EXHIBIT 10.20
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LOAN AGREEMENT
Dated as of August 12, 1997
Between
BA PARKWAY ASSOCIATES II, L.P.
as Borrower
and
LEHMAN BROTHERS HOLDINGS INC.,
DOING BUSINESS AS LEHMAN CAPITAL,
A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
as Lender
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PAGE
TABLE OF CONTENTS
PAGE
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION...................................1
Section 1.1 Definitions..................................................1
Section 1.2 Principles of Construction..................................17
II. GENERAL TERMS...........................................................17
Section 2.1 Loan Commitment; Disbursement to Borrower...................17
2.1.1 The Loan.....................................................17
2.1.2 Disbursement to Borrower.....................................17
2.1.3 The Note.....................................................17
2.1.4 Advances.....................................................17
Section 2.2 Use of Proceeds.............................................18
Section 2.3 Loan Repayment; Extension of Maturity Date..................19
2.3.1 Repayment....................................................19
2.3.2 Extension of Maturity Date...................................19
Section 2.4 Release of Property.........................................20
(i)
PAGE
2.4.1 Release of All the Properties................................20
2.4.2 Release of Individual Properties.............................21
2.4.3 Release on Payment in Full...................................22
Section 2.5 Interest....................................................22
2.5.1 Generally....................................................22
2.5.2 Determination of Interest Rate...............................23
2.5.3 Default Rate.................................................27
Section 2.6 Payments and Computations...................................27
2.6.1 Making of Payments...........................................27
2.6.2 Computations.................................................27
2.6.3 Late Payment Charge..........................................27
III. CONDITIONS PRECEDENT...................................................28
Section 3.1 Conditions Precedent to Initial Advance.....................28
Section 3.2 Conditions Precedent to Subsequent Advances Involving
Additional Properties.......................................34
Section 3.3 Conditions Precedent to Subsequent Advances Not Involving
Additional Properties.......................................44
IV. REPRESENTATIONS AND WARRANTIES..........................................48
Section 4.1 Borrower Representations....................................48
(ii)
Section 4.2 Survival of Representations.................................57
V. AFFIRMATIVE COVENANTS....................................................58
Section 5.1 Borrower Covenants..........................................58
VI. NEGATIVE COVENANTS......................................................66
Section 6.1 Borrower's Negative Covenants...............................66
VII. CASUALTY; CONDEMNATION; ESCROWS........................................68
Section 7.1 Insurance; Casualty and Condemnation........................68
7.1.1 Insurance....................................................68
7.1.2 Condemnation.................................................72
7.1.3 Restoration..................................................72
Section 7.2 Required Repairs; Required Repair Funds.....................76
7.2.1 Required Repairs; Deposits...................................76
7.2.2 Grant of Security Interest...................................77
7.2.3 Release of Required Repair Funds.............................77
7.2.4 Failure to Perform Required Repairs and Make
Initial Deposit..............................................78
Section 7.3 Tax and Insurance Escrow Fund...............................79
7.3.1 Tax and Insurance Escrow Fund................................79
(iii)
PAGE
7.3.2 Grant of Security Interest...................................79
7.3.3 Application of Tax and Insurance Escrow Fund.................80
Section 7.4 Replacements and Replacement Reserve........................80
7.4.1 Replacement Reserve Fund.....................................80
7.4.2 Grant of Security Interest...................................81
7.4.3 Disbursements from Replacement Reserve Account...............81
7.4.4 Performance of Replacements.................................82
7.4.5 Failure to Make Replacements and Make Initial Deposit........84
7.4.6 Balance in the Replacement Reserve Account...................85
7.4.7 Indemnification..............................................85
Section 7.5 Ground Lease Escrow Fund....................................85
VIII. DEFAULTS..............................................................86
Section 8.1 Event of Default............................................86
Section 8.2 Remedies....................................................88
Section 8.3 Remedies Cumulative.........................................90
IX. SPECIAL PROVISIONS......................................................90
Section 9.1 Sale of Notes and Securitization............................90
(iv)
PAGE
Section 9.2 Securitization Indemnification..............................92
Section 9.3 Intentionally Omitted.......................................95
Section 9.4 Exculpation.................................................95
Section 9.5 Cash Management.............................................97
9.5.1 Lockbox Account..............................................97
9.5.2 Cash Collateral Account......................................97
Section 9.6 Servicer....................................................98
Section 9.7 Insolvency Opinion..........................................99
X. MISCELLANEOUS............................................................99
Section 10.1 Survival...................................................99
Section 10.2 Lender's Discretion........................................99
Section 10.3 Governing Law..............................................99
Section 10.4 Modification, Waiver in Writing...........................101
Section 10.5 Delay Not a Waiver........................................101
(v)
Section 10.6 Notices...................................................101
Section 10.7 Trial by Jury.............................................102
Section 10.8 Headings..................................................103
Section 10.9 Severability..............................................103
Section 10.10 Preferences..............................................103
Section 10.11 Waiver of Notice.........................................104
Section 10.12 Remedies of Borrower.....................................104
Section 10.13 Expenses; Indemnity......................................104
Section 10.14 Schedules Incorporated...................................105
Section 10.15 Intentionally Omitted....................................106
Section 10.16 No Joint Venture or Partnership; No Third Party
Beneficiaries............................................106
Section 10.17 Publicity................................................106
(vi)
PAGE
Section 10.18 Cross-Default; Cross-Collateralization; Waiver of
Marshalling of Assets....................................106
Section 10.19 Waiver of Counterclaim...................................107
Section 10.20 Conflict; Construction of Documents; Reliance............107
Section 10.21 Brokers and Financial Advisors...........................108
Section 10.22 Prior Agreements.........................................108
Section 10.23 Joint and Several Liability..............................108
Section 10.24 Counterparts.............................................108
(vii)
SCHEDULES
Schedule I - Release Amounts
Schedule II - Required Repairs
Schedule III - Intentionally Omitted
Schedule IV - Rent Rolls
Schedule V - List of Franchise Agreements
Schedule VI - List of Management Agreements
Schedule VII - Litigation
(viii)
LOAN AGREEMENT
THIS LOAN AGREEMENT, DATED AS OF AUGUST 12, 1997 (AS AMENDED, RESTATED,
REPLACED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THIS
"AGREEMENT"), between Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc., a Delaware corporation
having an address at Three World Financial Center, New York, New York 10285
("LENDER") and BA PARKWAY ASSOCIATES II, L.P., a Delaware limited partnership,
having an address at 1010 Wisconsin Avenue, N.W., Washington, D.C. 20007
("BORROWER").
All capitalized terms used herein shall have the respective meanings set
forth in Article I hereof.
W I T N E S S E T H :
WHEREAS, Borrower desires to obtain the Loan from Lender;
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTIONI. DEFINITIONS; PRINCIPLES
OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.Section 1.1Definitions.
FOR ALL PURPOSES OF THIS AGREEMENT, EXCEPT AS OTHERWISE EXPRESSLY REQUIRED
OR UNLESS THE CONTEXT CLEARLY INDICATES A CONTRARY INTENT:
"ADDITIONAL BORROWER" shall mean any Person assuming the Loan and the Loan
Documents and encumbering its Individual Property with a Mortgage in connection
with a Subsequent Advance pursuant to the terms and provisions hereof. Upon the
funding of the related Subsequent Advance in accordance with the terms and
provisions hereof, an Additional Borrower assuming the Loan and the Loan
Documents and encumbering its Individual Property in connection with such
Subsequent Advance shall constitute an Individual Borrower.
"ADDITIONAL PROPERTY" shall have the meaning set forth in SECTION 2.1.4(B).
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"ADJUSTED RELEASE AMOUNT" shall mean, for an Individual Property, the
product of the Release Amount for such Individual Property and one hundred
twenty-five percent (125%).
"AFFILIATE" shall mean, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"ANNUAL BUDGET" shall mean the operating budget, including all planned
capital expenditures, for the Properties prepared by Borrower for the applicable
Fiscal Year or other period.
"APPLICABLE INTEREST RATE" shall have the meaning set forth in SECTION
2.5.2(A).
"APPROVED ANNUAL BUDGET" shall have the meaning set forth in
SECTION 5.1(R).
"APPROVED APPRAISAL" shall mean, with respect to an Individual Property, an
appraisal of such Individual Property (a) executed and delivered to Lender by a
qualified MAI appraiser having no direct or indirect interest in such Individual
Property or any loan secured in whole or in part thereby and whose compensation
is not affected by the approval or disapproval of such appraisal by Lender; (b)
addressed to Lender and its successors and assigns; (c) satisfying the
requirements of the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation and Title XI of the Federal Institutions Reform,
Recovery and Enforcement Act of 1989 and the regulations promulgated thereunder,
all as in effect on the date of such calculation, with respect to such appraisal
and the appraiser making such appraisal and (d) otherwise satisfactory to Lender
in all respects in Lender's sole discretion.
"ASSIGNMENT OF LEASES" shall mean, with respect to each Individual
Property, that certain first priority Assignment of Leases and Rents, dated as
of the date hereof, from an Individual Borrower, as assignor, to Lender, as
assignee, assigning to Lender all of such Individual Borrower's interest in and
to the Leases and Rents of such Individual Property as security for the Loan, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"ASSIGNMENT OF MANAGEMENT AGREEMENT" shall mean, with respect to each
Individual Property, that certain Assignment of Management Agreement and
Subordination of Management Fees among an Individual Borrower, as assignor,
Manager, as manager, and Lender, as assignee, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"AUSTIN PROPERTY" shall mean the proposed Additional Property known as the
Doubletree Hotel located in Austin, Texas.
"AWARD" shall have the meaning set forth in SECTION 7.1.2.
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"BASIC CARRYING COSTS" shall mean, with respect to an Individual Property,
the sum of the following costs associated with such Individual Property for the
relevant Fiscal Year or payment period: (i) real property taxes with respect to
such Individual Property and (ii) insurance premiums with respect to such
Individual Property.
"BORROWER" shall mean, collectively, BA Parkway Associates II, L.P.,
together with any Additional Borrower, and their respective successors and
assigns.
"BORROWER GROUP" shall have the meaning set forth in SECTION 9.2(D).
"BREAKAGE COSTS" shall have the meaning set forth in SECTION 2.5.2(H).
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York are not open for
business.
"CAPITAL EXPENDITURES" for any period shall mean the amount expended for
items capitalized under GAAP (including expenditures for building improvements
or major repairs, leasing commissions and tenant improvements).
"CAPITAL EXPENDITURES RESERVE FUND" shall have the meaning set forth in
SECTION 7.1.
"CASH COLLATERAL ACCOUNT" shall have the meaning set forth in SECTION
9.5.2.
"CASUALTY" shall have the meaning specified in SECTION 7.1.1(D).
"CASUALTY CONSULTANT" shall have the meaning set forth in SECTION
7.1.3(B)(III).
"CASUALTY RETAINAGE" shall have the meaning set forth in SECTION
7.1.3(B)(IV).
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CLOSING DATE DEBT SERVICE COVERAGE RATIO" shall have the meaning set forth
in SECTION 2.4.2(H).
"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 issued pursuant thereto in
temporary or final form.
"CONDEMNATION" shall have the meaning set forth in SECTION 7.1.3(A).
"CONDEMNATION RESTORATION" shall have the meaning set forth in SECTION
7.1.3(C).
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"CONTRIBUTION AGREEMENT" shall mean that certain Contribution Agreement by
and among the Individual Borrowers dated as of the date hereof, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
"DEBT" shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Exit Fee) due to Lender in
respect of the Loan under the Note, this Agreement, the Mortgages or any other
Loan Document.
"DEBT SERVICE" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the applicable period
in which:
(a) the numerator is the Underwritten Net Operating Income (excluding
interest on credit accounts) for such period as set forth in the statements
required hereunder; and
(b) the denominator is the aggregate amount of interest payable on
the outstanding principal balance of the Loan for such period assuming a
loan constant equal to the greater of (i) 10.48% or (ii) the Applicable
Interest Rate for such period.
"DEFAULT" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate permitted by applicable law, or (b) three
percent (3%) above the Applicable Interest Rate.
"DISCLOSURE DOCUMENT" shall have the meaning set forth in SECTION 9.2(A).
"DSCR CALCULATION DATE" shall mean, with respect to any Interest Period,
the twentieth (20th) day of the calendar month immediately prior to such
Interest Period.
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"ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or (ii)
a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company is subject to regulations substantially similar to 12 C.F.R. Section
9.10(b), having in either case a combined capital and surplus of at least Fifty
Million and No/100 Dollars ($50,000,000) and subject to supervision or
examination by federal and state authority. An Eligible Account will not be
evidenced by a certificate of deposit, passbook or other instrument.
"ELIGIBLE INSTITUTION" shall mean a depository institution or trust company
the short term unsecured debt obligations or commercial paper of which are rated
at least A-1 by Standard & Poor's Ratings Group, P-1 by Moody's Investors
Service, Inc., D-1 by Duff & Phelps Credit Rating Co. and F-1+ by Fitch
Investors Service, L.P. in the case of accounts in which funds are held for
thirty (30) days or less (or, in the case of accounts in which funds are held
for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least "AA" by Fitch, Duff and S&P and "Aaa" by Moody's).
"ELIGIBLE INVESTMENTS" shall mean any one or more of the following
investments in obligations or securities acquired at a purchase price of not
greater than par, including those issued by Lender or any Affiliate of Lender,
provided that such obligations or securities are either payable on demand or
have a maturity not later than the Business Day immediately prior to the date on
which the proceeds thereof are anticipated to be expended or applied pursuant to
the terms of the Loan Documents:
(a) direct obligations of, and obligations fully guaranteed as to payment
of principal and interest by, the United States, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association or any agency or
instrumentality of the United States of America provided such obligations are
backed by the full faith and credit of the United States of America;
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(b) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia at all times having the highest
long-term debt rating of the Rating Agencies, or such lower rating (but not
lower than the second highest such rating category of the Rating Agencies) as
will not or would not result in the qualification, reduction or withdrawal of
the initial ratings assigned in connection with a Securitization by the Rating
Agencies, as evidenced by a letter confirming such result by the Rating
Agencies;
(c) commercial or finance company paper which is rated at all times by the
Rating Agencies in its highest unsecured commercial or finance company paper
rating category or such lower unsecured commercial or finance company paper
rating category (but not lower than the second highest such rating category of
the Rating Agencies) as will not or would not result in the qualification,
reduction or withdrawal of the initial ratings assigned in connection with a
Securitization by the Rating Agencies, as evidenced by a letter confirming such
result by the Rating Agencies;
(d) certificates of deposit, demand or time deposits, federal funds or
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or of any state
thereof and subject to supervision and examination by federal or state banking
authorities, provided that the commercial paper or long-term unsecured debt
obligations of such depository institution or trust company (or in the case of
the principal depository institution or trust company in a holding company
system, the commercial paper or long-term unsecured debt obligations of such
holding company) are rated at all times in the highest rating category for such
securities by the Rating Agencies, or such lower category for such securities
(but not lower than the second highest such rating category of the Rating
Agencies) as will not or would not result in the qualification, reduction or
withdrawal of the initial ratings assigned in connection with a Securitization
by the Rating Agencies, as evidenced by a letter confirming such result by the
Rating Agencies;
(e) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation as will not or would not result in the
qualification, reduction or withdrawal of the initial ratings assigned in
connection with a Securitization by the Rating Agencies, as evidenced by a
letter confirming such result by the Rating Agencies;
(f) repurchase obligations with respect to any security described in
clauses (a) and (b) of this definition, in each case entered into with a
depository institution or trust company (acting as principal) described in
clause (d) above;
(g) securities (other than stripped bonds or stripped coupons) bearing
interest or sold at a discount that are issued by any corporation incorporated
under the laws of the United States of America or any state thereof or the
District of Columbia which are rated at all times in the highest rating category
of the Rating Agencies, or in such lower category (but not lower than the
second highest such rating category of the Rating Agencies) as will not or would
not result in the qualification,
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reduction or withdrawal of the initial ratings assigned in connection with a
Securitization by the Rating Agencies, as evidenced by a letter confirming such
result by the Rating Agencies;
(h) interests in money market funds which at all times have a rating of
"AAA" by the Rating Agencies, or such lower rating (but not lower than the
second highest rating category of the Rating Agencies for money market funds) as
will not or would not result in the qualification, reduction or withdrawal of
the initial ratings assigned in connection with a Securitization by the Rating
Agencies, as evidenced by a letter confirming such result from the Rating
Agencies; and
(i) such other investment bearing interest or sold at a discount
acceptable to Lender and the Rating Agencies as will or would not result in the
qualification, reduction or withdrawal of the initial ratings assigned in
connection with a Securitization by the Rating Agencies, as evidenced by a
letter confirming such result from the Rating Agencies; provided that such
investment shall be rated at all times by the Rating Agencies not lower than its
second highest rating category for investments of such type.
No obligation or security set forth above shall be an Eligible Investment
if (i) such obligation or security evidences a right to receive only interest
payments or (ii) the right to receive principal and interest payments derived
from the underlying investment provide a yield to maturity in excess of one
hundred twenty percent (120%) of the yield to maturity at par of such underlying
investment.
"ENVIRONMENTAL INDEMNITY" shall mean, with respect to each Individual
Property, that certain Environmental and Hazardous Substance Indemnification
Agreement by the related Individual Borrower, as indemnitor, for the benefit of
Lender, as indemnitee, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in the Environmental
Indemnity.
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"EURODOLLAR LOAN" shall mean each portion of the outstanding principal
amount of the Loan at such time as interest thereon accrues at a rate of
interest based upon LIBOR.
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 8.1(A).
"EXCHANGE ACT" shall have the meaning set forth in SECTION 9.2(A).
"EXIT FEE" shall have the meaning set forth in SECTION 2.4.2(C).
"EXTRAORDINARY EXPENSE" shall have the meaning set forth in SECTION 5.1(R).
"FISCAL YEAR" shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the Term.
"FOREIGN TAXES" shall have the meaning set forth in SECTION 2.5.2(E).
"FRANCHISE AGREEMENT" shall mean, with respect to any Individual Property,
that certain franchise agreement more specifically identified on SCHEDULE V
hereto.
"FRANCHISOR" shall mean, with respect to any Individual Property that is
subject to a Franchise Agreement, the franchisor with respect thereto, as same
is identified on SCHEDULE V attached hereto.
"FRANCHISOR RECOGNITION AGREEMENT" shall mean, with respect to each
Individual Property, a recognition agreement between Franchisor under the
Franchise Agreement with respect to the Individual Property and Lender in
Franchisor's customary form with such modifications as shall be reasonably
requested by Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence.
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"GROSS INCOME FROM OPERATIONS" shall mean all income, computed in
accordance with GAAP, derived from the ownership and operation of the Properties
from whatever source, including, but not limited to, Rents, utility charges,
escalations, forfeited security deposits, interest on credit accounts, service
fees or charges, license fees, parking fees, rent concessions or credits, and
other required pass-throughs but excluding sales, use and occupancy or other
taxes on receipts required to be accounted for by Borrower to any government or
governmental agency, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, proceeds of casualty insurance and condemnation awards
(other than business interruption or other loss of income insurance), and any
disbursements to the Borrower from the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Capital Expenditures Reserve Fund, the Ground
Lease Escrow Fund or any other escrow fund established pursuant to the Loan
Documents. Gross income shall not be diminished as a result of the Mortgages or
the creation of any intervening estate or interest in the Properties or any part
thereof.
"GROUND LEASE" shall mean any ground lease pursuant to which Borrower holds
a leasehold interest constituting a portion of the Properties.
"GROUND LEASE ESCROW FUND" shall have the meaning set forth in SECTION 7.5
hereof.
"IMPROVEMENTS" shall have the meaning set forth in the granting clause of
the related Mortgage with respect to each Individual Property.
"INDEBTEDNESS" of a Person, at a particular date, means the sum (without
duplication) at such date of (a) indebtedness or liability for borrowed money;
(b) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (c) obligations for the deferred purchase price of property or
services (including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance facilities; (f) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations with respect to the Indebtedness of any other
Person; and (g) obligations secured by any Liens, whether or not the obligations
have been assumed.
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"INDEPENDENT DIRECTOR" shall have the meaning set forth in SECTION
4.1(FF)(XVI).
"INDIVIDUAL BORROWER" shall mean, individually, BA Parkway Associates II,
L.P. or any Additional Borrower from and after the funding of the related
Subsequent Advance in accordance with the terms and provisions hereof and,
individually, their respective successors and assigns.
"INDIVIDUAL PROPERTY" shall mean an Individual Borrower's fee or leasehold
interest in each parcel of real property and the improvements thereon owned by
such Individual Borrower encumbered by a Mortgage on the Closing Date and in
each Additional Property thereafter encumbered by a Mortgage from and after the
date such Additional Property is so encumbered, together with all rights
pertaining to such property and improvements, as more particularly described in
the Granting Clauses of such Mortgages and referred to therein as the "Mortgaged
Property" or the "Trust Property", as the case may be.
"INITIAL ADVANCE" shall mean Lender's initial advance of proceeds of the
Loan in the amount of Seven Million and No/100 Dollars ($7,000,000).
"INSOLVENCY OPINION" shall have the meaning set forth in SECTION 9.7.
"INSURANCE PREMIUMS" shall have the meaning set forth in SECTION 7.1.1(B)
hereof.
"INTEREST PERIOD" shall mean (a) the period commencing on the date hereof
and ending on the ninth (9th) day of September, 1997 for the first period
hereunder, and (b) for each period thereafter, the period commencing on the
tenth (10th) day of each calendar month during the Term and ending on the ninth
(9th) day of the next occurring calendar month.
"LEASE" shall mean any lease (other than a Ground Lease), sublease or
subsublease, letting, license, concession or other agreement (whether written or
oral and whether now or hereafter in effect) pursuant to which any Person is
granted a possessory interest in, or right to use or occupy all or any portion
of any space in any Individual Property of Borrower, and every modification,
amendment or other agreement relating
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to such lease, sublease, subsublease, or other agreement entered into in
connection with such lease, sublease, subsublease, or other agreement and every
guarantee of the performance and observance of the covenants, conditions and
agreements to be performed and observed by the other party thereto.
"LEGAL REQUIREMENTS" shall mean, with respect to each Individual Property,
all federal, state, county, municipal and other governmental statutes, laws,
rules, orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting such Individual Property or any part thereof
or the construction, use, alteration or operation thereof, or any part thereof,
whether now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting such Individual Property or
any part thereof, including, without limitation, any which may (i) require
repairs, modifications or alterations in or to such Individual Property or any
part thereof, or (ii) in any way limit the use and enjoyment thereof.
"LEHMAN" shall have the meaning set forth in SECTION 9.2(B).
"LEHMAN GROUP" shall have the meaning set forth in SECTION 9.2(B).
"LENDER" shall mean Lehman Brothers Holdings Inc., doing business as Lehman
Capital, a division of Lehman Brothers Holdings Inc., together with its
successors and assigns.
"LEXINGTON OBLIGATIONS" shall have the meaning set forth in SECTION
3.2(JJ).
"LEXINGTON PROPERTY" shall mean the proposed Additional Property known as
the Vine Center located in Lexington, Kentucky.
"LIABILITIES" shall have the meaning set forth in SECTION 9.2(B).
"LIBOR" shall mean, with respect to each Interest Period, the rate per
annum equal to the quotient of (a) the rate reported on the date one (1) Working
Day
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prior to the beginning of such Interest Period as of 11:00 a.m., London, England
time, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for U.S. Dollar deposits
having a term equal to the applicable Interest Period and in an amount
comparable to the principal amount of the Loan to be outstanding during such
Interest Period (or, if said Telerate Access Service Page shall cease to be
publicly available, as reported by the Reuters Screen LIBO Page, and if said
Reuters Screen Page shall cease to be publicly available, then as reported by
any publicly available source of similar market data selected by Lender in
Lender's sole discretion, exercised in good faith, that accurately reflects such
London Interbank Offered Rate) divided by (b) a number equal to 1.00 minus the
aggregate (without duplication) of the rates (expressed as a decimal) of reserve
requirements applicable to Lender current on the date one (1) Working Day prior
to the beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves) under any regulations of any
Governmental Authority as now and from time to time hereafter in effect, dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of the Board of
Governors of the Federal Reserve System) maintained by a member bank of such
system. For purposes of this Agreement, the amount of any Eurodollar Loan to be
outstanding during each related Interest Period shall be the related portion of
the principal balance of the Loan bearing interest at a rate of interest based
upon LIBOR at 11:00 a.m., London, England time, on the date one (1) Working Day
prior to the beginning of the related Interest Period, less (1) the amount, if
any, which Borrower has elected to voluntarily prepay and which is to be applied
in reduction of such portion of the principal balance of the Loan after such
Working Day and prior to the expiration of the Interest Period immediately
preceding such related Interest Period pursuant to a proper and timely
irrevocable notice given in accordance with the provisions of SECTION 2.3.1 and
(2) the amount of any Casualty/Condemnation Involuntary Prepayment during the
Interest Period immediately preceding such related Interest Period, but which is
not to be applied in reduction of the principal balance of the Loan until the
Payment Date commencing such related Interest Period.
"LICENSES" shall have the meaning set forth in SECTION 4.1(V).
"LIEN" shall mean, with respect to each Individual Property, any mortgage,
deed of trust, lien, pledge, hypothecation, assignment, security interest, or
any other encumbrance, charge or transfer of, on or affecting the related
Individual Property
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or any portion thereof or Borrower, or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic's, materialmen's
and other similar liens and encumbrances.
"LOAN" shall mean the loan made by Lender to Borrower in the original
principal amount set forth in, and evidenced by, the Note executed and delivered
by Borrower and secured by the Mortgages and the other Loan Documents executed
and delivered by Borrower.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note, the
Mortgage and the Assignment of Leases encumbering each Individual Property, the
Assignment of Management Agreement for each Individual Property, the Franchisor
Recognition Agreement for each Individual Property, the Environmental Indemnity,
the Contribution Agreement and any other document pertaining to the Individual
Properties as well as all other documents executed and/or delivered in
connection with the Loan.
"LOCKBOX ACCOUNT" shall have the meaning set forth in SECTION 9.5.1(A).
"LTV RATIO" shall mean the ratio of the outstanding principal balance of
the Loan to the total of the lesser with respect to each Individual Property of
(a) the purchase price of each Individual Property if such Individual Property
was purchased by Borrower within twelve (12) months of the date of calculation
or (b) the value of each Individual Property established by an Approved
Appraisal with respect to such Individual Property.
"MAI" shall mean Member of the Appraisal Institute.
"MANAGEMENT AGREEMENT" shall mean, with respect to any Individual Property,
the management agreement(s) more specifically identified on SCHEDULE VI hereto
pursuant to which the Manager thereunder is to provide management and other
services with respect to such Individual Property.
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"MANAGER" shall mean, with respect to any individual Property that is
subject to one or more Management Agreements, the manager under such Management
Agreement(s) as identified on SCHEDULE VI hereto.
"MATURITY DATE" shall mean February 10, 1999, as such date may be extended
pursuant to SECTION 2.3.2, or such other date on which the final payment of
principal of the Note becomes due and payable as herein provided, whether at
such stated maturity date, by declaration of acceleration, or otherwise.
"MAXIMUM MANAGEMENT FEE" shall mean an amount equal to five percent (5%)
per annum of Gross Income from Operations for each Individual Property.
"MINOR LEASE" shall mean any Lease of space in any Individual Property,
which space (i) is used for a gift shop or travel related services, (ii) has no
public entrance on the exterior of the Improvements in which such space is
located and (iii) consists of less than 2,500 square feet.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean the monthly payment of
interest payable pursuant to SECTION 2.5.1.
"MORTGAGE" shall mean, with respect to each Individual Property, that
certain first priority Mortgage (or Deed of Trust or Deed to Secure Debt),
Assignment of Leases and Rents and Security Agreement, dated the date hereof,
executed and delivered by an Individual Borrower as security for the Loan made
to Borrower and encumbering such Individual Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"NET OPERATING INCOME" means the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.
"NET PROCEEDS" shall have the meaning set forth in SECTION 7.1.3(B).
"NET PROCEEDS DEFICIENCY" shall have the meaning set forth in
SECTION 7.1.3(B)(VI).
"NON-CAPSTAR PERSON" shall mean a limited partner or non-managing member of
an Individual Borrower or an Additional Borrower, as applicable, or a Person
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directly or indirectly controlled by an Individual Borrower or an Additional
Borrower, as applicable, which limited partner, non-managing member or Person is
not in control of, controlled by or under common control with, CapStar Hotel
Company.
"NOTE" shall mean that certain note of even date herewith, made by Borrower
in favor of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to Lender by
Borrower which is signed by an authorized senior officer of the general partner
or managing member of Borrower.
"OPERATING EXPENSES" shall mean the total of all expenditures, computed in
accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Properties that are incurred on a regular monthly or other
periodic basis, including without limitation, utilities, ordinary repairs and
maintenance, insurance, license fees, property taxes and assessments,
advertising expenses, management fees, franchise fees, payroll and related
taxes, computer processing charges, operational equipment or other lease
payments as approved by Lender, and other similar costs, but excluding
depreciation, Debt Service, Capital Expenditures, and contributions to the
Replacement Reserve Fund, the Tax and Insurance Escrow Fund, the Capital
Expenditures Reserve Fund, the Ground Lease Escrow Fund (if applicable) and any
other reserves required under the Loan Documents.
"OTHER CHARGES" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Properties, now or hereafter levied or assessed or
imposed against the Properties or any part thereof.
"OUTSIDE CLOSING DATE" shall have the meaning set forth in SECTION 2.1.4.
"PAYMENT DATE" shall mean the tenth (10th) day of each calendar month
during the Term or, if such day is not a Working Day, the immediately preceding
Working Day.
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"PARKWAY" shall mean BA Parkway Associates II, L.P.
"PERMITTED ENCUMBRANCES" shall mean, with respect to an Individual
Property, collectively, (a) the Liens and security interests created by the Loan
Documents , (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policies relating to such Individual Property or any part thereof
(including, without limitation, such Liens, encumbrances and other matters with
respect to which Lender is affirmatively insured by such Title Insurance
Policies), (c) Liens, if any, for Taxes imposed by any Governmental Authority
not yet due or delinquent, and (d) such other title and survey exceptions as
Lender has approved or may approve in writing in Lender's sole discretion, which
in the aggregate do not materially adversely affect the value or use of such
Individual Property or Borrower's ability to repay the Loan.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, 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.
"POLICIES" shall have the meaning set forth in SECTION 7.1.1(B).
