other covenants, obligations and liabilities of Borrower pursuant to the Loan Documents, Borrower has executed and delivered this Agreement and Borrower and Lender by these presents and by the execution and delivery hereof do hereby irrevocably agree as follows:
I. The Existing Mortgages and the respective liens thereof are hereby spread over those portions of the Property (as hereinafter defined), if any, not already covered thereby, which Property includes all of the right, title and interest of Borrower, whether now owned or hereafter acquired, in and to all of the following property, rights, interests and estates and Borrower by these presents and by the execution and delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and confirm to Lender, forever WITH POWER OF SALE, all right, title and interest of Borrower, whether now owned or hereafter acquired, in and to all of the following property, rights, interests and estates:
(a) the Premises;
(b) (i) all buildings, foundations, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind or nature now or hereafter located on the Premises (hereinafter collectively referred to as the “Improvements”); and (ii) to the extent permitted by law, the name or names, if any, as may now or hereafter be used for any of the Improvements, and the goodwill associated therewith;
(c) all easements, servitudes, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, ditches, ditch rights, reservoirs and reservoir rights, air rights and development rights, lateral support, drainage, gas, oil and mineral rights, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises or the Improvements and the reversion and reversions, remainder and remainders, whether existing or hereafter acquired, and all land lying in the bed of any
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street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent to or used in connection with the Premises and/or Improvements and all the estates, rights, titles, interests, property, possession, claim and demand whatsoever, both in law and in equity, of Borrower of, in and to the Premises and Improvements and every part and parcel thereof, with the appurtenances thereto;
(d) all machinery, equipment, systems, fittings, apparatus, appliances, furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, but not limited to, all plumbing, lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, telephone systems, computerized accounting systems, engineering equipment, vehicles, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, theft prevention equipment, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary hotel equipment and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, and used in connection with the Premises or the Improvements, or appurtenant thereto, and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, and used in connection with the Premises or the Improvements or appurtenant thereto, (hereinafter, all of the foregoing items described in this paragraph (d) are collectively called the “Equipment”), all of which, and any replacements, modifications, alterations and additions thereto, to the extent permitted by applicable law, shall be deemed to constitute fixtures (the “Fixtures”), and are part of the real estate and security for the payment of the Debt and the performance of Borrower’s obligations. To the extent any portion of the Equipment is not real property or fixtures under applicable law, it shall be deemed to be personal property, and this Security Instrument shall constitute a security agreement creating a security interest therein in favor of Lender under the UCC;
(e) all awards or payments, including interest thereon, which may hereafter be made with respect to the Premises, the Improvements, the Fixtures, or the Equipment,
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whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Premises, the Improvements or the Equipment or refunds with respect to the payment of property taxes and assessments, and all other proceeds of the conversion, voluntary or involuntary, of the Premises, Improvements, Equipment, Fixtures or any other Property or part thereof into cash or liquidated claims;
(f) all leases, tenancies, franchises, licenses and permits, Property Agreements and other agreements affecting the use, enjoyment or occupancy of the Premises, the Improvements, the Fixtures, or the Equipment or any portion thereof now or hereafter entered into, whether before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code and all reciprocal easement agreements, license agreements and other agreements with Pad Owners (hereinafter collectively referred to as the “Leases”), together with all receivables, revenues, rentals, credit card receipts, receipts and all payments received which relate to the rental, lease, franchise and use of space at the Premises or which relate to the Food and Beverage Lessee/Operators (it being acknowledged by Lender that the security interest granted hereunder in receivables, revenues, rentals, credit card receipts, receipts and all payments received which relate to the Food and Beverage Lessee/Operators shall not attach to interests of third-party joint venture partners of Borrower which are not Affiliates of Borrower) and rental and use of guest rooms or meeting rooms or banquet rooms or recreational facilities or bars, beverage or food sales, vending machines, mini-bars, room service, telephone, video and television systems, electronic mail, internet connections, guest laundry, bars, the provision or sale of other goods and services, and all other payments received from guests or visitors of the Premises, and other items of revenue, receipts or income as identified in the Uniform System of Accounts (as hereinafter defined), all cash or security deposits, lease termination payments, advance rentals and payments of similar nature and guarantees or other security held by, or issued in favor of, Borrower in connection therewith to the extent of Borrower’s right or interest therein and all remainders, reversions and other rights and estates appurtenant thereto, and all base, fixed, percentage or additional rents, and other rents, oil and gas or other mineral royalties, and bonuses, issues, profits and rebates and refunds or other payments made by any Governmental Authority from or relating to the Premises, the Improvements, the Fixtures or the Equipment plus all rents, common area charges and other payments now existing or hereafter arising, whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;
(g) all proceeds of and any unearned premiums on any insurance policies covering the Premises, the Improvements, the Fixtures, the Rents or the Equipment, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the
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Improvements, the Fixtures or the Equipment and all refunds or rebates of Impositions, and interest paid or payable with respect thereto;
(h) all deposit accounts, securities accounts, funds or other accounts maintained or deposited with Lender, or its assigns, in connection herewith, including, without limitation, the Security Deposit Account (to the extent permitted by law), the Engineering Escrow Account, the Central Account, the Sub-Accounts and the Escrow Accounts and all monies and investments deposited or to be deposited in such accounts;
(i) all accounts receivable, contract rights, franchises, interests, estate or other claims, both at law and in equity, now existing or hereafter arising, and relating to the Premises, the Improvements, the Fixtures or the Equipment, not included in Rents;
(j) all now existing or hereafter arising claims against any Person with respect to any damage to the Premises, the Improvements, the Fixtures or the Equipment, including, without limitation, damage arising from any defect in or with respect to the design or construction of the Improvements, the Fixtures or the Equipment and any damage resulting therefrom;
(k) all deposits or other security or advance payments, including rental payments now or hereafter made by or on behalf of Borrower to others, with respect to (i) insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair or similar services, (iv) refuse removal or sewer service, (v) parking or similar services or rights and (vi) rental of Equipment, if any, relating to or otherwise used in the operation of the Premises, the Improvements, the Fixtures or the Equipment;
(l) all intangible property now or hereafter relating to the Premises, the Improvements, the Fixtures or the Equipment or its operation, including, without limitation, software, letter of credit rights, trade names, trademarks (including, without limitation, any licenses of or agreements to license trade names or trademarks now or hereafter entered into by Borrower), logos, building names and goodwill;
(m) all now existing or hereafter arising advertising material, guaranties, warranties, building permits, other permits, licenses, plans and specifications, shop and working drawings, soil tests, appraisals and other documents, materials and/or personal property of any kind now or hereafter existing in or relating to the Premises, the Improvements, the Fixtures, and the Equipment;
(n) all now existing or hereafter arising drawings, designs, plans and specifications prepared by architects, engineers, interior designers, landscape designers and any other consultants or professionals for the design, development, construction, repair and/or improvement of the Property, as amended from time to time;
(o) the right, in the name of and on behalf of Borrower, to appear in and defend any now existing or hereafter arising action or proceeding brought with respect to the Premises, the Improvements, the Fixtures or the Equipment and to commence any
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action or proceeding to protect the interest of Lender in the Premises, the Improvements, the Fixtures or the Equipment;
(p) all rights, remedies and powers of Borrower under the Condominium Documents (hereinafter defined) including, without limitation, any right to appoint members to the Condominium Board (hereinafter defined) and the right to exercise any voting rights thereunder;
(q) the Ground Lease and the leasehold estate created thereby, together with all modifications, extensions and renewals of the Ground Lease and all credits, deposits, options, privileges and rights of Borrower as tenant under the Ground Lease including, without limitation, the right to renew or extend the Ground Lease for a succeeding term or terms to the extent set forth therein;
(r) all accounts, chattel paper, deposit accounts, fixtures, general intangibles, goods, instruments and securities accounts (each as defined in the Uniform Commercial Code as in effect from time to time in the State of New York in which the Premises is located (the “UCC Collateral”); and
(s) all proceeds, products, substitutions and accessions (including claims and demands therefor) of each of the foregoing.
All of the foregoing items (a) through (s), together with all of the right, title and interest of Borrower therein, are collectively referred to as the “Property”.
II. The liens of the Existing Mortgages as so spread, are hereby consolidated and coordinated so that together they shall hereafter constitute in law but one mortgage, a single lien, covering the Property and securing a sum equal to the Loan Amount, together with interest thereon, prepayment premium (if any), and all other sums due hereunder (the Existing Mortgages, as so spread, consolidated and coordinated and as modified, amended, restated, ratified and confirmed pursuant to the provisions of this Agreement being hereinafter collectively referred to as the “Security Instrument”).
III. The Existing Notes and the respective debts evidenced thereby were combined and coordinated to constitute one joint indebtedness in the principal sum of the Loan Amount together with interest thereon by that certain amended, restated and consolidated promissory note dated the date hereof given by Borrower to Lender in the original principal amount of the Loan Amount (the Existing Notes, as so combined and coordinated and as modified and amended pursuant to the provisions of said amended, restated and consolidated promissory note being hereafter collectively referred to as the “Consolidated Note”), which Consolidated Note was then split into separate notes in the aggregate principal amount of the Consolidated Note, one of which notes (“Note A-1”) evidences a portion of the Loan (“Loan A-1”) in the original principal amount of $108,500,000 and one of which notes (“Note A-2”) evidences a portion of the Loan (“Loan A-2”) in the original principal amount of $108,500,000 (“Note A-2”, together with Note A-1, collectively, the “Note”).
