1
EXHIBIT 10.25
ATTENTION: COUNTY CLERK - THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME
FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN
THE RECORDS WHERE MORTGAGES AND DEEDS OF TRUST ON REAL ESTATE ARE RECORDED.
ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A
MORTGAGE OR DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT
ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING
ADDRESSES OF THE BORROWER (DEBTOR) AND LENDER (SECURED PARTY) ARE SET FORTH IN
THIS INSTRUMENT
, as Grantor
-------------------------------
(Borrower)
and
, as Grantor
-------------------------------
(Borrower)
to
, as Trustee
-------------------------------
(Trustee)
for the benefit of
THE CHASE MANHATTAN BANK, as Beneficiary
(Lender)
-----------------------------------
DEED OF TRUST AND
SECURITY AGREEMENT
-----------------------------------
Dated: May 2, 2000
Location:
-----------------------
-----------------------
County:
-----------------------
PREPARED BY AND UPON
RECORDATION RETURN TO:
MESSRS. THACHER PROFFITT & WOOD & WOOD
Two World Trade Center
New York, New York 10048
Attention: Peter J. Mignone, Esq.
File No.: 86000-00686.
2
Article 1 - GRANTS OF SECURITY................................................2
Section 1.1 PROPERTY MORTGAGED.................................2
Section 1.2 ASSIGNMENT OF LEASES AND RENTS.....................6
Section 1.3 SECURITY AGREEMENT.................................7
Section 1.4 PLEDGE OF MONIES HELD..............................7
Section 1.5 CONDITIONS TO GRANT................................7
Article 2 - DEBT AND OBLIGATIONS SECURED......................................7
Section 2.1 DEBT. ............................................7
Section 2.2 OTHER OBLIGATIONS..................................8
Section 2.3 DEBT AND OTHER OBLIGATIONS.........................8
Section 2.4 PAYMENTS...........................................8
Article 3 - LOAN PARTY COVENANTS..............................................9
Section 3.1 PAYMENT OF DEBT....................................9
Section 3.2 INCORPORATION BY REFERENCE.........................9
Section 3.3 INSURANCE..........................................9
Section 3.4 PAYMENT OF TAXES, ETC.............................14
Section 3.5 ESCROW FUND.......................................14
Section 3.7 RESTORATION.......................................16
Section 3.8 LEASES AND RENTS..................................20
Section 3.9 MAINTENANCE AND USE OF PROPERTY...................20
Section 3.10 WASTE. ..........................................21
Section 3.11 COMPLIANCE WITH LAWS..............................21
Section 3.12 BOOKS AND RECORDS.................................22
Section 3.13 PAYMENT FOR LABOR AND MATERIALS...................26
Section 3.14 PERFORMANCE OF OTHER AGREEMENTS...................27
Section 3.15 CHANGE OF NAME, IDENTITY OR STRUCTURE.............27
Section 3.16 EXISTENCE.........................................27
Section 3.17 MANAGEMENT AND FRANCHISE AGREEMENTS...............27
Section 3.18 PRINCIPAL PLACE OF BUSINESS.......................30
Section 3.19 TRADED SHARES.....................................30
Section 3.20 NON-CONSOLIDATION OPINION.........................30
Section 3.21 TERMINATION OF OPERATING LEASE. .................30
Article 4 - SPECIAL COVENANTS................................................31
Section 4.1 PROPERTY USE. ...................................31
Section 4.2 SINGLE PURPOSE ENTITY. ..........................31
Section 4.3 ERISA.............................................35
Section 4.4 FF&E RESERVE. ...................................35
Article 5 - REPRESENTATIONS AND WARRANTIES...................................36
Section 5.1 WARRANTY OF TITLE.................................36
Section 5.2 LEGAL STATUS AND AUTHORITY........................36
Section 5.3 VALIDITY OF DOCUMENTS. ..........................36
Section 5.4 LITIGATION. .....................................37
3
Section 5.5 STATUS OF PROPERTY................................37
Section 5.6 NO FOREIGN PERSON. ..............................38
Section 5.7 SEPARATE TAX LOT. ...............................38
Section 5.8 LEASES. .........................................38
Section 5.9 SOLVENCY..........................................39
Section 5.10 BUSINESS PURPOSES. ..............................39
Section 5.11 TAXES. ..........................................39
Section 5.12 MAILING ADDRESS. ................................39
Section 5.13 NO CHANGE IN FACTS OR CIRCUMSTANCES. ............39
Section 5.14 DISCLOSURE. .....................................40
Section 5.15 THIRD PARTY REPRESENTATIONS. ....................40
Section 5.16 ILLEGAL ACTIVITY/FORFEITURE.......................40
Section 5.17 PERMITTED EXCEPTIONS. ...........................40
Section 5.18 PRINCIPAL PLACE OF BUSINESS. ....................40
Section 5.19 ERISA.............................................40
Section 5.20 FRANCHISE AGREEMENT. ............................41
Section 5.21 MANAGEMENT AGREEMENT..............................41
Section 5.22 NON-CONSOLIDATION OPINION ASSUMPTIONS. ..........41
Section 5.23 FEDERAL RESERVE REGULATIONS.......................41
Section 5.24 INVESTMENT COMPANY ACT. .........................41
Article 6 - OBLIGATIONS AND RELIANCES........................................41
Section 6.1 RELATIONSHIP OF THE LOAN PARTIES AND LENDER. ....41
Section 6.2 NO RELIANCE ON LENDER. ..........................41
Section 6.3 NO LENDER OBLIGATIONS.............................41
Section 6.4 RELIANCE. .......................................42
Article 7 - FURTHER ASSURANCES...............................................42
Section 7.1 RECORDING OF SECURITY INSTRUMENT, ETC. ..........42
Section 7.2 FURTHER ACTS, ETC. ..............................42
Section 7.3 CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY
STAMP LAWS........................................43
Section 7.4 ESTOPPEL CERTIFICATES.............................43
Section 7.5 FLOOD INSURANCE. ................................44
Section 7.6 REPLACEMENT DOCUMENTS. ..........................44
Article 8 - DUE ON SALE/ENCUMBRANCE..........................................45
Section 8.1 TRANSFER DEFINITIONS. ...........................45
Section 8.2 NO SALE/ENCUMBRANCE...............................45
Section 8.3 PERMITTED TRANSFERS. ............................47
Section 8.4 RESERVED..........................................48
Section 8.5 LENDER'S RIGHTS. ................................48
Article 9 - PREPAYMENT.......................................................49
Section 9.1 PREPAYMENT. .....................................49
Article 10 - DEFAULT.........................................................49
Section 10.1 EVENTS OF DEFAULT. ..............................49
4
Article 11 - RIGHTS AND REMEDIES.............................................51
Section 11.1 REMEDIES. .......................................51
Section 11.2 APPLICATION OF PROCEEDS. ........................54
Section 11.3 RIGHT TO CURE DEFAULTS............................54
Section 11.4 ACTIONS AND PROCEEDINGS. ........................54
Section 11.5 RECOVERY OF SUMS REQUIRED TO BE PAID. ...........55
Section 11.6 EXAMINATION OF BOOKS AND RECORDS. ...............55
Section 11.7 OTHER RIGHTS, ETC.................................55
Section 11.8 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. ...56
Section 11.9 VIOLATION OF LAWS. ..............................56
Section 11.10 RIGHT OF ENTRY. .................................56
Section 11.11 SUBROGATION.......................................56
Article 12 - ENVIRONMENTAL HAZARDS...........................................56
Section 12.1 ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. ...56
Section 12.2 ENVIRONMENTAL COVENANTS. ........................57
Section 12.3 LENDER'S RIGHTS. ................................58
Article 13 - INDEMNIFICATIONS................................................58
Section 13.1 GENERAL INDEMNIFICATION. ........................58
Section 13.2 MORTGAGE AND/OR INTANGIBLE TAX. .................59
Section 13.3 DUTY TO DEFEND; LEGAL FEES AND OTHER
FEES AND EXPENSES.................................59
Section 13.4 ENVIRONMENTAL INDEMNITY. ........................59
Article 14 - WAIVERS.........................................................59
Section 14.1 WAIVER OF COUNTERCLAIM. .........................59
Section 14.2 MARSHALLING AND OTHER MATTERS. ..................59
Section 14.3 WAIVER OF NOTICE. ...............................60
Section 14.4 WAIVER OF STATUTE OF LIMITATIONS. ...............60
Section 14.5 SOLE DISCRETION OF LENDER. ......................60
Section 14.6 WAIVER OF TRIAL BY JURY. ........................60
Section 14.7 WAIVER OF FORECLOSURE DEFENSE. ..................60
Section 14.7 SURETY WAIVERS. .................................60
Article 15 - EXCULPATION.....................................................61
Section 15.1 EXCULPATION. ....................................61
Article 16 - NOTICES.........................................................61
Section 16.1 NOTICES. ........................................61
Article 17 - CHOICE OF LAW/SUBMISSION TO JURISDICTION........................62