"PREMISES" shall have the meaning set forth in the granting clause of the
related Mortgage with respect to each Individual Property.
"PREPAYMENT DATE" shall have the meaning set forth in SECTION 2.3.1.
"PRIME RATE" shall mean the annual rate of interest publicly announced by
Citibank, N.A. in New York, New York, as its base rate, as such rate shall
change from time to time. If Citibank, N.A. ceases to announce a base rate,
Prime Rate shall mean the rate of interest published in THE WALL STREET JOURNAL
from time to time as the "Prime Rate". If more than one "Prime Rate" is
published in THE WALL STREET JOURNAL for a day, the average of such "Prime
Rates" shall be used, and such average shall be rounded up to the nearest
one-eighth of one percent (0.125%). If THE WALL STREET JOURNAL ceases to
publish the "Prime Rate", the Lender shall select an equivalent publication that
publishes such "Prime Rate", and if such "Prime Rates" are no longer generally
published or are limited, regulated or administered by a governmental or
quasigovernmental body, then Lender shall select a comparable interest rate
index.
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"PRIME RATE LOAN" shall mean any portion of the outstanding principal of
the Loan at such time as interest thereon accrues at a rate of interest based
upon the Prime Rate.
"PROMUS" shall mean Promus Hotels, Inc.
"PROPERTIES" shall mean, collectively, all of the Individual Properties
which are subject to the terms of this Agreement.
"PROPERTY REQUIRED REPAIRS" shall have the meaning set forth in SECTION
7.2.1.
"PROVIDED INFORMATION" shall have the meaning set forth in SECTION 9.1(A).
"RATING AGENCIES" shall mean each of Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch Investors Service, L.P., or any other
nationally-recognized statistical rating agency which has been approved by
Lender.
"REGISTRATION STATEMENT" shall have the meaning set forth in SECTION
9.2(B).
"RELEASE AMOUNT" shall mean for an Individual Property the amount set forth
on SCHEDULE I hereto.
"RENTS" shall mean, with respect to each Individual Property, all rents,
rent equivalents, moneys payable as damages or in lieu of rent or rent
equivalents, royalties (including, without limitation, all oil and gas or other
mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from any and all
sources arising from or attributable to the Individual Property, including,
without
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limitation, all hotel receipts, revenues and credit card receipts collected from
guest rooms, restaurants, bars, meeting rooms, banquet rooms and recreational
facilities, all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of property or rendering of services by Borrower
or any operator or manager of the hotel or the commercial space located in the
Improvements or acquired from others (including, without limitation, from the
rental of any office space, retail space, guest rooms or other space, halls,
stores, and offices, and deposits securing reservations of such space), license,
lease, sublease and concession fees and rentals, health club membership fees,
food and beverage wholesale and retail sales, service charges, vending machine
sales and proceeds, if any, from business interruption or other loss of income
insurance.
"REPLACEMENT RESERVE ACCOUNT" shall have the meaning set forth in SECTION
7.4.1.
"REPLACEMENT RESERVE FUND" shall have the meaning set forth in SECTION
7.4.1.
"REPLACEMENT RESERVE MONTHLY DEPOSIT" shall have the meaning set forth in
SECTION 7.4.1.
"REPLACEMENTS" shall have the meaning set forth in SECTION 7.4.3(A).
"REQUIRED RECORDS" shall mean, collectively, the financial statements,
certificates, reports or information required to be provided by Borrower to
Lender pursuant to SECTION 5.1(K) hereof.
"REQUIRED REPAIR ACCOUNT" shall have the meaning set forth in SECTION
7.2.1.
"REQUIRED REPAIR FUND" shall have the meaning set forth in SECTION 7.2.1.
"RESTORATION" shall have the meaning set forth in SECTION 7.1.1(G).
"SECURITIES" shall have the meaning set forth in SECTION 9.1.
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"SECURITIES ACT" shall have the meaning set forth in SECTION 9.2(A).
"SECURITIZATION" shall have the meaning set forth in SECTION 9.1.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in SECTION
8.2(C).
"SPREAD" shall mean for each Interest Period, with respect to a Eurodollar
Loan, (a) prior to the extension of the Maturity Date pursuant to SECTION
2.3.2(B), (i) one hundred seventy-five basis points (1.75%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.50, (ii) two hundred basis points (2.00%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.35 and no greater than 1.49, (iii) two hundred twenty-five
basis points (2.25%) for any Interest Period if the Debt Service Coverage Ratio
with respect to the twelve (12) full months immediately preceding the DSCR
Calculation Date for such Interest Period is no less than 1.20 and no greater
than 1.34 or (iv) two hundred seventy basis points (2.70%) for any Interest
Period if the Debt Service Coverage Ratio with respect to the twelve (12) full
months immediately preceding the DSCR Calculation Date for such Interest Period
is no less than 1.15 and no greater than 1.19 or (b) upon the extension of the
Maturity Date pursuant to SECTION 2.3.2(B), (i) two hundred basis points (2.00%)
for any Interest Period if the Debt Service Coverage Ratio with respect to the
twelve (12) full months immediately preceding the DSCR Calculation Date for such
Interest Period is no less than 1.50, (ii) two hundred twenty-five basis points
(2.25%) for any Interest Period if the Debt Service Coverage Ratio with respect
to the twelve (12) full months immediately preceding the DSCR Calculation Date
for such Interest Period is no less than 1.35 and no greater than 1.49, (iii)
two hundred fifty basis points (2.50%) for any Interest Period if the Debt
Service Coverage Ratio with respect to the twelve (12) full months immediately
preceding the DSCR Calculation Date for such Interest Period is no less than
1.20 and no greater than 1.34 or (iv) three hundred basis points (3.00%) for any
Interest Period if the Debt Service Coverage Ratio with respect to the twelve
(12) full months immediately
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preceding the DSCR Calculation Date for such Interest Period is no less than
1.15 and no greater than 1.19.
"STATE" shall mean, with respect to an Individual Property, the State or
Commonwealth in which such Individual Property or any part thereof is located.
"SUBSEQUENT ADVANCE" shall have the meaning set forth in SECTION 2.1.4(B).
"SUBSEQUENT ADVANCE CLOSING DATE" shall mean the date of the funding of any
subsequent advance of a portion of the proceeds of the Loan pursuant to
SECTION 2.1.4(B).
"SUBSEQUENT ADVANCE REQUEST" shall have the meaning set forth in SECTION
2.1.4(B).
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set forth in SECTION
7.3.1.
"TAXES" shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against any of the Properties or part thereof.
"TITLE INSURANCE POLICY" shall mean, with respect to each Individual
Property, ALTA mortgagee title insurance policy in the form (acceptable to
Lender) issued with respect to such Individual Property and insuring the lien of
the Mortgage encumbering such Individual Property.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code
as in effect in the applicable State or Commonwealth in which an Individual
Property is located.
"UNDERWRITER GROUP" shall have the meaning set forth in SECTION 9.2(B).
"UNDERWRITTEN NET OPERATING INCOME" shall mean Net Operating Income for the
applicable period calculated based upon (a) Gross Income from Operations
assuming an occupancy rate equal to the lesser of the actual occupancy rate for
such period or seventy-five percent (75%) and (b) Operating Expenses assuming
(i)
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management fees payable under the Management Agreement for each Individual
Property equal to the greater of the actual management fees payable under the
related Management Agreement during such period or five percent (5%) of Gross
Income from Operations for the related Individual Property during such period,
(ii) franchise fees payable under the Franchise Agreement for each Individual
Property equal to the greater of the actual franchise fees payable under the
related Franchise Agreement during such period or four percent (4%) of the gross
revenues from the rental of hotel rooms contained in the related Individual
Property during such period and (iii) expenses incurred for the replacement of
furniture, fixtures and equipment for the Properties during such period in an
amount not less than five percent (5%) of Gross Income from Operations for the
Properties during such period, such amount being subject to increase based upon
the advice of Lender's structural engineer or Lender's determination in its sole
discretion that such amount is not adequate for the maintenance and operation of
the Properties as first class hotel properties.
"WORKING DAY" shall mean any day on which dealings in foreign currencies
and exchange are carried on in London, England and in New York, New York.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections and schedules are to sections and schedules in
or to this Agreement unless otherwise specified. Unless otherwise specified,
the words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise specified, all
meanings attributed to defined terms herein shall be equally applicable to both
the singular and plural forms of the terms so defined.
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II. GENERAL TERMS
SECTION 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
2.1.1 THE LOAN. Subject to and upon the terms and conditions
set forth herein, Lender hereby agrees to make the Loan to Borrower on the
Closing Date, in the principal amount of up to One Hundred Million and No/100
Dollars ($100,000,000). The Loan shall mature on the Maturity Date.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may request and
receive only one borrowing hereunder in respect of the Loan, which borrowing
may be advanced in any number of disbursements in accordance with the terms
hereof, and any amount borrowed and repaid hereunder in respect of the Loan
may not be reborrowed. Borrower shall, on the Closing Date, Ceceive the
Initial Advance, subject to the direction given by Borrower as to the
application of the proceeds of the Loan to pay certain closing costs and to
fund the Tax and Insurance Escrow Fund and any other reserve or escrow fund
required hereunder, all in accordance with the provisions of this Agreement.
Borrower shall, on any Subsequent Advance Closing Date, receive the related
Subsequent Advance, subject to the direction given by Borrower as to the
application of the proceeds of the Loan to pay certain closing costs and to
fund the Tax and Insurance Escrow Fund and any other reserve or escrow fund
required hereunder.
2.1.3 THE NOTE. The loan shall be evidenced by the note of
borrower, in the original principal amount of the loan. The note shall be
entitled to the benefits of this agreement and shall be secured by the
mortgages, the assignments of leases and the other loan documents.
2.1.4 ADVANCES. (A) Lender shall make, and Borrower shall
accept, the Initial Advance subject to and upon the conditions and terms
contained herein including, without limitation, the conditions contained in
SECTION 3.1. hereof.
(b) In addition to the Initial Advance, Borrower may request
and receive one or more subsequent advances of a portion of the proceeds of
the Loan not previously advanced (each, a "SUBSEQUENT ADVANCE"); provided,
however, that (1) the amount of any Subsequent Advance and the Release Amount
of any Additional Property to be
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encumbered by a Mortgage in connection with such Subsequent Advance shall be
determined by Lender in its sole discretion after Lender's review of the
Subsequent Advance Request and all due diligence materials and other information
required for the satisfaction of the conditions set forth in SECTION 3.2 or
SECTION 3.3, as applicable, and (2) Borrower shall have satisfied each of the
conditions contained in SECTION 3.2 or SECTION 3.3, as applicable. Lender shall
not be obligated to make a Subsequent Advance after the date that is ninety (90)
days prior to the Maturity Date (the "OUTSIDE CLOSING DATE"). Borrower may
submit to Lender, a written request for a Subsequent Advance in form and
substance acceptable to Lender (each such request being hereinafter referred to
as a "SUBSEQUENT ADVANCE REQUEST"), which Subsequent Advance Request (i) with
respect to an advance pursuant to SECTION 3.2, may be submitted to Lender at any
time after the Closing Date and not later than thirty (30) days prior to the
Outside Closing Date, and (ii) with respect to an advance pursuant to SECTION
3.3, may be submitted only on one occasion per calendar quarter throughout the
term of the Loan and not later than thirty (30) days prior to the Outside
Closing Date. Each Subsequent Advance Request shall, among other things, (A) if
the Subsequent Advance requested is to be made pursuant to SECTION 3.3, request
a Subsequent Advance in an amount no less than the lesser of (1) One Million and
No/100 Dollars ($1,000,000) and (2) the total amount of proceeds of the Loan
remaining undisbursed as of the date of the Subsequent Request, (B) if the
Subsequent Advance requested is to be made pursuant to SECTION 3.2, set forth
one or more properties as may be acceptable to Lender in its sole discretion
(each such property so identified being hereinafter referred to as an
"ADDITIONAL PROPERTY") which shall be encumbered by a Mortgage and included as
an Individual Property hereunder as security for the Loan, and (C) set forth the
proposed Subsequent Advance Closing Date with respect to the Subsequent Advance
requested, which Subsequent Advance Closing Date shall be a Payment Date
occurring no less than thirty (30) days subsequent to the date on which the
Subsequent Advance Request is received by Lender. Borrower hereby acknowledges
that Borrower's agreement that each Additional Property so identified secure the
related Subsequent Advance and all prior advances of proceeds of the Loan is a
material inducement to Lender to make the Loan, subject to the terms and
provisions of SECTION 3.2(JJ).
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SECTION 2.2 USE OF PROCEEDS.
Borrower shall use the proceeds of the Loan disbursed to it
pursuant to SECTION 2.1 solely to (i) pay the purchase price and other costs
and expenses incurred in connection with the acquisition of the Properties by
Borrower, (ii) purchase or repay and discharge any existing loans relating to
the Properties, (iii) fund the Tax and Insurance Escrow Fund and any other
reserve or escrow fund required pursuant to the provisions of this Agreement,
(iv) pay costs and expenses incurred by Borrower in connection with the
renovation of any Individual Property as required pursuant to the related
Franchise Agreement, and (v) pay costs and expenses incurred in connection
with the closing of the Loan, including, without limitation, any fees payable
to Lender in connection with the Loan, and other costs and expenses incurred
by Borrower, all as approved in writing by Lender.
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SECTION 2.3 LOAN REPAYMENT; EXTENSION OF MATURITY DATE
2.3.1 REPAYMENT Borrower shall repay any outstanding
principal indebtedness of the Loan in full on the Maturity Date, together
with interest thereon to (but excluding) the date of repayment. Upon the
closing of a Subsequent Advance in connection with which the Lexington
Property is encumbered with a Mortgage, the Loan may not be prepaid in whole
or in part other than a prepayment made in connection with the release of the
Lexington Property from the Lien of the Mortgage thereon (and related Loan
Documents) in accordance with SECTION 2.4.2. Notwithstanding the foregoing,
prior to such encumbrance of the Lexington Property and following such
release of the Lexington Property, Borrower shall have the right to prepay
all or any portion of the Loan prior to the Maturity Date, without the
payment of any penalty or premium (other than an Exit Fee payable in
connection with the release of an Individual Property pursuant to the terms
and provisions hereof), upon not less than ten (10) days prior written notice
to Lender, specifying the date on which prepayment is to be made (a
"PREPAYMENT DATE"), provided that no Event of Default shall have occurred and
be continuing other than as set forth in SECTION 2.4.2(A). In addition to
the amount of such prepayment, Borrower shall also pay to Lender, together
with such prepayment, all interest accrued and unpaid with respect to such
prepayment and, if such Prepayment Date is not a Payment Date, Borrower shall
also pay any applicable Breakage Costs. Each notice of prepayment of the
Loan shall be irrevocable and shall specify (i) the applicable Prepayment
Date, (ii) the amount of such prepayment and the amount of interest thereon
to be paid in connection therewith and (iii) any Individual Property that is
to be released from the Lien of the Mortgage thereon (and related Loan
Documents) in connection with such prepayment.
2.3.2 EXTENSION OF MATURITY DATE (a) Borrower may, at its
option, extend the Maturity Date for the Loan to August 10, 1999, provided
that (i) Borrower shall deliver to Lender a written notice of Borrower's
desire to so extend the Maturity Date no earlier than ninety (90) days prior
to the original Maturity Date and no later than sixty (60) days prior to the
original Maturity Date; (ii) no Default or Event of Default shall have
occurred and be continuing as of the date of such extension of the Maturity
Date; (iii) Borrower shall pay Lender no later than thirty (30) days prior to
the original
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Maturity Date a non-refundable extension fee in the amount of 0.25% of the
outstanding principal amount of the Loan as of the date on which Borrower
delivers to Lender written notice of Borrower's desire to so extend the Maturity
Date; (iv) the Debt Service Coverage ratio with respect to the twelve (12) full
months immediately preceding the date on which Borrower delivers to Lender
written notice of Borrower's desire to so extend the Maturity Date shall be no
less than 1.30; (v) the LTV Ratio as of the date on which Borrower delivers to
Lender written notice of Borrower's desire to so extend the Maturity Date shall
not exceed sixty-five percent (65%) and (vi) no later than thirty (30) days
prior to the original Maturity Date, Borrower shall deliver to Lender such
financial statements, appraisals and other materials as are reasonably necessary
for Lender to confirm Borrower's satisfaction of the terms and conditions set
forth in clauses (i)-(v) above and that no material adverse change has occurred
with respect to Borrower or the Properties.
(b) Borrower may, at its option, further extend the Maturity
Date for the Loan to February 10, 2000, provided that (i) Borrower shall have
exercised the option to extend the Maturity Date pursuant to subsection (a)
above; (ii) Borrower shall deliver to Lender a written notice of Borrower's
desire to so extend the Maturity Date no earlier than ninety (90) days prior
to the original Maturity Date, as extended pursuant to subsection (a) above,
and no later than sixty (60) days prior to the original Maturity Date, as
extended pursuant to subsection (a) above; (iii) no Default or Event of
Default shall have occurred and be continuing as of the date of such
extension of the Maturity Date; (iv) Borrower shall pay to Lender no later
than thirty (30) days prior to the original Maturity Date, as extended
pursuant to subsection (a) above, a non-refundable extension fee in the
amount of 0.375% of the outstanding principal amount of the Loan as of the
date on which Borrower delivers to Lender written notice of Borrower's desire
to so extend the Maturity Date; (v) the Debt Service Coverage Ratio with
respect to the twelve (12) full months immediately preceding the date on
which Borrower delivers to Lender written notice of Borrower's desire to so
extend the Maturity Date shall be no less than 1.30; (vi) the LTV Ratio as of
the date on which Borrower delivers to Lender written notice of Borrower's
desire to so extend the Maturity Date shall not exceed sixty-five percent
(65%); (vii) no later than thirty (30) days prior to the original Maturity
Date, as extended pursuant to subsection (a) above, Borrower shall deliver to
Lender such financial statements, appraisals and other materials as are
reasonably necessary for Lender to confirm Borrower's satisfaction of the
terms and conditions set forth in clauses (i)-(vi) above and that no material
adverse change has occurred with respect to Borrower or the Properties and
(viii) the Spread shall be increased as set forth in clause (b) of the
definition thereof contained in SECTION 1.1 commencing as of the Maturity
Date, as extended pursuant to subsection (a) above.
SECTION 2.4 RELEASE OF PROPERTY Except as set forth in this
SECTION 2.4, no repayment or prepayment of all or any portion of the Loan
shall cause, give rise to a
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right to require, or otherwise result in, the release of any Lien of any
Mortgage on any of the Properties.
2.4.1 RELEASE OF ALL THE PROPERTIES
(a) If Borrower has elected to prepay the entire outstanding
principal balance of the Loan, the requirements of SECTION 2.3.1 have been
satisfied and Borrower shall have paid to Lender the outstanding principal
amount of the Loan together with all interest accrued thereon, any applicable
Breakage Costs and any other amounts owed by Borrower to Lender pursuant to
this Agreement or any other Loan Document, then all of the Properties shall
be released from the Liens of their respective Mortgages (and related Loan
Documents).
(b) In connection with the release of the Liens, the Borrower
shall submit to Lender, not less than ten (10) days prior to the Prepayment
Date, a release of Lien (and related Loan Documents) for each Individual
Property for execution by Lender. Such release shall be in a form appropriate
in each jurisdiction in which an Individual Property is located and
satisfactory to Lender in its sole discretion. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release.
2.4.2 RELEASE OF INDIVIDUAL PROPERTIES Borrower on one or more
occasions may obtain (i) the individual release of an Individual Property
from the Lien of the Mortgage thereon (and related Loan Documents) and (ii)
the release of Borrower's obligations under the Loan Documents with respect
to such Individual Property (other than those expressly stated to survive),
upon satisfaction of each of the following conditions:
(a) The requirements of SECTION 2.3.1 shall have been
satisfied; provided, however, that if the Lexington Property has been
encumbered with a Mortgage in connection with a Subsequent Advance, Borrower
may obtain the individual release of the Lexington Property from the Lien of
the Mortgage thereon (and related Loan Documents) regardless of the
occurrence and continuance of an Event of Default (other than an Event of
Default with respect to the Lexington Obligations) upon the satisfaction
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of all of the other requirements of SECTION 2.3.1 and the satisfaction of the
conditions set forth in this SECTION 2.4.2.
(b) Borrower shall have (i) prepaid the Loan in the amount of
the Adjusted Release Amount for such Individual Property or, with respect to
a release of the Lexington Property, in the event that the Lexington Property
has been encumbered with a Mortgage in connection with a Subsequent Advance,
prepaid the Loan in the amount of the Release Amount for the Lexington
Property, (ii) paid to Lender all interest accrued and unpaid with respect to
the Release Amount for such Individual Property and any other amounts due and
owing to Lender with respect to such Individual Property pursuant to this
Agreement or the other Loan Documents and (iii) paid to Lender any Breakage
Costs payable in connection with the payment of such Adjusted Release Amount
(or Release Amount, as applicable).
(c) Borrower shall have paid to Lender a fee (each such
fee being hereinafter referred to as an "EXIT FEE") in the amount of one
percent (1%) of the Release Amount for such Individual Property. Any fees
payable to Lehman or an Affiliate of Lehman in connection with (i) financing
provided by Lehman or an Affiliate of Lehman, the proceeds of which are
applied in whole or in part to the repayment of the Loan in full, or (ii) any
public offering or private placement of debt or equity securities of Borrower
or an Affiliate of Borrower for which Lehman or an Affiliate of Lehman serves
as lead manager, the proceeds of which are applied in whole or in part to the
repayment of the Loan in full, shall be reduced by the amount of any Exit
Fees paid by Borrower to Lender.
(d) Other than as permitted pursuant to SECTION
2.4.2(A), all payments of principal of, and interest on, the Loan
theretofore or at such time required to be paid shall have been paid and all
other amounts theretofore or at such time required to be paid under the Loan
Documents shall have been received by Lender (including, without limitation,
all reasonable costs and expenses incurred by Lender in connection with such
release).
(e) Borrower shall submit to Lender, not less than ten (10)
days prior to the date of such release, a release of Lien (and related Loan
Documents) for such Individual Property for execution by Lender. Such release
shall be in a form appropriate for each jurisdiction in which the Individual
Property is located and
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reasonably satisfactory to Lender. In addition, Borrower shall provide all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release.
(f) Borrower shall have delivered an Officer's Certificate to
Lender prior to the date such Individual Property is to be released from the
Lien of the Mortgage thereon (and related Loan Documents) certifying, as of
the date of such release, that (i) the conditions in this Section have been
satisfied, with detailed calculations indicating the derivation of the
amounts then payable in connection with such release pursuant to this SECTION
2.4.2, and (ii) the documentation delivered pursuant to SECTION 2.4.2.(E)
will not impair or otherwise adversely affect the Liens, security interests
and other rights of Lender under the Loan Documents not being released (or as
to the parties to the Loan Documents and Properties subject to the Loan
Documents not being released).
(g) Immediately prior to, and after giving effect to, the
proposed release, no Event of Default shall have occurred and be continuing
(other than as permitted pursuant to SECTION 2.4.2(A)).
(h) Other than with respect to a release of the Lexington
Property as permitted pursuant to the provisions of SECTION 2.4.2(A), after
giving effect to such release the Debt Service Coverage Ratio for all of the
Properties then remaining subject to the Liens of the Mortgages projected by
Lender with respect to the twelve (12) full calendar months immediately
following the release of such Individual Property shall be no less than the
greater of (i) 1.16 (the "CLOSING DATE DEBT SERVICE COVERAGE RATIO") and (ii)
the Debt Service Coverage Ratio for all of the Properties with respect to the
twelve (12) full calendar months immediately prior to the date of such
release.
2.4.3 RELEASE ON PAYMENT IN FULL.2.4.3 Release on Payment in
Full Lender shall, upon the written request and at the expense of Borrower,
upon payment in full of all principal and interest on the Loan and all other
amounts due and payable under the Loan Documents in accordance with the terms
and provisions of the Note and this Loan Agreement, release the Liens of the
Mortgages not theretofore released.
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SECTION 2.5 INTEREST.
2.5.1 GENERALLY. Interest on the Loan and the Note shall
accrue at the Applicable Interest Rate and shall be calculated in accordance
with SECTION 2.6.2. Interest on the Loan shall be paid in arrears in monthly
installments on the tenth (10th) day of each calendar month up to and
including the Maturity Date, each of such payments to be calculated at the
Applicable Interest Rate. The outstanding principal balance of the Loan
together with all accrued and unpaid interest thereon shall be due and
payable on the Maturity Date. All amounts due under the Note shall be payable
without setoff, counterclaim or any other deduction whatsoever.
2.5.2 DETERMINATION OF INTEREST RATE.
(a) The rate or rates at which the outstanding principal
amount of the Loan bears interest from time to time shall be referred to as
the "APPLICABLE INTEREST RATE". The Applicable Interest Rate with respect to
the Loan shall be: (i) LIBOR plus the Spread with respect to the applicable
Interest Period for a Eurodollar Loan or (ii) the Prime Rate for a Prime Rate
Loan if the Loan is converted to a Prime Rate Loan pursuant to the provisions
of SECTION 2.5.2(B), (C) or (F).
(b) Interest shall be charged and payable on the outstanding
principal amount of the Loan at a rate PER ANNUM equal to the Applicable
Interest Rate, but in no event to exceed the maximum rate permitted under
applicable law. Subject to the terms and conditions of this SECTION 2.5.2, the
Loan shall be a Eurodollar Loan and Borrower shall pay interest on the
outstanding principal amount of the Loan at LIBOR plus the Spread for the
applicable Interest Period. On or before each DSCR Calculation Date, Borrower
shall deliver to Lender (i) such financial statements, appraisals and other
materials as are necessary for Lender to calculate the Debt Service Coverage
Ratio with respect to the twelve (12) full months immediately preceding such
DSCR Calculation Date and (ii) Borrower's written suggestion of the Spread
determined in accordance with this Agreement that is applicable for the Interest
Period immediately following such DSCR Calculation Date. Provided that Borrower
shall have complied with the requirements of the immediately preceding sentence
with respect to the related DSCR Calculation Date, Lender shall, no later than
the first Business Day of the calendar month immediately following such DSCR
Calculation Date, notify Borrower by telephone as to the Spread determined in
accordance with this Agreement that is applicable for the
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Interest Period immediately following such DSCR Calculation Date.
Notwithstanding the foregoing, (A) as of the Closing Date, Borrower shall
have delivered to Lender such financial statements, appraisals and other
materials as are necessary for Lender to calculate the Debt Service Coverage
Ratio with respect to the twelve (12) full months immediately preceding
August 1, 1997 together with Borrower's suggestion of the Spread determined
in accordance with this Agreement to be applicable for the period from the
Closing Date through and including October 9, 1997 and Lender shall establish
the Spread with respect to such period as of the Closing Date and (B) the
Spread with respect to the period described in clause (A) above or any
Interest Period as established pursuant to this SECTION 2.5.2(B) shall be
redetermined by Lender in accordance with this Agreement in connection with
any Subsequent Advance made during such period or Interest Period and such
redetermined Spread shall be effective as of the related Subsequent Advance
Closing Date through the end of the applicable Interest Period. Any change in
the rate of interest hereunder due to a change in the Applicable Interest
Rate shall become effective as of the opening of business on the first day on
which such change in the Applicable Interest Rate shall become effective.
Each determination by Lender of the Applicable Interest Rate shall be
conclusive and binding for all purposes, absent manifest error.
(c) In the event that Lender shall have determined (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining LIBOR,
then Lender shall forthwith give notice by telephone of such determination,
confirmed in writing, to Borrower at least one (1) day prior to the last day
of the related Interest Period. If such notice is given, the related
outstanding Eurodollar Loan shall be converted, on the last day of the then
current Interest Period, to a Prime Rate Loan. Until such notice has been
withdrawn by Lender, no further Eurodollar Loans shall be made nor shall
Borrower have the right to convert a Prime Rate Loan to a Eurodollar Loan.
(d) If, pursuant to the terms of this Agreement, any portion
of the Loan has been converted to a Prime Rate Loan and Lender shall
determine (which determination shall be conclusive and binding upon Borrower
absent manifest error) that
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the event(s) or circumstance(s) which resulted in such conversion shall no
longer be applicable, Lender shall give notice thereof to Borrower, and
Borrower may elect to convert the Prime Rate Loan to a Eurodollar Loan by
delivering to Lender written notice of such election no later than 12:00 p.m.
(New York City Time), three (3) Working Days prior to the desired conversion
date, which notice shall be irrevocable. Notwithstanding any provision of
this Agreement to the contrary, in no event shall Borrower have the right to
elect to convert a Eurodollar Loan to a Prime Rate Loan.
(e) With respect to a Eurodollar Loan, all payments made by
Borrower hereunder shall be made free and clear of, and without reduction for
or on account of, income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions, reserves or withholdings imposed, levied,
collected, withheld or assessed by any Governmental Authority, which are
imposed, enacted or become effective after the date hereof (such non-excluded
taxes being referred to collectively as "FOREIGN TAXES"), excluding income
and franchise taxes of the United States of America or any political
subdivision or taxing authority thereof or therein (including Puerto Rico).
If any Foreign Taxes are required to be withheld from any amounts payable to
Lender hereunder, the amounts so payable to Lender shall be increased to the
extent necessary to yield to Lender (after payment of all Foreign Taxes)
interest or any such other amounts payable hereunder at the rate or in the
amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to
applicable law by Borrower, as promptly as possible thereafter, Borrower
shall send to Lender an original official receipt, if available, or certified
copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies
Lender for any incremental taxes, interest or penalties that may become
payable by Lender which may result from any failure by Borrower to pay any
such Foreign Tax when due to the appropriate taxing authority or any failure
by Borrower to remit to Lender the required receipts or other required
documentary evidence.
(f) If any requirement of law or any change therein or in the
interpretation or application thereof, shall hereafter make it unlawful for
Lender to make or maintain a Eurodollar Loan as contemplated hereunder, (i)
the obligation of Lender hereunder to make a Eurodollar Loan or to convert a
Prime Rate Loan to a Eurodollar Loan shall be canceled forthwith and (ii) any
outstanding Eurodollar Loan shall be converted automatically to a Prime Rate
Loan on the next succeeding Payment Date or within such earlier period as
required by law. Borrower hereby agrees promptly to pay Lender, upon demand,
any additional amounts necessary to compensate Lender for any costs incurred
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by Lender in making any conversion in accordance with this Agreement,
including, without limitation, any interest or fees payable by Lender to
lenders of funds obtained by it in order to make or maintain the Eurodollar
Loan hereunder. Lender's notice of such costs, as certified to Borrower,
shall be conclusive absent manifest error.