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IV. To the extent that Borrower makes a payment or Lender receives any payment or proceeds for Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Borrower hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Lender.
V. If any payment under the Note, the Mortgage or any other Loan Document is not paid when due, Borrower shall thereafter pay interest on the Debt from the date such payment was due until the date such payment is made at the Default Rate.
VI. Any privileges in the Existing Mortgages or Existing Notes to prepay the Debt, in whole or in part, except as may be provided hereinafter, are hereby terminated with the same force and effect as if they had never been granted.
VII. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of the Note.
VIII. Borrower shall promptly cause this Agreement to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice and fully to protect the lien of the Mortgage upon, and the interest of Lender in, the Property. Borrower will pay all filing, registration and recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Agreement, and all Federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the filing, registration, recording, execution and delivery of this Agreement and Borrower shall hold harmless and indemnify Lender against any liability incurred by reason of the imposition of any tax on the issuance, making, filing, registration or recording of this Agreement.
IX. Borrower represents, warrants and covenants to Lender that there are no offsets, counterclaims or defenses against the Debt, this Agreement, the Security Instrument (including each of the Existing Mortgages) or the Note (including each of the Existing Notes) and that Borrower (and the undersigned representative of Borrower, if any) has full power, authority and legal right to execute this Agreement and to keep and observe all of the terms of this Agreement on Borrower’s part to be observed or performed.
X. This Agreement may not be modified, amended, changed or terminated orally, but only by an agreement in writing signed by the party against whom the enforcement of any modification, amendment, change or termination is sought.
XI. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns.
XII. This Agreement may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument.
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XIII. If any term, covenant or condition of this Agreement shall be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.
XIV. This Agreement shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America.
XV. Borrower hereby binds itself, and Borrower’s successors and assigns, to warrant and forever defend the title to the Property.
XVI. The terms, covenants and provisions of the Existing Mortgages as herein modified, amended and restated are hereby modified, ratified and confirmed in all respects by Borrower and the terms, covenants and provisions of the Existing Mortgages are hereby modified, amended and restated so that henceforth, the terms, covenants and provisions of this Agreement shall supersede the terms, covenants and provisions of the Existing Mortgages and the terms, covenants and provisions of the Existing Mortgages shall read the same as the following text:
AND Borrower covenants with and warrants to Lender that:
ARTICLE I: DEFINITIONS
Section 1.01. Certain Definitions.
For all purposes of this Security Instrument, except as otherwise expressly provided or unless the context clearly indicates a contrary intent:
(i) the capitalized terms defined in this Section have the meanings assigned to them in this Section, and include the plural as well as the singular;
(ii) all accounting terms not otherwise defined herein shall be construed in accordance with GAAP; and
(iii) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Security Instrument as a whole and not to any particular Section or other subdivision.
“ACH” shall have the meaning set forth in Section 5.01 hereof.
“ACM” shall have the meaning set forth in Section 16.03 hereof.
“Adjusted Net Cash Flow” shall mean, as of any date of calculation, the Net Operating Income over the twelve (12)-month period preceding the date of calculation adjusted to reflect (a) an annual replacement reserve for furniture, fixtures and equipment of 4% of gross revenues during such preceding twelve (12) month period and (b) scheduled increases in real estate taxes over the subsequent twelve (12) month period resulting from, among other things, increases in tax rates or the assessed value of the Property and/or the expiration of any applicable tax
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abatements. The Adjusted Net Cash Flow shall be calculated by Borrower and shall be subject to the reasonable review and approval of Lender.
“Affiliate” of any specified Person shall mean any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.
“Annual Budget” shall mean an annual budget submitted by Borrower to Lender in accordance with the terms of Section 2.09 hereof.
“Appraisal” shall mean the appraisal of the Property and all supplemental reports or updates thereto previously delivered to Lender in connection with the Loan as set forth in the Receipt and Closing Certificate delivered to Lender by Borrower on the Closing Date.
“Appraiser” shall mean the Person who prepared the Appraisal.
“Approved Annual Budget” shall mean each Annual Budget approved by Lender in accordance with the terms hereof.
“Approved Manager Standard” shall mean the standard of business operations, practices and procedures customarily employed by entities having a senior executive with at least five (5) years’ experience in the management of full service luxury or full service upscale hotel properties which manage not less than five (5) full service luxury or full service upscale hotel properties having 2,000 hotel rooms in the aggregate, including, without limitation, certain full service luxury or full service upscale hotel properties which contain more than 250 hotel rooms.
“Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.
“Assignment” shall mean the Assignment of Leases and Rents and Security Deposits of even date herewith relating to the Property given by Borrower to Lender, as the same may be modified, amended or supplemented from time to time.
“Bank” shall mean the bank, trust company, savings and loan association or savings bank designated by Lender, in its sole and absolute discretion, in which the Central Account shall be located.
“Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time to time.
“Basic Carrying Costs” shall mean the sum of the following costs associated with the Property: (a) Impositions and (b) insurance premiums.
“Basic Carrying Costs Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.06 hereof.
“Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying Costs or with respect to insurance premiums financed in accordance with the terms of this Security Instrument an amount equal to the next
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installment of the insurance premiums then due. “Basic Carrying Costs Monthly Installment” shall also include, if required by Lender, a sum of money which, together with such monthly installments, will be sufficient to make the payment of each such Basic Carrying Cost at least thirty (30) days prior to the date initially due. Should such Basic Carrying Costs not be ascertainable at the time any monthly deposit is required to be made, the Basic Carrying Costs Monthly Installment shall be determined by Lender in its reasonable discretion on the basis of the aggregate Basic Carrying Costs for the prior Fiscal Year or month or the prior payment period for such cost. As soon as the Basic Carrying Costs are fixed for the then current Fiscal Year, month or period, the next ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus in prior monthly payments. If at any time during the term of the Loan Lender determines that there will be insufficient funds in the Basic Carrying Costs Escrow Account to make payments when they become due and payable, Lender shall have the right to adjust the Basic Carrying Costs Monthly Installment such that there will be sufficient funds to make such payments.
“Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 into which the Basic Carrying Costs Monthly Installments shall be deposited.
“Borrower” shall mean Borrower named herein and any successor to the obligations of Borrower.
“Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions in the State of New York or the State of North Carolina are authorized or obligated by law or executive order to be closed, or at any time during which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the comparable definition of “Business Day” in the Securitization documents.
“Capital Expenditures” shall mean for any period, the amount expended for items capitalized under GAAP including expenditures for building improvements or major repairs, leasing commissions and tenant improvements.
“Cash Expenses” shall mean for any period, the operating expenses for the Property as set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by Borrower minus payments into the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the SAOT Sub-Account and the Recurring Replacement Reserve Sub-Account.
“Central Account” shall mean an Eligible Account, maintained at the Bank, in the name of Lender or its successors or assigns (as secured party).
“Closing Date” shall mean the date of the Note.
“Code” shall mean the Internal Revenue Code of 1986, as amended and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations promulgated thereunder.
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“Condemnation Proceeds” shall mean all of the proceeds in respect of any Taking or purchase in lieu thereof.
“Condominium Board” shall have the meaning set forth in Section 3.02(e) hereof.
“Condominium Documents” shall have the meaning set forth in Section 3.02(e) hereof.
“Contest” shall have the meaning set forth in Section 18.32 hereof.
“Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of the property owned by it is bound.
“Control” means, when used with respect to any specific Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities, beneficial interests, by contract or otherwise. The definition is to be construed to apply equally to variations of the word “Control” including “Controlled,” “Controlling” or “Controlled by.”
“Counterparty” shall have the meaning set forth in Section 5.10 hereof.
“CPI” shall mean “The Consumer Price Index (New Series) (Base Period 1982-84=100) (all items for all urban consumers)” issued by the Bureau of Labor Statistics of the United States Department of Labor (the “Bureau”). If the CPI ceases to use the 1982-84 average equaling 100 as the basis of calculation, or if a change is made in the term, components or number of items contained in said index, or if the index is altered, modified, converted or revised in any other way, then the index shall be adjusted to the figure that would have been arrived at had the change in the manner of computing the index in effect at the date of this Security Instrument not been made. If at any time during the term of this Security Instrument the CPI shall no longer be published by the Bureau, then any comparable index issued by the Bureau or similar agency of the United States issuing similar indices shall be used in lieu of the CPI.
“Credit Card Company” shall have the meaning set forth in Section 5.01 hereof.
“Credit Card Payment Direction Letter” shall have the meaning set forth in Section 5.01 hereof.
“Curtailment Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.11 hereof into which sums shall be deposited during an O&M Operative Period.
“Curtailment Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof.
“Debt” shall have the meaning set forth in the Recitals hereto.