Section 17.1 CHOICE OF LAW. ..................................62
Section 17.2 PROVISIONS SUBJECT TO LAW. ......................62
Section 17.3 SUBMISSION TO JURISDICTION. .....................63
Article 18 - SECONDARY MARKET................................................63
5
Section 18.1 TRANSFER OF LOAN. ...............................63
Section 18.2 COOPERATION. ....................................63
Section 18.3 RESERVES/ESCROWS. ...............................63
Article 19 - COSTS...........................................................63
Section 19.1 PERFORMANCE AT BORROWER'S EXPENSE. ..............63
Section 19.2 LEGAL FEES FOR ENFORCEMENT. .....................64
Article 20 - DEFINITIONS.....................................................64
Section 20.1 GENERAL DEFINITIONS. ............................64
Section 20.2 HEADINGS, ETC. ..................................65
Article 21 - MISCELLANEOUS PROVISIONS........................................65
Section 21.1 NO ORAL CHANGE. .................................65
Section 21.2 LIABILITY. ......................................65
Section 21.3 INAPPLICABLE PROVISIONS. ........................65
Section 21.4 DUPLICATE ORIGINALS; COUNTERPARTS. ..............65
Section 21.5 NUMBER AND GENDER. ..............................65
Section 21.6 GUARANTORS AND INDEMNITORS. .....................65
Article 22 - SPECIAL ______________ PROVISIONS...............................65
Article 23 - DEED OF TRUST PROVISIONS........................................65
Section 23.1 CONCERNING THE TRUSTEE. .........................65
Section 23.2 TRUSTEE'S FEES. .................................66
Section 23.3 CERTAIN RIGHTS. .................................66
Section 23.4 RETENTION OF MONEY. .............................66
Section 23.5 PERFECTION OF APPOINTMENT. ......................67
Section 23.6 SUCCESSION INSTRUMENTS. .........................67
Article 24 - OPERATING LEASE PROVISIONS......................................67
Section 24.1 THE OPERATING LEASE. ............................67
Section 24.2 SUBLEASES. ......................................67
Section 24.3 NO MERGER OF FEE AND LEASEHOLD ESTATES; RELEASES. 68
Section 24.4 SUBORDINATION/PURCHASE RIGHTS.....................68
6
THIS DEED OF TRUST AND SECURITY AGREEMENT (the "Security Instrument")
is made as of the 2nd day of May, 2000, by _______________________, a Delaware
__________, having its principal place of business at 545 East John Carpenter
Freeway, Suite 1300, Irving, Texas 75062 ("Borrower") and
_________________________________, a Delaware limited liability company, having
its principal place of business at 545 East John Carpenter Freeway, Suite 1300,
Irving, Texas 75062 ("Operating Tenant") (Borrower and Operating Tenant shall
collectively and individually, as the context may require, be referred to herein
as the "Loan Parties"), as grantors, to __________________________, having an
address at __________________________________, as trustee ("Trustee"), for the
benefit of THE CHASE MANHATTAN BANK, a New York banking corporation, having an
address at 380 Madison Avenue, 10th Floor, New York, New York 10017, as
beneficiary ("Lender").
RECITALS:
Borrower is the [fee] [leasehold] owner of the real property described
in Exhibit A attached hereto (the "Land").
Operating Tenant is the current owner of the leasehold estate in said
real property created pursuant to that certain Lease Agreement by and between
FLLP, as owner, and _______________, as tenant, dated _______________ (the
"Operating Lease").
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $________________ in lawful money
of the United States of America (the note together with all extensions,
renewals, modifications, substitutions and amendments thereof shall collectively
be referred to as the "Note"), with interest from the date thereof at the rates
set forth in the Note, principal and interest to be payable in accordance with
the terms and conditions provided in the Note.
Borrower desires to secure the payment of the Debt (defined in Article
2) and the performance of all of its obligations under the Note and the Other
Obligations (defined in Article 2), and Operating Tenant has agreed to encumber
its leasehold estate in the Property (as defined below) as additional security
therefor.
Article 1 - GRANTS OF SECURITY
Section 1.1 PROPERTY MORTGAGED.
(A) Loan Parties do hereby irrevocably mortgage, grant,
bargain, sell, pledge, assign, warrant, transfer and convey to Trustee, its
successors and assigns, for the benefit of Lender, and grant a security interest
to Lender and Trustee in the Operating Lease and the leasehold estate created
thereby in the Land;
(B) Borrower does hereby irrevocably mortgage, grant, bargain,
sell, pledge, assign, warrant, transfer and convey to Trustee, its successors
and assigns, for the benefit of Lender, and grant a security interest to Lender
in all right, title, interest and fee estate of Borrower, now owned or hereafter
acquired in and to the Land;
2
7
TOGETHER WITH all right, title, interest and estate of the Loan Parties
now owned or hereafter acquired, in and to the following property, rights,
interests and estate (the foregoing fee and leasehold interests in the Land
together with the following property, rights, interests and estates being
hereinafter collectively referred to as the "Property"):
(a) Operating Lease. The Operating Lease and the leasehold
estate created thereby;
(b) Assignments/Modifications. All assignments, modifications,
extensions and renewals of the Operating Lease and all credits,
deposits, options, privileges and rights of Operating Tenant as tenant
under the Operating Lease, including, but not limited to, rights of
first refusal, if any, and the right, if any, to renew or extend the
Operating Lease for a succeeding term or terms, and also including all
the right, title, claim or demand whatsoever of Operating Tenant either
in law or in equity, in possession or expectancy, of, in and to
Lender's right, as tenant under the Operating Lease, to elect under
Section 365(h)(1) of the Bankruptcy Code, Title 11 U.S.C.A. Section 101
et seq. (the "Bankruptcy Code") to terminate or treat the Operating
Lease as terminated in the event (i) of the bankruptcy, reorganization
or insolvency of the Borrower, and (ii) the rejection of the Operating
Lease by the Borrower, as debtor in possession, or by a trustee for the
Borrower, pursuant to Section 365 of the Bankruptcy Code;
(c) Additional Land. All additional lands, estates and
development rights hereafter acquired by the Loan Parties for use in
connection with the Land and the development of the Land and all
additional lands and estates therein which may, from time to time, by
supplemental mortgage or otherwise be expressly made subject to the
lien of this Security Instrument;
(d) Improvements. The buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on
the Land (the "Improvements");
(e) Easements. All easements, rights-of-way or use, rights,
strips and gores of land, streets, ways, alleys, passages, sewer
rights, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to the Land and/or the Improvements,
including, but not limited to, those arising under and by virtue of the
Operating Lease, and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Land, to the
center line thereof and all the estates, rights, titles, interests,
dower and rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity, of
the Loan Parties of, in and to the Land and/or the Improvements,
including, but not limited to, those arising under and by virtue of the
Operating Lease, and every part and parcel thereof, with the
appurtenances thereto;
(f) Fixtures and Personal Property. All machinery, equipment,
fixtures (including, but not limited to, all heating, air conditioning,
plumbing, lighting, communications, elevator
3
8
fixtures, inventory and goods), inventory and articles of personal
property and accessions thereof and renewals, replacements thereof and
substitutions therefor (including, but not limited to, beds, bureaus,
chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables,
rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds,
screens, paintings, hangings, pictures, divans, couches, luggage carts,
luggage racks, stools, sofas, chinaware, linens, pillows, blankets,
glassware, silverware, foodcarts, cookware, dry cleaning facilities,
dining room wagons, keys or other entry systems, bars, bar fixtures,
liquor and other drink dispensers, icemakers, radios, television sets,
intercom and paging equipment, electric and electronic equipment,
dictating equipment, private telephone systems, medical equipment,
potted plants, heating, lighting and plumbing fixtures, fire prevention
and extinguishing apparatus, cooling and air-conditioning systems,
elevators, escalators, fittings, plants, apparatus, stoves, ranges,
refrigerators, laundry machines, tools, machinery, engines, dynamos,
motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing
equipment, call systems, brackets, electrical signs, bulbs, bells, ash
and fuel, conveyors, cabinets, lockers, shelving, spotlighting
equipment, dishwashers, garbage disposals, washers and dryers), other