(g) In the event that any change in any requirement of law or
in the interpretation or application thereof, or compliance by Lender with
any request or directive (whether or not having the force of law) hereafter
issued from any central bank or other Governmental Authority:
(i) shall hereafter impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, or deposits or
other liabilities in or for the account of, advances
or loans by, or other credit extended by, or any
other acquisition of funds by, any office of Lender
which is not otherwise included in the determination
of LIBOR hereunder;
(ii) shall hereafter have the effect of reducing the rate
of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which
Lender could have achieved but for such adoption,
change or compliance (taking into consideration
Lender's policies with respect to capital adequacy)
by any amount deemed by Lender to be material; or
(iii) shall hereafter impose on Lender any other condition
and the result of any of the foregoing is to increase
the cost to Lender of making, renewing or maintaining
loans or extensions of credit or to reduce any amount
receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable which Lender deems to be material as determined by
Lender (except to the extent such additional amount has already been taken into
account by the application of clause (b) of the definition of LIBOR set forth in
SECTION 1.1). If Lender becomes entitled to claim any additional amounts
pursuant to this SECTION 2.5.2(G), Lender shall provide Borrower with not less
than ninety (90) days written
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notice specifying in reasonable detail the event by reason of which it has
become so entitled and the additional amount required to fully compensate
Lender for such additional cost or reduced amount. A certificate as to any
additional costs or amounts payable pursuant to the foregoing sentence
submitted by Lender to Borrower shall be conclusive in the absence of
manifest error. This provision shall survive payment of the Note and the
satisfaction of all other obligations of Borrower under this Agreement and
the Loan Documents.
(h) Borrower agrees to indemnify Lender and to hold Lender
harmless from any loss or expense which Lender sustains or incurs as a
consequence of (i) any default by Borrower in payment of the principal of or
interest on a Eurodollar Loan, including, without limitation, any such loss
or expense arising from interest or fees payable by Lender to lenders of
funds obtained by it in order to maintain a Eurodollar Loan hereunder, (ii)
any prepayment (whether voluntary or mandatory) of the Eurodollar Loan on a
day that (A) is not the Payment Date immediately following the last day of an
Interest Period with respect thereto or (B) is the Payment Date immediately
following the last day of an Interest Period with respect thereto if Borrower
did not give the prior written notice of such prepayment required pursuant to
the terms of this Agreement, including, without limitation, such loss or
expense arising from interest or fees payable by Lender to lenders of funds
obtained by it in order to maintain the Eurodollar Loan hereunder and (iii)
the conversion (for any reason whatsoever, whether voluntary or involuntary)
of the Applicable Interest Rate from LIBOR plus the Spread to the Prime Rate
with respect to any portion of the outstanding principal amount of the Loan
then bearing interest at LIBOR plus the Spread on a date other than the
Payment Date immediately following the last day of an Interest Period,
including, without limitation, such loss or expenses arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to
maintain a Eurodollar Loan hereunder (the amounts referred to in clauses (i),
(ii) and (iii) are herein referred to collectively as the "BREAKAGE COSTS").
This provision shall survive payment of the Note in full and the satisfaction
of all other obligations of Borrower under this Agreement and the other Loan
Documents.
(i) Lender shall not be entitled to claim compensation pursuant to this
SECTION 2.5.2 for any Foreign Taxes, increased cost or reduction in amounts
received or receivable hereunder, or any reduced rate of return, which was
incurred or which accrued more than the earlier of (i) ninety
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(90) days before the date Lender notified Borrower of the change in law or
other circumstance on which such claim of compensation is based and delivered
to Borrower a written statement setting forth in reasonable detail the basis
for calculating the additional amounts owed to Lender under this SECTION
2.5.2, which statement shall be conclusive and binding upon all parties
hereto absent manifest error, or (ii) any earlier date provided that Lender
notified Borrower of such change in law or circumstance and delivered the
written statement referenced in clause (i) within ninety (90) days after
Lender received written notice of such change in law or circumstance.
(j) Lender will use reasonable efforts (consistent with legal
and regulatory restrictions) to maintain the availability of the Eurodollar
Loan and to avoid or reduce any increased or additional costs payable by
Borrower under this SECTION 2.5.2, including, if requested by Borrower, a
transfer or assignment of the Loan to a branch, office or Affiliate of Lender
in another jurisdiction, or a redesignation of its lending office with
respect to the Loan, in order to maintain the availability of the Eurodollar
Loan or to avoid or reduce such increased or additional costs, provided that
the transfer or assignment or redesignation (i) would not result in any
additional costs, expenses or risk to Lender that are not reimbursed by
Borrower and (ii) would not be disadvantageous in any other respect to Lender
as determined by Lender in its sole discretion.
2.5.3 DEFAULT RATE. Upon the occurrence of a Default in the
payment of any principal or interest due under the Loan Documents or an Event
of Default, Lender shall be entitled to receive, and Borrower shall pay to
Lender, interest on the entire outstanding principal balance of the Loan and,
to the extent permitted by applicable law, on any other amounts due under the
Loan Documents at the Default Rate. Interest at the Default Rate shall be
computed from the occurrence of the Default in the payment of principal,
interest or other sums due under the Loan Documents or the Event of Default
until the actual receipt and collection of the Debt (or that portion thereof
that is then due) or the cure of any other Event of Default. Interest at the
Default Rate, to the extent permitted by applicable law, shall be added to
the Debt and shall be secured by the Mortgages. This subsection, however,
shall not be construed as an agreement or
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privilege to extend the date of the payment of the Debt, nor as a waiver of
any other right or remedy accruing to Lender by reason of the occurrence of
any Event of Default.
SECTION 2.6 PAYMENTS AND COMPUTATIONS. ONS
2.6.1 MAKING OF PAYMENTS Each payment by Borrower hereunder
or under the Note shall be made in funds settled through the New York
Clearing House Interbank Payments System or other funds immediately available
to Lender by 1:00 p.m., New York City time, on the date such payment is due,
to Lender by deposit to such account as Lender may designate by written
notice to Borrower. Notwithstanding the foregoing, all payments made in
connection with the release of an Individual Property from the Lien of the
Mortgage thereon (and related Loan Documents) pursuant to SECTION 2.4.2 or
the payment in full of the Loan and all other amounts due and payable under
the Loan Documents shall be made in funds settled through the New York
Clearing House Interbank Payment System or other funds immediately available
to Lender by 4:00 p.m., New York City time, to such account as Lender may
designate. Whenever any payment hereunder or under the Note shall be stated
to be due on a day which is not a Working Day, such payment shall be made on
the immediately preceding Working Day.
2.6.2 COMPUTATIONS. Interest payable hereunder or under the
Note by Borrower shall be calculated on the basis of the actual number of
days elapsed in a three hundred sixty (360) day year.
2.6.3 LATE PAYMENT CHARGE If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower within five
(5) days of the date on which it is due, Borrower shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid sum
or the maximum amount permitted by applicable law in order to defray the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment.
Any such amount shall be secured by the Mortgages and the other Loan
Documents.
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III. CONDITIONS PRECEDENTENT
-----------------------
SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.
The obligation of Lender to make the Initial Advance hereunder
is subject to the fulfillment by Borrower or waiver by Lender of the following
conditions precedent no later than the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH
CONDITIONS. The representations and warranties of Borrower contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and as
of such date, and no Default or Event of Default shall have occurred and be
continuing; and Borrower shall be in compliance in all material respects with
all terms and conditions set forth in this Agreement and in each other Loan
Document on its part to be observed or performed.
(b) LOAN AGREEMENT AND NOTE. Lender shall have received a
copy of this Agreement and the Note, in each case, duly executed and
delivered on behalf of Borrower.
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(c) DELIVERY OF LOAN DOCUMENTS; TITLE INSURANCE; REPORTS; LEASES.
(i) MORTGAGES, ASSIGNMENTS OF LEASES, ASSIGNMENTS OF
AGREEMENTS. Lender shall have received from each Individual Borrower fully
executed and acknowledged counterparts of the Mortgages, the Assignments of
Leases and Assignments of the Agreements relating to each of the Properties
and evidence that counterparts of the Mortgages and Assignments of Leases
have been delivered to the title company for recording, in the reasonable
judgment of Lender, so as to effectively create upon such recording valid and
enforceable Liens upon such Properties, of the requisite priority, in favor
of Lender (or such other trustee as may be required or desired under local
law), subject only to the Permitted Encumbrances and such other Liens as are
permitted pursuant to the Loan Documents. Lender shall have also received
from each Individual Borrower fully executed counterparts of the
Environmental Indemnity, the Assignments of Management Agreement relating to
each of the Properties, and the Assignments of Franchise Agreements relating
to each of the Properties.
(ii) TITLE INSURANCE. Lender shall have received Title
Insurance Policies issued by a title company acceptable to Lender and dated
as of the Closing Date, with reinsurance and direct access agreements
acceptable to Lender. Such Title Insurance Policies shall (A) provide
coverage in amounts satisfactory to Lender, (B) insure Lender that the
relevant Mortgage creates a valid Lien on the Individual Property encumbered
thereby of the requisite priority, free and clear of all exceptions from
coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any endorsements), (C)
contain such endorsements and affirmative coverages as Lender may reasonably
request, and (D) name Lender as the insured. The Title Insurance Policies
shall be assignable. Lender also shall have received evidence that all
premiums in respect of such Title Insurance Policies have been paid or will
be paid from the proceeds of the Initial Advance simultaneously with the
closing of the Initial Advance.
(iii) SURVEY. Lender shall have received a current title
survey for each Individual Property, certified to the title company and
Lender and their successors and assigns, in form, scope and substance
satisfactory to Lender and prepared by a professional and properly licensed
land surveyor satisfactory to Lender in accordance with the 1992 Minimum
Standard Detail Requirements for ALTA/ACSM
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Land Title Surveys. The survey shall meet the classification of an "Urban
Survey" and the following additional items from the list of "Optional Survey
Responsibilities and Specifications" (Table A) shall be added to each survey:
2, 3, 4, 6, 8, 9, 10, 11 and 13. Such survey shall reflect the same legal
description contained in the Title Insurance Policy relating to such
Individual Property referred to in clause (ii) above and shall include, among
other things, a metes and bounds description of the real property comprising
part of such Individual Property reasonably satisfactory to Lender. The
surveyor's seal shall be affixed to each survey and the surveyor shall
provide a certification for each survey in form and substance reasonably
acceptable to Lender.
(iv) INSURANCE. Lender shall have received valid binders
and certificates of insurance for the policies of insurance required
hereunder, all satisfactory to Lender in its sole discretion, and evidence of
the payment of all premiums payable for the existing policy period. Borrower
shall deliver to Lender copies of such policies of insurance no later than
fifteen (15) days after the Closing Date, which policies shall be
satisfactory to Lender in its sole discretion.
(v) ENVIRONMENTAL REPORTS. Lender shall have received a
Phase I environmental report in respect of each Individual Property, which
Phase I environmental report shall include, among other things, the results
of testing for the presence of asbestos, lead paint and radon gas, in each
case satisfactory to Lender. Lender shall have received a Phase II
environmental report and the results of other environmental investigations in
respect of each Individual Property if such Phase II environmental report or
other environmental investigation is recommended in the Phase I environmental
report or by Lender's environmental consultant, each such Phase II
environmental report or such results of other environmental investigations to
be satisfactory to Lender.
(vi) ZONING; COMPLIANCE WITH LAWS. Evidence, in form and
substance satisfactory to Lender, confirming that each Individual Property
and the use thereof is in full compliance with the applicable Legal
Requirements with respect to zoning, subdivision, building, environmental
protection, toxic waste, asbestos and all other Legal Requirements. Such
evidence shall include any and all certificates, licenses, permits, approvals
or consents therefor and, in addition, if required by Lender an opinion
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of Borrower's counsel or architect as to the foregoing, including certificates
of occupancy or their legal equivalents permitting the use and occupancy of
each Individual Property as a hotel. Such evidence shall be based upon
Borrower's title to each Individual Property and shall not depend upon
easements or other similar interests unless disclosed in writing to Lender
and approved by Lender.
(vii) ENCUMBRANCES. Borrower shall have taken or caused to be
taken such actions in such a manner so that Lender has a valid and perfected
Lien of the requisite priority as of the Closing Date with respect to each
Mortgage in the applicable Individual Property, subject only to applicable
Permitted Encumbrances and such other Liens as are permitted pursuant to the
Loan Documents, and Lender shall have received satisfactory evidence thereof.
(d) RELATED DOCUMENTS. Each additional document not
specifically referenced in this SECTION 3.1, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(e) DELIVERY OF ORGANIZATIONAL DOCUMENTS. Borrower shall
deliver or cause to be delivered to Lender copies certified by the related
Individual Borrower or the appropriate public filing office, as designated by
Lender, of all organizational documentation related to each Individual
Borrower and its general and limited partners or members, as applicable,
and/or the formation, structure, existence, good standing and/or
qualification to do business of such Persons, as Lender may request in its
sole discretion, including, without limitation, good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates, all in
form and substance satisfactory to Lender in its sole discretion.
(f) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel with respect to due execution, authority,
enforceability of the Loan Documents and such other matters as Lender may
reasonably require, all such opinions in form, scope and substance
satisfactory to Lender in its reasonable discretion; provided, however, that
Lender shall not require an Insolvency Opinion other than as may be required
pursuant to SECTION 3.2(M) or SECTION 9.1.
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(g) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for Fiscal Year 1998.
(h) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties which are in arrears,
including without limitation, (i) accrued but unpaid insurance premiums
relating to each of the Properties, (ii) currently due Taxes (including any
in arrears) relating to each of the Properties, and (iii) currently due Other
Charges relating to each of the Properties, which amounts shall be funded
with proceeds of the Loan.
(i) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(j) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Closing Date shall have been paid or shall be
paid or established from the proceeds of the Initial Advance simultaneously
with the closing of the Initial Advance.
(k) ENGINEERING REPORTS. Lender shall have received a
structural engineering report with respect to each Individual Property, which
report shall include, among other things, an analysis of deferred maintenance
and ongoing capital expenditure reserve requirements with respect to such
Individual Property and shall be satisfactory in form and substance to Lender.
(l) FINANCIAL AND OPERATING STATEMENTS. Lender shall have
received financial statements for each Individual Property, audited by a
certified public accounting firm acceptable to Lender, for Fiscal Years 1994
and 1995, if available, and for Fiscal Year 1996 and unaudited financial
statements for each Individual Property for the portion of Fiscal Year 1997
elapsed as of the Closing Date, all such financial statements to be prepared
in accordance with procedures, and in form and substance, satisfactory to
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Lender. Lender shall have received operating statements for each Individual
Property, verified by a certified public accounting firm acceptable to
Lender, for each Individual Property for Fiscal Years designated by Lender
and a current trailing twelve (12) month operating statement for each
Individual Property.
(m) UTILITY SERVICES AND PARKING. Lender shall have received
evidence satisfactory to Lender that each Individual Property is served by
all public utilities and contains adequate parking necessary or convenient
for the full use and enjoyment of such Individual Property.
(n) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other
information with respect to each Individual Borrower and their respective
principals, general and limited partners or members and the Managers, as
Lender may request, all of which shall be satisfactory in form and substance
to Lender.
(o) EQUIPMENT LEASES. Lender shall have received copies of all
equipment leases and leases of personal property in effect as of the Closing
Date with respect to each Individual Property, each of which shall be
certified by Borrower and satisfactory to Lender.
(p) UNDERLYING ASSET DOCUMENTATION. Lender shall have
received a copy of each deed conveying each Individual Property to
Borrower, each of which shall be satisfactory in form and substance to
Lender in its sole discretion.
(q) ESTOPPEL CERTIFICATES. Borrower shall have delivered to
Lender an estoppel certificate executed by the tenant under each of the
Leases listed on SCHEDULE IV demising ten percent (10%) or more of the
rentable square footage of the portion of each related Individual Property
made available for lease and under such other Leases listed on SCHEDULE IV as
shall be necessary for Lender to have received estoppel certificates from
tenants under Leases listed on SCHEDULE IV demising a total of no less than
seventy percent (70%) of the rentable square footage of each related
Individual Property made available for lease. All such estoppel certificates
shall be in form and substance satisfactory to Lender. Notwithstanding the
foregoing, Borrower shall not be required to deliver such estoppel
certificates with respect to any Individual Property having no space made
available for lease other than pursuant to one or more Minor Leases.
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(r) LEASES AND RENT ROLLS. Lender shall have received
certified copies of all Leases, each of which shall be satisfactory to
Lender. Lender shall have received a current certified rent roll of each
Individual Property (i) listing each and every Lease with respect to such
Individual Property by the names of all tenants and square footage or other
identification of space leased, (ii) listing the monthly rental and all other
charges payable under each Lease and the date to which such rental and other
charges have been paid, (iii) listing the term of each Lease, the date of
occupancy and the date of expiration, (iv) setting forth any rent arrears and
amounts taken in settlement of outstanding arrears, (v) listing any
collections of rent for more than one (1) month in advance, (vi) describing
any material special provision, concession or inducement granted to the
tenant under each Lease and (vii) setting forth such other information as is
reasonably requested by Lender. Each such rent roll shall be satisfactory in
form and substance to Lender.
(s) SUBORDINATION AND ATTORNMENT. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the Leases
affecting the Properties designated by Lender to the Mortgage, except such
Leases as Lender may specifically require to be superior to the Mortgage and
such Leases that contain self-executing subordination provisions acceptable
to Lender. Lender shall have received an agreement to attorn to Lender
satisfactory to Lender from any tenant under a Lease that does not provide
for such attornment by its terms.
(t) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt
Service Coverage Ratio projected by Lender for the twelve (12) month period
immediately following the Closing Date shall be no less than 1.15 and the LTV
Ratio as of the Closing Date shall be no more than sixty-five percent (65%).
(u) TAX LOT. Lender shall have received evidence that
each Individual Property constitutes a separate tax lot, which evidence
shall be satisfactory in form and substance to Lender.
(v) MANAGEMENT AGREEMENT. Lender shall have received a
certified copy of the Management Agreement with respect to each Individual
Property satisfactory
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in form and substance to Lender. Each Manager and the related Individual
Borrower shall have executed and delivered to Lender an Assignment of
Management Agreement with respect to each Management Agreement for each
Individual Property.
(w) FRANCHISE AGREEMENT. Lender shall have received a
certified copy of the Franchise Agreement with respect to each Individual
Property satisfactory in form and substance to Lender. The related Franchisor
shall have executed and delivered to Lender a Franchisor Recognition
Agreement with respect to each Franchise Agreement for each Individual
Property.
(x) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures.
(y) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of the
Initial Advance in the amount of one percent (1%) of the Initial Advance.
Borrower shall have paid or reimbursed Lender for all costs and expenses in
connection with the origination of the Loan and the Initial Advance,
including, without limitation, the reasonable fees and disbursements of
Lender's New York and local counsel, the costs of all appraisals and
engineering and environmental reports, all title insurance premiums, all
survey charges, any mortgage, documentary stamp and intangible taxes, all
recording charges, any brokerage fees and commissions, any auditor's fees,
any initial fees and expenses of Servicer and any initial fees and expenses
for the establishment of the Lockbox Account, the Cash Collateral Account or
any escrow or reserve account established pursuant to the Loan Documents.
(z) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property, the financial statements of Borrower, the occupancy
rate, Leases and rent roll with respect to each Individual Property and all
other features of the transaction shall be as represented to Lender and all
documents and communications delivered to Lender in order to induce Lender to
make the Loan or the Initial Advance shall be without material adverse change
and Lender shall have received an Officer's Certificate as to the
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foregoing. No portion of any Individual Property shall have been damaged and
not repaired to Lender's satisfaction unless a reserve or other provision for
repair of such damage satisfactory to Lender has been established or made. No
portion of any Individual Property shall have been taken in condemnation or
other similar proceeding. No condemnation or other similar proceeding shall
be pending that may materially and adversely affect any Individual Property
or for which reserves or other provisions for restoration of the affected
Individual Property satisfactory to Lender in its sole discretion have not
been established. No structural change in the physical condition of any
portion of any Individual Property shall have occurred since the date of the
related structural engineering report delivered to Lender. None of Borrower,
Borrower's general or limited partners or members or other Person directly or
indirectly in control of, or controlled by, Borrower (other than a
Non-CapStar Person with respect to which a nonconsolidation opinion
reasonably satisfactory to Lender has been delivered to Lender) or tenants
under any Leases deemed by Lender to be material to the security for the Loan
or guarantors of any such Leases shall be the subject of any bankruptcy,
reorganization or insolvency proceeding. No Individual Borrower or general or
limited partner or member of any Individual Borrower (other than a
Non-CapStar Person with respect to which a nonconsolidation opinion
reasonably satisfactory to Lender has been delivered to Lender) shall be in
default under any loan or financing provided to such Individual Borrower,
general or limited partner or member, other than defaults under equipment
lease financings or resulting from the failure to pay trade payables, which
financings or trade payables are being disputed in good faith and do not
exceed One Hundred Thousand and No/100 Dollars ($100,000) in the aggregate.
No asbestos or other hazardous substances shall have been discovered at any
Individual Property other than as disclosed in the related Phase I
environmental report delivered to Lender and, if applicable, Phase II
environmental report delivered to Lender, unless provisions for the
remediation of such asbestos or other hazardous substances satisfactory to
Lender in its sole discretion have been made.
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SECTION 3.2 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES
INVOLVING ADDITIONAL PROPERTIES.
The obligation of Lender to make any Subsequent Advance
hereunder in connection with which any Additional Property is to be added as
security for the Loan is subject to the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the Subsequent
Advance Closing Date with respect to such Subsequent Advance:
(a) SUBSEQUENT ADVANCE REQUEST. Lender shall have received
a Subsequent Advance Request in accordance with SECTION 2.1.4(B).
(b) REPRESENTATIONS AND WARRANTIES; DEFAULTS. The
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
on and as of the related Subsequent Advance Closing Date with respect to
Borrower, any Additional Borrower assuming the Loan and the Loan Documents in
connection with such Subsequent Advance, the Properties and each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance with the same effect as if made on and as of such date, no Default or
Event of Default shall have occurred and be continuing and Borrower shall be
in compliance in all material respects with all terms and conditions set
forth in this Agreement and in each Loan Document on Borrower's part to be
observed or performed. Lender shall have received an Officer's Certificate
confirming the foregoing and the representations and warranties set forth
herein with respect to Borrower, any Additional Borrower assuming the Loan
and the Loan Documents in connection with such Subsequent Advance, the
Properties, any Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance or the Loan and containing such other
representations and warranties with respect to any Additional Borrower
assuming the Loan and the Loan Documents in connection with such Subsequent
Advance and any Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance as Lender may reasonably require,
such certificate to be in form and substance satisfactory to Lender.
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(c) ASSUMPTION AND MODIFICATION OF EXISTING LOAN DOCUMENTS.
(i) If an Additional Borrower is to acquire title to any
Additional Property to be added as security for the Loan in connection with
such Subsequent Advance, (A) such Additional Borrower shall have executed,
acknowledged and delivered to Lender an assumption agreement, satisfactory in
form and substance to Lender in its sole discretion, pursuant to which, among
other things, such Additional Borrower shall assume, jointly and severally,
the Loan and all obligations of Borrower pursuant to the Note, this Agreement
and the other Loan Documents, (B) such Additional Borrower and each
Individual Borrower shall execute and deliver to Lender the Contribution
Agreement or an amendment to the Contribution Agreement adding such
Additional Borrower as a party thereto, as applicable, which Contribution
Agreement or amendment shall be satisfactory in form and substance to Lender
in its sole discretion, and (C) such Additional Borrower and/or each
Individual Borrower shall execute, acknowledge and deliver to Lender any
other document or instrument that Lender may require in connection with such
Additional Borrower's assumption of the Loan and the Loan Documents.
(ii) Borrower shall have executed, acknowledged and
delivered to Lender (i) an amendment to this Agreement setting forth the
information contained on SCHEDULE I-VII hereto with respect to any Additional
Property to be added as security for the Loan in connection with such
Subsequent Advance; (ii) any modification or amendment to any existing
Mortgage or Assignment of Leases encumbering any Individual Property as of
the Subsequent Advance Closing Date or any notice of such Subsequent Advance
that Lender reasonably determines is necessary or advisable to ensure that
such Mortgage or Assignment of Leases secures such Subsequent Advance and
evidence that counterparts of such modification, amendment or notice have
been delivered to the title company for recording and (iii) any other
modification, amendment or supplement to this Agreement or the other Loan
Documents that Lender may require in connection with such Subsequent Advance
and the related addition of any Additional Property as security for the Loan,
which modification, amendment or supplement does
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not modify or amend any material term of any Loan Document in a manner that
has a material adverse effect on Borrower unless such modification, amendment
or supplement is required due to the failure of any Individual Borrower, such
Additional Borrower, any Individual Property or any such Additional Property
to fulfill the conditions set forth in this SECTION 3.2.
(d) ADDITIONAL LOAN DOCUMENTS. An Individual Borrower or an
Additional Borrower shall have acquired title to any Additional Property to
be added as security for the Loan in connection with such Subsequent Advance
and such Individual Borrower or Additional Borrower shall have executed,
acknowledged and delivered to Lender (i) a Mortgage, an Assignment of Leases
and one or more UCC-1 Financing Statements with respect to each such
Additional Property and evidence that counterparts of such Mortgage,
Assignment of Leases and UCC-1 Financing Statements have been delivered to
the title company for recording or filing, as applicable, so as to
effectively create upon such recording valid and enforceable Liens upon such
Additional Property, of the requisite priority, in favor of Lender (or such
other trustee as may be desired under local law), subject only to the
Permitted Encumbrances and such other Liens as are permitted pursuant to the
Loan Documents; (ii) an Environmental Indemnity with respect to each such
Additional Property and (iii) any other additional document that Lender may
reasonably require with respect to the addition of each Additional Property
as security for the Loan in connection with such Subsequent Advance. If an
Additional Borrower shall have acquired title to the Lexington Property or
the Austin Property and such Additional Property is to be added as security
for the Loan in connection with such Subsequent Advance, such Additional
Borrower shall have executed and delivered to Lender a pledge of all of such
Additional Borrower's direct or indirect interest in the Individual Borrower
known as BA Parkway Associates II, L.P., which pledge shall be satisfactory
in form and substance to Lender in its sole discretion and shall constitute a
Loan Document.
(e) TITLE INSURANCE. Lender shall have received (i) any
"tie-in" or similar endorsement to each such Title Insurance Policy available
with respect to any Title Insurance Policy insuring the Lien of any Mortgage
encumbering an Additional Property delivered to Lender in connection with
such Subsequent Advance and (ii) a Title Insurance Policy (or a marked,
signed and redated commitment to issue such Title
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Insurance Policy) insuring the Lien of any Mortgage encumbering an Additional
Property delivered to Lender in connection with such Subsequent Advance,
issued by a title company acceptable to Lender and dated as of the Subsequent
Advance Closing Date, with reinsurance and direct access agreements
acceptable to Lender, which reinsurance agreements shall not include any
exception for creditors' rights if such exception may be omitted by the
issuer of such reinsurance agreements. Such Title Insurance Policies shall
(1) provide coverage in an amount equal to the amount of the Release Amount
of the related Additional Property if the tie-in or similar endorsement
described above is available, or, if such endorsement is not available, in an
amount equal to one hundred twenty-five percent (125%) of the Release Amount
of the related Additional Property, (2) insure Lender that the relevant
Mortgage creates a valid lien on such Additional Property encumbered thereby
of the requisite priority, free and clear of all exceptions from coverage
other than Permitted Encumbrances and standard exceptions and exclusions from
coverage (as modified by the terms of any endorsements), (3) contain such
endorsements and affirmative coverages as Lender may reasonably request, and
(4) name Lender as the insured. Such Title Insurance Policies shall be
assignable. Lender also shall have received evidence that all premiums in
respect of such endorsements, modifications and Title Insurance Policies have
been paid or will be paid from the proceeds of such Subsequent Advance
simultaneously with the closing of such Subsequent Advance.
(f) SURVEY. Lender shall have received a current title survey
for each Additional Property to be encumbered by a Mortgage in connection
with such Subsequent Advance, certified to the title company and Lender and
their successors and assigns, in form and substance satisfactory to Lender
and prepared by a professional and properly licensed land surveyor
satisfactory to Lender in accordance with the 1992 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys. The Survey shall meet the
classification of an "Urban Survey" and the following additional items from
the list of "Optional Survey Responsibilities and Specifications" (Table A)
shall be added to each survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13. Such survey
shall reflect the same legal description contained in the Title Insurance
Policy relating to such Additional Property and shall include, among other
things, a metes and bounds description of the real
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property comprising part of such Additional Property reasonably satisfactory
to Lender. The surveyor's seal shall be affixed to each survey and the
surveyor shall provide a certification for each survey in form and substance
reasonably acceptable to Lender.
(g) INSURANCE. Lender shall have received valid binders and
certificates of insurance for the policies of insurance required hereunder
with respect to each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance, all satisfactory to Lender in its
sole discretion, and evidence of the payment of all premiums payable for the
existing policy period. Borrower shall deliver to Lender copies of such
policies of insurance no later than fifteen (15) days after the Subsequent
Advance Closing Date with respect to such Subsequent Advance, which policies
shall be satisfactory to Lender in its sole discretion.
(h) ENVIRONMENTAL REPORTS. Lender shall have received a Phase
I environmental report in respect of each Additional Property to be
encumbered by a Mortgage in connection with such Subsequent Advance, which
Phase I environmental report shall include, among other things, the results
of testing for the presence of asbestos, lead paint and radon gas, in each
case satisfactory to Lender. Lender shall have received a Phase II
environmental report and the results of other environmental investigations in
respect of each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance if such Phase II environmental report
or other environmental investigation is recommended in the Phase I
environmental report or by Lender's environmental consultant, each such Phase
II environmental report or such results of other environmental investigations
to be satisfactory to Lender.
(i) ZONING; COMPLIANCE WITH LAWS. Evidence, in form and
substance satisfactory to Lender, confirming that each Additional Property to
be encumbered by a Mortgage in connection with such Subsequent Advance and
the use thereof is in full compliance with the applicable Legal Requirements
with respect to zoning, subdivision, building, environmental protection,
toxic waste, asbestos and all other Legal Requirements. Such evidence shall
include any and all certificates, licenses, permits, approvals or consents
therefor and, in addition, if required by Lender an opinion of Borrower's
counsel or architect as to the foregoing, including certificates of occupancy
or their legal equivalents permitting the use and occupancy of each such
Additional
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Property as a hotel. Such evidence shall be based upon title to each such
Additional Property held by the related Individual Borrower or Additional
Borrower and shall not depend upon easements or other similar interests
unless disclosed in writing to Lender and approved by Lender.