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“Debt Service” shall mean the amount of interest and principal payments due and payable in accordance with the Note during an applicable period.
“Debt Service Coverage” shall mean the quotient obtained by dividing Adjusted Net Cash Flow by the sum of the (a) aggregate payments of interest, principal and all other sums due for such specified period under the Note (determined as of the date the calculation of Debt Service Coverage is required or requested hereunder) and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate or mezzanine financing, if any, then affecting or related to the Property or, if Debt Service Coverage is being calculated in connection with a request for consent to any subordinate or mezzanine financing, then proposed. In determining Debt Service Coverage, the applicable interest rate for the Loan and for any floating rate loan referred to in clause (b) above, if any, shall be the LIBOR Margin, with respect to the Loan, and the applicable margin over the applicable index, with respect to any other loan referred to in clause (b) above, plus, in each case, 7.0% with respect to the Loan and the applicable strike price set forth in any rate cap or similar agreement applicable to any other loan referred to in clause (b) above with respect to such loan.
“Debt Service Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Required Debt Service Payment shall be deposited.
“Default” shall mean any Event of Default or event which would constitute an Event of Default if all requirements in connection therewith for the giving of notice, the lapse of time, and the happening of any further condition, event or act, had been satisfied.
“Default Rate” shall mean the lesser of (a) the highest rate allowable at law and (b) five percent (5%) above the interest rate set forth in the Note.
“Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable, interest in excess of the interest which would have accrued on (a) the Principal Amount and (b) any accrued but unpaid interest, if the Default Rate was not applicable.
“Development Laws” shall mean all applicable subdivision, zoning, environmental protection, wetlands protection, or land use laws or ordinances, and any and all applicable rules and regulations of any Governmental Authority promulgated thereunder or related thereto.
“Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, in each case in preliminary or final form, used to offer securities in connection with a Securitization.
“Dollar” and the sign “$” shall mean lawful money of the United States of America.
“Eligible Account” shall mean a segregated account which is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company the long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that such
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account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its highest rating category at all times (or, in the case of the Basic Carrying Costs Escrow Account, the long term unsecured debt obligations of which are rated at least “AA” (or its equivalent)) by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) or, if the funds in such account are to be held in such account for less than thirty (30) days, the short term obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its highest rating category at all times or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in either case a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal and state authority, or otherwise acceptable (as evidenced by a written confirmation from each Rating Agency that such account would not, in and of itself, cause a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) to each Rating Agency, which may be an account maintained by Lender or its agents. Eligible Accounts may bear interest. The title of each Eligible Account shall indicate that the funds held therein are held in trust for the uses and purposes set forth herein.
“Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.
“Environmental Problem” shall mean any of the following:
(a) the presence of any Hazardous Material on, in, under, or above all or any portion of the Property;
(b) the release or threatened release of any Hazardous Material from or onto the Property;
(c) the violation or threatened violation of any Environmental Statute with respect to the Property; or
(d) the failure to obtain or to abide by the terms or conditions of any permit or approval required under any Environmental Statute with respect to the Property.
A condition described above shall be an Environmental Problem regardless of whether or not any Governmental Authority has taken any action in connection with the condition and regardless of whether that condition was in existence on or before the date hereof.
“Environmental Report” shall mean the environmental audit report for the Property and any supplements or updates thereto, previously delivered to Lender in connection with the Loan.
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“Environmental Statute” shall mean any federal, state or local statute, ordinance, rule or regulation, any judicial or administrative order (whether or not on consent) or judgment applicable to Borrower or the Property including, without limitation, any judgment or settlement based on common law theories, and any provisions or condition of any permit, license or other authorization binding on Borrower relating to (a) the protection of the environment, the safety and health of persons (including employees) or the public welfare from actual or potential exposure (or effects of exposure) to any actual or potential release, discharge, disposal or emission (whether past or present) of any Hazardous Materials or (b) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq., and all rules, regulations and guidance documents promulgated or published thereunder.
“Equipment” shall have the meaning set forth in granting clause (d) of this Security Instrument.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Security Instrument and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.
“ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower or Guarantor is a member and (b) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower or Guarantor is a member.
“Escrow Account” shall mean each of the Basic Carrying Costs Escrow Account, the SAOT Escrow Account, the Recurring Replacement Reserve Escrow Account, the Mez Payment Escrow Account, the Operation and Maintenance Expense Escrow Account and the Curtailment Reserve Escrow Account, each of which shall be an Eligible Account or book entry sub-account of an Eligible Account.
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“Event of Default” shall have the meaning set forth in Section 13.01 hereof.
“Extraordinary Expense” shall mean (a) a material extraordinary operating expense or capital expense not set forth in the Approved Annual Budget or allotted for in the Recurring Replacement Reserve Sub-Account and (b) the excess of Operating Expenses over those set forth in the Approved Annual Budget for Interest Accrual Periods prior to the Interest Accrual Period in which such determination is being made resulting from revenues which have increased over those set forth in the Approved Annual Budget for which, with respect to items set forth in this clause (b) no Lender approval is required.
“Fee Mortgage” shall mean any mortgage, deed of trust, deed to secure debt or indenture of mortgage or deed of trust now or hereafter placed upon the fee title to the Premises covered by the Ground Lease.
“First Interest Accrual Period” shall have the meaning set forth in the Note.
“Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of this Security Instrument, or such other fiscal year of Borrower as Borrower may select from time to time with the prior written consent of Lender, which consent shall not be unreasonably withheld.
“Fixtures” shall have the meaning set forth in granting clause (d) of this Security Instrument.
“Food and Beverage Lessee/Operators” shall have the meaning set forth on Exhibit H attached hereto and made a part hereof.
“GAAP” shall mean generally accepted accounting principles in the United States of America, as of the date of the applicable financial report, consistently applied.
“General Partner” shall mean, if Borrower or an SPE Pledgor is a partnership, each general partner of Borrower or SPE Pledgor, as applicable, and, if Borrower or an SPE Pledgor is a limited liability company, each managing member of Borrower or SPE Pledgor and in each case, if applicable, each general partner or managing member of such general partner or managing member. In the event that Borrower, an SPE Pledgor or any General Partner is a single member limited liability company, the term “General Partner” shall include such single member.
“Governmental Authority” shall mean, with respect to any Person, any federal or State government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such Person’s property and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading.
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“Ground Lease” shall mean the lease or leases of, or other interest in, the Leasehold Premises more particularly described on Exhibit F hereto, together with all exhibits and renewals, modifications and extensions thereto.
“Ground Lessor” shall mean the Person which holds the interest of lessor under the Ground Lease.
“Guarantor” shall mean Morgans Group LLC, a Delaware limited liability company, and each SPE Pledgor.
“Hazardous Material” shall mean any flammable, explosive or radioactive materials, hazardous materials or wastes, hazardous or toxic substances, pollutants or related materials, asbestos or any material containing asbestos, molds, spores and fungus which may pose a risk to human health or the environment or any other substance or material as defined in or regulated by any Environmental Statutes.
“Hudson Hotel” shall mean that certain hotel property located at 356 West 58th Street, New York, New York.
“Impositions” shall mean all taxes (including, without limitation, all real estate, ad valorem, assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), ground rents, condominium common charges, excises, levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property and/or any Rent (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Borrower (including, without limitation, all franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Property or any other collateral delivered or pledged to Lender in connection with the Loan is located) or Lender or (b) the Property or any part thereof or any Rents therefrom or any estate, right, title or interest therein. Impositions shall not include any taxes imposed on Lender’s income and franchise taxes imposed on Lender by the law or regulation of any Governmental Authority.
“Improvements” shall have the meaning set forth in granting clause (b) of this Security Instrument.
“Indemnified Parties” shall have the meaning set forth in Section 12.01 hereof.
“Independent” shall mean, when used with respect to any Person, a Person who (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in Borrower, or in any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower, (c) is not connected with Borrower or any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower as an
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officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions and (d) is not a member of the immediate family of a Person defined in (b) or (c) above. Whenever it is herein provided that any Independent Person’s opinion or certificate shall be provided, such opinion or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof.
“Independent Director” shall have the meaning set forth in Section 2.02(g)(xvi) hereof.
“Initial Engineering Deposit” shall equal the amount set forth on Exhibit B attached hereto and made a part hereof.
“Institutional Lender” shall mean any of the following Persons: (a) any bank, savings and loan association, savings institution, trust company or national banking association, acting for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance company or pension and/or annuity company, (d) any fraternal benefit society, (e) any pension, retirement or profit sharing trust or fund within the meaning of Title I of ERISA or for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment company or business development company, as defined in the Investment Company Act of 1940, as amended, (g) any small business investment company licensed under the Small Business Investment Act of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934, as amended, or any investment adviser registered under the Investment Adviser Act of 1940, as amended, (i) any government, any public employees’ pension or retirement system, or any other government agency supervising the investment of public funds, or (j) any other entity all of the equity owners of which are Institutional Lenders; provided that each of said Persons shall have net assets in excess of $1,000,000,000 and a net worth in excess of $500,000,000, be in the business of making commercial mortgage loans, secured by properties of like type, size and value as the Property and have a long term credit rating which is not less than “BBB-” (or its equivalent) from each Rating Agency.