customary hotel equipment and other tangible property of every kind and
nature whatsoever owned by the Loan Parties, or in which the Loan
Parties have or shall have an interest, now or hereafter located upon
the Land and the Improvements, or appurtenant thereto, and usable in
connection with the present or future operation and occupancy of the
Land and the Improvements and all building equipment, materials and
supplies of any nature whatsoever owned by the Loan Parties, or in
which the Loan Parties have or shall have an interest, now or hereafter
located upon the Land and the Improvements, or appurtenant thereto, and
usable in connection with the present or future operation and occupancy
of the Land and the Improvements (hereinafter collectively called the
"Personal Property"), including the right, title and interest of the
Loan Parties in and to any of the Personal Property which may be
subject to any security interests, as defined in the Uniform Commercial
Code, as adopted and enacted by the state or states where any of the
Property is located (the "Uniform Commercial Code"), superior in lien
to the lien of this Security Instrument and all proceeds and products
of all of the above;
(g) Leases and Rents. All leases (including the Operating
Leases), subleases, rental agreements, registration cards and
agreements, if any, and other agreements whether or not in writing
affecting the use, enjoyment or occupancy of the Land and/or the
Improvements heretofore or hereafter entered into and all extensions,
amendments and modifications thereto, whether before or after the
filing by or against the Loan Parties of any petition for relief under
Creditors Rights Laws (defined in Article 10) (the "Leases") and all
right, title and interest of the Loan Parties' successors and assigns
therein and thereunder, including, without limitation, any guaranties
of the lessees' obligations thereunder, cash or securities deposited
thereunder to secure the performance by the lessees of their
obligations thereunder and all rents, additional rents, revenues,
issues, registration fees, if any, and profits (including all oil and
gas or other mineral royalties and bonuses) from the Land and the
Improvements, all income, rents, room rates, issues, profits, revenues,
deposits, accounts and other benefits from the operation of the hotel
on the Land and/or the Improvements, including, without limitation, all
revenues and credit card receipts collected from guest rooms,
restaurants, bars, mini-bars, meeting rooms, banquet rooms and
recreational facilities and otherwise, all receivables, customer
obligations, installment payment obligations and other
4
9
obligations now existing or hereafter arising or created out of sale,
lease, sublease, license, concession or other grant of the right of the
possession, use or occupancy of all or any portion of the Land and/or
Improvements, or personalty located thereon, or rendering of services
by the Loan Parties 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, commercial space, guest room or other space, halls,
stores or offices, including any deposits securing reservations of such
space, exhibit or sales space of every kind, 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 relating to the use, enjoyment or occupancy of the
Land and/or the Improvements whether paid or accruing before or after
the filing by or against the Loan Parties of any petition for relief
under Creditors Rights Laws (the "Rents") and all proceeds from the
sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;
(h) Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Land, the Improvements,
the Personal Property and other collateral granted under this Section
1.1, including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Property;
(i) Condemnation Awards. All awards or payments, including
interest thereon, which may heretofore and hereafter be made with
respect to the Land, the Improvements, the Personal Property and other
collateral granted under this Section 1.1, whether from the exercise of
the right of eminent domain (including but not limited to any transfer
made in lieu of or in anticipation of the exercise of the right), or
for a change of grade, or for any other injury to or decrease in the
value of the Property;
(j) Tax Certiorari. All refunds, rebates or credits in
connection with a reduction in real estate taxes and assessments
charged against the Land, the Improvements, the Personal Property and
other collateral granted under this Section 1.1 as a result of tax
certiorari or any applications or proceedings for reduction;
(k) Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash or liquidation
claims;
(l) Rights. The right, in the name and on behalf of the Loan
Parties to appear in and defend any action or proceeding brought with
respect to the Property and to commence any action or proceeding to
protect the interest of Lender in the Land, the Improvements, the
Personal Property and other collateral granted under this Section 1.1;
(m) Agreements. Except for the Franchise Agreement (defined
below), all agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other
documents, now or hereafter entered into, and all rights therein and
thereto, respecting or pertaining to the use, occupation, construction,
management or
5
10
operation of the Land and any part thereof and any Improvements or
respecting any business or activity conducted on the Land and any part
thereof, including, without limitation, the right, upon the occurrence
and during the continuance of an Event of Default (defined in Article
10) to receive and collect any sums payable to the Loan Parties
thereunder;
(n) Intangibles. All trade names, trademarks, servicemarks,
logos, copyrights, goodwill, books and records, tenant or guest lists,
advertising materials, telephone exchange numbers identified in such
materials and all other general intangibles relating to or used in
connection with the operation of the Land, the Improvements and the
Personal Property;
(o) Accounts Receivables. All right, title and interest of the
Loan Parties arising from the operation of the Land and the
Improvements in and to all payments for goods or property sold or
leased or for services rendered, whether or not yet earned by
performance, and not evidenced by an instrument or chattel paper,
(hereinafter referred to as "Accounts Receivable") including, without
limiting the generality of the foregoing, (i) all accounts, contract
rights, book debts, and notes arising from the operation of a hotel on
the Land and the Improvements or arising from the sale, lease or
exchange of goods or other property and/or the performance of services,
(ii) the Loan Parties' rights to payment from any consumer
credit/charge card organization or entities which sponsor and
administer such cards as the American Express Card, the Visa Card and
the Mastercard, (iii) the Loan Parties' rights in, to and under all
purchase orders for goods, services or other property, (iv) the Loan
Parties' rights to any goods, services or other property represented by
any of the foregoing, (v) monies due to or to become due to the Loan
Parties' under all contracts for the sale, lease or exchange of goods
or other property and/or the performance of services including the
right to payment of any interest or finance charges in respect thereto
(whether or not yet earned by performance on the part of the Loan
Parties) and (vi) all collateral security and guaranties of any kind
given by any person or entity with respect to any of the foregoing.
Accounts Receivable shall include those now existing or hereafter
created, substitutions therefor, proceeds (whether cash or non-cash,
movable or immovable, tangible or intangible) received upon the sale,
exchange, transfer, collection or other disposition or substitution
thereof and any and all of the foregoing and proceeds therefrom;
(p) Accounts. All reserves, escrows and deposit accounts
maintained by the Loan Parties with respect to the Property including,
without limitation, any lockbox account and cash management account,
and all securities, investments, property and financial assets held
therein from time to time and all proceeds, products, distributions or
dividends or substitutions thereon and thereof; and
(q) Other Rights. Any and all other rights of the Loan Parties
in and to the items set forth in Subsections (a) through (p) above.
Section 1.2 ASSIGNMENT OF LEASES AND RENTS. The Loan Parties hereby
absolutely and unconditionally assign to Lender and Trustee the Loan Parties'
right, title and interest in and to all current and future Leases and Rents,
which assignment is more particularly set forth in that certain Assignment of
Leases and Rents dated as of the date hereof and recorded simultaneously
herewith. It is intended by the Loan Parties that this assignment constitutes a
present, absolute assignment and not an assignment for additional security only.
Nevertheless, subject to the terms of
6
11
this Section 1.2 and Sections 3.8 and 11.1(h), Lender grants to the Loan Parties
a revocable license to collect and receive the Rents. Borrower shall hold a
portion of the Rents sufficient to discharge all current sums due on the Debt,
for use in the payment of such sums.