(j) ENCUMBRANCES. The applicable Individual Borrower or
Additional Borrower shall have taken or caused to be taken such actions in
such a manner so that Lender has a valid and perfected Lien of the requisite
priority as of the Subsequent Advance Closing Date with respect to each
Mortgage encumbering an Additional Property to be delivered in connection
with such Subsequent Advance, subject only to applicable Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents, and Lender shall have received satisfactory evidence thereof.
(k) RELATED DOCUMENTS. Each additional document not
specifically referenced in this SECTION 3.2, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(l) ORGANIZATIONAL DOCUMENTS. (i) Each Individual Borrower
shall deliver or cause to be delivered to Lender updates or confirmations as
to continued effectiveness without modification, certified by such Individual
Borrower or the appropriate filing office, as designated by Lender, of all
organizational documentation related to such Individual Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do business of
such Persons delivered to Lender in connection with the Initial Advance and
such additional organizational and authorizing documentation as Lender may
request in its sole discretion pertaining to the Subsequent Advance
including, without limitation, good standing certificates, qualifications to
do business in the appropriate jurisdictions and taking into consideration
any Additional Property to be encumbered by a Mortgage in connection with
such Subsequent Advance, resolutions authorizing the entering into of the
Subsequent Advance and any related documentation and incumbency certificates,
all in form and substance satisfactory to Lender in its reasonable discretion
and (ii) if an Additional Borrower is to acquire title to any Additional
Property to be added as security
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for the Loan in connection with such Subsequent Advance, such Additional
Borrower (other than the Additional Borrower holding title to the Lexington
Property) shall be a newly-formed entity and such Additional Borrower shall
comply with the terms and provisions of SECTION 4.1(FF) and shall deliver or
cause to be delivered to Lender copies certified by such Additional Borrower
or the appropriate public filing office, as designated by Lender, of all
organizational documentation related to such Additional Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do business of
such Persons, as Lender may request in its reasonable discretion, including,
without limitation, good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the assumption of
the Loan and the other transactions contemplated by this Agreement and
incumbency certificates, all in form and substance satisfactory to Lender in
its sole discretion. If the Lexington Property is to be added as security for
the Loan in connection with such Subsequent Advance, the limited partnership
interest in BA Parkway Associates II, L.P. held by CapStar Lexington Company,
L.L.C., as nominee, may be transferred to the Additional Borrower holding
title to the Lexington Property, provided that all documentation with respect
to such transfer shall be satisfactory in form and substance to Lender in its
sole discretion, all requirements with respect to such Additional Borrower
set forth in this SECTION 3.2(L) shall be satisfied and BA Parkway Associates
II, L.P. and its general and limited partners shall continue to comply with
the terms and provisions of SECTION 4.1(FF) after the consummation of such
transfer.
(m) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel, which counsel shall be reasonably acceptable to
Lender, with respect to due execution, authority, enforceability of any of the
documents described in clauses (c) and (d) above and such other matters as
Lender may reasonably require in connection with the Subsequent Advance, all
such updates and opinions in form, scope and substance customary for rated
transactions and satisfactory to Lender in its reasonable discretion; provided,
however, that Lender shall not require an Insolvency Opinion other than as may
be required to address certain concerns with respect to the partners, members or
other Affiliates of an Additional Borrower acquiring title to an Additional
Property to be added as security for the Loan in connection with such
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Subsequent Advance, which partners, members or other Affiliates are not
Affiliates of CapStar Hotel Company, or as may be required pursuant to
SECTION 9.2.
(n) GROUND LEASE. If any portion of an Additional Property to
be encumbered by a Mortgage in connection with such Subsequent Advance is a
leasehold interest, (i) the related Ground Lease shall be satisfactory in
form and substance to Lender or Borrower shall obtain such amendments or
modifications to such Ground Lease and such nondisturbance or other
agreements from the lessor under such Ground Lease that Lender shall deem
necessary or advisable in order for the leasehold interest pursuant to such
Ground Lease to constitute acceptable collateral for the Loan and (ii)
Borrower shall have delivered to Lender an estoppel certificate from the
lessor under such Ground Lease, which estoppel certificate shall be
satisfactory in form and substance to Lender.
(o) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for the succeeding Fiscal Year.
(p) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties and each Additional
Property to be encumbered by a Mortgage in connection with such Subsequent
Advance which are in arrears, including without limitation, (i) accrued but
unpaid insurance premiums with respect to each of the Properties and each
Additional Property to be added as an Individual Property in connection with
such Subsequent Advance, (ii) currently due Taxes (including any in arrears)
relating to each of the Properties and each Additional Property to be
encumbered by a Mortgage in connection with such Subsequent Advance and (iii)
currently due Other Charges relating to each of the Properties and each
Additional Property to be encumbered by a Mortgage in connection with such
Subsequent Advance, which amounts shall be funded with proceeds of the
Subsequent Advance.
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(q) ESCROWS. Borrower shall make such additional deposits to
the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Capital
Expenditures Reserve Fund, and the Ground Lease Escrow Fund, if applicable,
as required pursuant to the terms and provisions of the Agreement with
respect to each Additional Property to be encumbered by a Mortgage in
connection with such Subsequent Advance, which amounts may be funded from the
proceeds of such Subsequent Advance.
(r) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with such Subsequent Advance
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(s) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Subsequent Advance Closing Date with respect
to such Subsequent Advance shall have been paid or shall be paid or
established from the proceeds of such Subsequent Advance simultaneously with
the closing of such Subsequent Advance.
(t) ENGINEERING REPORTS. Lender shall have received a
structural engineering report with respect to each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance, which
report shall include, among other things, an analysis of deferred maintenance
and ongoing capital expenditure reserve requirements with respect to such
Additional Property and shall be satisfactory in form and substance to Lender.
(u) FINANCIAL AND OPERATING STATEMENTS. Lender shall have
received (i) financial statements for each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance,
audited by a certified public accounting firm acceptable to Lender, for the
two (2) completed Fiscal Years occurring two (2) and three (3) years prior to
the Subsequent Advance Closing Date with respect to such Subsequent Advance,
if available, and for the completed Fiscal Year immediately prior to the
Subsequent Advance Closing Date with respect to such Subsequent Advance and
(ii) unaudited financial statements for each such Additional Property for the
portion of the current Fiscal Year elapsed as of such Subsequent Advance
Closing Date, all such
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financial statements described in clauses (i) and (ii) to be prepared in
accordance with procedures, and in form and substance, satisfactory to
Lender. Lender shall have received operating statements for each such
Additional Property, verified by a certified public accounting firm
acceptable to Lender, for each such Additional Property for Fiscal Years
designated by Lender and a current trailing twelve (12) month operating
statement for each such Additional Property.
(v) UTILITY SERVICES AND PARKING. Lender shall have received
evidence satisfactory to Lender that each Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance is served by all
public utilities and contains adequate parking necessary or convenient for the
full use and enjoyment of such Additional Property.
(w) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other information
with respect to each Individual Borrower and any Additional Borrower assuming
the Loan and the Loan Documents in connection with such Subsequent Advance and
their respective principals, general and limited partners or members, and the
Managers as lender may request, all of which shall be satisfactory in form and
substance to Lender.
(x) EQUIPMENT LEASES. Lender shall have received copies of all
equipment leases and leases of personal property in effect as of the Closing
Date with respect to each Additional Property to be encumbered with a Mortgage
in connection with such Subsequent Advance, each of which shall be certified by
Borrower and satisfactory to Lender.
(y) UNDERLYING ASSET DOCUMENTATION. Lender shall have received
a copy of each deed conveying each Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance to an Individual Borrower or
an Additional Borrower, as applicable, each of which shall be satisfactory in
form and substance to Lender in its sole discretion.
(z) ESTOPPEL CERTIFICATES. Borrower shall have delivered to
Lender an estoppel certificate executed by the tenant under each of the Leases
of space at each
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Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance demising ten percent (10%) or more of the rentable square
footage of the portion of each such Additional Property made available for
lease and under such other Leases of space at each such Additional Property
as shall be necessary for Lender to have received estoppel certificates from
tenants under Leases of space at each such Additional Property demising a
total of no less than seventy percent (70%) of the rentable square footage of
each such Additional Property made available for lease. All such estoppel
certificates shall be in form and substance satisfactory to Lender.
(aa) LEASES AND RENT ROLLS. Lender shall have received
certified copies of all Leases of space at each Additional Property to be
encumbered with a Mortgage in connection with such Subsequent Advance, each
of which shall be satisfactory to Lender. Lender shall have received a
current certified rent roll of each Additional Property to be encumbered with
a Mortgage in connection with such Subsequent Advance (i) listing each and
every Lease with respect to such Additional Property by the names of all
tenants and square footage or other identification of space leased, (ii)
listing the monthly rental and all other charges payable under each Lease and
the date to which such rental and other charges have been paid, (iii) listing
the term of each Lease, the date of occupancy and the date of expiration,
(iv) setting forth any rent arrears and amounts taken in settlement of
outstanding arrears, (v) listing any collections of rent for more than one
(1) month in advance, (vi) describing any material special provision,
concession or inducement granted to the tenant under each Lease and (vii)
setting forth such other information as is reasonably requested by Lender.
Each such rent roll shall be satisfactory in form and substance to Lender.
(bb) SUBORDINATION AND ATTORNMENT. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the Leases
affecting each Additional Property to be encumbered with a Mortgage in
connection with such Subsequent Advance designated by Lender to the related
Mortgage, except such Leases as Lender may specifically require to be
superior to the related Mortgage and such Leases that contain self-executing
subordination provisions acceptable to Lender. Lender shall have received an
agreement to attorn to Lender satisfactory to Lender from any tenant under a
Lease that does not provide for such attornment by its terms.
(cc) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt
Service Coverage Ratio with respect to the Loan, including such Subsequent
Advance, projected
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by Lender for the twelve (12) month period immediately following the
Subsequent Advance Closing Date with respect to such Subsequent Advance shall
be no less than 1.15 and the LTV Ratio as of such Subsequent Advance Closing
Date shall be no more than sixty-five percent (65%).
(dd) TAX LOT. Lender shall have received evidence that each
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance constitutes a separate tax lot, which evidence shall be
satisfactory in form and substance to Lender.
(ee) MANAGEMENT AGREEMENT. Lender shall have received a
certified copy of the Management Agreement with respect to each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance satisfactory in form and substance to Lender. Each Manager and the
related Individual Borrower or Additional Borrower shall have executed and
delivered to Lender an Assignment of Management Agreement with respect to
each Management Agreement for each Additional Property to be encumbered with
a Mortgage in connection with such Subsequent Advance.
(ff) FRANCHISE AGREEMENT. Lender shall have received a
certified copy of the Franchise Agreement with respect to each Additional
Property to be encumbered with a Mortgage in connection with such Subsequent
Advance, satisfactory in form and substance to Lender. The related Franchisor
shall have executed and delivered to Lender a Franchisor Recognition
Agreement with respect to each Franchise Agreement for each such Additional
Property.
(gg) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures with respect to such Subsequent Advance and each
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance.
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(hh) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of such
Subsequent Advance in the amount of one percent (1%) of such Subsequent
Advance. Borrower shall have paid or reimbursed Lender for all costs and
expenses in connection with such Subsequent Advance, including, without
limitation, the reasonable fees and disbursements of Lender's New York and
local counsel, the costs of all appraisals and engineering and environmental
reports, all title insurance premiums, all survey charges, any mortgage,
documentary stamp and intangible taxes, all recording charges, any brokerage
fees and commissions and any auditor's fees.
(ii) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property and each Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance, the financial statements
of Borrower and any Additional Borrower assuming the Loan and the Loan
Documents in connection with such Subsequent Advance, the occupancy rate,
Leases and rent roll with respect to each Individual Property and each such
Additional Property and all other features of the Loan and such Subsequent
Advance shall be as represented to Lender and all documents and
communications delivered to Lender in order to induce Lender to make the Loan
or such Subsequent Advance shall be without material adverse change and
Lender shall have received an Officer's Certificate as to the foregoing. No
portion of any Individual Property or Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance shall have been
damaged and not repaired to Lender's satisfaction unless a reserve or other
provision for repair of such damage satisfactory to Lender has been
established or made. No portion of any Individual Property shall have been
taken in condemnation or other similar proceeding. No condemnation or other
similar proceeding shall be pending that may materially and adversely affect
any Individual Property or Additional Property to be encumbered with a
Mortgage in connection with such Subsequent Advance or for which reserves or
other provisions for restoration of the affected Individual Property or
Additional Property satisfactory to Lender in its sole discretion have not
been established. No structural change in the physical condition of any
portion of any Individual Property or Additional Property to be encumbered
with a Mortgage in connection with such Subsequent Advance shall have
occurred since the date of the related structural engineering report
delivered to Lender other than alterations to an Individual Property or an
Additional Property approved by Lender. No Individual Borrower, or Additional
Borrower assuming the Loan and the Loan Documents in connection with such
Subsequent Advance, general or limited partners or members of any Individual
Borrower or any such Additional Borrower or other Person directly or
indirectly in control of, or controlled by, any Individual Borrower or any
such Additional Borrower (other than a Non-CapStar Person with respect to
which a nonconsolidation opinion reasonably satisfactory to Lender has been
delivered ), or tenants under any Leases deemed by Lender to be material to
the security for such Subsequent Advance or the Loan or guarantors of any
such Leases shall be the subject of any bankruptcy, reorganization or
insolvency proceeding. No Individual Borrower or Additional Borrower assuming
the Loan and the
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Loan Documents in connection with such Subsequent Advance or general or
limited partner or member of any Individual Borrower or any such Additional
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender) shall be in default under any loan or financing provided to such
Individual Borrower, Additional Borrower, general or limited partner or
member, other than defaults under equipment lease financings or resulting
from the failure to pay trade payables, which financings or trade payables
are being disputed in good faith and do not exceed One Hundred Thousand and
No/100 Dollars ($100,000) in the aggregate. No asbestos or other hazardous
substances shall have been discovered at any Individual Property or
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance other than as disclosed in the related Phase I
environmental report delivered to Lender and, if applicable, Phase II
environmental report delivered to Lender, unless provisions for the
remediation of such asbestos or other hazardous substances satisfactory to
Lender in its sole discretion have been made.
(jj) LEXINGTON PROPERTY. Notwithstanding anything to the
contrary set forth in this Agreement or any other Loan Document, if the
Lexington Property is to be added as security for the Loan in connection with
such Subsequent Advance, (i) the Lexington Property shall only secure the
portion of the Loan consisting of the Release Amount for the Lexington
Property, together with all interest thereon and all other sums (including
the Exit Fee) payable to Lender with respect to such portion of the Loan or
the Lexington Property, and the performance of all other obligations by the
related Additional Borrower under the Loan Documents with respect to the
Lexington Property only (such portion of the Loan, interest, other sums and
obligations being hereinafter
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referred to collectively as the "LEXINGTON OBLIGATIONS"); (ii) the Loan
Documents other than the Loan Documents with respect to the Lexington
Property shall not secure the Lexington Obligations and (iii) a Default or
Event of Default with respect to the Lexington Obligations shall constitute a
Default or Event of Default, as applicable, under this Agreement and the
other Loan Documents and a Default or Event of Default under this Agreement
or any other Loan Documents, regardless of whether such Default or Event of
Default shall have occurred with respect to the Lexington Obligations, shall
constitute a Default or Event of Default, as applicable, under the Loan
Documents with respect to the Lexington Property.
SECTION 3.3 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES NOT
INVOLVING ADDITIONAL PROPERTIES.
The obligation of Lender to make any Subsequent Advance
hereunder in connection with which no Additional Property is to be added as
security for the Loan is subject to the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the Subsequent
Advance Closing Date with respect to such Subsequent Advance:
(a) SUBSEQUENT ADVANCE REQUEST. Lender shall have received
a Subsequent Advance Request in accordance with SECTION 2.1.4.(B).
(b) REPRESENTATIONS AND WARRANTIES; DEFAULTS. The
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
on and as of the related Subsequent Advance Closing Date with respect to
Borrower and the Properties with the same effect as if made on and as of such
date, no Default or Event of Default shall have occurred and be continuing
and Borrower shall be in compliance in all material respects with all terms
and conditions set forth in this Agreement and in each Loan Document on
Borrower's part to be observed or performed. Lender shall have received an
Officer's Certificate confirming the foregoing and the representations and
warranties set forth herein with respect to Borrower and the Loan Document in
connection with such Subsequent Advance, such certificate to be in form and
substance satisfactory to Lender.
(c) MODIFICATION OF EXISTING LOAN DOCUMENTS. Borrower shall
have executed, acknowledged and delivered to Lender any modification or
amendment to any existing Mortgage or Assignment of Leases encumbering any
Individual Property as of
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the Subsequent Advance Closing Date or any notice of such Subsequent Advance
that Lender reasonably determines is necessary or advisable to ensure that
such Mortgage or Assignment of Leases secures such Subsequent Advance and
evidence that counterparts of such modification, amendment or notice have
been delivered to the title company for recording and any other modification,
amendment or supplement to this Agreement or the other Loan Documents that
Lender may require in connection with such Subsequent Advance.
(d) TITLE INSURANCE. Lender shall have received any
endorsement to or other modifications of, each Title Insurance Policy
insuring the Lien of an existing Mortgage delivered in connection with any
prior advance of the proceeds of the Loan as Lender determines is necessary
or advisable to ensure the continued priority of the Lien of such existing
Mortgage as amended or modified in connection with such Subsequent Advance
and as security for the Loan, including such Subsequent Advance, and issued
by a title company acceptable to Lender and dated as of the Subsequent
Advance Closing Date, with reinsurance and direct access agreements
acceptable to Lender, which reinsurance agreements shall not include any
exception for creditors' rights if such exception may be omitted by the
issuer of such reinsurance agreements. Lender also shall have received
evidence that all premiums in respect of such endorsements and modifications
have been paid or will be paid from the proceeds of such Subsequent Advance
simultaneously with the closing of such Subsequent Advance.
(e) RELATED DOCUMENTS. Each additional document not
specifically referenced in Section 3.3, but relating to the transactions
contemplated herein, shall have been duly authorized, executed and delivered
by all parties thereto and Lender shall have received and approved certified
copies thereof.
(f) ORGANIZATIONAL DOCUMENTS. Each individual Borrower shall
deliver or cause to be delivered to Lender updates or confirmations as to
continued effectiveness without modification, certified by such Individual
Borrower or the appropriate filing office, as designated by Lender, of all
organizational documentation related to such Individual Borrower and its
general and limited partners or members, as applicable, and/or the formation,
structure, existence, good standing and/or qualification to do
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business of such Persons delivered to Lender in connection with the Initial
Advance and such additional organizational and authorizing documentation as
Lender may request in its sole discretion pertaining to the Subsequent
Advance including, without limitation, resolutions authorizing the entering
into of the Subsequent Advance and any related documentation and incumbency
certificates, all in form and substance satisfactory to Lender in its
reasonable discretion.
(g) OPINIONS OF BORROWER'S COUNSEL. Lender shall have received
opinions of Borrower's counsel, which counsel shall be reasonably acceptable
to Lender, with respect to due execution, authority, enforceability of any of
the documents described in clause (c) above and such other matters as Lender
may reasonably require in connection with the Subsequent Advance, all such
updates and opinions in form, scope and substance customary for rated
transactions and satisfactory to Lender in its reasonable discretion;
provided, however, that Lender shall not require an Insolvency Opinion other
than as may be required pursuant to SECTION 3.2(M) or SECTION 9.1.
(h) BUDGETS. Borrower shall have delivered, and Lender shall
have approved, the Annual Budget for the current Fiscal Year and, if
available, for the succeeding Fiscal Year.
(i) BASIC CARRYING COSTS. Borrower shall have paid all Basic
Carrying Costs relating to each of the Properties which are in arrears,
including without limitation, (i) accrued but unpaid insurance premiums with
respect to each of the Properties, (ii) currently due Taxes (including any in
arrears) relating to each of the Properties and (iii) currently due Other
Charges relating to each of the Properties, which amounts shall be funded
with proceeds of the Subsequent Advance.
(j) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with such Subsequent Advance
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies
of such documents as Lender may reasonably request.
(k) PAYMENTS. All payments, deposits or escrows required to be
made or established by Borrower under this Agreement, the Note and the other
Loan Documents on or before the Subsequent Advance Closing Date with respect
to such
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Subsequent Advance shall have been paid or shall be paid or established from
the proceeds of such Subsequent Advance simultaneously with the closing of
such Subsequent Advance.
(l) CREDIT REPORTS AND SEARCHES. Lender shall have received
such credit reports, references, UCC and judgment searches and other
information with respect to each Individual Borrower and their respective
principals, general and limited partners or members, and each Manager as
lender may request, all of which shall be satisfactory in form and substance
to Lender.
(m) DEBT SERVICE COVERAGE RATIO AND LTV RATIO. The Debt Service
Coverage Ratio with respect to the Loan, including such Subsequent Advance,
projected by Lender for the twelve (12) month period immediately following
the Subsequent Advance Closing Date with respect to such Subsequent Advance
shall be no less than 1.15 and the LTV Ratio as of such Subsequent Advance
Closing Date shall be no more than sixty-five percent (65%).
(n) ADDITIONAL DOCUMENTATION. Lender shall have received any
additional reports, documentation, site inspections, title insurance,
property, casualty and liability insurance reviews, surveys and other due
diligence items customarily requested by Lender in connection with the
origination of mortgage loans comparable to the Loan and any other
information that Lender may deem appropriate in order to comply with Lender's
due diligence procedures with respect to such Subsequent Advance.
(o) LOAN FEE AND TRANSACTION COSTS. Borrower shall have paid
Lender a fee in consideration of the underwriting and origination of such
Subsequent Advance in the amount of one percent (1%) of such Subsequent
Advance. Borrower shall have paid or reimbursed Lender for all costs and
expenses incurred in connection with such Subsequent Advance, including,
without limitation, the reasonable fees and disbursements of Lender's New
York and local counsel, the costs of all title insurance premiums, any
mortgage, documentary stamp and intangible taxes, all recording charges, any
brokerage fees and commissions and any auditor's fees.
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(p) MATERIAL ADVERSE CHANGE. The income and expenses of each
Individual Property, the financial statements of Borrower, the occupancy
rate, Leases and rent roll with respect to each Individual Property and all
other features of the Loan and such Subsequent Advance shall be as
represented to Lender and all documents and communications delivered to
Lender in order to induce Lender to make the Loan or such Subsequent Advance
shall be without material adverse change and Lender shall have received an
Officer's Certificate as to the foregoing. No portion of any Individual
Property shall have been damaged and not repaired to Lender's satisfaction
unless a reserve or other provision for repair of such damage satisfactory to
Lender has been established or made. No portion of any Individual Property
shall have been taken in condemnation or other similar proceeding. No
condemnation or other similar proceeding shall be pending that may materially
and adversely affect any Individual Property or for which reserves or other
provisions for restoration of the affected Individual Property satisfactory
to Lender in its sole discretion have not been established. No structural
change in the physical condition or any portion of any Individual Property or
Additional Property to be encumbered with a Mortgage in connection with such
Subsequent Advance shall have occurred since the date of the related
structural engineering report delivered to Lender other than alterations to
an Individual Property approved by Lender. No Individual Borrower, general or
limited partners or members of any Individual Borrower or other Person
directly or indirectly in control of, or controlled by, any Individual
Borrower (other than a Non-CapStar Person with respect to which a
nonconsolidation opinion reasonably satisfactory to Lender has been delivered
to Lender), or tenants under any Leases deemed by Lender to be material to
the security for such Subsequent Advance or the Loan or guarantors of any
such Leases shall be the subject of any bankruptcy, reorganization or
insolvency proceeding. No Individual Borrower or general or limited partner
or member of any Individual Borrower (other than a Non-CapStar Person with
respect to which a nonconsolidation opinion reasonably satisfactory to Lender
has been delivered to Lender) shall be in default under any loan or financing
provided to such Individual Borrower, general or limited partner or member,
other than defaults under equipment lease financings or resulting from the
failure to pay trade payables, which financings or trade payables are being
disputed in good faith and do not exceed One Hundred Thousand and No/100
Dollars ($100,000) in the aggregate. No asbestos or other hazardous
substances shall have been discovered at any Individual Property other than
as disclosed in the related Phase I environmental report delivered to Lender
and, if
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applicable, Phase II environmental report delivered to Lender, unless
provisions for the remediation of such asbestos or other hazardous substances
satisfactory to Lender in its sole discretion have been made.
IV. REPRESENTATIONS AND WARRANTIESTIES
SECTION 4.1 BORROWER REPRESENTATIONS.
Borrower represents and warrants as of the date hereof and as
of the Closing Date that:
(a) ORGANIZATION. Each Individual Borrower has been duly
organized and is validly existing and in good standing with requisite power
and authority to own its properties and to transact the businesses in which
it is now engaged. Each Individual Borrower is duly qualified to do business
and is in good standing in each jurisdiction where it is required to be so
qualified in connection with its properties, businesses and operations. Each
Individual Borrower possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the
sole business of each Individual Borrower is the ownership, management and
operation of the Properties.
(b) PROCEEDINGS. Each Individual Borrower has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents. This Agreement and such other Loan
Documents have been duly executed and delivered by or on behalf of each
Individual Borrower and constitute legal, valid and binding obligations of
each Individual Borrower enforceable against each Individual Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(c) NO CONFLICTS. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrower will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance (other than pursuant to
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the Loan Documents) upon any of the property or assets of any Individual
Borrower pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, partnership agreement, management agreement, franchise
agreement or other agreement or instrument to which any Individual Borrower
is a party or by which any Individual Borrower's property or assets is
subject, nor will such action result in any violation of the provisions of
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over any Individual Borrower or any
Individual Borrower's properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any court or
any such regulatory authority or other governmental agency or body required
for the execution, delivery and performance by Borrower of this Agreement or
any other Loan Documents has been obtained and is in full force and effect.
(d) LITIGATION. Except as otherwise set forth on SCHEDULE VII
hereto, there are no actions, suits or proceedings at law or in equity by or
before any Governmental Authority or other agency now pending or threatened
against or affecting any Individual Borrower or now pending or, to the best
knowledge of Borrower, threatened against or affecting any of the Properties,
which actions, suits or proceedings, if determined against any Individual
Borrower or any of the Properties, would materially adversely affect the
condition (financial or otherwise) or business of Borrower or the condition
or ownership of any of the Properties.
(e) AGREEMENTS. No Individual Borrower is a party to any
agreement or instrument or subject to any court order, judgment or other
legal restriction which would materially and adversely affect Borrower or any
of the Properties, or Borrower's business, properties or assets, operations
or condition, financial or otherwise. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
to which it is a party or by which any Individual Borrower or any of its
Properties are bound, other than defaults under equipment lease financings or
resulting from the failure to pay trade payables, which financings or trade
payables are being disputed in good faith and do not exceed One Hundred
Thousand and No/100 Dollars ($100,000) in the aggregate .
(f) TITLE. Each Individual Borrower has good, marketable and
insurable fee or leasehold, as applicable, title to the real property
comprising part of the Individual
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Property with respect to which such Individual Borrower has executed and
delivered a Mortgage and good title to the balance of such Individual
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. Each Mortgage intended
to encumber any of the Properties, when properly recorded in the appropriate
records, together with any Uniform Commercial Code financing statements
required to be filed in connection therewith, will create (i) a valid,
perfected lien on the applicable Individual Property, subject only to
Permitted Encumbrances and the Liens created by the Loan Documents and (ii)
perfected security interests in and to, and perfected collateral assignments
of, all personalty (including the Leases), all in accordance with the terms
thereof, in each case subject only to any applicable Permitted Encumbrances,
such other Liens as are permitted pursuant to the Loan Documents and the
Liens created by the Loan Documents. There are no claims for payment for
work, labor or materials affecting any of the Properties which are or, to the
best of Borrower's knowledge after diligent inquiry, may become a Lien prior
to, or of equal priority with, the Liens created by the Loan Documents,
unless such claim is being contested by Borrower in accordance with SECTION
5.1(M).
(g) NO BANKRUPTCY FILING. No Individual Borrower is
contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of such Individual Borrower's assets or property, and no Individual
Borrower has knowledge of any Person contemplating the filing of any such
petition against it.
(h) FULL AND ACCURATE DISCLOSURE. No statement of fact made by
Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed to
Lender which materially and adversely affects, nor as far as Borrower can
foresee, would materially and adversely affect, any of the Properties or the
business, operations or condition (financial or otherwise) of Borrower.
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(i) NO PLAN ASSETS. Borrower is not an "employee benefit plan,"
as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of
the assets of Borrower constitutes or will constitute "plan assets" of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101.
(j) COMPLIANCE. Borrower and each of the Properties and the use
thereof comply in all material respects with all applicable Legal
Requirements, including, without limitation, building and zoning ordinances
and codes, other than violations of Legal Requirements for which reserves or
other provisions for the cure of such violations satisfactory to Lender in
its sole discretion have been established. Borrower is not in default or
violation of any order, writ, injunction, decree or demand of any
Governmental Authority, the violation of which would materially adversely
affect the condition (financial or otherwise) or business of Borrower. There
has not been committed by Borrower or, to the best knowledge of Borrower, any
other Person in occupancy of, or involved with the operation or use of, the
Properties any act or omission affording the federal government or any state
or local government the right of forfeiture as against any of the Properties
or any part thereof or any monies paid in performance of Borrower's
obligations under any of the Loan Documents. Borrower hereby covenants and
agrees not to commit, permit or suffer to exist any act or omission affording
such right of forfeiture.
(k) FINANCIAL INFORMATION. All financial data, including,
without limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of the Properties (i)
are true, complete and correct in all material respects, (ii) accurately
represent the financial condition of Borrower and the Properties as of the
date of such reports, and (iii) to the extent prepared or audited by an
independent certified public accounting firm, have been prepared in
accordance with GAAP throughout the periods covered, except as disclosed
therein. Borrower does not have any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Properties or
the operation thereof as hotels or the operation of any office space forming
a part of the Properties, except as referred to or reflected in said
financial statements. Since the date of such financial statements, there has
been no materially adverse change
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in the financial condition, operations or business of Borrower from that set
forth in said financial statements.