“Insurance Proceeds” shall mean all of the proceeds received under the insurance policies required to be maintained by Borrower pursuant to Article III hereof.
“Insurance Requirements” shall mean all terms of any insurance policy required by this Security Instrument, all requirements of the issuer of any such policy, and all regulations and then current standards applicable to or affecting the Property or any use or condition thereof, which may, at any time, be recommended by the Board of Fire Underwriters, if any, having jurisdiction over the Property, or such other Person exercising similar functions.
“Interest Accrual Period” shall have the meaning set forth in the Note.
“Interest Rate” shall have the meaning set forth in the Note.
“Interest Shortfall” shall mean any shortfall in the amount of interest required to be paid with respect to the Loan Amount on any Payment Date.
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“Inventory” shall have the meaning as such term is defined in the Uniform Commercial Code applicable in the State in which the Property is located, including, without limitation, provisions in storerooms, refrigerators, pantries and kitchens, beverages in wine cellars and bars, other merchandise for sale, fuel, mechanical supplies, stationery and other supplies and similar items, as defined in the Uniform System of Accounts.
“Late Charge” shall have the meaning set forth in Section 13.09 hereof.
“Leases” shall have the meaning set forth in granting clause (f) of this Security Instrument.
“Legal Requirement” shall mean as to any Person, the certificate of incorporation, by-laws, certificate of limited partnership, agreement of limited partnership or other organization or governing documents of such Person, and any law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or regulation (including, without limitation, Environmental Statutes, Development Laws and Use Requirements) or determination of an arbitrator or a court or other Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in any instruments, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Lender” shall mean the Lender named herein and its successors or assigns.
“LIBOR Margin” shall have the meaning set forth in the Note.
“LIBOR Rate” shall have the meaning set forth in the Note.
“Loan” shall have the meaning set forth in the Recitals hereto.
“Loan Amount” shall have the meaning set forth in the Recitals hereto.
“Loan Documents” shall mean this Security Instrument, the Note, the Assignment, and any and all other agreements, instruments, certificates or documents executed and delivered by Borrower or any Affiliate of Borrower in connection with the Loan, together with any supplements, amendments, modifications or extensions thereof.
“Loan Year” shall mean each 365 day period (or 366 day period if the month of February in a leap year is included) commencing on the first day of the month following the Closing Date (provided, however, that the first Loan Year shall also include the period from the Closing Date to the end of the month in which the Closing Date occurs).
“Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all Condemnation Proceeds.
“Major Contracts” shall mean all Space Leases in excess of 2,000 square feet, and all Leases, consulting agreements, joint venture agreements or other contracts between Borrower and a third party operator (including joint ventures in which Borrower has an interest) relating to food and beverage operations at the Property.
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“Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of such tenant where such tenant or such Affiliate leases, in the aggregate, five percent (5%) or more of the Total GLA.
“Management Agreement” shall have the meaning set forth in Section 7.02(e) hereof.
“Manager” shall mean Morgans Hotel Group Management LLC, a Delaware limited liability company or any other Person which manages the Property on behalf of Borrower.
“Manager Certification” shall have the meaning set forth in Section 2.09(d) hereof.
“Manager Control Notice” shall have the meaning set forth in Section 7.02(e) hereof.
“Material Adverse Effect” shall mean any event or condition that has a material adverse effect on (a) the Property, (b) the business, profits, management, operations or condition (financial or otherwise) of Borrower, (c) the enforceability, validity, perfection or priority of the lien of any Loan Document or (d) the ability of Borrower to perform any obligations under any Loan Document.
“Maturity”, when used with respect to the Note, shall mean the Maturity Date set forth in the Note or such other date pursuant to the Note on which the final payment of principal, and premium, if any, on the Note becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, or otherwise.
“Maturity Date” shall mean the Maturity Date set forth in the Note, as the same may be extended from time to time pursuant to the terms of the Note.
“Mez Loan” shall mean that certain loan in the original principal sum of $32,500,000 of even date herewith made by Wachovia Bank, National Association to the owner of one hundred percent (100%) of the direct or indirect equity interests in Borrower which is secured by a pledge of such equity interest.
“Mez Payment Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.14 hereof.
“Mez Payment Amount” shall mean, as of any Payment Date, the amount of principal and interest then due and payable pursuant to the terms of the Mez Loan.
“Mez Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Mez Payment Amount shall be deposited.
“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Borrower, Guarantor or any ERISA Affiliate.
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“Net Capital Expenditures” shall mean for any period the amount by which Capital Expenditures during such period exceed reimbursements for such items during such period from any Account established pursuant to the Loan Documents.
“Net Operating Income” shall mean in each Fiscal Year or portion thereof during the term hereof, Operating Income less Operating Expenses.
“Net Proceeds” shall mean the excess of (a)(i) the purchase price (at foreclosure or otherwise) actually received by Lender with respect to the Property as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default, or (ii) in the event that Lender (or Lender’s nominee) is the purchaser at foreclosure by credit bid, then the amount of such credit bid, in either case, over (b) all costs and expenses, including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable, incurred by Lender in connection with the exercise of such remedies, including the sale of such Property after a foreclosure against the Property.
“New Lease” shall have the meaning set forth in Section 2.05 hereof.
“Note” shall have the meaning set forth in the Recitals hereto.
“O&M Operative Period” shall mean the period of time commencing upon the determination by Lender, which determination shall be made in Lender’s reasonable discretion, that the Debt Service Coverage (tested quarterly except during the continuance of an O&M Operative Period, in which event the Debt Service Coverage shall be tested monthly and shall be calculated based upon information contained in the reports furnished to Lender pursuant to Section 2.09 hereof) is less than 1.05:1.00 and terminating on the Payment Date next succeeding the date upon which Lender reasonably determines that the Debt Service Coverage for two (2) consecutive calendar quarters is 1.05:1.00 or greater.
“O&M Program” shall have the meaning set forth in Section 16.03 hereof.
“OFAC List” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.
“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed on behalf of Borrower by an authorized representative of Borrower which states that the items set forth in such certificate are true, accurate and complete in all respects.
“Operating Expenses” shall mean, in each Fiscal Year or portion thereof during the term hereof, all expenses directly attributable to the operation, repair and/or maintenance of the Property including, without limitation, (a) Impositions, (b) insurance premiums, (c) management fees, whether or not actually paid, equal to the greater of the actual management fees and four percent (4%) of total revenues of the Property, (d) costs attributable to the operation, repair and maintenance of the systems for heating, ventilating and air conditioning the Improvements and
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actually paid for by Borrower, and (e) with respect to the bar premises at the Hudson Hotel only, consulting fees which are to be paid to third party consultants that are not Affiliates of Borrower, any SPE Pledgor, Manager or Guarantor and are employed by Manager, 58th Street Bar Company LLC and which are actually paid over to such consultants. Operating Expenses shall not include interest, principal and premium, if any, or any other amount due under the Note or otherwise in connection with the Debt, income taxes, extraordinary capital improvement costs, any non-cash charge or expense such as depreciation or amortization or any item of expense otherwise includable in Operating Expenses which is paid directly by any tenant except real estate taxes paid directly to any taxing authority by any tenant.
“Operating Income” shall mean, in each Fiscal Year or portion thereof during the term hereof, all revenue derived by Borrower arising from the Property including, without limitation, room revenues, vending machines revenues, beverage revenues, food revenues, Borrower’s pro rata share of net profits of Food and Beverage Lessee/Operators, and packaging revenues, rental revenues (whether denominated as basic rent, additional rent, escalation payments, electrical payments or otherwise) and other fees and charges payable pursuant to Leases or otherwise in connection with the Property, and business interruption, rent or other similar insurance proceeds. Operating Income shall not include (a) Insurance Proceeds (other than proceeds of rent, business interruption or other similar insurance allocable to the applicable period) and Condemnation Proceeds (other than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part of the applicable Property allocable to the applicable period), or interest accrued on such Condemnation Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the Property or any part thereof or interest therein, (d) capital contributions or loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise includable in Operating Income but paid directly by any tenant to a Person other than Borrower except for real estate taxes paid directly to any taxing authority by any tenant, (f) any other material extraordinary, non-recurring revenues which for the purposes hereof shall be deemed not to include room revenues, (g) Rent paid by or on behalf of any lessee under a Space Lease which is the subject of any proceeding or action relating to its bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a bankrupt or insolvent unless such Space Lease has been affirmed by the trustee in such proceeding or action, (h) Rent paid by or on behalf of any lessee under a Lease the demised premises of which are not occupied either by such lessee or by a sublessee thereof unless the lessee has a long-term unsecured debt rating of not less than “A” (or its equivalent) from any Rating Agency; (i) Rent paid by or on behalf of any lessee under a Lease in whole or partial consideration for the termination of any Lease, or (j) sales tax rebates from any Governmental Authority.
“Operation and Maintenance Expense Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.09 hereof relating to the payment of Operating Expenses (exclusive of Basic Carrying Costs).
“Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which sums allocated for the
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payment of Cash Expenses, Net Capital Expenditures and approved Extraordinary Expenses shall be deposited.