Section 1.3 SECURITY AGREEMENT. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of the
Loan Parties in the Property. By executing and delivering this Security
Instrument, the Loan Parties hereby grant to Lender and Trustee, as security for
the Obligations (defined in Section 2.3), a security interest in the Personal
Property and other collateral given as security for the Obligations (whether
denominated as part of the Property or otherwise) to the extent that under
applicable law the same would be governed by the Uniform Commercial Code
(collectively, "UCC Collateral") to the full extent that the Personal Property
and other UCC Collateral may be subject to the Uniform Commercial Code.
Section 1.4 PLEDGE OF MONIES HELD. The Loan Parties hereby pledge to
Lender any and all monies now or hereafter held by Lender, including, without
limitation, any sums deposited in the Escrow Fund (as defined in Section 3.5),
Net Proceeds (defined in Section 3.7) and any accounts established pursuant to
that certain FF&E Reserve and Security Agreement dated as of the date hereof
between Borrower and Lender (the "FF&E Reserve") and that certain Reserve and
Security Agreement dated as of the date hereof between Borrower and Lender (the
"Cash Reserve"), as additional security for the Obligations until expended or
applied as provided in this Security Instrument, the FF&E Reserve and the Cash
Reserve, as applicable.
Section 1.5 CONDITIONS TO GRANT. TO HAVE AND TO HOLD the above granted
and described Property unto Trustee for and on behalf of Lender and to the use
and benefit of Lender and Trustee, and for their successors and assigns forever;
IN TRUST, WITH POWER OF SALE, to secure payment to Lender of the Debt
at the time and in the manner provided for its payment in the Note and in this
Security Instrument.
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall pay to Lender the Debt at the time and in the manner provided
in the Note and this Security Instrument, shall perform the Other Obligations as
set forth in this Security Instrument and shall comply with each and every
covenant and condition set forth herein and in the Note, these presents and the
estate hereby granted shall cease, terminate and be void.
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 DEBT. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
payment of the following, in such order of priority as Lender may determine in
its sole discretion (the "Debt"):
(a) the indebtedness evidenced by the Note in lawful money of
the United States of America;
7
12
(b) interest, default interest, late charges and other sums,
as provided in the Note, this Security Instrument or the Other Security
Documents (defined in Section 3.2);
(c) the Default Consideration (defined in the Note), if any;
(d) all other monies agreed or provided to be paid to Lender
pursuant to the Note, this Security Instrument or the Other Security
Documents;
(e) all sums advanced pursuant to this Security Instrument to
protect and preserve the Property and the lien and the security
interest created hereby; and
(f) all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal,
extension, or change of or substitution for the Debt or any part
thereof, or the acquisition or perfection of the security therefor, and
payable pursuant to the Note, this Security Instrument or the Other
Security Documents.
Section 2.2 OTHER OBLIGATIONS. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the performance of the following (the "Other Obligations"):
(a) all other obligations of the Loan Parties contained
herein;
(b) each obligation of the Loan Parties contained in the Note
and in the Other Security Documents; and
(c) each obligation of the Loan Parties contained in any
renewal, extension, amendment, modification, consolidation, change of,
or substitution or replacement for, all or any part of the Note, this
Security Instrument or the Other Security Documents.
Section 2.3 DEBT AND OTHER OBLIGATIONS. Borrower's obligations for the
payment of the Debt and the Loan Parties' performance of the Other Obligations
shall be referred to collectively as the "Obligations."
Section 2.4 PAYMENTS. Unless payments are made in the required amount
in immediately available funds at the place where the Note is payable,
remittances in payment of all or any part of the Debt shall not, regardless of
any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Lender in funds immediately available at the
place where the Note is payable (or any other place as Lender, in Lender's sole
discretion, may have established by delivery of written notice thereof to
Borrower) and shall be made and accepted subject to the condition that any check
or draft may be handled for collection in accordance with the practice of the
collecting bank or banks; provided, however, Lender shall not be required to
accept payment for any Obligation in cash. Acceptance by Lender of any payment
in an amount less than the amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default.
8
13
Article 3 - LOAN PARTY COVENANTS
Borrower and Operating Tenant, as applicable, covenant and agree that:
Section 3.1 PAYMENT OF DEBT. Borrower will pay the Debt at the time and
in the manner provided in the Note and in this Security Instrument.
Section 3.2 INCORPORATION BY REFERENCE. All the covenants, conditions
and agreements contained in (a) the Note and (b) all and any of the documents
other than the Note or this Security Instrument now or hereafter executed and
delivered by the Loan Parties and/or others and by or in favor of Lender, which
wholly or partially secure or guaranty payment of the Note or are otherwise
executed and delivered in connection with the Loan (hereinafter defined; such
other documents, together with any and all extensions, renewals, substitutions,
replacements, amendments, modifications and/or restatements thereof, the "Other
Security Documents") are hereby made a part of this Security Instrument to the
same extent and with the same force as if fully set forth herein.
Section 3.3 INSURANCE.
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for the Loan Parties and the Property providing
at least the following coverages:
(i) insurance with respect to the Improvements and
the Personal Property insuring against any peril now or
hereafter included within the classification "All Risk" or
"Special Perils", in each case (A) in an amount equal to 100%
of the "Full Replacement Cost," which for purposes of this
Security Instrument shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground
utilities and footings) with a waiver of depreciation; (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
$25,000 (provided, however, if flood insurance is required
pursuant to Subsection 3.3(a)(vii) of this Security
Instrument, the deductible for this type of insurance only
shall not exceed $100,000); and (D) providing coverage for
contingent liability from Operation of Building Laws,
Demolition Costs and Increased Cost of Construction
Endorsements together with an "Ordinance or Law Coverage" or
"Enforcement" endorsement. The Full Replacement Cost shall be
redetermined from time to time (but not more frequently than
once in any twelve (12) calendar months) at the request of
Lender by an appraiser or contractor designated and paid by
Borrower and approved by Lender, or by an engineer or
appraiser in the regular employ of the insurer. After the
first appraisal, additional appraisals may be based on
construction cost indices customarily employed in the trade.
No omission on the part of Lender to request any such
ascertainment shall relieve Borrower of any of its obligations
under this Subsection;
(ii) commercial general liability insurance against
all claims for personal injury, bodily injury, death or
property damage occurring upon, in or about the Property,
including "Dram Shop" or other liquor liability coverage if
alcoholic beverages are sold from or may be consumed at the
Property, such insurance (A) to be on the so-called
"occurrence" form with a general aggregate limit of not less
than $6,000,000 and a per occurrence limit of not less than
$6,000,000; (B) to continue at not less than the aforesaid
limit until required to be changed by Lender in writing
9
14
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 written
and oral contracts; and (5) contractual liability covering the
indemnities contained in Article 13 hereof to the extent the
same is available;
(iii) loss of rents and/or business interruption
insurance (A) with loss payable to Lender; (B) covering all
risks required to be covered by the insurance provided for in
Subsection 3.3(a)(i); (C) in an amount equal to the actual
loss sustained (i) if a Casualty Restoration has been
commenced within the twelve (12) month period following the
date of the loss, from the date of the loss through and
including the date occurring twelve (12) months following the
date in which the Property has been restored as nearly as
possible to the condition the Property was in immediately
prior to the loss or (ii) if a Casualty Restoration has not
been commenced within the twelve (12) month period following
the date of the loss, during the twelve (12) month period
following the date of the loss; and (D) containing an extended
period of indemnity endorsement which provides that after the
physical loss to the Improvements and the Personal Property
has been repaired, the continued loss of income will be
insured until such income returns to the same level it was
prior to the loss, or the expiration of eighteen (18) months
from the date of the loss, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of
such period. All insurance proceeds payable to Lender pursuant
to this Subsection shall be held by Lender and shall be
applied to the obligations secured hereunder from time to time
due and payable hereunder and under the Note; provided,
however, that nothing herein contained shall be deemed to
relieve Borrower of its obligations to pay the obligations
secured hereunder on the respective dates of payment provided
for in the Note except to the extent such amounts are actually
paid out of the proceeds of such loss of rents and/or business
interruption insurance;
(iv) at all times during which structural
construction, repairs or alterations are being made with
respect to the Improvements (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 3.3(a)(i) 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 3.3(a)(i), (3) including permission to
occupy the Property, and (4) with an agreed amount endorsement
waiving co-insurance provisions;
(v) to the extent required by law, workers'
compensation, subject to the statutory limits of the state in
which the Property is located, and employer's liability
insurance with a limit of at least $1,000,000 per accident and
per disease per employee, and $1,000,000 for disease aggregate
in respect of any work or operations on or about the Property,
or in connection with the Property or its operation (if
applicable);
10
15
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by
Lender;
(vii) if any portion of the Improvements is at any
time located in an area identified by the Secretary of Housing
and Urban Development or any successor thereto as an area
having special flood hazards pursuant to 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 any successor law (the "Flood
Insurance Acts"), flood hazard insurance in an amount equal to
the lesser of (A) the principal balance of the Note, and (B)
the maximum limit of coverage available for the Property under
the Flood Insurance Acts;
(viii) earthquake, sinkhole and mine subsidence
insurance, if required in amounts, form and substance
satisfactory to Lender, provided that the insurance pursuant
to this Subsection (viii) shall be on terms consistent with
the all risk insurance policy required under Section
3.3(a)(i). Lender acknowledges that such insurance is not
required as of the date hereof;
(ix) to the extent Borrower or Operating Tenant
employs or retains any Employees and Agents (defined below), a
blanket fidelity bond and errors and omissions insurance
coverage insuring against losses resulting from dishonest or
fraudulent acts committed by (A) Borrower's or Operating
Tenant's personnel; (B) any employees of outside firms that
provide appraisal, legal, data processing or other services
for Borrower or Operating Tenant or (C) temporary contract
employees or student interns (each of the foregoing, the
"Employees and Agents");
(x) umbrella liability insurance in an amount not
less than Twenty-Five Million and No/100 Dollars
($25,000,000.00) per occurrence on terms consistent with the
commercial general liability insurance policy required under
subsection (ii) above; and
(xi) such other insurance and in such amounts as are
required pursuant to the Franchise Agreement (hereinafter
defined) or 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 Property
located in or around the region in which the Property is
located.