(l) CONDEMNATION. No Condemnation or other proceeding has been
commenced or, to Borrower's best knowledge, is contemplated with respect to
all or any portion of any of the Properties or for the relocation of roadways
providing access to any of the Properties, other than as disclosed to Lender
in writing and approved by Lender.
(m) FEDERAL RESERVE REGULATIONS. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors,
or for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
(n) UTILITIES AND PUBLIC ACCESS. Each of the Properties has
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service such Property for its
respective intended uses. All public utilities necessary or convenient to the
full use and enjoyment of each of the Properties are located either in the
public right-of-way abutting such Properties (which are connected so as to
serve the Properties without passing over other property) or in recorded
easements serving such Properties and such easements are set forth in the
Title Insurance Policies. All roads necessary for the use of each of the
Properties for their current respective purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities, other
than as disclosed to Lender in writing and approved by Lender.
(o) NOT A FOREIGN PERSON. No Individual Borrower is a
"foreign person" within the meaning of ss.1445(f)(3) of the Code.
(p) SEPARATE LOTS. Each Individual Property is comprised of
one (1) or more parcels which constitutes a separate tax lot and does
not constitute a portion of any other tax lot not a part of such
Individual Property.
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(q) ASSESSMENTS. There are no pending or proposed special or
other assessments for public improvements or otherwise affecting any of the
Properties, nor are there any contemplated improvements to any of the
Properties that may result in such special or other assessments, other than
as are currently being paid by Borrower in a timely manner or as otherwise
disclosed to Lender in writing and approved by Lender.
(r) ENFORCEABILITY. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by any Individual
Borrower, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents, or the exercise of any right thereunder,
render the Loan Documents unenforceable, and no Individual Borrower has
asserted any right of rescission, set-off, counterclaim or defense with
respect thereto.
(s) NO PRIOR ASSIGNMENT. There are no prior assignments of
the Leases or any portion of the Rents due and payable or to become due and
payable which are presently outstanding.
(t) INSURANCE. Borrower has obtained and has delivered to
Lender valid binders and certificates of insurance for all insurance policies
reflecting the insurance coverages, amounts and other requirements set forth
in this Agreement. No Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any such policy, except
as disclosed to Lender in writing and approved by Lender.
(u) USE OF PROPERTIES. Each of the Properties is used
exclusively for hotel and/or office purposes and other appurtenant and
related uses including, but not limited to, restaurants and lounges.
(v) CERTIFICATE OF OCCUPANCY; LICENSES. All certifications,
permits, licenses and approvals, including without limitation, certificates
of completion and occupancy permits and any applicable liquor license
required for the legal use, occupancy and operation of each of the Properties
as a hotel or a hotel and office building, as applicable (collectively, the
"LICENSES"), have been obtained and are in full force and effect. The
Borrower shall keep and maintain all licenses necessary for the operation of
each of the Properties as a hotel or a hotel and office building, as
applicable. The use
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being made of each Individual Property is in conformity with the certificate
of occupancy issued for such Individual Property.
(w) FLOOD ZONE. Except as set forth on the surveys of the
Properties delivered to Lender, none of the Improvements on any of the
Properties are located in an area as identified by the Federal Emergency
Management Agency as an area having special flood hazards.
(x) PHYSICAL CONDITION. Except items for which reserves or
other provisions for the correction thereof satisfactory to Lender in its
sole discretion have been established or as otherwise disclosed to Lender in
writing and approved by Lender, (i) each of the Properties, including,
without limitation, all buildings, improvements, parking facilities,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems,
fire protection systems, electrical systems, equipment, elevators, exterior
sidings and doors, landscaping, irrigation systems and all structural
components, are in good condition, order and repair in all material respects;
(ii) there exists no structural or other material defects or damages in any
of the Properties, whether latent or otherwise, and (iii) Borrower has not
received notice from any insurance company or bonding company of any defects
or inadequacies in any of the Properties, or any part thereof, which would
adversely affect the insurability of the same or cause the imposition of
extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.
(y) INTENTIONALLY OMITTED.
(z) LEASES. The Properties are not subject to any Leases other
than the Leases described in SCHEDULE IV hereto. No Person has any possessory
interest in any of the Properties or right to occupy the same other than
pursuant to the provisions of the Leases. Except as set forth on SCHEDULE IV,
the current Leases are in full force and effect and there are no defaults
thereunder by Borrower or, to the best of Borrower's knowledge after diligent
inquiry, any other party and there are no conditions that, with the passage of
time or the giving of notice, or both, would constitute defaults thereunder by
Borrower or, to the best of Borrower's knowledge after diligent inquiry, any
other party. Except as set forth on SCHEDULE IV, no Rent (including security
deposits) has been
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paid more than one (1) month in advance of its due date. Except as set forth
on SCHEDULE IV, all work to be performed by Borrower under each Lease has
been performed as required and has been accepted by the applicable tenant,
and any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given by Borrower to any
tenant has already been received by such tenant. There has been no prior
sale, transfer or assignment, hypothecation or pledge of any Lease or of the
Rents received thereunder. Except as set forth on SCHEDULE IV, no tenant
listed on SCHEDULE IV has assigned its Lease or sublet all or any portion of
the premises demised thereby, no such tenant holds its leased premises under
assignment or sublease, nor does anyone except such tenant and its employees
occupy such leased premises. Except as set forth on SCHEDULE IV, no tenant
under any Lease has a right or option pursuant to such Lease or otherwise to
purchase all or any part of the leased premises or the building of which the
leased premises are a part. No tenant under any Lease has any right or option
for additional space in the Improvements. Except as disclosed in the Phase I
and Phase II environmental reports with respect to the Properties delivered
to Lender in connection with the Loan, no hazardous wastes or toxic
substances, as defined by applicable federal, state or local statutes, rules
and regulations, have been disposed, stored or treated by any tenant under
any Lease on or about the leased premises (other than substances of the kind
and in amounts ordinarily and customarily used or stored at similar
properties for the purpose of cleaning or other maintenance or operations and
used and stored in compliance with all Environmental Laws) nor does Borrower
have any knowledge of any tenant's intention to use its leased premises for
any activity which, directly or indirectly, involves the use, generation,
treatment, storage, disposal or transportation of any petroleum product or
any toxic or hazardous chemical, material, substance or waste.
(aa) INTENTIONALLY OMITTED.
(bb) LOAN TO VALUE. The Loan is secured by interest in real
property having a fair market value as of the date hereof at least equal to
sixty-five percent (65%) of the original principal balance of the Loan.
(cc) FILING AND RECORDING TAXES. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the transfer of the Properties to
Borrower have been paid. All mortgage, mortgage
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recording, stamp, intangible or other similar tax required to be paid by any
Person under applicable Legal Requirements currently in effect in connection
with the execution, delivery, recordation, filing, registration, perfection
or enforcement of any of the Loan Documents, including, without limitation,
the Mortgages encumbering the Properties have been paid, and, under current
Legal Requirements, the Mortgages encumbering the Properties are enforceable
in accordance with their respective terms by Lender (or any subsequent holder
thereof) subject to applicable bankruptcy, insolvency and similar laws
affecting rights of creditors generally, and to general principles of equity.
(dd) MANAGEMENT AGREEMENTS. Each Management Agreement with
respect to each Individual Property is in full force and effect and there is
no default thereunder by any party thereto and no event has occurred (other
than payments due but not yet delinquent) that, with the passage of time
and/or the giving of notice would constitute a default thereunder.
(ee) FRANCHISE AGREEMENTS. The Franchise Agreement with respect
to each Individual Property is in full force and effect and there is no
default thereunder by the related Individual Borrower or, to the best of
Borrower's knowledge, any other party thereto and no event has occurred
(other than payments due but not yet delinquent) that, with the passage of
time and/or the giving of notice would constitute a default thereunder.
(ff) SINGLE-PURPOSE. Borrower hereby represents and warrants
to, and covenants with, Lender that as of the date hereof and until such time
as the Debt shall be paid in full:
(i) Borrower and each Individual Borrower do not own and
will not own any asset or property other than (A) the Properties, (B)
incidental personal property necessary for the ownership or operation of the
Properties and (C) an interest in one or more other Individual Borrowers.
(ii) Borrower and each Individual Borrower will not
engage in any business other than the ownership, management and operation of
the Properties and
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Borrower and each Individual Borrower will conduct and operate its business
as presently conducted and operated.
(iii) Borrower and each Individual Borrower will not
enter into any contract or agreement with any Affiliate of any Individual
Borrower, any constituent party of any Individual Borrower or any Affiliate
of any constituent party, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available
on an arms-length basis with third parties other than any such party.
(iv) Borrower and each Individual Borrower have not
incurred and will not incur any Indebtedness, secured or unsecured, direct or
indirect, absolute or contingent (including guaranteeing any obligation)
other than (A) the Debt and (B) unsecured trade payables incurred by Borrower
with respect to one or more of the Properties in the ordinary course of
business and not outstanding for more than sixty (60) days and equipment
leases entered into by Borrower with respect to one or more of the Properties
in the ordinary course of business, which equipment leases shall require
total payments in a calendar year not to exceed One Hundred Thousand and
No/100 Dollars ($100,000) at any time. No Indebtedness other than the Debt
may be secured (subordinate or PARI PASSU) by the Properties.
(v) No Individual Borrower has made or will make any
loans or advances to any third party (including any Affiliate or
constituent party), and no Individual Borrower shall acquire obligations or
securities of its Affiliates.
(vi) Borrower represents and warrants that each
Individual Borrower is solvent and covenants that each Individual Borrower
will remain solvent and will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its assets as the
same shall become due.
(vii) Each Individual Borrower has done or caused to be
done and will do all things necessary to observe partnership formalities and
preserve its existence, and each Individual Borrower will not, nor will any
Individual Borrower permit any constituent party to amend, modify or
otherwise change the partnership certificate, partnership agreement, articles
of incorporation and bylaws, trust or other organizational documents of such
Individual Borrower or such Individual Borrower's general partner or managing
member (or the general partner or managing member of such Individual
Borrower's general partner or managing member if such Individual Borrower's
general
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partner or managing member is a limited partnership or limited liability
company) without the prior written consent of Lender.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from those of its
Affiliates and any constituent party and Borrower will file its own tax
returns. Borrower shall maintain its books, records, resolutions and
agreements as official records.
(ix) Each Individual Borrower will be, and at all times
will hold itself out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate of such Individual Borrower or
any constituent party of such Individual Borrower), shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates
as a division or part of the other and Borrower shall maintain and utilize a
separate telephone number and separate stationery, invoices and checks.
(x) Each Individual Borrower covenants to maintain
adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations.
(xi) No Individual Borrower or constituent party will
seek or effect the liquidation, dissolution, winding up, consolidation or
merger, in whole or in part, of any Individual Borrower.
(xii) Borrower will not commingle the funds and other
assets of Borrower with those of any Affiliate or constituent party or any
other Person.
(xiii) Borrower has and will maintain its assets in such
a manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any Affiliate or constituent
party or any other Person.
(xiv) Each Individual Borrower does not and will not hold
itself out to be responsible for the debts or obligations of any other Person
other than those of another Individual Borrower pursuant to the Loan
Documents.
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(xv) If an Individual Borrower is a limited partnership,
each general partner is a corporation, limited partnership or limited
liability company whose sole asset is its interest in such Individual
Borrower and each general partner will at all times comply, and will cause
such Individual Borrower to comply, with each of the representations,
warranties, and covenants contained in this SECTION 4.1(FF) as if such
representation, warranty or covenant was made directly by such general
partner. If an Individual Borrower is a limited liability company, its
managing member is a corporation, limited partnership or limited liability
company whose sole asset is its interest in such Individual Borrower and the
managing member will at times comply, and will cause such Individual Borrower
to comply, with each of the representations, warranties, and covenants
contained in this SECTION 4.1(FF) as if such representation, warranty or
covenant was made directly by such managing member. If the general partner or
managing member of an Individual Borrower is a limited partnership or limited
liability company, each general partner or managing member thereof is a
corporation, limited partnership or limited liability company whose sole
asset is its interest in such general partner or managing member of such
Individual Borrower and each general partner or managing member thereof will
at all times comply, and will cause the general partner or managing member of
such Individual Borrower to comply, with each of the representations,
warranties and covenants contained in this Section 4.1(ff) as if such
representation, warranty or covenant was made directly by such general
partner.
(xvi) Each Individual Borrower shall at all times
cause there to be at least one duly appointed member of the board of
directors (an "INDEPENDENT DIRECTOR") of each general partner or managing
member of each Individual Borrower (or of each general partner or managing
member of any such general partner or managing member that is a limited
partnership or limited liability company) reasonably satisfactory to Lender
who shall not have been at the time of such individual's appointment, and may
not have been at any time during the preceding five (5) years (A) a
shareholder of, or an officer, director, partner or employee of, any
Individual Borrower or any of their respective shareholders, subsidiaries or
Affiliates, (B) a customer of, or supplier to, any Individual Borrower or any
of their respective shareholders, subsidiaries or Affiliates, (C) a Person
controlling or under common control with any such shareholder, partner
supplier or customer, or (D) a member of the immediate family of any such
shareholder, officer, director, partner, employee, supplier or customer of
any other director of any
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Individual Borrower. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
(xvii) No Individual Borrower shall cause or permit the
board of directors of any general partner or managing member of any
Individual Borrower (or of any general partner or managing member of any such
general partner or managing member that is a limited partnership or limited
liability company) to take any of the following actions which, under the
terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, shall require a vote of the board
of directors of the general partner or managing member of such Individual
Borrower, unless at the time of such action there shall be at least one
member of such board of directors who is an Independent Director:
(A) File or consent to the filing of any
bankruptcy, insolvency or reorganization case or proceeding;
institute any proceedings under any applicable insolvency law
or otherwise seek any relief under any laws relating to the
relief from debts or the protection of debtors generally;
(B) Seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such Individual Borrower
or a substantial portion of its properties;
(C) Make any assignment for the
benefit of such Individual Borrower's creditors;
(D) Amend the organizational documentation
of such Individual Borrower or any general partner or managing
member of such Individual Borrower in any manner that does not
comply with each of the representations, warranties and
covenants contained in this SECTION 4.1(FF) without the
consent of Lender, or, after the Securitization, without
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(1) confirmation from each of the Rating Agencies rating the
Securities that such amendment would not result in the
qualification, withdrawal or downgrade of the initial ratings
assigned in connection with the Securitization and (2)
approval of such amendment by Lender; or
(E) Take any action in furtherance of
any of the foregoing. Section 4.2 Survival of
Representations.
Borrower agrees that all of the representations and warranties
of Borrower or any Individual Borrower set forth in SECTION 4.1 and elsewhere
in this Agreement and in the other Loan Documents shall survive for so long
as any amount remains owing to Lender under this Agreement or any of the
other Loan Documents by Borrower. All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents by
Borrower or any Individual Borrower shall be deemed to have been relied upon
by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf.
V. AFFIRMATIVE COVENANTSNANTS
SECTION 5.1 BORROWER COVENANTS. NTS
From the date hereof and until payment and performance in full
of all obligations of Borrower under the Loan Documents or the earlier
release of the Liens of all Mortgages encumbering the Properties (and all
related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower hereby covenants and agrees with Lender that:
(a) EXISTENCE; COMPLIANCE WITH LEGAL REQUIREMENTS; INSURANCE.
Borrower shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its existence, rights, licenses, permits
and franchises and comply with all Legal Requirements applicable to it and
its Properties. Borrower shall at all times maintain, preserve and protect
all franchises and trade names and preserve all the remainder of its property
used or useful in the conduct of its business and shall keep all of the
Properties in good working order and repair, and from time to time make, or
cause to be made, all reasonably necessary repairs, renewals, replacements,
betterments and improvements
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thereto, all as more fully provided in the Mortgages encumbering such
Properties. Borrower shall keep each of the Properties insured at all times
by financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided in this Agreement.
(b) TAXES AND OTHER CHARGES. Borrower shall pay all Taxes and
Other Charges now or hereafter levied or assessed or imposed against the
Properties or any part thereof as the same become due and payable; provided,
however, that Borrower's obligation to directly pay Taxes shall be suspended
for so long as Borrower complies with the terms and provisions of SECTION 7.3
hereof. Borrower will deliver to Lender receipts for payment or other
evidence satisfactory to Lender that the Taxes and Other Charges have been so
paid or are not then delinquent no later than ten (10) days prior to the date
on which the Taxes and/or Other Charges would otherwise be delinquent if not
paid. Borrower shall furnish to Lender receipts for the payment of the Taxes
and the Other Charges prior to the date the same shall become delinquent
(provided, however, that Borrower is not required to furnish such receipts
for payment of Taxes in the event that such Taxes have been paid by Lender
pursuant to SECTION 7.3 hereof). Borrower shall not suffer and shall promptly
cause to be paid and discharged any lien or charge whatsoever which may be or
become a lien or charge against the Properties, and shall promptly pay for
all utility services provided to the Properties. After prior written notice
to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (i) no Default or Event of Default has
occurred and remains uncured; (ii) Borrower is permitted to do so under the
provisions of any mortgage or deed of trust superior in lien to the
applicable Mortgage; (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable statutes,
laws and ordinances; (iv) no Individual Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated,
cancelled or lost; (v) Borrower shall promptly upon final determination
thereof pay the amount of any such Taxes or Other Charges, together with all
costs, interest and penalties which may be payable in connection therewith;
(vi) such
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proceeding shall suspend the collection of Taxes or Other Charges from the
applicable Individual Property; and (vii) Borrower shall furnish such
security as may be required in the proceeding, or as may be requested by
Lender, to insure the payment of any such Taxes or Other Charges, together
with all interest and penalties thereon. Lender may pay over any such cash
deposit or part thereof held by Lender to the claimant entitled thereto at
any time when, in the judgment of Lender, the entitlement of such claimant is
established.
(c) LITIGATION. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower which would materially adversely affect Borrower's condition
(financial or otherwise) or business or any of the Properties.
(d) ACCESS TO PREMISES. Borrower shall permit agents,
representatives and employees of Lender to inspect any of its Properties or
any part thereof at reasonable hours upon reasonable advance notice.
(e) NOTICE OF DEFAULT. Borrower shall promptly advise Lender of
any material adverse change in Borrower's condition, financial or otherwise,
or of the occurrence of any Default or Event of Default of which Borrower has
knowledge.
(f) COOPERATE IN LEGAL PROCEEDINGS. Borrower shall cooperate
fully with Lender with respect to any proceedings before any court, board or
other Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan
Documents and, in connection therewith, permit Lender, at its election, to
participate in any such proceedings.
(g) PERFORM LOAN DOCUMENTS. Borrower shall observe, perform and
satisfy all the terms, provisions, covenants and conditions of, and shall pay
when due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
(h) INSURANCE BENEFITS. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable in connection with any of the Properties, and Lender shall
be reimbursed for any expenses incurred in connection therewith (including
attorneys' fees and disbursements, and the payment by Borrower of the expense
of an appraisal on behalf of Lender in case
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of a fire or other casualty affecting any of the Properties or any part
thereof) out of such Insurance Proceeds.
(i) FURTHER ASSURANCES; SUPPLEMENTAL MORTGAGE AFFIDAVITS.
Borrower shall, at Borrower's sole cost and expense:
(A) furnish to Lender all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and
specifications, appraisals, title and other insurance reports and agreements,
and each and every other document, certificate, agreement and instrument
required to be furnished by Borrower pursuant to the terms of the Loan
Documents or reasonably requested by Lender in connection therewith;
(B) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary or desirable, to evidence, preserve and/or protect the
collateral at any time securing or intended to secure the obligations of
Borrower under the Loan Documents, as Lender may reasonably require; and
(C) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time.
If at any time Lender determines, based on applicable law, that Lender is not
being afforded the maximum amount of security available from any one or more
of the Properties as a direct or indirect result of applicable taxes not
having been paid with respect to any such Properties, Borrower agrees that
Borrower will execute, acknowledge and deliver to Lender, immediately upon
Lender's request, supplemental affidavits increasing the amount of the Debt
attributable to any such Individual Property (as set forth on SCHEDULE I
hereto) for which all applicable taxes have been paid to an amount determined
by Lender to be equal to the lesser of (y) the greater of the fair market
value of the applicable Individual Property (i) as of the date hereof and
(ii) as of the date such supplemental affidavits are to be delivered to
Lender, and (z) the amount of the Debt
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attributable to any such Individual Property (as set forth on SCHEDULE I
hereto), and Borrower shall, on demand, pay any additional taxes.
(j) FINANCIAL REPORTING. (i) Borrower shall keep and maintain
or shall cause to be kept and maintained on a Fiscal Year basis, in
accordance with GAAP (or such other accounting basis reasonably acceptable to
Lender), proper and accurate books, records and accounts reflecting all of
the financial affairs of Borrower and all items of income and expense in
connection with the operation on an individual basis of each of the
Properties. Lender shall have the right from time to time at all times during
normal business hours upon reasonable notice to examine such books, records
and accounts at the office of Borrower or other Person maintaining such
books, records and accounts and to make such copies or extracts thereof as
Lender shall desire. After the occurrence of an Event of Default, Borrower
shall pay any costs and expenses incurred by Lender to examine Borrower's
accounting records with respect to the Properties, as Lender shall determine
to be necessary or appropriate in the protection of Lender's interest.
(ii) Borrower shall furnish to Lender annually, within
ninety (90) days following the end of each Fiscal Year of Borrower, a
complete copy of Borrower's annual financial statements audited by a "Big
Six" accounting firm or other independent certified public accountant
acceptable to Lender in accordance with GAAP (or such other accounting basis
acceptable to Lender) covering the Properties on a combined basis as well as
each Individual Property for such Fiscal Year and containing statements of
operations (profit and loss) and of cash flows for the Borrower and the
Properties and a balance sheet for Borrower. Such statements shall set forth
the financial condition and the results of operations for the Properties for
such Fiscal Year, and shall include, but not be limited to, amounts
representing annual Gross Income from Operations and Operating Expenses and
such other information and reports as Lender may reasonably request.
Borrower's annual financial statements shall be accompanied by (A) a
comparison of the budgeted income and expenses and the actual income and
expenses for the prior Fiscal Year, (B) an Officer's Certificate stating that
each such annual financial statement presents fairly the financial condition
and the results of operations of Borrower and the Properties being reported
upon and has been prepared in accordance with GAAP and (C) an unqualified
opinion of a "Big Six" accounting firm or other independent certified public
accountant reasonably acceptable to Lender. Together with Borrower's annual
financial statements, Borrower shall furnish to Lender an Officer's
Certificate certifying as of the date thereof whether there exists an event
or
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circumstance which constitutes a Default or Event of Default under the
Loan Documents executed and delivered by, or applicable to, Borrower, and if
such Default or Event of Default exists, the nature thereof, the period of
time it has existed and the action then being taken to remedy the same.
(iii) Borrower shall furnish or cause to be furnished to
Lender on or before forty-five (45) days after the end of each quarter of
each Fiscal Year, Borrower's quarterly financial statements for such quarter
covering the Properties on a combined basis as well as each Individual
Property and containing statements of operations (profit and loss) and of
cash flows for the Borrower and the Properties and a balance sheet for
Borrower. Such statements shall set forth the financial condition and the
results of operations of the Properties for such quarter and shall include
but not be limited to, amounts representing Gross Income from Operations and
Operating Expenses for such quarter and such other information and reports as
Lender may reasonably request. Borrower's quarterly financial statements
shall be accompanied by (A) a comparison of the budgeted income and expenses
and the actual income and expenses for the prior quarter; (B) updated
occupancy statements and rent rolls for the Properties for the subject
quarter (including an average daily rate statement and any franchise
inspection reports received by Borrower during the subject quarter) and (C)
an Officer's Certificate stating that each such quarterly statement,
occupancy statement and rent roll presents fairly the financial condition and
the results of operations of Borrower and the Properties being reported upon
on a combined and individual property basis (subject to normal year-end
adjustments).
(iv) Borrower shall furnish, or cause to be furnished, to
Lender on or before thirty (30) days after the end of each calendar month the
following items, accompanied by an Officer's Certificate stating that such
items are true, correct, accurate, and complete and fairly present the
financial condition and results of the operations of Borrower and the
Properties on a combined and individual property basis (subject to normal
year-end adjustments) as applicable: (A) occupancy reports and rent rolls for
the Properties for the subject month; (B) monthly and year-to-date operating
statements (including Capital Expenditures) prepared for each calendar month,
noting Gross Income from Operations and Operating Expenses and other
information necessary
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and sufficient to fairly represent the financial position and results of
operation of the Properties during such calendar month, and containing a
comparison of budgeted income and expenses and the actual income and expenses
together with a detailed explanation of any variances of five percent (5%) or
more between budgeted and actual amounts for such periods, all in form
satisfactory to Lender and (C) a calculation reflecting the Debt Service
Coverage Ratio for the immediately preceding twelve (12) month period as of
the last day of such month. In addition, the Officer's Certificate
accompanying such items shall include a certification that the
representations and warranties of Borrower and each Individual Borrower set
forth in SECTION 4.1(FF)(IV) are true and correct as of the date of such
certificate and that there are no trade payables outstanding for more than
sixty (60) days other than trade payables being disputed in good faith, which
disputed trade payables do not exceed One Hundred Thousand and No/100 Dollars
($100,000) in the aggregate.
(v) Borrower shall furnish to Lender, within ten (10) Business
Days after request (or as soon thereafter as may be reasonably possible),
such further detailed information with respect to the operation of any of the
Properties and the financial affairs of Borrower as may be reasonably
requested by Lender.
(l) BUSINESS AND OPERATIONS. Borrower shall continue to engage
in the businesses presently conducted by it as and to the extent the same are
necessary for the ownership, maintenance, management and operation of each of
the Properties. Borrower shall qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same
are required for the ownership, maintenance, management and operation of each
of the Properties.
(m) TITLE TO THE PROPERTIES. Borrower shall warrant and defend
(i) the title to each of the Properties and every part thereof, subject only
to Liens permitted hereunder (including Permitted Encumbrances), and (ii) the
validity and priority of the Liens of the Mortgages and the Assignments of
Leases on the Properties, subject only to Liens permitted hereunder
(including Permitted Encumbrances), in each case against the claims of all
Persons whomsoever. Notwithstanding the foregoing, after prior written notice
to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
claim for payment for work, labor or materials affecting any of the
Properties which may become a Lien prior to,
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or of equal priority with, the Liens created by the Loan Documents, provided
that (i) no Default or Event of Default has occurred and remains uncured;
(ii) Borrower is permitted to do so under the provisions of any mortgage or
deed of trust superior in lien to the applicable Mortgage; (iii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (iv) no
Individual Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, cancelled or lost; (v) Borrower
shall promptly upon final determination thereof pay the amount of any such
claim, together with all costs, interest and penalties which may be payable
in connection therewith; (vi) such proceeding shall suspend the collection of
such claim through recourse to the applicable Individual Property; and (vii)
Borrower shall furnish such security as may be required in the proceeding, or
as may be requested by Lender, to insure the payment of any such claim,
together with all interest and penalties thereon. Lender may pay over any
such cash deposit or part thereof held by Lender to the claimant entitled
thereto at any time when, in the judgment of Lender, the entitlement of such
claimant is established. Borrower shall reimburse Lender for any losses,
costs, damages or expenses (including reasonable attorneys' fees and court
costs) incurred by Lender if an interest in any of the Properties, other than
as permitted hereunder, is claimed by another Person.
(n) COSTS OF ENFORCEMENT. In the event (i) that any Mortgage
encumbering any of the Properties is foreclosed in whole or in part or that
any such Mortgage is put into the hands of an attorney for collection, suit,
action or foreclosure, (ii) of the foreclosure of any mortgage prior to or
subsequent to any Mortgage encumbering any of the Properties, to which
proceeding Lender is made a party, or (iii) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or an
assignment by Borrower for the benefit of its creditors, Borrower and its
successors or assigns, shall be chargeable with and agree to pay all costs of
collection and defense, including attorneys' fees in connection therewith and
in connection with any appellate proceeding or post-judgment action involved
therein, which shall be due and payable together with all required service or
use taxes.
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(o) ESTOPPEL STATEMENT. (i) After request by Lender, Borrower
shall within ten (10) days furnish Lender with a statement, duly acknowledged
and certified, setting forth (A) the amount of the original principal amount
of the Note, (B) the unpaid principal amount of the Note, (C) the Applicable
Interest Rate of the Note, (D) the date installments of interest were last
paid, (E) any offsets or defenses to the payment of the Debt, if any, and (F)
that the Note, this Agreement, the Mortgages and the other Loan Documents are
valid, legal and binding obligations and have not been modified or if
modified, giving particulars of such modification, provided that Borrower
shall not be required to deliver such statements more frequently than two (2)
times in any calendar year.
(ii) Borrower shall deliver to Lender upon request, an
estoppel certificate executed by the tenant under each of the Leases demising
ten percent (10%) or more of the rentable square footage of the portion of
each related Individual Property made available for lease and under such
other Leases as shall be necessary for Lender to have received estoppel
certificates from tenants under Leases demising a total of no less than
seventy percent (70%) of the rentable square footage of each related
Individual Property made available for lease. All such estoppel certificates
shall be in form and substance satisfactory to Lender. Notwithstanding the
foregoing, Borrower shall not be required to deliver such estoppel
certificates (A) with respect to any Individual Property having no space made
available for lease other than pursuant to one or more Minor Leases or (B)
more frequently than two (2) times in any calendar year.
(p) LOAN PROCEEDS. Borrower shall use the proceeds of the
Loan disbursed to Borrower pursuant to the terms and provisions hereof
only for the purposes set forth in SECTION 2.2.
(q) PERFORMANCE BY BORROWER. Borrower shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision of
each Loan Document executed and delivered by, or applicable to, Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document executed
and delivered by, or applicable to, Borrower without the prior written
consent of Lender.
(r) ANNUAL OPERATING BUDGET AND CAPITAL EXPENDITURES BUDGET.
For each fiscal year commencing on January 1, 1998, and for each Fiscal Year
thereafter,
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Borrower shall submit to Lender for Lender's written approval an annual
budget (an "ANNUAL BUDGET") not later than thirty (30) days prior to the
commencement of such Fiscal Year, in form satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly
operating capital and other expenses for the Properties, including all
planned capital expenditures in respect of the Properties for such Fiscal
Year. Each Annual Budget shall contain, among other things, limitations on
management fees, franchise fees, third party service fees, and other expenses
as Borrower may reasonably determine. Lender shall have the right to approve
such Annual Budget and in the event that Lender objects to the proposed
Annual Budget submitted by Borrower, Lender shall advise Borrower of such
objections within fifteen (15) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall promptly revise such Annual Budget and resubmit the same to Lender.