“Pad Owners” shall mean any owner of any fee interest in property contiguous to or surrounded by the Property who has entered into or is subject to a reciprocal easement agreement or other agreement or agreements with Borrower either (a) in connection with an existing or potential improvement on such property or (b) relating to or affecting the Property.
“Payment Date” shall have the meaning set forth in the Note.
“Payment Guaranty” shall have the meaning set forth in the Recitals hereto.
“PBGC” shall mean the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.
“Permitted Encumbrances” shall have the meaning set forth in Section 2.05(a) hereof.
“Permitted Liens” shall mean:
(a) the liens created by the Loan Documents;
(b) liens, if any, for Impositions or other charges not yet due and payable and not delinquent, or that are being contested in accordance with the terms of this Security Instrument;
(c) liens which arise by operation of law (including statutory liens of landlords), judgment liens and materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens securing obligations that are not overdue for more than thirty (30) days (and if overdue by more than thirty (30) days, that are being contested in good faith and as to which appropriate reserves are being maintained) or that have been fully-bonded, paid or with respect to which enforcement action has been stayed, all in accordance with the terms of this Security Instrument;
(d) liens, pledges or deposits to secure obligations under workmen’s compensation, unemployment insurance, social security laws or similar legislation or to secure public or statutory obligations of Borrower;
(e) purchase money liens, including the lessor’s interest in respect of any property subject to a capital lease, upon or in property acquired or held by Borrower in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of any such property to be subject to such liens, or liens existing on any such property at the time of acquisition, or extensions, renewals or replacements of any of the foregoing for the same or lesser amount; provided, however, that no such lien shall extend to any property other than the property being acquired, and no such extension, renewal or replacement shall extend to or cover property not theretofore subject to the lien being extended, renewed or replaced, all subject to the limitations set forth in Section 2.02(g) of this Security Instrument;
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(f) Permitted Encumbrances and such other title and survey exceptions as Lender approves in writing in Lender’s discretion;
(g) the liens of any Mez Loan; and
(h) Space Leases existing as of the date hereof or hereafter entered into in accordance with the terms hereof.
“Permitted Transferee” shall mean any of the following Persons:
(a) a pension fund, pension trust or pension account that immediately prior to such transfer owns, directly or indirectly, total gross real estate assets of at least $1,000,000,000;
(b) a pension fund advisor who (i) immediately prior to such transfer, Controls, directly or indirectly, at least $1,000,000,000 of total gross real estate assets and (ii) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (a) of this definition;
(c) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (i) with a net worth, determined as of a date no more than six (6) months prior to the date of the transfer of at least $500,000,000 and (ii) which, immediately prior to such transfer, controls, directly or indirectly, total gross real estate assets of at least $1,000,000,000;
(d) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (i) with, immediately prior to such transfer, a combined capital and surplus of at least $500,000,000 and (ii) which, immediately prior to such transfer, controls, directly or indirectly total gross real estate assets of at least $1,000,000,000;
(e) any Person who (i) owns or operates at least five (5) full service luxury or full service upscale properties totaling no less than 1,500 hotel rooms (exclusive of the Property), (ii) has a net worth, determined as of a date no more than six (6) months prior to the date of such transfer, of at least $500,000,000 and (iii) immediately prior to such transfer, Controls, directly or indirectly, total gross real estate assets of at least $1,000,000,000, provided such Person is reasonably acceptable to Lender based upon, among other things, its credit history and general reputation; or
(f) any Person in which more than fifty percent (50%) of the ownership interests are owned directly or indirectly by any of the entities listed in subsections (a) through (e) of this definition of “Permitted Transferee”, or any combination of more than one such entity, and which is controlled directly or indirectly by such entity or entities;
in each event with respect to which Lender shall have received information satisfactory to it confirming that neither the proposed Permitted Transferee nor any Affiliate of the proposed
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Permitted Transferee (A) is on the OFAC List or would, if such Person assumes the Loan or obtains an interest in Borrower, cause Lender to be in violation of Legal Requirements or (B) has been, within the seven (7) years prior to the proposed Transfer, the subject of any bankruptcy, reorganization or insolvency proceeding.
“Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
“Plan” shall mean an employee benefit or other plan established or maintained by Borrower, Guarantor or any ERISA Affiliate during the five-year period ended prior to the date of this Security Instrument or to which Borrower, Guarantor or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Security Instrument, been required to make contributions (whether or not covered by Title IV of ERISA or Section 302 of ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.
“Premises” shall have the meaning set forth in the first “Whereas” clause of this Security Instrument.
“Principal Amount” shall mean the Loan Amount as such amount may be reduced from time to time pursuant to the terms of this Security Instrument, the Note or the other Loan Documents.
“Principal Payments” shall mean all payments of principal made pursuant to the terms of the Note.
“Prohibited Person” shall mean any Person and/or any Affiliate thereof identified on the OFAC List or any other Person or foreign country or agency thereof with whom a U.S. Person may not conduct business or transactions by prohibition of Federal law or Executive Order of the President of the United States of America.
“Property” shall have the meaning set forth in the granting clauses of this Security Instrument.
“Property Agreements” shall mean all agreements, grants of easements and/or rights-of-way, reciprocal easement agreements, permits, declarations of covenants, conditions and restrictions, disposition and development agreements, planned unit development agreements, parking agreements, party wall agreements or other instruments affecting the Property, including, without limitation any agreements with Pad Owners, but not including any brokerage agreements, management agreements, service contracts, Space Leases or the Loan Documents.
“Qualified Transferee” shall have the meaning set forth in the form intercreditor agreement attached as Appendix VI to the U.S. CMBS Legal and Structured Finance Criteria published by Standard and Poor’s dated May 1, 2003.
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“Rate Cap Agreement” shall mean that certain interest rate protection agreement (together with the confirmation and schedules relating thereto) with a notional amount which shall not at any time be less than the Principal Amount and a LIBOR Rate strike price equal to seven percent (7.0%) per annum entered into by Borrower in accordance with the terms hereof or of the other Loan Documents and any similar interest rate cap or collar agreements subsequently entered into in replacement or substitution therefor by Borrower with respect to the Loan.
“Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc., and Moody’s Investors Service, Inc. (“Moody’s”) and any successor to any of them; provided, however, that at any time after a Securitization, “Rating Agency” shall mean those of the foregoing rating agencies that from time to time rate the securities issued in connection with such Securitization.
“Realty” shall have the meaning set forth in Section 2.05(b) hereof.
“Recurring Replacement Expenditures” shall mean Capital Expenditures for furniture, Fixtures and Equipment to be located at the Property from time to time, as determined in accordance with GAAP, which are set forth in the Approved Annual Budget.
“Recurring Replacement Reserve Monthly Installment” shall mean the amount per month set forth on Exhibit B attached hereto and made a part hereof (the “Initial Recurring Installments”) until the end of the first (1st) Loan Year and an amount per month in each subsequent Loan Year or portion thereof occurring prior to the Maturity Date equal to four percent (4%) of the total revenues of the Property during the prior Loan Year (or portion thereof) divided by twelve (12).
“Recurring Replacement Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement Expenditures.
“Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Recurring Replacement Reserve Monthly Installment shall be deposited.
“Regulation AB” shall mean Regulation AB under the Securities Act and the Securities Exchange Act of 1934 (as amended).
“Rent Account” shall mean one or more Eligible Account(s) maintained in a bank acceptable to Lender in the joint names of Lender and Borrower.
“Rents” shall have the meaning set forth in granting clause (f) of this Security Instrument.
“Rent Roll” shall have the meaning set forth in Section 2.05(o) hereof.
“Required Debt Service Coverage” shall mean a Debt Service Coverage of not less than 1.2:1.
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“Required Debt Service Payment” shall mean, as of any Payment Date, (a) the amount of interest and principal then due and payable pursuant to the Note, together with any other sums due thereunder, including, without limitation, any prepayments required to be made or for which notice has been given under this Security Instrument, Default Rate Interest and premium, if any, paid in accordance therewith plus (b) pursuant to Section 5.04, reasonable out-of-pocket fees incurred by Lender in connection with its administration and servicing of the Central Account.
“Required Work” shall mean the work set forth on Exhibit D attached hereto and made a part hereof.
“Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii) hereof.
“RevPAR” shall mean the average revenues per available room per day.
“RevPAR Yield Index” shall mean the percentage amount determined by dividing the RevPAR of the Property by the RevPAR of the Property’s Competitive Set as determined by Smith Travel Research (“STR”) or if STR is no longer publishing, a successor reasonably acceptable to Lender.
“Sale” shall have the meaning set forth in Section 9.04 hereof.
“SAOT Deposit” shall mean the amount required to be deposited into the SAOT Sub-Account pursuant to Section 5.05 hereof which is equal to the SAOT Expenditures for the calendar month immediately preceding the calendar month in which such deposit is made.
“SAOT Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.07 hereof.
“SAOT Expenditures” shall mean sales, use or occupancy or other taxes due to any Governmental Authority imposed on charges for the use of guest rooms at the Property.
“SAOT Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the SAOT Deposit shall be deposited.