(b) All insurance provided for in Subsection 3.3(a) hereof
shall be obtained under valid and enforceable policies (the "Policies"
or in the singular, the "Policy"), in such forms and, from time to time
after the date hereof, in such amounts as may be satisfactory to
Lender, issued by financially sound and responsible insurance companies
authorized and admitted to do business in the state in which the
Property is located and approved by Lender. The insurance companies
must have a general policy rating of A or better and a financial class
of VIII or better by A.M. Best Company, Inc., and a claims paying
ability/financial strength rating of "AA-" (or its equivalent) or
better by at least two (2) of the rating agencies which have assigned a
rating to the Securities (each, a "Rating Agency") (one of which will
be Standard & Poor's Rating Group if they are rating the Securities and
one of which shall be
11
16
Moody's Investors Service, Inc. if they are rating the Securities), or
if only one Rating Agency is rating the Securities, then only by such
Rating Agency (each such insurer shall be referred to below as a
"Qualified Insurer"). Notwithstanding the foregoing, the insurance
company providing the insurance required under Subsection 3.3(a)(ii)
above may have a claims paying ability/financial strength rating of
"A+" (or its equivalent) by at least two (2) Rating Agencies, provided
that such insurance company shall have a financial class of XV or
better as determined by A.M. Best Company, Inc. Not less than twenty
(20) days prior to the expiration dates of the Policies theretofore
furnished to Lender pursuant to Subsection 3.3(a), Borrower shall
deliver certified copies of the Policies marked "premium paid" or
accompanied by evidence satisfactory to Lender of payment of the
premiums due thereunder (the "Insurance Premiums"), provided, however,
that in the case of renewal Policies, Borrower may furnish Lender with
binders therefor to be followed by the original Policies within ten
(10) days after the issuance of said Policies. Without limiting the
foregoing, in the event Borrower has obtained any Blanket Policy
(defined below) in accordance with the provisions of Subsection 3.3(c),
then Borrower shall be obligated to deliver Lender certified copies of
each such Blanket Policy in lieu of the original Blanket Policy.
(c) Except to the extent required pursuant to Section 3.3(a)
hereof, Borrower shall not obtain (i) any umbrella or blanket liability
or casualty Policy (each, a "Blanket Policy") unless, in each case,
such Policy is approved in advance in writing by Lender and Lender's
interest is included therein as provided in this Security Instrument
and such Policy is issued by a Qualified Insurer, or (ii) separate
insurance concurrent in form or contributing in the event of loss with
that required in Subsection 3.3(a) to be furnished by, or which may be
reasonably required to be furnished by, Borrower. In the event Borrower
obtains separate insurance or an umbrella or a blanket Policy, Borrower
shall notify Lender of the same and shall cause certified copies of
each Policy to be delivered as required in Subsection 3.3(a). Any
blanket insurance Policy shall specifically allocate to the 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
Subsection 3.3(a). Notwithstanding Lender's approval of any umbrella or
blanket liability or casualty Policy hereunder, Lender reserves the
right, in its sole discretion, to require Borrower to obtain a separate
Policy in compliance with this Section 3.3.
(d) All Policies of insurance provided for or contemplated by
Subsection 3.3(a), except for the Policy referenced in Subsection
3.3(a)(v), shall name Lender, Borrower and Operating Tenant as the
insured or additional insured, as their respective interests may
appear, and in the case of property damage, boiler and machinery, and
flood 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 Subsection
3.3(a) shall contain clauses or endorsements to the effect that:
(i) no act or negligence of the Loan Parties, or
anyone acting for the Loan Parties, or of any tenant under any
Lease 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;
12
17
(ii) the Policy shall not be materially changed
(other than to increase the coverage provided thereby) or
cancelled without at least 30 days' written notice to Lender
and any other party named therein as an insured; and
(iii) each Policy shall provide that the issuers
thereof shall give written notice to Lender if the Policy has
not been renewed thirty (30) days prior to its expiration; and
(iv) Lender shall not be liable for any Insurance
Premiums thereon or subject to any assessments thereunder.
(f) Borrower shall furnish to Lender, on or before thirty (30)
days after the close of each of Borrower's fiscal years, a statement
certified by Borrower or a duly authorized officer of Borrower of the
amounts of insurance maintained in compliance herewith, of the risks
covered by such insurance and of the insurance company or companies
which carry such insurance and, if requested by Lender, verification of
the adequacy of such insurance by an independent insurance broker or
appraiser acceptable to Lender.
(g) 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, after 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 missing
insurance coverage as Lender in its sole discretion deems appropriate,
and all expenses 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 this
Security Instrument and shall bear interest in accordance with Article
4 of the Note; provided, however, in the event that any insurance
required hereunder is not in full force and effect, Lender shall not be
obligated to provide any notice to the Loan Parties before obtaining
such insurance.
(h) If the Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty, the Loan Parties shall give prompt
notice of such damage to Lender and, provided the Insurance Proceeds
(as defined below) have been made available to Borrower for repair and
restoration pursuant to the terms of Section 3.7 hereof, shall promptly
commence and diligently prosecute the completion of the repair and
restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with
such alterations as may be approved by Lender (the "Casualty
Restoration") and otherwise in accordance with Section 3.7 of this
Security Instrument. Provided the Insurance Proceeds have been made
available to Borrower for the Casualty Restoration pursuant to the
terms of Section 3.7 hereof, Borrower shall pay all costs of such
Casualty Restoration whether or not such costs are covered by
insurance. Notwithstanding anything to the contrary contained in this
Subsection, Borrower shall not be obligated to notify Lender of any
damage to the Property which shall cost less than $25,000.00 to repair
or restore.
13
18
(i) In the event of a foreclosure of the Security Instrument
or other transfer of title to the Property in extinguishment in whole
or in part of the Debt, all right, title and interest of the Loan
Parties in and to the Policies then in force concerning the Property
and all proceeds payable thereunder shall thereupon vest exclusively in
Lender or the purchaser at such foreclosure or other transferee in the
event of such other transfer of title.
Section 3.4 PAYMENT OF TAXES, ETC.