Lender shall advise Borrower of any objections to such revised Annual Budget
within ten (10) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall
promptly revise the same in accordance with the process described in this
subparagraph until the Lender approves an Annual Budget. Each such Annual
Budget approved by Lender in accordance with terms hereof shall hereinafter
be referred to as an "APPROVED ANNUAL BUDGET." Until such time that Lender
approves a proposed Annual Budget, the most recently Approved Annual Budget
shall apply; provided that, such Approved Annual Budget shall be adjusted to
reflect actual increases in real estate taxes, insurance premiums and
utilities expenses. In the event that the Borrower must incur an
extraordinary operating expense or capital expense not set forth in the
Annual Budget (each an "EXTRAORDINARY EXPENSE"), then Borrower shall promptly
deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for the Lender's approval.
(s) REPLACEMENT OF FRANCHISOR. If a default on the part of a
Franchisor has occurred under any Franchise Agreement, which default
continues beyond any applicable notice or cure period, and Lender determines
in its reasonable discretion that such default would materially and adversely
affect the value of the related Individual Property, Borrower shall
diligently pursue the termination of such Franchise Agreement and the
replacement of such Franchisor with another franchisor acceptable to Lender
in its sole discretion.
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(t) LEASING MATTERS. Any renewals of Leases or Leases with
respect to an Individual Property written after the date hereof shall be
approved by Lender, which approval shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, (i) renewals of Minor
Leases and proposed Minor Leases shall not be subject to the prior approval
of Lender and (ii) renewals of Leases (other than Minor Leases) and proposed
Leases (other than Minor Leases) shall not be subject to the prior approval
of Lender, provided that (A) the rental income pursuant to the renewal or
proposed Lease does not exceed ten percent (10%) of the total rental income
derived from the applicable Individual Property, (B) the premises demised,
pursuant to the Lease to be renewed or the proposed Lease constitutes less
than ten percent (10%) of the total leaseable area of the related Individual
Property, (C) no rent credits, free rents or concessions are granted under
the renewal or proposed Lease, (D) the renewal or proposed Lease provides for
rental rates and other terms comparable to existing local market rates and
terms, (E) the renewal or proposed Lease is an arm's-length transaction with
a bona fide, independent third-party tenant, on commercially reasonable terms
and does not contain any terms that would materially affect Lender's rights
under the Loan Documents, (F) the renewal or proposed Lease is subject and
subordinate to the Mortgage with respect to the related Individual Property
and the tenant thereunder agrees to attorn to Lender and (G) the proposed
Lease is written on the standard form of lease which shall have been approved
by Lender. Upon request, Borrower shall furnish Lender with executed copies
of all Leases. All renewals of Leases and all proposed Leases shall provide
for rental rates comparable to existing local market rates, shall be
arm's-length transactions with bona fide, independent third-party tenants,
shall be on commercially reasonable terms and shall not contain any terms
that would materially affect Lender's rights under the Loan Documents. All
Leases executed after the date hereof shall provide that they are subordinate
to the Mortgage encumbering the applicable Individual Property and that the
lessee agrees to attorn to Lender. Borrower (1) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (2) shall enforce and may amend or terminate the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed in a commercially reasonable manner;
(3) shall not collect any of the rents more than one (1) month in advance
(other than security deposits); (4) shall not execute any other assignment of
lessor's interest in the Leases or the Rents (except as contemplated by the
Loan Documents); (5) shall not alter, modify
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or change the terms of any Lease in a manner inconsistent with the provisions
of the Loan Documents; (6) shall make no material change to the standard form
of lease approved by Lender without Lender's prior written approval and (7)
shall execute and deliver at the request of Lender all such further
assurances, confirmations and assignments in connection with the Leases as
Lender shall from time to time reasonably require.
(u) DEBT SERVICE COVERAGE RATIO. Prior to the extension of the
Maturity Date pursuant to Section 2.3.2, if the Debt Service Coverage Ratio
as determined on the DSCR Calculation Date in any month with respect to the
twelve (12) full months immediately preceding such DSCR Calculation Date
shall be less than 1.15, then, Borrower shall, no later than the Payment Date
occurring in the month following such DSCR Calculation Date, make a
prepayment to Lender of the then outstanding principal amount of the Loan in
an amount sufficient to increase the Debt Service Coverage Ratio to not less
than 1.15. After the extension of the Maturity Date pursuant to Section
2.3.2, if the Debt Service Coverage Ratio as determined on the DSCR
Calculation Date in any month with respect to the twelve (12) full months
immediately preceding such DSCR Calculation Date shall be less than 1.30,
then, Borrower shall, no later than the Payment Date occurring in the month
following such DSCR Calculation Date, make a prepayment to Lender of the then
outstanding principal amount of the Loan in an amount sufficient to increase
the Debt Service Coverage Ratio to not less than 1.30. Any prepayment
required pursuant to this SECTION 5.1(U) shall not be applied to the
principal balance of the Loan until the first Payment Date occurring after
the receipt by Lender of such prepayment and shall be accompanied by a
payment of all interest to have accrued on such prepayment as of such Payment
Date.
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VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS.
From the date hereof until payment and performance in full of
all obligations of Borrower under the Loan Documents or the earlier release
of the Liens of all Mortgages encumbering each of the Properties in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
(a) OPERATION OF PROPERTIES. No Individual Borrower shall,
without the prior consent of Lender (which consent shall not be unreasonably
withheld), terminate, cancel, modify, renew or extend any Franchise Agreement
or any Management Agreement or otherwise replace any Franchisor with respect
to any Individual Property or any Manager or enter into any other management
or franchise agreement with respect to any of the Properties. The total base
management fees payable with respect to any Individual Property pursuant to
the related Management Agreement(s) shall not exceed the Maximum Management
Fee.
(b) LIENS. Borrower shall not, without the prior written
consent of Lender, create, incur, assume or suffer to exist any Lien on any
portion of any of the Properties or permit any such action to be taken,
except:
(i) Permitted Encumbrances;
(ii) Liens created by or permitted pursuant to the Loan
Documents;
(iii) Liens for Taxes, or Other Charges not yet due; or
(iv) Liens arising from utility and other similar
easements granted by an Individual Borrower and approved by Lender, which
approval shall not be unreasonably withheld.
(c) DISSOLUTION. No Individual Borrower shall dissolve,
terminate, liquidate, merge with or consolidate into another Person.
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(d) CHANGE IN BUSINESS. Borrower and each Individual Borrower
shall not enter into any line of business other than the ownership and
operation of the Properties, or make any material change in the scope or
nature of its business objectives, purposes or operations, or undertake or
participate in activities other than the continuance of its present business.
(e) DEBT CANCELLATION. No Individual Borrower shall cancel or
otherwise forgive or release any claim or debt (other than termination of
Leases in accordance herewith) owed to such Individual Borrower by any
Person, except for adequate consideration and in the ordinary course of such
Individual Borrower's business.
(f) AFFILIATE TRANSACTIONS. No Individual Borrower shall enter
into, or be a party to, any transaction with an Affiliate of any Individual
Borrower or any of the partners of any Individual Borrower except in the
ordinary course of business and on terms which are fully disclosed to Lender
in advance and are no less favorable to such Individual Borrower or such
Affiliate than would be obtained in a comparable arm's-length transaction
with an unrelated third party.
(g) ZONING. Borrower and each Individual Borrower shall not
initiate or consent to any zoning reclassification of any portion of any of
the Properties or seek any variance under any existing zoning ordinance or
use or permit the use of any portion of any of the Properties in any manner
that could result in such use becoming a non-conforming use under any zoning
ordinance or any other applicable land use law, rule or regulation, without
the prior consent of Lender.
(h) ASSETS. Borrower and each Individual Borrower shall
not purchase or own any properties other than the Properties or an
interest in another Individual Borrower.
(i) NO JOINT ASSESSMENT. No Individual Borrower shall suffer,
permit or initiate the joint assessment of any Individual Property (i) with
any other real property constituting a tax lot separate from such Individual
Property, and (ii) with any portion of such Individual Property that may be
deemed to constitute personal property,
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or any other procedure whereby the Lien of any taxes which may be levied
against such personal property shall be assessed or levied or charged to such
Individual Property.
(j) PRINCIPAL PLACE OF BUSINESS. No Individual Borrower shall
change its principal place of business set forth on the first page of this
Agreement without first giving Lender thirty (30) days prior written notice.
VII. CASUALTY; CONDEMNATION; ESCROWS
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 INSURANCE
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and each of the Properties providing at
least the following coverages:
(i) comprehensive all risk insurance on the Improvements
and the Personal Property, including contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to the greater of (1) one
hundred percent (100%) of the "Full Replacement Cost," which for purposes of
this Agreement shall mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and footings) with a waiver
of depreciation, (2) such amount as to ensure that Borrower would not be
deemed to be a co-insurer under such coverage or (3) the outstanding
principal balance of the Loan; (B) containing an agreed amount endorsement
with respect to the Improvements and Personal Property waiving all
co-insurance provisions; (C) providing for no deductible in excess of Ten
Thousand and No/100 Dollars ($10,000) per occurrence for all such insurance
coverage, except (1) with respect to flood insurance and earthquake insurance
for an Individual Property not located in California, for which the
deductible shall not be in excess of Twenty-Five Thousand and No/100 Dollars
($25,000) per occurrence and (2) with respect to earthquake insurance for an
Individual Property located in California, for which the deductible shall not
be in excess, per occurrence, of the greater of (I) an amount equal to five
percent (5%) of the Full Replacement Cost of the damaged Individual Property
and (II) One Hundred Thousand and No/100 Dollars ($100,000); and (D)
containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any
of the Improvements or the use of the Individual Property shall at any
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time constitute legal non-conforming structures or uses. In addition,
Borrower shall obtain (x) if any portion of the Improvements is currently or
at any time in the future located in a federally designated "special flood
hazard area", flood hazard insurance in an amount equal to the lesser of (1)
the outstanding principal balance of the Note or (2) the maximum amount of
such insurance available under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, as each may be amended or such greater amount as Lender shall
require; (y) windstorm insurance in amounts and in form and substance
satisfactory to Lender in the event the Individual Property is located in an
area prone to hurricanes and (z) earthquake insurance in amounts and in form
and substance satisfactory to Lender in the event the Individual Property is
located in an area with a high degree of seismic activity, provided that the
insurance pursuant to clauses (x), (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under
this subsection (i).
(ii) commercial general liability insurance against claims
for personal injury, bodily injury, death or property damage occurring upon,
in or about the Individual Property, such insurance (A) to be on the
so-called "occurrence" form with a combined limit, including umbrella
coverage, of not less than Fifty Million and No/100 Dollars ($50,000,000) ;
(B) to continue at not less than the aforesaid limit until required to be
changed by Lender in writing by reason of changed economic conditions making
such protection inadequate; and (C) to cover at least the following hazards:
(1) premises and operations; (2) products and completed operations on an "if
any" basis; (3) independent contractors; (4) blanket contractual liability
for all legal contracts; and (5) contractual liability covering the
indemnities contained in ARTICLE 9 of the Mortgages to the extent the same is
available;
(iii) business income insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance
provided for in subsection (i) above; (C) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
Improvements and Personal Property has been repaired, the continued loss of
income will be insured until such income either returns to the same level it
was at prior to the loss, or the expiration of twelve (12) months from
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the date that the Individual Property is repaired or replaced and operations are
resumed, whichever first occurs, and notwithstanding that the policy may
expire prior to the end of such period; and (D) in an amount equal to the
greater of (1) one hundred percent (100%) of the projected gross income from
the Individual Property for a period of twenty-four (24) months from the date
that the Individual Property is repaired or replaced and operations are
resumed or (2) one hundred percent (100%) of the projected operating expenses
(including, without limitation, Debt Service) to be incurred in connection
with the operation of the Individual Property for a period of twelve (12)
months from the date that the Individual Property is repaired or replaced and
operations are resumed. The amount of such business income insurance shall be
determined prior to the date hereof and at least once each year thereafter
based on Borrower's reasonable estimate of the gross income from the Property
for the succeeding twelve (12) month period. All proceeds payable to Lender
pursuant to this subsection shall be held by Lender and shall be applied to
the obligations secured by the Loan Documents from time to time due and
payable hereunder and under the Note; provided, however, that (y) nothing
herein contained shall be deemed to relieve Borrower of its obligations to
pay the obligations secured by the Loan Documents on the respective dates of
payment provided for in the Note and the other Loan Documents except to the
extent such amounts are actually paid out of the proceeds of such business
income insurance and (z) upon fifteen (15) days prior notice from Lender to
Borrower that the period covered by such business income insurance must be
increased in connection with a Securitization, Borrower shall increase the
period covered by such business income insurance from twelve (12) months to
eighteen (18) months and shall deliver to Lender a certificate of insurance
satisfactory to Lender evidencing such increase, and Borrower's failure to
comply with this clause (z) shall constitute an Event of Default ;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the Improvements, and
only if the Individual Property coverage form does not otherwise apply, (A)
owner's contingent or protective liability insurance covering claims not
covered by or under the terms or provisions of the above mentioned commercial
general liability insurance policy; and (B) the insurance provided for in
subsection (i) above written in a so-called builder's risk completed value
form (1) on a non-reporting basis, (2) against all risks insured against
pursuant to subsection (i) above, (3) including permission to occupy the
Individual Property, and (4) with an agreed amount endorsement waiving
co-insurance provisions;
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(v) workers' compensation, subject to the statutory limits
of the state in which the Individual Property is located, and employer's
liability insurance, all in amounts not less than the amount required under
the Legal Requirements of the state in which the Individual Property is
located in respect of any work or operations on or about the Individual
Property, or in connection with the Individual Property or its operation (if
applicable);
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on terms
consistent with the commercial property insurance policy required under
subsection (i) above;
(vii) motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles containing minimum
limits per occurrence, including umbrella coverage, of Five Million and
No/100 Dollars ($5,000,000); and
(viii) upon sixty (60) days' written notice, such other
reasonable insurance and in such reasonable amounts as Lender from time to
time may reasonably request against such other insurable hazards which at the
time are commonly insured against for property similar to the Individual
Property located in or around the region in which the Individual Property is
located.
(b) All insurance provided for in SECTION 7.1.1(A) shall be
obtained under valid and enforceable policies (collectively, the "POLICIES"
or individually, the "POLICY"), and shall be subject to the approval of
Lender as to insurance companies, amounts, deductibles, loss payees and
insureds. The Policies shall be issued by financially sound and responsible
insurance companies authorized to do business in the state in which the
Property is located and having a claims paying ability rating of "AA" or
better by at least two (2) of the Rating Agencies, one of which shall be
Standard & Poor's Ratings Group. The Policies described in SECTION 7.1.1
shall designate Lender as loss payee. Not less than ten (10) days prior to
the expiration dates of the Policies theretofore furnished to Lender,
certificates of insurance evidencing the Policies accompanied by evidence
satisfactory to Lender of payment of the premiums due
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thereunder (collectively, the "INSURANCE Premiums"), shall be delivered by
Borrower to Lender.
(c) Any blanket insurance Policy shall specifically allocate to
the Individual Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a separate
Policy insuring only the Property in compliance with the provisions of
SECTION 7.1.1(A).
(d) All Policies of insurance provided for or contemplated by
SECTION 7.1.1(A), except for the Policy referenced in SECTION 7.1.1(A)(V),
shall name Borrower, or the Tenant, as the insured and Lender as the
additional insured, as its interests may appear, and in the case of property
damage, boiler and machinery, flood and earthquake insurance, shall contain a
so-called New York standard non-contributing mortgagee clause in favor of
Lender providing that the loss thereunder shall be payable to Lender.
(e) All Policies of insurance provided for in SECTION
7.1.1(A)(V) shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting
for Borrower, or of any Tenant or other occupant, or failure to comply with
the provisions of any Policy, which might otherwise result in a forfeiture of
the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;
(ii) the Policy shall not be materially changed (other
than to increase the coverage provided thereby) or canceled without at least
thirty (30) days' written notice to Lender and any other party named therein
as an additional insured;
(iii) each Policy shall provide that the issuers thereof
shall give written notice to Lender if the Policy has not been renewed
fifteen (15) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
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(f) If at any time Lender is not in receipt of written evidence
that all insurance required hereunder is in full force and effect, Lender
shall have the right, without notice to Borrower, to take such action as
Lender deems necessary to protect its interest in the Property, including,
without limitation, the obtaining of such insurance coverage as Lender in its
sole discretion deems appropriate and all premiums incurred by Lender in
connection with such action or in obtaining such insurance and keeping it in
effect shall be paid by Borrower to Lender upon demand and until paid shall
be secured by the Mortgages and shall bear interest at the Default Rate.
(g) If the Individual Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty, Borrower shall give prompt
notice of such damage to Lender and shall promptly commence and diligently
prosecute the completion of the repair and restoration of the Individual
Property as nearly as possible to the condition the Individual Property was
in immediately prior to such fire or other casualty, with such alterations as
may be reasonably approved by Lender (a "RESTORATION") and otherwise in
accordance with SECTION 7.1.3. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender may,
but shall not be obligated to make proof of loss if not made promptly by
Borrower;
(h) In the event of foreclosure of the Mortgage with respect to
the Individual Property, or other transfer of title to the Individual
Property in extinguishment in whole or in part of the Debt all right, title
and interest of Borrower in and to the Policies that are not blanket Policies
then in force concerning the Individual Property and all proceeds payable
thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.
7.1.2 CONDEMNATION. Borrower shall promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent
domain proceeding affecting any of the Properties and shall deliver to Lender
copies of any and all papers served in connection with such proceedings.
Lender may participate in any such proceedings, and Borrower shall from time
to time deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts,
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and cooperate with them in the carrying on or defense of any such
proceedings. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of such
taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the
Debt shall not be reduced until any award or payment therefor (an "AWARD")
shall have been actually received and applied by Lender, after the deduction
of expenses of collection, to the reduction or discharge of the Debt. Lender
shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the award interest at the
rate or rates provided herein or in the Note. If the Property or any portion
thereof is taken by a condemning authority, Borrower shall promptly commence
and diligently prosecute the Restoration of the Property and otherwise comply
with the provisions of SECTION 7.1.3. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall
have been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt.
7.1.3 RESTORATION. The following provisions shall apply in
connection with the Restoration of any Individual Property:
(a) If the Net Proceeds shall be less than Five Hundred
Thousand and No/100 Dollars ($500,000) and the costs of completing the
Restoration shall be less than Five Hundred Thousand and No/100 Dollars
($500,000), the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in SECTION 7.1.3(B)(I)
are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.
(b) If the Net Proceeds are equal to or greater than Five
Hundred Thousand and No/100 Dollars ($500,000) or the costs of completing the
Restoration is equal to or greater than Five Hundred Thousand and No/100
Dollars ($500,000) Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this SECTION 7.1.3. The term
"NET PROCEEDS" for purposes of this SECTION 7.1.3 shall mean: (i) the net
amount of all insurance proceeds received by Lender pursuant to SECTION 7.1.1
(a)(i), (iv), (vi) and (vii) as a result of such damage or
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destruction, after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting same
("INSURANCE PROCEEDS"), or (ii) the net amount of the Award, after deduction
of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same ("CONDEMNATION
PROCEEDS"), whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower
for Restoration provided that each of the following conditions
are met:
(A) no Event of Default shall have occurred
and be continuing;
(B) (1) in the event the Net Proceeds are
Insurance Proceeds, less than twenty-five percent
(25%) of the total floor area of the Improvements on
the Individual Property has been damaged, destroyed
or rendered unusable as a result of such fire or
other casualty or (2) in the event the Net Proceeds
are Condemnation Proceeds, less than ten percent
(10%) of the land constituting the Individual
Property is taken, and such land is located along the
perimeter or periphery of the Individual Property,
and no portion of the Improvements is located in such
land;
(C) the Leases with respect to the
Individual Property, other than Minor Leases, shall
remain in full force and effect during and after the
completion of the Restoration, notwithstanding the
occurrence of any such fire or other casualty or
taking, whichever the case may be.
(D) Borrower shall commence the Restoration
as soon as reasonably practicable (but in no event
later than sixty (60) days after such damage or
destruction or taking,
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whichever the case may be, occurs) and shall diligently
pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any
operating deficits, including all scheduled payments
of principal and interest under the Note, which will
be incurred with respect to the Individual Property
as a result of the occurrence of any such fire or
other casualty or taking, whichever the case may be,
will be covered out of (1) the Net Proceeds, (2) the
insurance coverage referred to in SECTION
7.1.1(A)(III), if applicable, or (3) by other funds
of Borrower;
(F) Lender shall be satisfied that the
Restoration will be completed on or before the
earliest to occur of (1) the Maturity Date, (2) the
earliest date required for such completion under the
terms of any Lease, (3) such time as may be required
under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the
Property to the condition it was in immediately prior
to such fire or other casualty or to as nearly as
possible the condition it was in immediately prior to
such taking, as applicable or (4) the expiration of
the insurance coverage referred to in SECTION
7.1.1(A)(III);
(G) the Individual Property and the use
thereof after the Restoration will be in compliance
with and permitted under all applicable zoning laws,
ordinances, rules and regulations;
(H) the Restoration shall be done and
completed by Borrower in an expeditious and diligent
fashion and in compliance with all applicable
governmental laws, rules and regulations (including,
without limitation, all applicable environmental
laws); and
(I) such fire or other casualty or taking,
as applicable, does not result in the loss of access
to the Individual
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Property or the related Improvements beyond the period
of Restoration.
(ii) The Net Proceeds shall be held by Lender in an
interest-bearing account and, until disbursed in accordance
with the provisions of this SECTION 7.1.3(B), shall constitute
additional security for the Debt and other obligations under
the Loan Documents. The Net Proceeds shall be disbursed by
Lender to, or as directed by, Borrower from time to time
during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and
work and labor performed (except to the extent that they are
to be paid for out of the requested disbursement) in
connection with the Restoration have been paid for in full,
and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to
file same, or any other liens or encumbrances of any nature
whatsoever on the Individual Property arising out of the
Restoration which have not either been fully bonded to the
satisfaction of Lender and discharged of record or in the
alternative fully insured to the satisfaction of Lender by the
title company issuing the Title Insurance Policy.
(iii) All plans and specifications required in
connection with the Restoration shall be subject to prior
review and acceptance in all respects by Lender and by an
independent consulting engineer selected by Lender (the
"CASUALTY CONSULTANT"). Lender shall have the use of the plans
and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. The
identity of the contractors, subcontractors and materialmen
engaged in the Restoration, as well as the contracts under
which they have been engaged, shall be subject to prior review
and acceptance by Lender and the Casualty Consultant. All
costs and expenses incurred by Lender in connection with
making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and
disbursements and the Casualty Consultant's fees, shall be
paid by Borrower.
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(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal
to the costs actually incurred from time to time for work in
place as part of the Restoration, as certified by the Casualty
Consultant, MINUS the Casualty Retainage. The term "CASUALTY
RETAINAGE" shall mean an amount equal to ten percent (10%) of
the costs actually incurred for work in place as part of the
Restoration, as certified by the Casualty Consultant, until
the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the
contrary set forth above in this SECTION 7.1.3(B), be less
than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the
Restoration. The Casualty Retainage shall not be released
until the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the
provisions of this SECTION 7.1.3(B) and that all approvals
necessary for the re-occupancy and use of the Individual
Property have been obtained from all appropriate governmental
and quasi-governmental authorities, and Lender receives
evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out
of the Casualty Retainage; provided, however, that Lender will
release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman
engaged in the Restoration as of the date upon which the
Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all
work and has supplied all materials in accordance with the
provisions of the contractor's, subcontractor's or
materialman's contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment
in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the
title company issuing the Title Insurance Policy, and Lender
receives an endorsement to the Title Insurance Policy insuring
the continued priority of the lien of the related Mortgage and
evidence of payment of any premium payable for such
endorsement. If required by Lender, the release of any such
portion of the Casualty Retainage shall be approved by the
surety company, if any, which has issued a payment or
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performance bond with respect to the contractor, subcontractor
or materialman.
(v) Lender shall not be obligated to make
disbursements of the Net Proceeds more frequently than once
every calendar month.
(vi) If at any time the Net Proceeds or the
undisbursed balance thereof shall not, in the opinion of
Lender in consultation with the Casualty Consultant, be
sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower
shall deposit the deficiency (the "NET PROCEEDS DEFICIENCY")
with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited
with Lender shall be held by Lender and shall be disbursed for
costs actually incurred in connection with the Restoration on
the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this SECTION
7.1.3(B) shall constitute additional security for the Debt and
other obligations under the Loan Documents.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency
deposited with Lender after the Casualty Consultant certifies
to Lender that the Restoration has been completed in
accordance with the provisions of this SECTION 7.1.3(B), and
the receipt by Lender of evidence satisfactory to Lender that
all costs incurred in connection with the Restoration have
been paid in full, shall be remitted by Lender to Borrower,
provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of
the Other Security Documents.
(c) All Net Proceeds not required (i) to be made available for
the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to SECTION 7.1.3(B)(VII) may be retained and applied by Lender on the
next occurring Payment Date toward the payment of the Debt whether or not then
due and payable in such order,
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priority and proportions as Lender in its sole discretion shall deem proper,
or, at the discretion of Lender, the same may be paid, either in whole or in
part, to Borrower for such purposes as Lender shall designate, in its
discretion.
SECTION 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS.
7.2.1 REQUIRED REPAIRS; DEPOSITS. Borrower shall perform the
repairs at its Properties, as more particularly set forth on SCHEDULE II
hereto (such repairs hereinafter referred to as "PROPERTY REQUIRED REPAIRS").
Borrower shall complete each of the Property Required Repairs on or before
the required deadline for each repair as set forth on SCHEDULE II. Upon
thirty (30) days prior notice from Lender to Borrower that a reserve for
Property Required Repairs shall be required in connection with a
Securitization, Borrower shall deposit with Lender the amount for each
Individual Property set forth on SCHEDULE II hereto to perform the Property
Required Repairs for such Individual Property to the extent such Property
Required Repairs have not yet been performed in accordance with this SECTION
7.2. Amounts so deposited shall hereinafter be referred to as the "REQUIRED
REPAIR FUND". Lender will maintain the Required Repair Fund in a segregated
account (the "REQUIRED REPAIR ACCOUNT") and the Required Repair Fund shall be
invested and reinvested by Lender, at Borrower's direction, in one or more
Eligible Investments, subject to the following restrictions: (A) such
Eligible Investments and the proceeds thereof shall be deemed a part of the
Required Repair Fund; (B) each such Eligible Investment shall be made in the
name of Lender (in its capacity as such) or in the name of a nominee of
Lender under its complete and exclusive dominion and control or, if
applicable law provides for perfection of pledges of an instrument not
evidenced by a certificate or other instrument through registration of such
pledge on books maintained by or on behalf of the issuer of such investment,
such pledge may be so registered; (C) Lender shall have the sole control over
such investment, the income thereon and the proceeds thereof; (D) other than
investments described in clause (B) above, any certificate or other
instrument evidencing such investment shall be delivered directly to Lender
or its agent; (E) the proceeds of each investment shall be remitted by the
purchaser thereof directly to Lender and (F) Lender shall not be liable for
any loss sustained on the investment of any funds constituting a part of the
Required Repair Fund.
7.2.2 GRANT OF SECURITY INTEREST. Borrower shall grant a first
priority security interest to Lender, as security for payment of all sums due
under the
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Loan and the performance of all other terms, conditions and covenants of the
Loan Documents and this Agreement on Borrower's part to be paid and
performed, in all of Borrower's right, title and interest in and to the
Required Repair Fund and the Required Repair Account and shall execute and
deliver to Lender such UCC-1 Financing Statements and other documents or
instruments as Lender may request in order to grant and perfect such security
interest. Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Required
Repair Fund or the Required Repair Account or permit any lien or encumbrance
to attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Required Repair Fund to the payment of the Debt
in any order in its sole discretion. Until expended or applied as herein
provided, the Required Repair Fund shall constitute additional security for
the Debt.
7.2.3 RELEASE OF REQUIRED REPAIR FUNDS. After Borrower's
initial deposit into the Required Repair Account pursuant to SECTION 7.2.1,
Lender shall disburse to Borrower the Required Repair Funds from the Required
Repair Account from time to time upon satisfaction by Borrower of each of the
following conditions: (a) Borrower shall submit a written request for payment
to Lender at least ten (10) days prior to the date on which Borrower requests
such payment be made and specifies the Property Required Repairs to be paid;
(b) on the date such request is received by Lender and on the date such
payment is to be made, no Default or Event of Default shall exist and remain
uncured; (c) Lender shall have received a certificate from Borrower (i)
stating that all Property Required Repairs at the applicable Individual
Property funded by the prior requested disbursement have been completed in
good and workmanlike manner and in accordance with all applicable federal,
state and local laws, rules and regulations, (ii) any license, permit or
other approval by any Governmental Authority required to commence and/or
complete the Property Required Repairs to be funded by the requested
disbursement have been obtained, (iii) identifying each Person that will
supply materials or labor in connection with the Property Required Repairs to
be performed at such Individual Property and to be funded by the requested
disbursement and including copies of invoices or statements from each such
Person setting forth the
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costs for such materials or labor, and (iv) stating that each Person that
supplied materials or labor in connection with the Property Required Repairs
performed at an Individual Property and funded by the prior requested
disbursement has been paid all amounts to be paid to such Person as set forth
in the written request with respect to such prior requested disbursement and
setting forth the amount paid to each such Person and, if such requested
disbursement includes amounts constituting the final payment to any Person on
account of any Property Required Repairs, such certificate shall be
accompanied by lien waivers or other evidence of payment satisfactory to
Lender; (d) at Lender's option if the amount disbursed for Property Required
Repairs with respect to one Individual Property under the prior requested
disbursement exceeded a total of Two Hundred Fifty Thousand and No/100
Dollars ($250,000), a title search for any Individual Property indicating
that such Individual Property is free from all liens, claims and other
encumbrances not previously approved by Lender, and (e) Lender shall have
received such other evidence as Lender shall reasonably request that the
Property Required Repairs at any Individual Property funded by the prior
requested disbursement have been completed and the related costs and expenses
have been paid. Lender shall not be required to make disbursements from the
Required Repair Account with respect to any Individual Property more
frequently than once per calendar month and unless such requested
disbursement is in an amount greater than Fifteen Thousand and No/100 Dollars
($15,000) (or a lesser amount if the total amount in the Required Repair
Account is less than Fifteen Thousand and No/100 Dollars ($15,000), in which
case only one disbursement of the amount remaining in the account shall be
made) and such disbursement shall be made only upon satisfaction of each
condition contained in this SECTION 7.2.3. Prior to Borrower's initial
deposit of funds into the Required Repair Fund in accordance with SECTION
7.2.2 or thereafter with respect to any calendar month during which a request
for payment from the Required Repair Fund is not submitted to Lender pursuant
to this SECTION 7.2.3, Borrower shall deliver to Lender, as a part of the
monthly reports to be delivered pursuant to SECTION 5.1(J)(IV), an Officer's
Certificate setting forth the amounts paid during the preceding calendar
month for Property Required Repairs and setting forth each Person to whom
such amounts were paid, the amount paid to each such Person and the related
Property Required Repairs performed by each such Person.