“Securities Act” shall mean the Securities Act of 1933, as the same shall be amended from time to time.
“Securitization” shall mean a public or private offering of securities by Lender or any of its Affiliates or their respective successors and assigns which are collateralized, in whole or in part, by this Security Instrument.
“Security Deposit Account” shall have the meaning set forth in Section 5.01 hereof.
“Security Instrument” shall mean this Security Instrument as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.
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“Servicer” shall have the meaning set forth in Section 5.04 hereof.
“Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB.
“Single Purpose Entity” shall mean a corporation, partnership, joint venture, limited liability company, trust or unincorporated association, which is formed or organized solely for the purpose of holding, directly, an ownership interest in the Property or, with respect to SPE Pledgor, holding an ownership interest in a Food and Beverage Lessee/Operator or, with respect to General Partner, holding an ownership interest in and managing a Person which holds an ownership interest in the Property, does not engage in any business unrelated to the Property, does not have any assets other than those related to its interest in the Property or any indebtedness other than as permitted by this Security Instrument or the other Loan Documents, has its own separate books and records and has its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, holds itself out as being a Person separate and apart from any other Person and which otherwise satisfies the criteria of the Rating Agency, as in effect on the Closing Date, for a special-purpose bankruptcy-remote entity.
“Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person, at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has sufficient capital with which to conduct its business as presently conducted and as proposed to be conducted and (c) such Person has not incurred debts, and does not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this definition, “debt” means any liability on a claim, and “claim” means (a) a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) a right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such contingent liabilities, such liabilities shall be computed in accordance with GAAP at the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an actual or matured liability.
“Space Leases” shall mean any Lease or sublease thereunder (including, without limitation, any Major Space Lease) or any other agreement providing for the use and occupancy of a portion of the Property together with any supplements, renewals, amendments, modifications or extensions thereof.
“SPE Pledgor” shall have the meaning set forth on Exhibit I attached hereto and made a part hereof.
“Spread Maintenance Premium” shall mean (a) the amount of the prepayment, multiplied by (b) the LIBOR Margin multiplied by (c) a fraction, the numerator of which is the number of full and partial months from such prepayment date through the end of the first (1st) Loan Year and the denominator of which is 12.
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“State” shall mean any of the states which are members of the United States of America.
“Stated Maturity” when used with respect to the Note or any installment of interest and/or principal payment thereunder, shall mean the date specified in the Note as the fixed date on which a payment of all or any portion of principal and/or interest is due and payable, as such date may be extended from time to time pursuant to the terms of the Note.
“Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.
“Substantial Casualty” shall have the meaning set forth in Section 3.04(a)(iv) hereof.
“Taking” shall mean a condemnation or taking pursuant to the lawful exercise of the power of eminent domain.
“Third Party Disbursements” shall mean to the extent actually deposited in the Central Account, (a) that portion of Rents collected by Borrower or Manager, on behalf of Food and Beverage Lessee/Operators consisting of the sum of (i) operating revenues and sales taxes (to the extent not otherwise reserved for in the SAOT Sub-Account or SAOT Escrow Account) of such Food and Beverage Lessee/Operators plus (ii) distributions by such Food and Beverage Lessee/Operators to its members other than distributions to members who are Affiliates of Borrower, (b) Rents and/or deposits with respect to gift shop, laundry and parking facilities and movie rentals, which Borrower is contractually obligated to collect on behalf of third parties that are not Affiliates of Borrower, SPE Pledgor, Manager or Guarantor which are to be, and actually have been, paid to such third parties, and (c) gratuities or service charges or other similar receipts which are to be paid to any employees of Manager and/or the Food and Beverage Lessee/Operators or Persons occupying similar positions for performing similar duties and which are actually paid to such Persons.
“Total GLA” shall mean the total gross leasable area of the Property, including all Space Leases.
“Transfer” shall mean the conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any legal or beneficial interest (a) in all or any portion of the Property; (b) if Borrower is a corporation or, if Borrower is a partnership and any General Partner is a corporation, in the stock of Borrower or any General Partner; (c) in Borrower (or any trust of which Borrower is a trustee); or (d) if Borrower is a limited or general partnership, joint venture, limited liability company, trust, nominee trust, tenancy in common or other unincorporated form of business association or form of ownership interest, in any Person having a legal or beneficial ownership in Borrower, excluding any legal or beneficial interest in any constituent limited partner, if Borrower is a limited partnership, or in any non-managing member, if Borrower is a limited liability company, unless such interest would, or together with all other direct or indirect interests in Borrower which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in Borrower or would result in any Person who, as of the Closing Date, did
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not own, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower, owning, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower and excluding any legal or beneficial interest in any General Partner unless such interest would, or together with all other direct or indirect interest in the General Partner which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in the General Partner (or result in a change in control of the management of the General Partner from the individuals exercising such control immediately prior to the conveyance or other disposition of such legal or beneficial interest) and shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower leasing all or substantially all of the Property to one or more Persons pursuant to a single or related transactions, or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Property to a condominium regime or transferring ownership to a cooperative corporation; and the dissolution or termination of Borrower or the merger or consolidation of Borrower with any other Person. Notwithstanding the foregoing or anything to the contrary contained in any other Loan Document, “Transfer” shall not include (a) transfers of publicly traded stock on a national stock exchange or on the NASDAQ Stock Market in the normal course of business and not in connection with a tender offer or a sale of Morgans Hotel Group Co. or substantially all of the assets of such Person or (b) pledges (but not the transfer of any direct or indirect interest in Borrower in connection with the realization of such pledged interests) of direct or indirect interests in the borrower under the Mez Loan to Qualified Transferees in connection with a financing secured by pledges of direct or indirect interests in all or substantially all of the assets of Morgans Group LLC, provided that the Net Operating Income at the time of the origination of the financing constitutes ten percent (10%) or less of the net operating income of the assets with respect to which the pledged interests which secure such debt relate or (c) the Mez Loan or (d) any Transfer which does not result in (i) a change of Control of Borrower (it being acknowledged that any holder of more than forty percent of the direct or indirect interest in Borrower may have veto rights over major decisions which are customary in joint venture agreements between two fifty percent owners of a Person and the same shall not constitute a change of Control) or (ii) a Transfer of more than 49% of any direct or indirect interest in Borrower. Nothing contained herein or in any other Loan Document shall be construed to prohibit (i) the acquisition by any Affiliate of Borrower of all or any portion of the interests in Hudson Leaseco LLC, or (ii) the acquisition by Borrower or any Affiliate of Borrower of the leasehold interest currently held by Hudson Leaseco LLC in respect of the Property.
“UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the State in which the Realty is located; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State in which the Realty is located (“Other UCC State”), “UCC” means the Uniform Commercial Code as in effect in such Other UCC State for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority.
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“Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging Industry, 9th Revised Edition, Educational Institute of the American Hotel and Motel Association and Hotel Association of New York City (1996), as from time to time amended.
“Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has elected or is required to apply to the repayment of the Debt pursuant to this Security Instrument, the Note or any other Loan Documents, (b) any funds representing a voluntary or involuntary principal prepayment other than scheduled Principal Payments and (c) any Net Proceeds.
“Use Requirements” shall mean any and all building codes, permits, certificates of occupancy or compliance, laws, regulations, or ordinances (including, without limitation, health, pollution, fire protection, medical and day-care facilities, waste product and sewage disposal regulations), restrictions of record, easements, reciprocal easements, declarations or other agreements affecting the use of the Property or any part thereof.
“Welfare Plan” shall mean an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower, Guarantor or any ERISA Affiliate or that covers any current or former employee of Borrower, Guarantor or any ERISA Affiliate.
“Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.
ARTICLE II: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER
Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and the other Loan Documents, all in lawful money of the United States of America in immediately available funds.
Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower represents and warrants to and covenants with Lender:
(a) Organization and Authority. Borrower (i) is a limited liability company, general partnership, limited partnership or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) has all requisite power and authority and all necessary licenses and permits to own and operate the Property and to carry on its business as now conducted and as presently proposed to be conducted and (iii) is duly qualified, authorized to do business and in good standing in the jurisdiction where the Property is located and in each other jurisdiction where the conduct of its business or the nature of its activities makes such qualification necessary. If Borrower is a limited liability company, limited partnership or general partnership, each general partner or managing member, as applicable, of Borrower which is a corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation.
(b) Power. Borrower and, if applicable, each General Partner has full power and authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a party, to receive the borrowings thereunder, to execute and deliver the Note and to grant to
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Lender a first priority, perfected and continuing lien on and security interest in the Property, subject only to the Permitted Encumbrances.