(a) Borrower shall promptly pay or cause to be paid by their
due date all taxes and other governmental impositions, including,
without limitation, assessments, water rates, sewer rents, vault
charges and license fees for the use of vaults, chutes and similar
areas adjoining the Land, now or hereafter levied or assessed or
imposed against the Property or any part thereof (the "Taxes"), not
paid from the Escrow Fund, all ground rents payable under the Operating
Lease, maintenance charges and similar charges, now or hereafter levied
or assessed or imposed against the Property or any part thereof (the
"Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to
Lender, promptly upon Lender's request, evidence satisfactory to Lender
that the Taxes, Other Charges and utility service charges have been so
paid or are not then delinquent. 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 Property. Except to
the extent sums sufficient to pay all Taxes and Other Charges have been
deposited with Lender in accordance with the terms of this Security
Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall
become delinquent.
(b) 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 of the
Taxes, provided that (i) no Event of Default has occurred and is
continuing under the Note, this Security Instrument or any of the Other
Security Documents, (ii) Borrower is permitted to do so under the
provisions of any other mortgage, deed of trust or deed to secure debt
affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from the Loan Parties and from the Property or
Borrower shall have paid all of the Taxes under protest, (iv) 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, (v) neither the Property nor
any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, cancelled or lost, and (vi) Borrower shall have
deposited with Lender adequate reserves for the payment of the Taxes,
together with all interest and penalties thereon, unless Borrower has
paid all of the Taxes under protest, or Borrower shall have furnished
the security as may be required in the proceeding, or as may be
reasonably requested by Lender to insure the payment of any contested
Taxes, together with all interest and penalties thereon, taking into
consideration the amount in the Escrow Fund available for payment of
Taxes.
Section 3.5 ESCROW FUND. In addition to the initial deposits with
respect to Taxes and, if applicable, Insurance Premiums made by Borrower to
Lender on the date hereof to be held by Lender in escrow, Borrower shall pay, or
shall cause to be paid, to Lender on the tenth day of each
14
19
calendar month (a) one-twelfth of an amount which would be sufficient to pay the
Taxes payable, or reasonably estimated by Lender to be payable, during the next
ensuing twelve (12) months and (b) at the option of Lender, if the liability or
casualty Policy maintained by Borrower covering the Property shall not
constitute an approved blanket or umbrella Policy pursuant to Subsection 3.3(c)
hereof, or Lender shall require Borrower to obtain a separate Policy pursuant to
Subsection 3.3(c) hereof, one-twelfth of an amount which would be sufficient to
pay the Insurance Premiums due for the renewal of the coverage afforded by the
Policies upon the expiration thereof (the amounts in (a) and (b) above shall be
called the "Escrow Fund"). In the event Lender shall elect to collect payments
in escrow for Insurance Premiums, Borrower shall pay to Lender an initial
deposit to be determined by Lender, in its sole discretion, to increase the
amounts in the Escrow Fund to an amount which, together with anticipated monthly
escrow payments, shall be sufficient to pay all Insurance Premiums and Taxes as
they become due. Borrower agrees to notify Lender immediately of any changes to
the amounts, schedules and instructions for payment of any Taxes and Insurance
Premiums of which it has or obtains knowledge and authorizes Lender or its agent
to obtain the bills for Taxes directly from the appropriate taxing authority.
The 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. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payment of such Taxes and
Insurance Premiums. If the amount of the Escrow Fund shall exceed the amounts
due for Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof,
Lender shall, in its discretion, return any excess to Borrower or credit such
excess against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand,
an amount which Lender shall reasonably estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Lender. Unless otherwise required by
applicable state or federal law, no earnings or interest on the Escrow Fund
shall be payable to the Loan Parties.
Section 3.6 CONDEMNATION. The Loan Parties shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding affecting the Property and shall deliver to Lender copies of
any and all papers served in connection with 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), and whether or not any award or
payment made in any condemnation or eminent domain proceeding affecting the
Property (an "Award") is made available to the Loan Parties for Restoration in
accordance with Section 3.7, Borrower shall continue to pay the Debt at the time
and in the manner provided for its payment in the Note and in this Security
Instrument and the Debt shall not be reduced until any 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. The Loan Parties shall cause the Award made in any
condemnation or eminent domain proceeding, which is payable to the Loan Parties,
to be paid directly to Lender. Lender may apply any Award to the reduction or
discharge of the Debt whether or not then due and payable. In the event that the
Property or any portion thereof is taken by any condemning authority, Borrower
shall promptly (i) proceed to restore,
15
20
repair, replace or rebuild the Property or (ii) cause the Property to be
restored, repaired, replaced or rebuilt, in a workmanlike manner to the extent
practicable to be of at least equal value and substantially the same character
as prior to such condemnation or eminent domain proceeding (the "Condemnation
Restoration"; the Condemnation Restoration and the Casualty Restoration are
collectively hereinafter referred to as the "Restoration"). 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.
Section 3.7 RESTORATION. The following provisions shall apply in
connection with the Restoration of the Property:
(a) If the Net Proceeds (defined below) shall be less
than$150,000.00 and the costs of completing the Restoration shall be
less than $150,000.00, the Net Proceeds will be disbursed by Lender to
Borrower upon receipt, provided that all of the conditions set forth in
Subsection 3.7(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
Security Instrument.
(b) If the Net Proceeds are equal to or greater than
$150,000.00 or the costs of completing the Restoration are equal to or
greater than $150,000.00, Lender shall make the Net Proceeds available
for the Restoration in accordance with the provisions of this Section
3.7(b). The term "Net Proceeds" for the purposes of this Section shall
mean: (1) the net amount of all insurance proceeds received by Lender
pursuant to Sections 3.3(a)(i), (iv), (vi), (vii), (viii) and, as
applicable, (xi) of this Security Instrument as a result of such damage
or destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable legal fees), if any, in
collecting same ("Insurance Proceeds") or (2) the net amount of the
Award received by Lender, after deduction of its reasonable costs and
expenses (including, but not limited to, reasonable legal fees), if
any, in collecting same ("Condemnation Proceeds"), whichever the case
may be.
(i) The Net Proceeds shall be made available to
Borrower for the Restoration provided that each of the
following conditions are met:
(A) no Event of Default shall have occurred
and be continuing under the Note, this Security
Instrument or any of the Other Security Documents;
(B) (1) in the event the Net Proceeds are
Insurance Proceeds, less than fifty percent (50%) of
the total floor area of the Improvements 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
Property has been taken, such land is located along
the perimeter or periphery of the Property, no
portion of the Improvements is located on such land
and such taking does not materially impair the
existing access to the Property;
16
21
(C) Intentionally omitted;
(D) Borrower shall commence the Restoration
as soon as reasonably practicable (but in no event
later than thirty (30) days after such damage,
destruction or taking occurs) and shall diligently
pursue the same to satisfactory completion;
(E) Lender shall be satisfied that any
operating deficits which will be incurred with
respect to the Property as a result of the occurrence
of any such fire or other casualty or taking will be
covered out of (1) the Net Proceeds, (2) the
insurance coverage referred to in Subsection
3.3(a)(iii), or (3) by other funds of Borrower;
(F) Lender shall be satisfied that, upon the
completion of the Restoration, the gross cash flow
and the net cash flow of the Property will be
restored to a level sufficient to cover all carrying
costs and operating expenses of the Property,
including, without limitation, debt service on the
Note at a coverage ratio (after deducting all
required reserves as required by Lender from net
operating income) of at least 1.10 to 1.0, which
coverage ratio shall be determined by Lender in its
sole and absolute discretion on the basis of the
Applicable Interest Rate (as defined in the Note);
(G) Lender shall be satisfied that the
Restoration will be completed on or before the
earliest to occur of (1) six (6) months prior to the
Maturity Date (as defined in the Note), (2) eighteen
(18) months after the occurrence of such fire or
other casualty or taking, (3) the date required for
such completion pursuant to the Franchise Agreement
or (4) 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 taking;
(H) Borrower shall execute and deliver to
Lender a completion guaranty in form and substance
satisfactory to Lender and its counsel pursuant to
the provisions of which Borrower shall guaranty to
Lender the lien-free completion by Borrower of the
Restoration in accordance with the provisions of this
Subsection 3.7(b);
(I) the Property and the use thereof after
the Restoration will be in compliance with and
permitted under all applicable zoning laws,
ordinances, rules and regulations;
(J) 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
(defined below)) and in accordance with the terms and
conditions of the Franchise Agreement; and
17
22
(K) the Franchise Agreement is not
terminated as a result of such casualty.