7.2.4 FAILURE TO PERFORM REQUIRED REPAIRS AND MAKE INITIAL
DEPOSIT. It shall be an Event of Default under this Agreement if (i) Borrower
does not exercise diligent efforts to complete the Property Required Repairs
at each Individual
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Property by the required deadline for each repair as set forth on SCHEDULE
II, or (ii) Borrower does not make the initial deposit into the Required
Repair Fund in accordance with SECTION 7.2.2. Upon the occurrence of an Event
of Default, Lender, at its option, may withdraw all Required Repair Funds
from the Required Repair Account and Lender may apply such funds either to
completion of the Property Required Repairs at one or more of the Properties
or toward payment of the Debt in such order, proportion and priority as
Lender may determine in its sole discretion. Lender's right to withdraw and
apply Required Repair Funds shall be in addition to all other rights and
remedies provided to Lender under this Agreement and the other Loan Documents.
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SECTION 7.3 TAX AND INSURANCE ESCROW FUND.
7.3.1 TAX AND INSURANCE ESCROW FUND. Borrower shall pay to
Lender on each Payment Date (a) one-twelfth of the Taxes that Lender
estimates will be payable during the next ensuing twelve (12) months in order
to accumulate with Lender sufficient funds to pay all such Taxes at least ten
(10) days prior to their respective due dates, and (b) one-twelfth of the
Insurance Premiums that Lender estimates will be payable for the renewal of
the coverage afforded by the Policies upon the expiration thereof in order to
accumulate with Lender sufficient funds to pay all such Insurance Premiums at
least thirty (30) days prior to the expiration of the Policies (said amounts
in (a) and (b) above being hereinafter referred to as the "TAX AND INSURANCE
ESCROW FUND"). The Tax and Insurance Escrow Fund and the payments of interest
or principal or both, payable pursuant to the Note, shall be added together
and shall be paid as an aggregate sum by Borrower to Lender. Lender will
apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance
Premiums required to be made by Borrower pursuant to SECTION 5.1 hereof and
under the Mortgages. In making any payment relating to the Tax and Insurance
Escrow Fund, Lender may do so according to any bill, statement or estimate
procured from the appropriate public office (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into
the accuracy of such bill, statement or estimate or into the validity of any
tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to SECTION 5.1 hereof, Lender shall, in
its sole discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Tax and Insurance Escrow Fund. Any
amount remaining in the Tax and Insurance Escrow Fund after the Debt has been
paid in full shall be returned to Borrower. In allocating such excess, Lender
may deal with the person shown on the records of Lender to be the owner of
the Properties. If at any time Lender reasonably determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay the items set
forth in (a) and (b) above, Lender shall notify Borrower of such
determination and Borrower shall increase its monthly payments to Lender by
the amount that Lender estimates is sufficient to make up the deficiency at
least ten (10) days prior to delinquency of the Taxes and/or thirty (30) days
prior to expiration of the Policies, as the case may be.
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7.3.2 GRANT OF SECURITY INTEREST. Borrower hereby pledges,
assigns and grants a security interest to Lender, as security for payment of
all sums due under the Loan and the performance of all other terms,
conditions and provisions of the Loan Documents and this Agreement on
Borrower's part to be paid and performed, of all Borrower's right, title and
interest in and to the Tax and Insurance Escrow Fund. Borrower shall not,
without obtaining the prior written consent of Lender, further pledge, assign
or grant any security interest in the Tax and Insurance Escrow Fund or permit
any lien or encumbrance to attach thereto, or any levy to be made thereon, or
any UCC-1 Financing Statements, except those naming Lender as the secured
party, to be filed with respect thereto.
7.3.3 APPLICATION OF TAX AND INSURANCE ESCROW FUND. Until
expended or applied as above provided, any amounts in the Tax and Insurance
Escrow Fund shall constitute additional security for the Debt. Upon the
occurrence of an Event of Default, Lender may apply any sums then present in
the Tax and Insurance Escrow Fund to the payment of the following items in
any order in its sole discretion: (i) Taxes and Other Charges; (ii) Insurance
Premiums; (iii) interest on the unpaid principal balance of the Note; (iv)
amortization of the unpaid principal balance of the Note; or (v) all other
sums payable pursuant to this Agreement and the other Loan Documents.
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SECTION 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
7.4.1 REPLACEMENT RESERVE FUND. Commencing no later than
thirty (30) days after Lender's notice to Borrower that a replacement reserve
shall be required in connection with a Securitization, Borrower shall pay to
Lender on each Payment Date one twelfth of the amount (the "REPLACEMENT
RESERVE MONTHLY DEPOSIT") equal to five percent (5%) of the Gross Income from
Operations projected by Lender for the current calendar year to be applied to
replacements and repairs of the type listed on SCHEDULE III hereof required
to be made to the Mortgaged Property during the calendar year. Amounts so
deposited shall hereinafter be referred to as the "REPLACEMENT RESERVE FUND".
Lender will maintain the Replacement Reserve Fund in a segregated account
(the "REPLACEMENT RESERVE ACCOUNT") and the Replacement Reserve Fund shall be
invested and reinvested by Lender, at Borrower's direction, in one or more
Eligible Investments, subject to the following restrictions: (A) such
Eligible Investments and the proceeds thereof shall be deemed a part of the
Replacement Reserve Fund; (B) each such Eligible Investment shall be made in
the name of Lender (in its capacity as such) or in the name of a nominee of
Lender under its complete and exclusive dominion and control or, if
applicable law provides for perfection of pledges of an instrument not
evidenced by a certificate or other instrument through registration of such
pledge on books maintained by or on behalf of the issuer of such investment,
such pledge may be so registered; (C) Lender shall have the sole control over
such investment, the income thereon and the proceeds thereof; (D) other than
investments described in clause (B) above, any certificate or other
instrument evidencing such investment shall be delivered directly to Lender
or its agent; (E) the proceeds of each investment shall be remitted by the
purchaser thereof directly to Lender and (F) Lender shall not be liable for
any loss sustained on the investment of any funds constituting a part of the
Replacement Reserve Fund. Lender may reassess its estimate of the amount
necessary for the Replacement Reserve Fund from time to time and, and may
increase the monthly amounts required to be deposited into the Replacement
Reserve Fund by thirty (30) days notice to Borrower if it determines in its
reasonable discretion that an increase is necessary to maintain the proper
maintenance and operation of the Properties. Any amount held in the
Replacement Reserve Account and allocated for an Individual Property shall be
retained by Lender and credited toward the future Replacement Reserves
Monthly Deposits required by Lender hereunder in the event such Individual
Property is released from the Lien of its related Mortgage in accordance with
SECTION 2.4 hereof.
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7.4.2 GRANT OF SECURITY INTEREST. Borrower shall grant a first
priority security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and
provisions to be paid and performed, of all Borrower's right, title and
interest in and to the Replacement Reserve Fund and the Replacement Reserve
Account and shall execute and deliver to Lender such UCC-1 Financing
Statements and other documents or instruments as Lender may request in order
to grant and perfect such security interest. Borrower shall not, without
obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Replacement Reserve Fund or the
Replacement Reserve Account or permit any lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. Upon the occurrence of an Event of Default, Lender may apply any
sums then present in the Replacement Reserve Fund to the payment of the Debt
in any order in its sole discretion. Until expended or applied as above
provided, the Replacement Reserve Fund shall constitute additional security
for the Debt.
7.4.3 DISBURSEMENTS FROM REPLACEMENT RESERVE ACCOUNT. (a) After
the commencement of Borrower's obligation to make the Replacement Reserve
Monthly Deposit pursuant to SECTION 7.4.1, Lender shall make disbursements
from the Replacement Reserve Account to pay Borrower only for the costs to
maintain and replace the furniture, fixtures and equipment used in connection
with the operation of the Properties as set forth in the Approved Annual
Budget (collectively, the "REPLACEMENTS"). Lender shall not be obligated to
make disbursements from the Replacement Reserve Account to reimburse Borrower
for the costs of routine maintenance (other than the regular replacement of
furniture, fixtures and equipment constituting Replacements) to an Individual
Property or for costs which are to be reimbursed from the Required Repair
Fund.
(b) Lender shall, upon written request from Borrower and
satisfaction of the requirements set forth in this SECTION 7.4.3 and SECTION
7.4.4 of this Agreement, disburse to Borrower amounts from the Replacement
Reserve Account to pay for the actual approved costs of Replacements or to
reimburse the Borrower therefor in accordance with the Approved Annual Budget
within ten (10) days of Lender's receipt
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of a request for disbursement in accordance with SECTION 7.4.3(C). In no
event shall Lender be obligated to disburse funds from the Replacement
Reserve Account if a Default or an Event of Default exists.
(c) Each request for disbursement from the Replacement Reserve
Account shall be in a form specified or approved by Lender and shall certify
as to (i) the specific Replacements for which the disbursement is requested,
(ii) the quantity and price of each item purchased, if the Replacement
includes the purchase or replacement of specific items, (iii) the price of
all materials (grouped by type or category) used in any Replacement other
than the purchase or replacement of specific items, and (iv) the cost of all
contracted labor or other services applicable to each Replacement for which
such request for disbursement is made. With each request for disbursement,
Borrower shall certify that all Replacements that were the subject of the
prior request for disbursement have been made in accordance with all
applicable Legal Requirements of any Governmental Authority having
jurisdiction over the applicable Individual Property to which the
Replacements are being provided. Each request for disbursement shall include
copies of invoices for all items or materials to be purchased and all
contracted labor or services to be provided in connection with the
Replacements for which the disbursement is requested. Each request for
disbursement shall include a statement setting forth each Person that
supplied materials or labor in connection with Replacements that were the
subject of the prior request for disbursement and setting forth the amount
paid to each such Person and shall include evidence satisfactory to Lender of
payment of all such amounts evidence of completion of the Replacements for
which the prior request for disbursement was made, which evidence shall be
satisfactory to Lender in its reasonable discretion. Prior to Borrower's
making of the initial Replacement Reserve Monthly Deposit in accordance with
SECTION 7.4.1 or thereafter with respect to any calendar month during which a
request for disbursement from the Replacement Reserve Fund is not submitted
to Lender pursuant to this SECTION 7.4.3, Borrower shall deliver to Lender,
as a part of the monthly reports to be delivered pursuant to SECTION
5.1(J)(IV), an Officer's Certificate setting forth the amounts paid during
the preceding calendar month for Replacements and setting forth each Person
to whom such amounts were paid, the amount paid to each such Person and the
related Replacement provided by each such Person.
(d) Borrower shall not make a request for disbursement from
the Replacement Reserve Account more frequently than once in any calendar month
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and (except in connection with the final disbursement) the total cost of all
Replacements in any request shall not be less than Fifteen Thousand and
No/Dollars ($15,000).
7.4.4 PERFORMANCE OF REPLACEMENTS. (a) Borrower shall make
Replacements when required in order to keep each Individual Property in
condition and repair consistent with other first class, full service hotel or
first class, full service hotel and office properties, as applicable, in the
same market segment and under the same franchisor in the metropolitan area in
which the respective Individual Property is located, and to keep each
Individual Property or any portion thereof from deteriorating. Borrower shall
complete all Replacements in a good and workmanlike manner as soon as
practicable following the commencement of making each such Replacement.
(b) Lender reserves the right, at its option, to approve all
material contracts or work orders with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements. Upon Lender's request, Borrower shall
assign any contract or subcontract to Lender.
(c) In the event Lender determines in its reasonable discretion
that any Replacement is not being performed in a workmanlike or timely manner
or that any Replacement has not been completed in a workmanlike or timely
manner, Lender shall have the option to withhold any further disbursements
from the Replacement Reserve Account and, upon ten (10) days prior written
notice, to proceed under existing contracts or to contract with third parties
to complete such Replacement and to apply the Replacement Reserve Fund toward
the labor and materials necessary to complete such Replacement and, without
providing any prior notice to Borrower, to exercise any and all other
remedies available to Lender upon an Event of Default hereunder.
(d) In order to facilitate Lender's completion or making of the
Replacements pursuant to SECTION 7.4.4(C) above, Borrower grants Lender the
right to enter onto any Individual Property and perform any and all work and
labor necessary to complete or make the Replacements and/or employ watchmen
to protect such Individual Property from damage. All sums so expended by
Lender shall be deemed to have been advanced under the Loan to Borrower and
secured by the Mortgages. For this purpose
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Borrower constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake the Replacements in
the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said
attorney-in-fact as follows: (i) to use any funds in the Replacement Reserve
Account for the purpose of making or completing the Replacements; (ii) to
make such additions, changes and corrections to the Replacements as shall be
necessary or desirable to complete the Replacements; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (iv) to pay, settle or compromise all existing
bills and claims which are or may become Liens against any Individual
Property, or as may be necessary or desirable for the completion of the
Replacements, or for clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by any of the
contract documents; (vi) to prosecute and defend all actions or proceedings
in connection with any Individual Property or the rehabilitation and repair
of any Individual Property; and (vii) to do any and every act which Borrower
might do in its own behalf to fulfill the terms of this Agreement.
(e) Nothing in this SECTION 7.4.4 shall: (i) make Lender
responsible for making or completing the Replacements; (ii) require Lender to
expend funds in addition to the Replacement Reserve Fund to make or complete
any Replacement; (iii) obligate Lender to proceed with the Replacements; or
(iv) obligate Lender to demand from Borrower additional sums to make or
complete any Replacement.
(f) Upon reasonable prior notice by Lender, Borrower shall
permit Lender and Lender's agents and representatives (including, without
limitation, Lender's engineer, architect, or inspector) or third parties
making Replacements pursuant to this SECTION 7.4.4 to enter onto each
Individual Property during normal business hours (subject to the rights of
tenants under their Leases) to inspect the progress of any Replacements and
all materials being used in connection therewith and to examine all plans and
shop drawings relating to such Replacements which are or may be kept at each
Individual Property. Borrower shall cause all contractors and subcontractors
to cooperate with Lender or Lender's representatives or such other persons
described above in connection with inspections described in this SECTION
7.4.4(F) or the completion of Replacements pursuant to this SECTION 7.4.4.
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(g) If Lender has determined in its reasonable discretion that
any Replacements are not being completed in a timely and workmanlike manner
or in the event that the amount disbursed for the completion of a single
Replacement pursuant to a prior disbursement from the Replacement Reserve
Account exceeded One Hundred Thousand and No/100 Dollars ($100,000), Lender
may require an inspection of the applicable Individual Property at Borrower's
expense prior to making a monthly disbursement from the Replacement Reserve
Account in order to verify completion of such Replacements. Lender may
require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and/or may require a copy of a
certificate of completion by an independent qualified professional acceptable
to Lender prior to the disbursement of any amounts from the Replacement
Reserve Account. Borrower shall pay the expense of the inspection as required
hereunder, whether such inspection is conducted by Lender or by an
independent qualified professional.
(h) The Replacements and all materials, equipment, fixtures, or
any other item comprising a part of any Replacement shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those Liens existing on the date of
this Agreement which have been approved in writing by Lender).
(i) In the event that the prior request for disbursement
included any amount in excess of Two Hundred Fifty Thousand and No/100
Dollars ($250,000) for any single Replacement requiring construction,
installation or completion, Lender may require Borrower to provide Lender
with a search of title to the applicable Individual Property prior to making
any additional disbursements from the Replacement Reserve Account, which
search shows that no mechanic's or materialmen's liens or other liens of any
nature have been placed against the applicable Individual Property since the
date of recordation of the related Mortgage and that title to such Individual
Property is free and clear of all Liens (other than the lien of the related
Mortgage and any other Liens previously approved in writing by the Lender, if
any).
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(j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
applicable Individual Property and applicable insurance requirements
including, without limitation, applicable building codes, special use
permits, environmental regulations, and requirements of insurance
underwriters.
(k) In addition to any insurance required under the Loan
Documents, Borrower shall provide or cause to be provided workmen's
compensation insurance, builder's risk, and public liability insurance and
other insurance to the extent required under applicable law in connection
with a particular Replacement. All such policies shall be in form and amount
reasonably satisfactory to Lender. All such policies which can be endorsed
with standard mortgagee clauses making loss payable to Lender or its assigns
shall be so endorsed. Certified copies of such policies shall be delivered to
Lender.
7.4.5 FAILURE TO MAKE REPLACEMENTS AND MAKE INITIAL DEPOSIT.
(a) It shall be an Event of Default under this Agreement if (i) Borrower
fails to make the initial Replacement Reserve Monthly Deposit in accordance
with SECTION 7.4.1 or (ii) fails to comply with any other provision of this
SECTION 7.4 and such failure is not cured within thirty (30) days after
notice from Lender. Upon the occurrence of an Event of Default, Lender may
use the Replacement Reserve Fund (or any portion thereof) for any purpose,
including but not limited to completion of the Replacements as provided in
SECTION 7.4.4, or for any other repair or replacement to any Individual
Property or toward payment of the Debt in such order, proportion and priority
as Lender may determine in its sole discretion. Lender's right to withdraw
and apply the Replacement Reserve Funds shall be in addition to all other
rights and remedies provided to Lender under this Agreement and the other
Loan Documents.
(b) Nothing in this Agreement shall obligate Lender to apply
all or any portion of the Replacement Reserve Fund on account of an Event of
Default to payment of the Debt or in any specific order or priority.
7.4.6 BALANCE IN THE REPLACEMENT RESERVE ACCOUNT. The
insufficiency of any balance in the Replacement Reserve Account shall not
relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents.
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7.4.7 INDEMNIFICATION. Borrower shall indemnify Lender and
hold Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys fees and expenses)
arising from or in any way connected with the performance of the
Replacements. Borrower shall assign to Lender all rights and claims Borrower
may have against all persons or entities supplying labor or materials in
connection with the Replacements; provided, however, that Lender may not
pursue any such right or claim unless an Event of Default has occurred and
remains uncured.
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SECTION 7.5 GROUND LEASE ESCROW FUNDS
If any portion of any Additional Property shall be a
leasehold interest, commencing upon the Subsequent Advance Closing Date on
which such Additional Property is encumbered by a Mortgage, Borrower shall
pay to Lender on each Payment Date an amount that is estimated by Lender to
be due and payable by the applicable Individual Borrower under the related
Ground Lease for all rent and any and all other charges which may be due by
such Individual Borrower under the related Ground Lease in order to
accumulate with Lender sufficient funds to pay all sums payable under the
related Ground Lease at least ten (10) Business Days prior to the dates due
(said amounts, hereinafter called the "GROUND LEASE ESCROW FUND"). Upon such
Individual Borrower's failure to pay any rent or other charges due under the
related Ground Lease after the receipt of any notice and the expiration of
any cure period available to such Individual Borrower pursuant to the related
Ground Lease, Lender may, in its discretion, apply any amounts held in the
Ground Lease Escrow Fund to the payment of such rent or other charges;
provided however, that the provisions of this SECTION 7.5 shall not be deemed
to create any obligation on the part of Lender to pay any such rent or other
charges from amounts on deposit in the Ground Lease Escrow Fund. Borrower
shall grant a first priority security interest to Lender, as security for
payment of all sums due under the Loan and the performance of all other
terms, conditions and provisions to be paid and performed, of all Borrower's
right, title and interest in and to the Ground Lease Escrow Fund and shall
execute and deliver to Lender such UCC-1 Financing Statements and other
documents or instruments as Lender may request in order to grant and perfect
such security interest. Borrower shall not, without obtaining the prior
written consent of Lender, further pledge, assign or grant any security
interest in the Ground Lease Escrow Fund or permit any lien or encumbrance to
attach thereto, or any levy to be made thereon, or any UCC-1 Financing
Statements, except those naming Lender as the secured party, to be filed with
respect thereto. Upon the occurrence of an Event of Default, Lender may apply
any sums then present in the Ground Lease Escrow Fund to the payment of the
Debt in any order in its sole discretion. Notwithstanding the foregoing, the
Borrower shall not be required to make monthly deposits to the Ground Lease
Escrow Fund so long as on the applicable Subsequent Advance Closing Date and
for the remainder of the Term, the Borrower has deposited and maintains in
the Ground Lease Escrow Fund sufficient amounts for the payment of three (3)
months of rent and any and all other charges under the related Ground Lease.
Such initial deposit may be
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increased by Lender in the amount Lender deems is necessary in its reasonable
discretion based on any increases in the rent due under the related Ground
Lease.
VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an event of
default hereunder (an "EVENT OF DEFAULT"):
(i) if any portion of the Debt is not paid when
due;
(ii) if any of the Taxes or Other Charges are
not paid when the same are due and payable;
(iii) if any payment required pursuant to SECTION
5.1(U) is not made when due;
(iv) if the Policies are not kept in full force
and effect, or if certified copies of the Policies are not delivered to
Lender within ten (10) days of Lender's request therefor;
(v) if any Individual Borrower transfers or
encumbers any portion of the Properties other than as permitted under the
Loan Documents without Lender's prior written consent;
(vi) if any representation or warranty made by
Borrower or any Individual Borrower herein or in any other Loan Document, or
in any report, certificate, financial statement or other instrument,
agreement or document furnished to Lender shall have been false or misleading
in any material adverse respect as of the date the representation or warranty
was made;
(vii) if any Individual Borrower shall make an
assignment for the benefit of creditors;
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(viii) if a receiver, liquidator or trustee shall be
appointed for any Individual Borrower or if any Individual Borrower shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, any Individual Borrower, or if any proceeding for the
dissolution or liquidation of any Individual Borrower shall be instituted;
provided, however, if such appointment, adjudication, petition or proceeding
was involuntary and not consented to by any Individual Borrower, upon the
same not being discharged, stayed or dismissed within sixty (60) days;
(ix) if any Individual Borrower attempts to assign
its rights under this Agreement or any of the other Loan Documents or any
interest herein or therein in contravention of the Loan Documents;
(x) if Borrower or any Individual Borrower
breaches any covenant contained in SECTION 4.1 (FF) hereof;
(xi) (A) if Promus shall not have executed and
delivered to Parkway the License Agreement that Parkway has executed and
delivered to Promus for execution and a copy of such fully executed License
Agreement shall not have been delivered to Lender prior to the expiration of
the interim period during which Parkway is authorized to continue to operate
the Individual Property known as the Embassy Suites Hotel, Philadelphia,
Pennsylvania as an Embassy Suites Hotel as described in that certain letter
dated August 12, 1997 from Promus to Lender, as such interim period may be
extended from time to time in writing by Promus, or (B) if a default by
Borrower has occurred under any Franchise Agreement and continues beyond any
applicable cure period and such default permits the Franchisor thereunder to
terminate such Franchise Agreement;
(xii) with respect to any term, covenant or
provision set forth herein which specifically contains a notice requirement
or grace period, if Borrower or any Individual Borrower shall be in default
under such term, covenant or condition after the giving of such notice or the
expiration of such grace period;
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(xiii) if any of the assumptions contained in any
Insolvency Opinion delivered to Lender in connection with the Loan is or
shall become untrue in any material respect;
(xiv) if Borrower or any Individual Borrower
shall continue to be in Default under any of the other terms, covenants or
conditions of this Agreement not specified in subsections (i) to (xi) above,
for ten (10) days after notice to Borrower from Lender, in the case of any
Default which can be cured by the payment of a sum of money, or for thirty
(30) days after notice from Lender in the case of any other Default;
provided, however, that if such non-monetary Default is susceptible of cure
but cannot reasonably be cured within such 30-day period and provided further
that Borrower shall have commenced to cure such Default within such 30-day
period and thereafter diligently and expeditiously proceeds to cure the same,
such 30-day period shall be extended for such time as is reasonably necessary
for Borrower in the exercise of due diligence to cure such Default, such time
not to exceed an additional sixty (60) days; or
(xv) if there shall be default under any of the
other Loan Documents beyond any applicable cure periods contained in such
documents, whether as to Borrower, any Individual Borrower or any of the
Properties;
(b) Upon the occurrence of an Event of Default (other than an
Event of Default described in clauses (vii), (viii) or (ix) above) and at any
time thereafter the Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan Documents or at
law or in equity, Lender may take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against Borrower or
any Individual Borrower and in and to all or any of the Properties,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in the Loan Documents against Borrower or any Individual
Borrower and any or all of the Properties, including, without limitation, all
rights or remedies available at law or in equity; and upon any Event of
Default described in clauses (vii), (viii) or (ix) above, the Debt and all
other obligations of Borrower hereunder and under the other Loan Documents
shall immediately and automatically become due and payable, without
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notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
SECTION 8.2 REMEDIES.
(a) Upon the occurrence of an Event of Default, all or any one
or more of the rights, powers, privileges and other remedies available to
Lender against Borrower under this Agreement or any of the other Loan
Documents executed and delivered by, or applicable to, Borrower or at law or
in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or
other action for the enforcement of its rights and remedies under any of the
Loan Documents with respect to all or any of the Properties. Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and
in such order as Lender may determine in its sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other
rights and remedies of Lender permitted by law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality
of the foregoing, Borrower agrees that if an Event of Default is continuing
(i) Lender is not subject to any "one action" or "election of remedies" law
or rule, and (ii) all liens and other rights, remedies or privileges provided
to Lender shall remain in full force and effect until Lender has exhausted
all of its remedies against the Properties and each Mortgage has been
foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt
or the Debt has been paid in full.
(b) Except as otherwise set forth in Section 3.2(jj), with
respect to Borrower and the Properties, nothing contained herein or in any
other Loan Document shall be construed as requiring Lender to resort to any
Individual Property for the satisfaction of any of the Debt in preference or
priority to any other Individual Property, and Lender may seek satisfaction
out of all of the Properties or any part thereof, in its absolute discretion
in respect of the Debt. In addition and except as otherwise set forth in
SECTION 3.2(JJ), Lender shall have the right from time to time to partially
foreclose the Mortgages in any manner and for any amounts secured by the
Mortgages then due and payable as determined by Lender in its sole discretion
including, without limitation, the following circumstances: (i) in the event
Borrower defaults beyond any applicable grace
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period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose one or more of the Mortgages to recover such
delinquent payments, or (ii) in the event Lender elects to accelerate less
than the entire outstanding principal balance of the Loan, Lender may
foreclose one or more of the Mortgages to recover so much of the principal
balance of the Loan as Lender may accelerate and such other sums secured by
one or more of the Mortgages as Lender may elect. Notwithstanding one or more
partial foreclosures, the Properties shall remain subject to the Mortgages to
secure payment of sums secured by the Mortgages and not previously recovered.
(c) Lender shall have the right from time to time to sever the
Note and the other Loan Documents into one or more separate notes, mortgages
and other security documents (the "SEVERED LOAN DOCUMENTS") in such
denominations as Lender shall determine in its sole discretion for purposes
of evidencing and enforcing its rights and remedies provided hereunder.
Borrower shall execute and deliver to Lender from time to time, promptly
after the request of Lender, a severance agreement and such other documents
as Lender shall request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to
Lender. Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead to
make and execute all documents necessary or desirable to effect the aforesaid
severance, Borrower ratifying all that its said attorney shall do by virtue
thereof; provided, however, Lender shall not make or execute any such
documents under such power until three (3) days after notice has been given
to Borrower by Lender of Lender's intent to exercise its rights under such
power. Except as may be required in connection with a securitization pursuant
to SECTION 9.1 hereof, (i) Borrower shall not be obligated to pay any costs
or expenses incurred in connection with the preparation, execution, recording
or filing of the Severed Loan Documents, and (ii) the Severed Loan Documents
shall not contain any representations, warranties or covenants not contained
in the Loan Documents and any such representations and warranties contained
in the Severed Loan Documents will be given by Borrower only as of the
Closing Date.
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SECTION 8.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Lender under this Agreement
shall be cumulative and not exclusive of any other right, power or remedy
which Lender may have against Borrower or any Individual Borrower pursuant to
this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any
such remedy, right or power or shall be construed as a waiver thereof, but
any such remedy, right or power may be exercised from time to time and as
often as may be deemed expedient. A waiver of one Default or Event of Default
with respect to Borrower or any Individual Borrower shall not be construed to
be a waiver of any subsequent Default or Event of Default by Borrower or any
Individual Borrower or to impair any remedy, right or power consequent
thereon.
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IX. SPECIAL PROVISIONSIONS
SECTION 9.1 SALE OF NOTES AND SECURITIZATION.
At the request of the holder of the Note and, to the extent not
already required to be provided by Borrower under this Agreement, Borrower
shall use reasonable efforts to satisfy the market standards to which the
holder of the Note customarily adheres or which may be reasonably required in
the marketplace or by the Rating Agencies in connection with the sale or
transfer of the Note or participations or other interests therein or the
first successful securitization (such sale, transfer and/or securitization,
the "SECURITIZATION") of rated single or multi-class securities (the
"SECURITIES") secured by or evidencing ownership interests in the Note and
the Mortgages, including, without limitation, to:
(a) (i) provide such financial and other
information with respect to the Properties, the
Borrower, the Managers and the Franchisors, (ii)
provide existing budgets relating to the
Properties and (iii) to perform or permit or cause
to be performed or permitted such site inspection,
appraisals, market studies, environmental reviews
and reports (Phase I's and, if appropriate, Phase
II's), engineering reports and other due diligence
investigations of the Properties, as may be
reasonably requested by the holder of the Note or
the Rating Agencies or as may be necessary or
appropriate in connection with the Securitization
(the "PROVIDED INFORMATION"), together, if
customary, with appropriate verification and/or
consents of the Provided Information through
letters of auditors or opinions of counsel of
independent attorneys acceptable to the Lender and
the Rating Agencies;
(b) at Borrower's expense, cause counsel to render the
Insolvency Opinion or any other opinion customary in
securitization transactions with respect to the
Properties and Borrower and its affiliates, which
counsel and opinions shall be reasonably satisfactory
to the holder of the Note and the Rating Agencies;
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(c) (i) deliver one or more Officer's
Certificates certifying as to the accuracy of all
representations made by Borrower in the Loan
Documents as of the date of the closing of the
Securitization in all relevant jurisdictions or
setting forth any then existing facts conflicting
with any such representations, (ii) deliver
certificates of the relevant Governmental
Authorities in all relevant jurisdictions
indicating the good standing and qualification of
each individual Borrower and their respective
general partners or managing members, as
applicable, as of the date of the Securitization
and (iii) make such additional representations and
warranties as of the closing date of the
Securitization with respect to the Properties,
Borrower, and the Loan Documents as are
customarily provided in securitization
transactions and as may be reasonably requested by
the holder of the Note or the Rating Agencies and
consistent with the facts covered by such
representations and warranties as they exist on
the date thereof; and
(d) execute such amendments to the Loan Documents
and organizational documents, enter into a lockbox
or similar arrangement with respect to the Rents
as and to the extent provided herein and establish
and fund such reserve funds (including, without
limitation, the Required Repair Fund and the
Replacement Reserve Fund) as and to the extent
provided herein or as otherwise may be reasonably
requested by the holder of the Note or as may be
requested by the Rating Agencies or otherwise to
effect the Securitization; provided, however, that
the Borrower shall not be required to modify or
amend any Loan Document if such modification or
amendment would (i) change the interest rate, the
stated maturity or the amortization of principal
amount of the Loan set forth herein, or (ii)
modify or amend any other economic term or other
material term of any Loan Document in a manner
that has a material adverse effect on Borrower.