(c) Authorization of Borrowing. The execution, delivery and performance of the Loan Documents to which Borrower is a party, the making of the borrowings thereunder, the execution and delivery of the Note, the grant of the liens on the Property pursuant to the Loan Documents to which Borrower is a party and the consummation of the Loan are within the powers of Borrower and have been duly authorized by Borrower and, if applicable, the General Partners, by all requisite action (and Borrower hereby represents that no approval or action of any member, limited partner or shareholder, as applicable, of Borrower, which has not been received or taken, is required to authorize any of the Loan Documents to which Borrower is a party) and will constitute the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their terms, except as enforcement may be stayed or limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether considered in proceedings at law or in equity) and will not (i) violate any provision of its partnership agreement or partnership certificate or certificate of incorporation or by-laws, or operating agreement, certificate of formation or articles of organization, as applicable, or, to its knowledge, any law, judgment, order, rule or regulation of any court, arbitration panel or other Governmental Authority, domestic or foreign, or other Person affecting or binding upon Borrower or the Property, or (ii) violate any provision of any indenture, agreement, mortgage, deed of trust, contract or other instrument to which Borrower or, if applicable, any General Partner is a party or by which any of their respective property, assets or revenues are bound, or be in conflict with, result in an acceleration of any obligation or a breach of or constitute (with notice or lapse of time or both) a default or require any payment or prepayment under, any such indenture, agreement, mortgage, deed of trust, contract or other instrument, or (iii) result in the creation or imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which it is a party.
(d) Consent. Neither Borrower nor, if applicable, any General Partner, is required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Security Instrument, the Note or the other Loan Documents which has not been so obtained or filed.
(e) Interest Rate. To Borrower’s knowledge, the rate of interest paid under the Note and the method and manner of the calculation thereof do not violate any usury or other law or applicable Legal Requirement.
(f) Other Agreements. Borrower is not a party to nor is otherwise bound by any agreements or instruments which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in violation of its organizational documents or other restriction or any agreement or instrument by which it is bound, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or Governmental Authority, or any Legal Requirement, in each case, applicable to
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Borrower or the Property, except for such violations that would not, individually or in the aggregate, have a Material Adverse Effect.
(g) Maintenance of Existence. (i) Borrower is familiar with all of the criteria of the Rating Agency required to qualify as a special-purpose bankruptcy-remote entity and Borrower, SPE Pledgor and, if applicable, each General Partner at all times since their formation have been duly formed and existing and shall preserve and keep in full force and effect their existence as a Single Purpose Entity.
(ii) Borrower, SPE Pledgor and, if applicable, each General Partner, at all times since their organization have complied, and will continue to comply, with the provisions of its certificate and agreement of partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, and the laws of its jurisdiction of organization relating to partnerships, corporations or limited liability companies, as applicable.
(iii) Borrower, SPE Pledgor and, if applicable, each General Partner have done or caused to be done and will do all things necessary to observe organizational formalities and preserve their existence and Borrower, SPE Pledgor and, if applicable, each General Partner will not amend, modify or otherwise change the certificate and agreement of partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, or other organizational documents of Borrower, SPE Pledgor and, if applicable, each General Partner except for immaterial amendments which do not modify the Single Purpose Entity provisions.
(iv) Borrower, SPE Pledgor and, if applicable, each General Partner, have at all times accurately maintained, and will continue to accurately maintain, their respective financial statements, accounting records and other partnership, company or corporate documents separate from those of any other Person and Borrower and SPE Pledgor has filed and will file its own tax returns or, if Borrower, SPE Pledgor and/or, if applicable, General Partner is part of a consolidated group for purposes of filing tax returns, Borrower, SPE Pledgor and General Partner, as applicable, have been shown and will be shown as separate members of such group. Borrower, SPE Pledgor and, if applicable, each General Partner have not at any time since their formation commingled, and will not commingle, their respective assets with those of any other Person and each has maintained and will maintain their assets in such a manner such that it will not be costly or difficult to segregate, ascertain or identify their individual assets from those of any other Person. Borrower, SPE Pledgor and, if applicable, each General Partner have not permitted and will not permit any Affiliate independent access to their bank accounts. Borrower, SPE Pledgor and, if applicable, each General Partner have at all times since their formation accurately maintained and utilized, and will continue to accurately maintain and utilize, their own separate bank accounts, payroll and separate books of account, stationery, invoices and checks.
(v) Borrower, SPE Pledgor and, if applicable, each General Partner, have at all times paid, and will continue to pay, their own liabilities from their own separate
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assets and each has allocated and charged and each shall allocate and charge fairly and reasonably any overhead which Borrower, SPE Pledgor and, if applicable, any General Partner, shares with any other Person, including, without limitation, for office space and services performed by any employee of another Person.
(vi) Borrower, SPE Pledgor and, if applicable, each General Partner, have at all times identified themselves, and will continue to identify themselves, in all dealings with the public, under their own names and as separate and distinct entities and shall correct any known misunderstanding regarding their status as separate and distinct entities. Borrower, SPE Pledgor and, if applicable, each General Partner, have not at any time identified themselves, and will not identify themselves, as being a division of any other Person.
(vii) Borrower, SPE Pledgor and, if applicable, each General Partner, have been at all times, and will continue to be, adequately capitalized in light of the nature of their respective businesses.
(viii) Borrower, SPE Pledgor and, if applicable, each General Partner, (A) have not owned, do not own and will not own any assets or property other than, with respect to Borrower, the Property and any incidental personal property necessary for the ownership, management or operation of the Property, with respect to the SPE Pledgor, the ownership of an interest in a Food and Beverage Lessee/Operator and, with respect to General Partner, if applicable, its interest in Borrower, (B) have not engaged and will not engage in any business other than the ownership, management and operation of the Property or with respect to the SPE Pledgor, the ownership of an interest in a Food and Beverage Lessee/Operator, or with respect to General Partner, if applicable, its interest in Borrower, (C) have not incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (w) the Loan, (x) unsecured trade and operational debt which (1) is not evidenced by a note, (2) is incurred in the ordinary course of the operation of the Property, (3) does not, together with any equipment financing, incurred pursuant to clause (y) hereof, exceed in the aggregate one percent (1%) of the Loan Amount or, with respect to the SPE Pledgor, $100,000, and (4) is, unless being contested in accordance with the terms of this Security Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the date when due, (y) equipment financing relating to equipment used in connection with the operation of the Property which (1) is incurred in the ordinary course of the operation of the Property, (2) does not, together with any unsecured trade and operational debt incurred pursuant to clause (x) hereof, exceed one percent (1%) of the Loan Amount or, with respect to the SPE Pledgor, $100,000, (3) which is secured only by the financed equipment, and (4) is, unless being contested in accordance with the terms of this Security Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the date when due and (z) with respect to the General Partner, the Mez Loan, (D) have not pledged and will not pledge their assets for the benefit of any other Person, other than, with respect to the Mez Loan, the pledge by each General Partner of its direct or indirect interest in Borrower and the pledges by the SPE Pledgors and (E)
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have not made and will not make any loans or advances to any Person (including any Affiliate).
(ix) None of Borrower, SPE Pledgor nor, if applicable, any General Partner will change its name or principal place of business unless thirty (30) days prior written notice thereof is provided to Lender.
(x) None of Borrower, SPE Pledgor nor, if applicable, any General Partner has, and neither of such Persons will have, any subsidiaries other than with respect to Borrower, General Partner and, with respect to SPE Pledgor, as disclosed in writing to Lender.
(xi) Each of Borrower and SPE Pledgor has preserved and maintained and will preserve and maintain its existence as a Delaware limited liability company and all material rights, privileges, tradenames, if any, and franchises.
(xii) None of Borrower, SPE Pledgor nor, if applicable, any General Partner, has merged or consolidated with, and none of them will merge or consolidate with, and none of them have sold all or substantially all of its respective assets to any Person, and none of them will sell all or substantially all of its respective assets to any Person, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution). None of Borrower, SPE Pledgor nor, if applicable, any General Partner has acquired nor will acquire any business or assets from, or capital stock or other ownership interest of, or be a party to any acquisition of, any Person.
(xiii) Borrower, SPE Pledgor and, if applicable, each General Partner, has not at any time since their formation assumed, guaranteed or held themselves out to be responsible for, and will not assume, guarantee or hold themselves out to be responsible for the liabilities or the decisions or actions respecting the daily business affairs of their partners, shareholders or members or any predecessor company, corporation or partnership, each as applicable, any Affiliates, or any other Persons other than (i) in connection with the Loan and (ii) obligations relating to the Property which have been fully satisfied with proceeds of the Loan. Neither Borrower nor SPE Pledgor has at any time since its formation acquired, and will not acquire, obligations or securities of its partners or shareholders, members or any predecessor company, corporation or partnership, each as applicable, or any Affiliates. Borrower, SPE Pledgor and, if applicable, each General Partner, have not at any time since their formation made, and will not make, loans to its partners, members or shareholders or any predecessor company, corporation or partnership, each as applicable, or any Affiliates of any of such Persons. Borrower, SPE Pledgor and, if applicable, each General Partner, have no known contingent liabilities nor do they have any material financial liabilities under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Person is a party or by which it is otherwise bound other than under the Loan Documents.
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(xiv) None of Borrower, SPE Pledgor nor, if applicable, General Partner, has at any time since their formation entered into and are not a party to, and, will not enter into or be a party to, any transaction with its Affiliates, members, partners or shareholders, as applicable, or any Affiliates thereof except in the ordinary course of business of Borrower or SPE Pledgor, as applicable, on terms which are substantially similar to those which Borrower or SPE Pledgor, as applicable, would obtain in a comparable arm’s length transaction with an unrelated third party.