(ii) The Net Proceeds shall be held by Lender and,
until disbursed in accordance with the provisions of this
Subsection 3.7(b), shall constitute additional security for
the Obligations. 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 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
insuring the lien of this Security Instrument.
(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
"Restoration Consultant"). In the event an Event of Default
has occurred and is continuing under the Note, the Security
Instrument or the Other Security Documents, Lender shall have
the right to use 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 Restoration Consultant. All costs and expenses reasonably
incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation,
reasonable legal fees and disbursements and the Restoration
Consultant's fees, shall be paid by Borrower.
(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
Restoration Consultant, minus the Restoration Retainage. The
term "Restoration Retainage" as used in this Subsection 3.7(b)
shall mean an amount equal to 10% of the costs actually
incurred for work in place as part of the Restoration, as
certified by the Restoration Consultant, until such time as
the Restoration Consultant certifies to Lender that Net
Proceeds representing 50% of the required Restoration have
been disbursed. There shall be no Restoration Retainage with
respect to costs actually incurred by Borrower for work in
place in completing the last 50% of the required Restoration.
The Restoration Retainage shall in no event, and
notwithstanding anything to the contrary set forth above in
this Subsection 3.7(b), be less than the amount actually held
back by Borrower from contractors, subcontractors and
materialmen engaged in the Restoration. The Restoration
Retainage shall not be released until the Restoration
Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection
3.7(b) and that all approvals necessary for the
18
23
re-occupancy and use of the Property have been obtained from
all appropriate governmental and quasi-governmental
authorities, and Lender receives evidence reasonably
satisfactory to Lender that the costs of the Restoration have
been paid in full or will be paid in full out of the
Restoration Retainage, provided, however, that Lender will
release the portion of the Restoration Retainage being held
with respect to any contractor, subcontractor or materialman
engaged in the Restoration as of the date upon which the
Restoration 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, and 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 insuring the lien of this
Security Instrument. If required by Lender, the release of any
such portion of the Restoration Retainage shall be approved by
the surety company, if any, which has issued a payment or
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 reasonable
opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Restoration Consultant to
be incurred in connection with the completion of the
Restoration, Borrower shall deposit the deficiency (the "Net
Proceeds Deficiency") in immediately available funds 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 Subsection
3.7(b) shall constitute additional security for the
Obligations.
(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 Restoration Consultant
certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 3.7(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 Subsection 3.7(b)(vii) may be retained and applied
by Lender toward the payment of the Debt whether or not then due and
payable in such order, priority and proportions as Lender in its
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. If Lender shall receive
and retain Net Proceeds, the lien of this Security Instrument shall be
reduced only by the amount thereof received and retained by Lender and
actually applied by Lender in reduction of the Debt.
19
24
Section 3.8 LEASES AND RENTS. Upon request, the Loan Parties shall
furnish Lender with executed copies of all Leases. In addition, all renewals of
Leases and all proposed future Leases shall provide for rental rates and terms
comparable to existing local market rates and terms and shall be arms-length
transactions with bona fide, independent third party tenants. Any proposed
future Major Lease (defined below) and renewals of existing Major Leases, if
any, shall be subject to the prior approval of Lender and its counsel, at
Borrower's expense. Any proposed future Major Lease or renewal of any existing
Major Lease that has not been approved by Lender and its counsel shall be void
and of no force and effect. All future Leases shall provide that they are
subordinate to this Security Instrument and that the lessee agrees to attorn to
Lender. The Loan Parties (i) shall observe and perform all the obligations
imposed upon the lessor under the Leases (except that with respect to the
Operating Lease, the Operating Tenant shall observe and perform all of the
obligations imposed upon lessee) and shall not do or permit to be done anything
to impair the value of any of the Leases as security for the Debt; (ii) shall
promptly send copies to Lender of all notices of default which the Loan Parties
shall send or receive thereunder; (iii) shall enforce all of the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed, excluding the Operating Lease; provided,
however, that the Loan Parties shall not be entitled to terminate a Major Lease
without the prior written consent of Lender; (iv) shall not collect any of the
Rents more than one (1) month in advance; (v) shall not execute any other
assignment of the lessor's interest in any of the Leases or the Rents; (vi)
shall not alter, modify or change the financial or other material terms of any
Major Leases without the prior written consent of Lender, or cancel or terminate
any Major Lease or accept a surrender thereof or convey or transfer or suffer or
permit a conveyance or transfer of the Land or of any interest therein so as to
effect a merger of the estates and rights of or a termination or diminution of
the obligations of, lessees thereunder; (vii) shall not alter, modify or change
the terms of any guaranty, letter of credit or other credit support with respect
to any of the Major Leases (the "Lease Guaranty") or cancel or terminate such
Lease Guaranty without the prior written consent of Lender; and (viii) shall not
consent to any assignment of or subletting under any Major Leases not in
accordance with their terms (or with respect to the Operating Lease, assign its
interest thereunder or sublet any interest thereunder unless in accordance with
the terms of this Section 3.8), without the prior written consent of Lender. The
term "Major Lease" shall mean (i) the Operating Lease and (ii) any Lease which
(A) provides for rental income representing ten percent (10%) or more of the
total income for the Property or (B) covers ten percent (10%) or more of the
total space at the Property, in the aggregate.
Section 3.9 MAINTENANCE AND USE OF PROPERTY. Borrower shall cause the
Property to be maintained in a good and safe condition and repair and in the
condition required under the Franchise Agreement. The Improvements and the
Personal Property shall not be removed, demolished or materially altered (except
for normal replacement of the Personal Property) without the consent of Lender.
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. The Loan Parties shall not
initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or defining the uses which may be made of the Property or any part
thereof. If under applicable zoning provisions the use of all or
20
25
any portion of the Property is or shall become a nonconforming use, the Loan
Parties will not cause or permit the nonconforming use to be discontinued or the
nonconforming Improvement to be abandoned without the express written consent of
Lender.
Section 3.10 WASTE. The Loan Parties shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. The Loan Parties will not, without the
prior written consent of Lender, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of the Land, regardless of the depth thereof or the method of mining
or extraction thereof.
Section 3.11 COMPLIANCE WITH LAWS.
(a) The Loan Parties shall promptly comply with all Applicable
Laws (defined in Section 20.1) affecting the Property, or the use
thereof, including all Environmental Laws.
(b) Borrower shall from time to time, upon Lender's reasonable
request, provide Lender with evidence reasonably satisfactory to Lender
that the Property complies with all Applicable Laws or is exempt from
compliance with Applicable Laws.
(c) Notwithstanding any provisions set forth herein or in any
document regarding Lender's approval of alterations of the Property,
the Loan Parties shall not alter the Property in any manner which would
materially increase the Loan Parties' responsibilities for compliance
with Applicable Laws without the prior written approval of Lender.
Lender's approval of the plans, specifications, or working drawings for
alterations of the Property shall create no responsibility or liability
on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to
tenant improvements constructed by the Loan Parties or by any of its
tenants. Lender may condition any such approval upon receipt of a
certificate of compliance with Applicable Laws from an independent
architect, engineer, or other person acceptable to Lender.
(d) The Loan Parties shall give prompt notice to Lender of the
receipt by the Loan Parties of any notice related to a violation of any
Applicable Laws and of the commencement of any proceedings or
investigations which relate to compliance with Applicable Laws.
(e) 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
Applicable Laws affecting the Property, provided that (i) no Event of
Default has occurred and is continuing under the Note, this Security
Instrument or any of the Other Security Documents; (ii) Borrower is
permitted to do so under the provisions of any other mortgage, deed of
trust or deed to secure debt affecting the Property; (iii) such
proceeding shall be permitted under and be conducted in accordance with
the provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default thereunder; (iv)
neither the Property, any part thereof or interest therein, any of the
21
26
tenants or occupants thereof, nor the Loan Parties shall be affected in
any material adverse way as a result of initiating or prosecuting such
proceeding; (v) either non-compliance with the Applicable Laws shall
not impose civil or criminal liability on Borrower or Lender or
Borrower shall comply with the Applicable Laws during the pendency of
the proceeding; (vi) Borrower shall have furnished the security as may
be required in the proceeding or by Lender to ensure compliance by
Borrower with the Applicable Laws and (vii) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.