Borrower shall be responsible only for all legal fees and
disbursements incurred by Borrower in connection with Borrower's complying
with the requirements of this SECTION 9.1 and SECTION 9.2 and for all legal
fees and disbursements incurred by Lender for the amendment or modification
of the Loan Documents, preparation of any additional Loan Documents, review
of organizational documents and opinions and other services provided by
Lender's counsel in order to ensure compliance with the market standards
described in SECTION 9.1 where the failure to so comply is the result of
concessions made by Lender at the request of Borrower in connection with the
closing of the Initial Advance or any Subsequent Advance.
SECTION 9.2 SECURITIZATION INDEMNIFICATION.
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(a) Borrower understands that certain of the Provided
Information and the Required Records may be included in disclosure documents
in connection with the Securitization, including, without limitation, a
prospectus, prospectus supplement or private placement memorandum (each, a
"DISCLOSURE DOCUMENT") and may also be included in filings with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Securities and Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), or provided or made available to investors
or prospective investors in the Securities, the Rating Agencies, and service
providers relating to the Securitization, provided that no Provided
Information or Required Records shall be so included, provided or made
available without Borrower's review and approval of such Provided Information
and/or Required Records. In the event that any Disclosure Document is
required to be revised prior to the sale of all Securities, the Borrower will
cooperate with the holder of the Note in updating the Disclosure Document by
providing all current information necessary to keep the Disclosure Document
accurate and complete in all material respects. The holder of the Note will
promptly discontinue the use of any Disclosure Document upon such holder's
receipt of written notice from Borrower that such Disclosure Document
requires revision to correct any inaccuracy.
(b) Borrower agrees to provide in connection with each of (i) a
preliminary and a private placement memorandum or (ii) a preliminary and
final prospectus or prospectus supplement, as applicable, an indemnification
certificate (A) certifying that Borrower has carefully examined certain
specified sections of such memorandum or prospectus, as applicable, including
without limitation, the sections entitled "Special Considerations,"
"Description of the Mortgages," "Description of the Mortgage Loans and
Mortgaged Properties," "The Manager," "The Borrower" and "Certain Legal
Aspects of the Mortgage Loan," and such sections (and any other sections
reasonably requested) do not contain any untrue statement of a material fact
with respect to Borrower, the Properties or the terms and provisions of the
Loan or the Loan Documents or omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances under
which they were made, not misleading, (B) indemnifying Lender (and for
purposes of this SECTION 9.2, Lender hereunder shall
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include its officers and directors), the affiliate of Lehman Brothers Inc.
("LEHMAN") that has filed the registration statement relating to the
securitization (the "REGISTRATION STATEMENT"), each of its directors, each of
its officers who have signed the Registration Statement and each person or
entity who controls the affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the "LEHMAN
Group"), and Lehman, each of its directors and each person who controls
Lehman within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act (collectively, the "UNDERWRITER GROUP") for any losses,
claims, damages or liabilities (collectively, the "LIABILITIES") to which
Lender, the Lehman Group or the Underwriter Group may become subject insofar
as the Liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such sections or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in such sections or necessary
in order to make the statements in such sections or in light of the
circumstances under which they were made, not misleading and (C) agreeing to
reimburse Lender, the Lehman Group and the Underwriter Group for any legal or
other expenses reasonably incurred by Lender and Lehman in connection with
investigating or defending the Liabilities; provided, however, that Borrower
will be liable in any such case under clauses (B) or (C) above only to the
extent that any such loss claim, damage or liability arises out of or is
based upon any such untrue statement or omission made therein in reliance
upon and in conformity with written information furnished to Lender by or on
behalf of Borrower in connection with the preparation of the memorandum or
prospectus or in connection with the underwriting of the debt, including,
without limitation, financial statements of Borrower, operating statements,
rent rolls, environmental site assessment reports and property condition
reports with respect to the Properties. This indemnity agreement will be in
addition to any liability which Borrower may otherwise have.
(c) In connection with filings under the Exchange Act and
provided that the holder of the Note complies with the proviso to SECTION
9.2(A), Borrower agrees to indemnify (i) Lender, the Lehman Group and the
Underwriter Group for Liabilities to which Lender, the Lehman Group or the
Underwriter Group may become subject insofar as the Liabilities arise out of
or are based upon the omission or alleged omission to state in the Provided
Information or Required Records a material fact required to be stated in the
Provided Information or Required Records in order to make the statements in
the Provided Information or Required Records, in light of the circumstances
under which
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they were made not misleading and (ii) reimburse Lender, the Lehman Group or
the Underwriter Group for any legal or other expenses reasonably incurred by
Lender, the Lehman Group or the Underwriter Group in connection with
defending or investigating the Liabilities.
(d) Lehman agrees to indemnify and hold harmless Borrower, each
of its directors and each person who controls Borrower within the meaning of
Section 15 of the Securities Act (the "BORROWER GROUP") against any and all
losses, claims, damages or liabilities, joint or several, to which such group
may become subject, under the Securities Act or otherwise, and will reimburse
such group for any legal or other expenses reasonably incurred by such group
in connection with investigating or defending any such loss, claim, damage,
liability or action, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in a
Disclosure Document or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission relates to information that does not accurately reflect the
Provided Information.
(e) Promptly after receipt by an indemnified party under this
SECTION 9.2 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this SECTION 9.2, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to any indemnified party hereunder
except to the extent that failure to notify causes prejudice to the
indemnifying party. In the event that any action is brought against any
indemnified party, and its notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent that
it (or they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with
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counsel reasonably satisfactory to such indemnified party. After notice from
the indemnifying party to such indemnified party under this SECTION 9.2, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for
the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to
it that are different from or additional to those available to another
indemnified party.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in SECTION
9.2(B), (C) or (d) is for any reason held to be unenforceable by an
indemnified party in respect of any losses, claims, damages or liabilities
(or action in respect thereof) referred to therein which would otherwise be
indemnifiable under SECTION 9.2(B), (C) or (D), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of such losses, claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to
which the respective parties are entitled, the following factors shall be
considered: (i) Lehman's and Borrower's relative knowledge and access to
information concerning the matter with respect to which claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and
(iii) any other equitable considerations appropriate in the circumstances.
Lender and Borrower hereby agree that it would not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation.
(g) The liabilities and obligations of both Borrower and Lender
under this SECTION 9.2 shall survive the termination of this Agreement and
the satisfaction and discharge of the Debt.
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SECTION 9.3 INTENTIONALLY OMITTED.
SECTION 9.4 EXCULPATION.
Subject to the qualifications below, Lender shall not enforce
the liability and obligation of Borrower to perform and observe the
obligations contained in the Note, this Agreement, the Mortgages or the other
Loan Documents by any action or proceeding wherein a money judgment shall be
sought against Borrower, except that Lender may bring a foreclosure action,
an action for specific performance or any other appropriate action or
proceeding to enable Lender to enforce and realize upon its interest under
the Note, this Agreement, the Mortgages and the other Loan Documents, or in
the Properties, the Rents, or any other collateral given to Lender pursuant
to the Loan Documents; provided, however, that, except as specifically
provided herein, any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower's interest in the
Properties, in the Rents and in any other collateral given to Lender, and
Lender, by accepting the Note, this Agreement, the Mortgages and the other
Loan Documents, agrees that it shall not sue for, seek or demand any
deficiency judgment against Borrower in any such action or proceeding under
or by reason of or under or in connection with the Note, this Agreement, the
Mortgages or the other Loan Documents. The provisions of this section shall
not, however, (a) constitute a waiver, release or impairment of any
obligation evidenced or secured by any of the Loan Documents; (b) impair the
right of Lender to name Borrower or any Individual Borrower as a party
defendant in any action or suit for foreclosure and sale under any of the
Mortgages; (c) affect the validity or enforceability of any guaranty made by
a Person other than Borrower or an Individual Borrower in connection with the
Loan or any of the rights and remedies of the Lender thereunder; (d) impair
the right of Lender to obtain the appointment of a receiver; (e) impair the
enforcement of any of the Assignments of Leases; (f) constitute a prohibition
against Lender to seek a deficiency judgment against Borrower or any
Individual Borrower in order to fully realize the security granted by each of
the Mortgages or to commence any other appropriate action or proceeding in
order for Lender to exercise its remedies against all of the Properties; or
(g) constitute a waiver of the right of Lender to enforce the liability and
obligation of
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Borrower or any Individual Borrower, by money judgment or otherwise, to the
extent of any loss, damage, cost, expense, liability, claim or other
obligation incurred by Lender (including attorneys' fees and costs reasonably
incurred) arising out of or in connection with the following:
(i) fraud or intentional misrepresentation by Borrower, any
Individual Borrower or any guarantor in connection with
the Loan;
(ii) the gross negligence or willful misconduct of Borrower or
any Individual Borrower;
(iii) the breach of any representation, warranty, covenant
or indemnification provision in the Environmental
Indemnity or in the Mortgages concerning
environmental laws, hazardous substances and asbestos
and any indemnification of Lender with respect
thereto in either document;
(iv) the removal or disposal of any portion of the Properties
after an Event of Default;
(v) the misapplication or conversion by Borrower or any
Individual Borrower of (A) any insurance proceeds
paid by reason of any loss, damage or destruction to
the Properties, (B) any Awards or other amounts
received in connection with the condemnation of all
or a portion of the Properties, or (C) any Rents
following an Event of Default;
(vi) failure to pay charges for labor or materials or other
charges resulting in a Lien on any portion of the
Properties prior to the Lien created by the Loan
Documents;
(vii) any security deposits, advance deposits or any other
deposits collected with respect to the Properties
which are not delivered to Lender upon a foreclosure
of the Properties or action in lieu thereof, except
to the extent any such security deposits were applied
in accordance with the terms and conditions of any of
the Leases prior to the occurrence of the Event of
Default that gave rise to such foreclosure or action
in lieu thereof; and
(viii) Borrower's indemnification of Lender set forth in SECTION
9.2 hereof.
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Notwithstanding anything to the contrary in this Agreement, the
Note or any of the Loan Documents, (A) Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the
full amount of the Debt secured by the Mortgages or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Loan Documents, and (B) the Debt shall be fully recourse
to Borrower in the event that: (i) the first full monthly payment of
principal and interest under the Note is not paid when due; (ii) Borrower
fails to permit on-site inspections of the Properties on more than two (2)
occasions per calendar year after written notice from Lender requesting such
inspections, fails to provide financial information as required pursuant to
this Agreement on more than two (2) occasions per calendar year after written
notice from Lender requesting such financial information, fails to maintain
its status as a single purpose entity or fails to appoint a new property
manager upon the request of Lender after an Event of Default, each as
required by, and in accordance with the terms and provisions of, this Loan
Agreement and the Mortgages; (iii) Borrower fails to obtain Lender's prior
written consent to any subordinate financing (other than equipment lease
financings entered into by Borrower with respect to equipment to be used at
one or more of the Properties in the ordinary course of business, which
equipment leases shall not require total payments in a calendar year in
excess of One Hundred Thousand and No/100 Dollars ($100,000) at any time) or
other voluntary lien encumbering the Properties; or (iv) Borrower fails to
obtain Lender's prior written consent to any assignment, transfer, or
conveyance of the Properties or any interest therein as required by the
Mortgage.
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SECTION 9.5 CASH MANAGEMENT.
9.5.1 LOCKBOX ACCOUNT. (a) Upon thirty (30) days prior notice
from Lender to Borrower that a lockbox account shall be required in
connection with a Securitization or upon the occurrence and continuance of an
Event of Default, Borrower shall establish and maintain a segregated Eligible
Account (the "LOCKBOX ACCOUNT") to be held by the Servicer in the trust for
the benefit of Lender, which Lockbox Account shall be under the sole dominion
and control of Lender. The Lockbox Account shall be entitled "BA Parkway
Associates II, L.P., as Borrower, and Lehman Brothers Holdings Inc., as
Lender, pursuant to Loan Agreement dated as of August 12, 1997 - Lockbox
Account" and the title of the Lockbox Account shall be modified as necessary
to include the name of any Additional Borrower becoming an Individual
Borrower in connection with a Subsequent Advance after the date hereof.
Borrower hereby grants to Lender a first priority security interest in the
Lockbox Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1 Financing
Statements and continuations thereof. Borrower will not in any way alter or
modify the Lockbox Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make withdrawals
from the Lockbox Account and all costs and expenses for establishing and
maintaining the Lockbox Account shall be paid by Borrower.
(b) Upon the establishment of the Lockbox Account, Borrower
shall, or shall cause each Manager to, deliver written instructions to all
tenants under Leases to deliver all Rents payable thereunder directly to the
Lockbox Account. Borrower shall, and shall cause each Manager to, deposit all
amounts received by Borrower or Manager constituting Rents into the Lockbox
Account promptly upon receipt.
(c) Upon the establishment of the Lockbox Account, Borrower
shall obtain from Account Holder an agreement that Account Holder will
commence to transfer to the Cash Collateral Account in immediately available
funds by federal wire transfer all amounts on deposit in the Lockbox Account
once every other Business Day throughout the Term.
9.5.2 CASH COLLATERAL ACCOUNT. (a) Simultaneously with the
establishment of the Lockbox Account pursuant to SECTION 9.5.1(A), Borrower
shall establish and maintain a segregated Eligible Account (the "CASH
COLLATERAL ACCOUNT") to be held by Servicer in trust for the benefit of
Lender, which Cash Collateral Account
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shall be under the sole dominion and control of Lender. The Cash Collateral
Account shall be entitled "BA Parkway Associates II, L.P., as Borrower, and
Lehman Brothers Holdings Inc., as Lender, pursuant to Loan Agreement dated as
of August 12, 1997 - Cash Collateral Account" and the title of the Cash
Collateral Account shall be modified as necessary to include the name of any
Additional Borrower becoming an Individual Borrower in connection with a
Subsequent Advance after the date hereof. Borrower hereby grants to Lender a
first priority security interest in the Cash Collateral Account and all
deposits at any time contained therein and the proceeds thereof and will take
all actions necessary to maintain in favor of Lender a perfected first
priority security interest in the Cash Collateral Account, including, without
limitation, executing and filing UCC-1 Financing Statements and continuations
thereof. Borrower will not in any way alter or modify the Cash Collateral
Account and will notify Lender of the account number thereof. Lender and
Servicer shall have the sole right to make withdrawals from the Cash
Collateral Account and all costs and expenses for establishing and
maintaining the Cash Collateral Account shall be paid by Borrower.
(b) Provided no Event of Default shall have occurred and be
continuing, on each Payment Date occurring after the establishment of the
Lockbox Account and the Cash Collateral Account, all funds on deposit in the
Cash Collateral Account shall be applied by Lender to the payment of the
following items in the order indicated:
(i) First, payments to the Ground Lease Escrow Fund, if
any, in accordance with the terms and provisions of SECTION 7.5;
(ii) Second, payments to the Tax and Insurance Escrow
Fund in accordance with the terms and conditions of SECTION 7.3 hereof;
(iii) Third, payment of the Monthly Debt Service Payment
Amount;
(iv) Fourth, payments to the Replacement Reserve Fund in
accordance with the terms and conditions hereof;
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(v) Fifth, payment to Lender of any other amounts then
due and payable under the Loan Documents; and
(vi) Sixth, payment of any excess amounts to Borrower.
(c) The insufficiency of funds on deposit in the Cash
Collateral Account shall not absolve Borrower of the obligation to make any
payments, as and when due pursuant to this Agreement and the other Loan
Documents, and such obligations shall be separate and independent, and not
conditioned on any event or circumstance whatsoever.
SECTION 9.6 SERVICER.
At the option of Lender, the Loan may be serviced by a
servicer/trustee (the "SERVICER") selected by Lender and Lender may delegate
all or any portion of its responsibilities under this Agreement and the other
Loan Documents to the Servicer pursuant to a servicing agreement (the
"SERVICING AGREEMENT") between Lender and Servicer. Borrower shall be
responsible for the payment of (a) any set-up fees or any other initial costs
relating to or arising under the Servicing Agreement and (b) the monthly
servicing fee due to the Servicer under the Servicing Agreement.
SECTION 9.7 INSOLVENCY OPINION.
Within thirty (30) days after Lender's request in connection
with a Securitization, Borrower shall deliver to Lender an opinion of
Borrower's counsel that may be relied upon by Lender and any Rating Agency
rating any Securities issued in connection with the Securitization, and their
respective successors and assigns, as to nonconsolidation and true sale, if
applicable, with respect to each Individual Borrower and their Affiliates and
the Properties (the "INSOLVENCY OPINION"), which opinion and counsel shall be
reasonably satisfactory to Lender and satisfactory to any such Rating Agency.
X. MISCELLANEOUS
SECTION 10.1 SURVIVAL.
This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the
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making by Lender of the Loan and the execution and delivery to Lender of the
Note, and shall continue in full force and effect so long as all or any of
the Debt is outstanding and unpaid unless a longer period is expressly set
forth herein or in the other Loan Documents. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to
include the legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement, by or on behalf of
Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
SECTION 10.2 LENDER'S DISCRETION.
Whenever pursuant to this Agreement, Lender exercises any right
given to it to approve or disapprove, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove or to
decide whether arrangements or terms are satisfactory or not satisfactory
shall (except as is otherwise specifically herein provided) be in the sole
discretion of Lender and shall be final and conclusive.
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SECTION 10.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE
OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO
THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT
LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT
ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE
LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW
OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE,
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER
HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE
LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO
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THIS AGREEMENT MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND BORROWER WAIVES ANY
OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON
CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION
OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT DECAMPO, DIAMOND &
ASH, 805 THIRD AVENUE, NEW YORK, NEW YORK 10022, ATTENTION: THOMAS M. ASH
III, ESQ. AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES
THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF
SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I)
SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED
AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A
SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH
SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR
SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF
ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.
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SECTION 10.4 MODIFICATION, WAIVER IN WRITING.
No modification, amendment, extension, discharge, termination
or waiver of any provision of this Agreement, or of the Note, or of any other
Loan Document, nor consent to any departure by Borrower therefrom, shall in
any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for
which given. Except as otherwise expressly provided herein, no notice to, or
demand on Borrower, shall entitle Borrower to any other or future notice or
demand in the same, similar or other circumstances.
SECTION 10.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or
agreement, or exercising any right, power, remedy or privilege hereunder, or
under the Note or under any other Loan Document, or any other instrument
given as security therefor, shall operate as or constitute a waiver thereof,
nor shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege. In
particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Note or any other Loan
Document, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
SECTION 10.6 NOTICES.
All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in
writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answer
back acknowledged), addressed as follows (or at such other address and person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided
for in this Section):
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If to Lender:
Lehman Brothers Holdings Inc.,
doing business as Lehman Capital, a
division of Lehman Brothers Holding Inc.
Three World Financial Center, 12th Floor
Commercial Mortgage Surveillance Group
New York, New York 10285
Attention: Mr. Larry J. Kravetz
Facsimile No. (212) 526-2768
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: W. Christopher White, Esq.
Facsimile No. (212) 504-6666
If to Borrower:
c/o CapStar Hotel Company
1010 Wisconsin Avenue, N.W.
Washington, DC 20007
Attention: Mr. Paul W. Whitsell
Facsimile No. (202) 965-4445
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with a copy to:
DeCampo, Diamond & Ash
805 Third Avenue
New York, New York 10022
Attention: Thomas M. Ash III, Esq.
Facsimile No. (212) 758-1728
A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case
of expedited prepaid delivery and telecopy, upon the first attempted delivery
on a Business Day.
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SECTION 10.7 TRIAL BY JURY.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THE LOAN, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED
HEREBY AND THEREBY. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a
material inducement to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement and the other
Loan Documents, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents
that it has reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following consultation with
legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SECTION 10.7 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN
MADE PURSUANT TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
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SECTION 10.8 HEADINGS.
The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
SECTION 10.9 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 10.10 PREFERENCES.
Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by Lender.
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SECTION 10.11 WAIVER OF NOTICE.
Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this
Agreement or the other Loan Documents specifically and expressly provide for
the giving of notice by Lender to Borrower and except with respect to matters
for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower.
SECTION 10.12 REMEDIES OF BORROWER.
In the event that a claim or adjudication is made that Lender
or its agents have acted unreasonably or unreasonably delayed acting in any
case where by law or under this Agreement or the other Loan Documents, Lender
or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents shall be liable
for any monetary damages, and Borrower's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether
Lender has acted reasonably shall be determined by an action seeking
declaratory judgment.
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SECTION 10.13 EXPENSES; INDEMNITY.
(a) Borrower covenants and agrees to pay, or if Borrower fails
to pay to reimburse, Lender upon receipt of written notice from Lender for
all reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by Lender in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of
Lender's New York and local counsel, the costs of all appraisals and
engineering and environmental reports, all title insurance premiums, all
survey charges, any mortgage, documentary stamp and intangible taxes, all
recording charges, any brokerage fees and commissions and any auditor's fees;
(ii) the establishment and maintenance of the Lockbox Account, the Cash
Collateral Account or any escrow or reserve account established pursuant to
this Agreement or the other Loan Documents and the grant or perfection of any
security interest therein; (iii) Borrower's ongoing performance of and
compliance with Borrower's respective agreements and covenants contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date, including, without limitation,
confirming compliance with environmental and insurance requirements; (iv)
other than as set forth in the final sentence of SECTION 9.1 or in SECTION
9.2(D) or (F), Lender's ongoing performance and compliance with all
agreements and conditions contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing
Date; (v) other than as set forth in the final sentence of SECTION 9.1 or in
SECTION 9.2(D) or (F), the negotiation, preparation, execution, delivery and
administration of any consents, amendments, waivers or other modifications to
this Agreement and the other Loan Documents and any other documents or
matters requested by Lender; (vi) securing Borrower's compliance with any
requests made pursuant to SECTION 9.1 hereof; (vii) enforcing or preserving
any rights, in response to third party claims or the prosecuting or defending
of any action or proceeding or other litigation, in each case against, under
or affecting Borrower, this Agreement, the other Loan Documents, the
Properties, or any other security given for the Loan; and (viii) enforcing
any obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Properties or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any
insolvency or bankruptcy proceedings; provided,
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however, that Borrower shall not be liable for the payment of any such costs
and expenses to the extent the same arise by reason of the gross negligence,
illegal acts, fraud or willful misconduct of Lender. Any cost and expenses
due and payable to Lender may be paid from any amounts in the Cash Collateral
Account.
(b) Borrower shall indemnify, defend and hold harmless Lender
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for Lender in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not Lender shall be designated a party
thereto), that may be imposed on, incurred by, or asserted against Lender in
any manner relating to or arising out of (i) any breach by Borrower of its
obligations under, or any material misrepresentation by Borrower contained
in, this Agreement or the other Loan Documents, or (ii) the use or intended
use of the proceeds of the Loan (collectively, the "INDEMNIFIED
LIABILITIES"); provided, however, that Borrower shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities arise
from the gross negligence, illegal acts, fraud or willful misconduct of
Lender or from the use of Provided Information or Required Records pursuant
to SECTION 9.2(A) without complying with the proviso thereto. To the extent
that the undertaking to indemnify, defend and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, Borrower shall pay the maximum portion that it is permitted to pay
and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Lender.
SECTION 10.14 SCHEDULES INCORPORATED.
The Schedules annexed hereto are hereby incorporated herein as
a part of this Agreement with the same effect as if set forth in the body
hereof.
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SECTION 10.15 INTENTIONALLY OMITTED.
SECTION 10.16 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES
(a) Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Properties other
than that of mortgagee, beneficiary or lender.
(b) This Agreement and the other Loan Documents are solely for
the benefit of Lender and the Borrower and nothing contained in this
Agreement or the other Loan Documents shall be deemed to confer upon anyone
other than the Lender and the Borrower any right to insist upon or to enforce
the performance or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions
in accordance with their terms or be entitled to assume that Lender will
refuse to make the Loan in the absence of strict compliance with any or all
thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender if, in Lender's sole discretion, Lender deems it
advisable or desirable to do so.
SECTION 10.17 PUBLICITY.
All news releases, publicity or advertising by any party hereto
or their respective Affiliates through any media intended to reach the
general public which refers to the Loan Documents or the financing evidenced
by the Loan Documents, to Borrower, Lender, Lehman, or any of their
respective Affiliates in connection with the Loan shall be subject to the
prior written approval of the other party hereto.
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SECTION 10.18 CROSS-DEFAULT; CROSS-COLLATERALIZATION;
WAIVER OF MARSHALLING OF ASSETS
(a) Borrower acknowledges that Lender has made the Loan to the
Borrower upon the security of its collective interest in the Properties
(other than the Lexington Property) and in reliance upon the aggregate of the
Properties taken together (other than the Lexington Property) being of
greater value as collateral security than the sum of the Properties taken
separately. Other than as set forth in Section 3.2(jj), Borrower agrees that
the Mortgages are and will be cross-collateralized and cross-defaulted with
each other so that (i) an Event of Default under any of the Mortgages shall
constitute an Event of Default under each of the other Mortgages which secure
the Note; (ii) an Event of Default under the Note or this Loan Agreement
shall constitute an Event of Default under each Mortgage; and (iii) each
Mortgage shall constitute security for the Note as if a single blanket lien
were placed on all of the Properties as security for the Note.
(b) To the fullest extent permitted by law, Borrower, for
itself and its successors and assigns, waives all rights to a marshalling of
the assets of Borrower, Borrower's partners and others with interests in
Borrower, and of the Properties, or to a sale in inverse order of alienation
in the event of foreclosure of all or any of the Mortgages, and agrees not to
assert any right under any laws pertaining to the marshalling of assets, the
sale in inverse order of alienation, homestead exemption, the administration
of estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the
Properties for the collection of the Debt without any prior or different
resort for collection or of the right of Lender to the payment of the Debt
out of the net proceeds of the Properties in preference to every other
claimant whatsoever. In addition, Borrower, for itself and its successors and
assigns, waives in the event of foreclosure of any or all of the Mortgages,
any equitable right otherwise available to the Borrower which would require
the separate sale of the Properties or require Lender to exhaust its remedies
against any Individual Property or any combination of the Properties before
proceeding against any other Individual Property or combination of
Properties; and further in the event of such foreclosure the Borrower does
hereby expressly consents to and authorizes, at the option
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of the Lender, the foreclosure and sale either separately or together of any
combination of the Properties.
SECTION 10.19 WAIVER OF COUNTERCLAIM.
Borrower hereby waives the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against it by Lender or its agents.
SECTION 10.20 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this
Loan Agreement and any of the other Loan Documents, the provisions of this
Loan Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower
shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of
any rights or remedies available to it under any of the Loan Documents or any
other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of
real estate financings and other real estate transactions and investments
which may be viewed as adverse to or competitive with the business of the
Borrower or its affiliates.
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SECTION 10.21 BROKERS AND FINANCIAL ADVISORS.
Borrower and Lender each hereby represents that it has dealt
with no financial advisors, brokers, underwriters, placement agents, agents
or finders in connection with the transactions contemplated by this Agreement
and each hereby agrees to indemnify, defend and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind
(including Lender's attorneys' fees and expenses) in any way relating to or
arising from the failure of its respective representation contained in this
SECTION 10.21 to be true and correct. The provisions of this SECTION 10.21
shall survive the expiration and termination of this Agreement and the
payment of the Debt.
SECTION 10.22 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between
such parties, whether oral or written, are superseded by the terms of this
Agreement and the other Loan Documents.
SECTION 10.23 JOINT AND SEVERAL LIABILITY.
If Borrower consists of more than one Person, the obligations
and liabilities of each such Person pursuant to this Agreement and the other
Loan Documents shall be joint and several.
SECTION 10.24 COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
BA PARKWAY ASSOCIATES II, L.P.
By: CapStar PA, Inc.
By: /s/ John E. Plunket
-----------------------------
Name: John E. Plunket
Title: Vice President
LEHMAN BROTHERS HOLDINGS
INC., DOING BUSINESS AS LEHMAN
CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC.
By: /s/ Michael Mazzei
-----------------------------
Name: Michael Mazzei
Title: Managing Director
SCHEDULE I
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RELEASE AMOUNTS
PROPERTY RELEASE AMOUNT
-------- --------------
EMBASSY SUITES HOTEL $7,000,000
PHILADELPHIA, PENNSYLVANIA
SCHEDULE II
-----------
REQUIRED REPAIRS
SCH II-1
SCHEDULE III
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INTENTIONALLY OMITTED
SCH III-1
SCHEDULE IV
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RENT ROLLS
SCH IV-1
SCHEDULE V
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LIST OF FRANCHISE AGREEMENTS
1. Embassy Suites License Agreement between Promus Hotels, Inc., as
licensor, and BA Parkway Associates II, L.P., as licensee, with respect
to Embassy Suites Hotel at 1776 Benjamin Franklin Parkway,
Philadelphia, Pennsylvania.
SCH V-1
SCHEDULE VI
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LIST OF MANAGEMENT AGREEMENTS
1. Hotel Management Agreement dated as of August 12, 1997 between BA
Parkway Associates II, L.P. and CapStar Management Company, L.P. with
respect to the Individual Property known as the Embassy Suites Hotel,
Philadelphia, Pennsylvania.
SCH VI-1
SCHEDULE VII
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LITIGATION
SCH VIII-1