(xv) If Borrower or SPE Pledgor is a limited partnership or a limited liability company, the General Partner shall be a corporation or limited liability company whose sole asset is its ownership interests in Borrower and SPE Pledgor, as applicable, and the General Partner will at all times comply, and will cause Borrower or SPE Pledgor to comply, with each of the representations, warranties, and covenants contained in this Section 2.02(g) as if such representation, warranty or covenant was made directly by such General Partner.
(xvi) Borrower and SPE Pledgor shall at all times cause there to be at least two (2) duly appointed members, with respect to Borrower, and at least one (1) duly appointed member, with respect to SPE Pledgor, of the board of directors or board of managers or other governing board or body, as applicable (each an “Independent Director”), of, if Borrower or SPE Pledgor is a corporation, Borrower and SPE Pledgor, as applicable, and, if Borrower or SPE Pledgor is a limited partnership or limited liability company, of the General Partner, reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment, and may not be or have been at any time (A) a shareholder of SPE Pledgor, officer, director, attorney, counsel, partner, member or employee of Borrower or any of the foregoing Persons or Affiliates thereof, (B) a customer or creditor of, or supplier or service provider to, Borrower or SPE Pledgor or any of its shareholders, partners, members or their Affiliates, (C) a member of the immediate family of any Person referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or under common Control with any Person referred to in (A) through (C) above. A natural person who otherwise satisfies the foregoing definition except for being the Independent Director of a Single Purpose Entity Affiliated with Borrower, SPE Pledgor or General Partner shall not be disqualified from serving as an Independent Director if such individual is at the time of initial appointment, or at any time while serving as the Independent Director, an Independent Director of a Single Purpose Entity Affiliated with Borrower or SPE Pledgor or General Partner if such individual is an Independent Director provided by a nationally-recognized company that provides professional independent directors.
(xvii) Borrower, SPE Pledgor and, if applicable, each General Partner, shall not cause or permit the board of directors or board of managers or other governing board or body, as applicable, of Borrower, SPE Pledgor or, if applicable, each General Partner, to take any action which, under the terms of any certificate of incorporation, by-laws, certificate of formation, operating agreement or articles of organization with respect to any common stock, requires a vote of the board of directors of Borrower or SPE Pledgor,
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or, if applicable, the General Partner, unless at the time of such action there shall be at least two (2) members, with respect to Borrower, and at least one (1) member, with respect to SPE Pledgor, who is or are Independent Director(s).
(xviii) Borrower, SPE Pledgor and, if applicable, each General Partner has paid and shall pay the salaries of their own employees and has maintained and shall maintain a sufficient number of employees in light of their contemplated business operations.
(xix) Borrower and SPE Pledgor shall, and shall cause their Affiliates to, and Borrower and SPE Pledgor have and have caused their Affiliates to, conduct their business so that the assumptions made with respect to Borrower and SPE Pledgor in that certain opinion letter relating to substantive non-consolidation dated the date hereof (the “Insolvency Opinion”) delivered in connection with the Loan shall be true and correct in all respects. Notwithstanding the foregoing, holders of direct or indirect equity interests in Borrower may deliver to Lender so called “bottom up” guarantees which do not result in a Material Adverse Effect or result in a change in any obligation of Borrower or Guarantor to Lender, provided (x) subsequent to a Securitization, Borrower shall deliver to Lender a letter from each Rating Agency confirming that any rating issued by the Rating Agency in connection with a Securitization will not, as a result of the delivery of such guaranty, be downgraded from the then current ratings thereof, qualified or withdrawn, and (y) Borrower shall deliver to Lender an update of the Insolvency Opinion addressing the guaranty and confirming the conclusions thereof which shall be in form and substance satisfactory to Lender.
Notwithstanding anything to the contrary contained in this Section 2.02(g), provided Borrower and SPE Pledgor are each a Delaware limited liability company which satisfies the single purpose bankruptcy remote entity requirements of each Rating Agency for a single member limited liability company, the foregoing provisions of this Section 2.02(g) shall not apply to the General Partner.
(h) No Defaults. No Default or Event of Default has occurred and is continuing or would occur as a result of the consummation of the transactions contemplated by the Loan Documents. Borrower is not in default in the payment or performance of any of its Contractual Obligations in any respect.
(i) Consents and Approvals. Borrower and, if applicable, each General Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and registrations and filings of or with all Governmental Authorities and (ii) consents, approvals, waivers and notifications of partners, stockholders, members, creditors, lessors and other nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if applicable, the General Partner, in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents.
(j) Investment Company Act Status, etc. Borrower is not (i) 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, (ii) a “holding company” or a “subsidiary
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company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.
(k) Compliance with Law. Borrower is in compliance in all material respects with all Legal Requirements to which it or the Property is subject, including, without limitation, all Environmental Statutes, the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act and ERISA. No portion of the Property has been or will be purchased, improved, fixtured, equipped or furnished with proceeds of any illegal activity and, to the best of Borrower’s knowledge, no illegal activities are being conducted at or from the Property.
(l) Financial Information. All financial data that has been delivered by Borrower to Lender (i) is true, complete and correct in all material respects, (ii) accurately represents the financial condition and results of operations of the Persons covered thereby as of the date on which the same shall have been furnished, and (iii) in the case of audited financial statements, has been prepared in accordance with GAAP and the Uniform System of Accounts (or such other accounting basis as is reasonably acceptable to Lender) throughout the periods covered thereby. As of the date hereof, none of Borrower, SPE Pledgor nor, if applicable, any General Partner, has any contingent liability, liability for taxes or other unusual or forward commitment not reflected in such financial statements delivered to Lender. Since the date of the last financial statements delivered by Borrower to Lender except as otherwise disclosed in such financial statements or notes thereto, there has been no change in the assets, liabilities or financial position of Borrower SPE Pledgor nor, if applicable, any General Partner, or in the results of operations of Borrower which would have a Material Adverse Effect. None of Borrower, SPE Pledgor nor, if applicable, any General Partner, has incurred any obligation or liability, contingent or otherwise not reflected in such financial statements which would have a Material Adverse Effect.
(m) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Security Instrument. Borrower hereby agrees to indemnify and hold Lender harmless for, from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a claim by any Person, including without limitation the Carlton Group and any of their Affiliates, that such Person acted on behalf of Borrower in connection with the transactions contemplated herein or (ii) any breach of the foregoing representation. The provisions of this subsection (m) shall survive the repayment of the Debt.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of “purchasing” or “carrying” any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of the Loan Documents.
(o) Pending Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Borrower, threatened against or affecting Borrower or the Property in any
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court or before any Governmental Authority which if adversely determined either individually or collectively has or is reasonably likely to have a Material Adverse Effect.
(p) Solvency; No Bankruptcy. Each of Borrower, SPE Pledgor and, if applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii) is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors and is not contemplating the filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person’s assets or property and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or have been made with an intent to hinder, delay or defraud any present or future creditors of Borrower or SPE Pledgor and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Borrower’s assets do not, and immediately upon consummation of the transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to carry out its business as presently conducted or as proposed to be conducted. Borrower does not intend to, nor believes that it will, incur debts and liabilities beyond its ability to pay such debts as they may mature.
(q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower or, at Borrower’s direction, to, inter alia, (i) satisfy, or enable Lender to obtain by assignment, certain loans presently encumbering all or a part of the Property and (ii) pay certain transaction costs incurred by Borrower in connection with the Loan. No portion of the proceeds of the Loan will be used for family, personal, agricultural or household use.
(r) Tax Filings. Borrower, SPE Pledgor and, if applicable, each General Partner, have filed all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower, SPE Pledgor and, if applicable, the General Partners. Borrower, SPE Pledgor and, if applicable, the General Partners, believe that their respective tax returns properly reflect the income and taxes of Borrower, SPE Pledgor and said General Partner, if any, for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.
(s) Not Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.
(t) ERISA. (i) The assets of Borrower and Guarantor are not and will not become treated as “plan assets”, whether by operation of law or under regulations promulgated under ERISA. If any Person having a legal or beneficial ownership interest in Borrower is using (or is deemed under ERISA to be using) “plan assets”, Borrower will qualify as a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(e) at all times that the Loan is outstanding. Each Plan and Welfare Plan, and, to the knowledge of Borrower, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, its terms and the applicable provisions of ERISA, the Code and any other applicable Legal Requirement, and no event or condition has occurred and is
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continuing as to which Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this Section. Other than an application for a favorable determination letter with respect to a Plan, there are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan under which Borrower, Guarantor or any ERISA Affiliate, directly or indirectly (through an indemnification agreement or otherwise), could be subject to any material risk of liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan, other than a Multiemployer Plan, provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits.
(ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to the PBGC (or any other relevant Governmental Authority)) by Borrower or an ERISA Affiliate with respect to such event or condition, if such report or notice is required to be filed with the PBGC or any other relevant Governmental Authority:
(A) any reportable event, as defined in Section 4043 of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code and of Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code), and any request for a waiver under Section 412(d) of the Code for any Plan;
(B) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;
(C) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
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