Section 3.12 BOOKS AND RECORDS.
(a) The Loan Parties and any Guarantors (defined in Subsection
10.1(e)) and Indemnitor(s) (defined in Section 13.4), if any, shall
keep adequate books and records of account in accordance with generally
accepted accounting principals ("GAAP") or the Uniform System of
Accounts for the Lodging Industry as approved by the American Hotel and
Motel Association (as in effect from time to time) (the "Uniform System
of Accounts"), or in accordance with other methods acceptable to Lender
in its sole discretion, consistently applied and shall furnish to
Lender:
(i) in the event all leases at the Property
(excluding the Operating Lease) in the aggregate (A) provide
for rental income representing ten percent (10%) or more of
the total income for the Property or (B) cover ten percent
(10%) or more of the total space at the Property, quarterly
certified rent rolls signed and dated by the Loan Parties,
detailing the names of all tenants of the Improvements under
any Major Lease, the portion of Improvements occupied by each
tenant, the base rent and any other charges payable under each
Lease and the term of each Lease, including the expiration
date, the extent to which any tenant is in default under any
Lease, and any other information as is reasonably required by
Lender (the "Rent Rolls"), within twenty (20) days after the
end of each calendar quarter; provided, however, that Lender
may demand at any time that the Loan Parties furnish to Lender
certified Rent Rolls for any given month(s);
(ii) quarterly operating statements of the Property,
prepared and certified by the respective Loan Parties in the
form reasonably required by Lender, detailing the revenues
received, the expenses incurred and the net operating income
before and after debt service (principal and interest) and
major capital improvements for that quarter and containing
appropriate year to date information, within thirty (30) days
after the end of each fiscal quarter; provided, however, that
with respect to the fourth fiscal quarter only, said
statements shall be furnished to Lender within forty-five (45)
days after the end of the said quarter;
(iii) a quarterly comparison of the budgeted total
income and total expenses to the actual total income and total
expenses for the subject quarter with a detailed explanation
of any material variances reasonably determined by Lender
between budgeted and actual amounts for such quarter and a
report of occupancy for the subject quarter including an
average daily room rate, occupancy rates and room revenues,
within thirty (30) days after the end of each fiscal quarter;
provided,
22
27
however, that with respect to the fourth fiscal quarter only,
said comparison shall be furnished to Lender within forty-five
(45) days after the end of the said quarter;
(iv) an annual comparison of the budgeted total
income and total expenses to the actual total income and total
expenses with a detailed explanation of any material variances
reasonably determined by Lender between budgeted and actual
amounts for such year and an annual occupancy report including
an average daily room rate, occupancy rates and room revenues,
within ninety (90) days after the close of each fiscal year of
the Loan Parties;
(v) an annual operating statement of the Property
detailing the total revenues received, total expenses
incurred, total cost of all capital improvements, total debt
service and total cash flow, to be prepared and certified by
the respective Loan Parties in the form reasonably required by
Lender, or if required (a) by Lender after the occurrence of
an Event of Default under the Note, this Security Instrument
or the Other Security Documents or (b) for Lender to comply
with Regulation S-X of the federal securities laws, an audited
annual operating statement prepared and certified by an
independent certified public accountant acceptable to Lender,
within ninety (90) days after the close of each fiscal year of
the applicable Loan Parties;
(vi) an annual balance sheet and profit and loss
statement of the Loan Parties, any Guarantors and any
Indemnitor(s) in the form reasonably required by Lender,
prepared and certified by the respective the Loan Parties,
Guarantors and/or Indemnitor(s), or if required (a) by Lender
after the occurrence of an Event of Default under the Note,
this Security Instrument or the Other Security Documents or
(b) for Lender to comply with Regulation S-X of the federal
securities laws, audited financial statements prepared by an
independent certified public accountant acceptable to Lender,
within ninety (90) days after the close of each fiscal year of
the applicable Loan Party, Guarantors and Indemnitor(s), as
the case may be; and
(vii) an annual operating budget presented on a
monthly basis consistent with the annual operating statement
described above for the Property, including cash flow
projections for the upcoming year, and all known proposed
capital replacements and improvements as prepared and
delivered by Franchisor (defined below) pursuant to the
Management Agreement, but in no event after the start of each
fiscal year.
(b) Upon request from Lender, the Loan Parties, any Guarantor
and any Indemnitor shall furnish in a timely manner to Lender:
(i) a property management report containing any such
information requested by Lender from time to time, certified
by the respective Loan Parties (or an officer, general
partner, member or principal of such Loan Party if such Loan
Party is not an individual) under penalty of perjury to be
true and complete, but no more frequently than quarterly; and
(ii) an accounting of all security deposits held in
connection with any Lease of any part of the Property,
including the name and identification number of the
23
28
accounts in which such security deposits are held, the name
and address of the financial institutions in which such
security deposits are held and the name of the person to
contact at such financial institution, along with any
authority or release necessary for Lender to obtain
information regarding such accounts directly from such
financial institutions.
(c) The Loan Parties, any Guarantor and any Indemnitor shall
furnish Lender with such other additional financial or management
information (including State and Federal tax returns) as may, from time
to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
(d) The Loan Parties, any Guarantor and any Indemnitor shall
furnish to Lender and its agents convenient facilities for the
examination and audit of any such books and records.
(e) Any reports, statements or other information required to
be delivered under this Security Instrument shall be delivered in paper
form and in the event that Lender requires financial statements in
connection with subsection (f) below because the Loan together with any
Affiliated Loans (defined below) equal or exceed 20% of the aggregate
principal amount of all mortgage loans included in a Securitization
(defined below), the Loan Parties shall deliver such reports,
statements and other information (i) on a diskette, and (ii) if
requested by Lender and within the capabilities of the applicable Loan
Party's data systems without change or modification thereto, in
electronic form and prepared using Microsoft Word for Windows or
WordPerfect for Windows files (which files may be prepared using a
spreadsheet program and saved as word processing files).
(f) If requested by Lender, the Loan Parties shall provide
Lender, promptly upon request, with the following financial statements
if, at the time a preliminary or final prospectus, prospectus
supplement, private placement memorandum, offering circular or other
offering document (the "Disclosure Document") is being prepared for a
Securitization, it is expected that the principal amount of the Loan
together with any Affiliated Loans at the time of Securitization may,
or if the principal amount of the Loan together with any Affiliated
Loans at any time during which the Loan and any Affiliated Loans are
included in a Securitization does, equal or exceed 20% of the aggregate
principal amount of all mortgage loans included or expected to be
included, as applicable, in the Securitization:
(i) A balance sheet with respect to the Property for
the two most recent fiscal years, meeting the requirements of
Section 210.3-01 of Regulation S-X of the Securities Act and
statements of income and statements of cash flows with respect
to the Property for the three most recent fiscal years,
meeting the requirements of Section 210.3-02 of Regulation
S-X, and, to the extent that such balance sheet is more than
135 days old as of the date of the document in which such
financial statements are included, interim financial
statements of the Property meeting the requirements of Section
210.3-01 and 210.3-02 of Regulation S-X (all of such financial
statements, collectively, the "Standard Statements");
provided, however, that with respect to a Property (other than
properties that are hotels, nursing homes, or other properties
that would be deemed to constitute a business and not real
estate
24
29
under Regulation S-X or other legal requirements) that has
been acquired by the Loan Parties from an unaffiliated third
party (such Property, "Acquired Property"), as to which the
other conditions set forth in Section 210.3-14 of Regulation
S-X for provision of financial statements in accordance with
such Section have been met, in lieu of the Standard Statements
otherwise required by this section, the Loan Parties shall
instead provide the financial statements required by such
Section 210.3-14 of Regulation S-X ("Acquired Property
Statements").
(ii) Not later than 30 days after the end of each
fiscal quarter following the date hereof, a balance sheet of
the Property as of the end of such fiscal quarter, meeting the
requirements of Section 210.3-01 of Regulation S-X, and
statements of income and statements of cash flows of the
Property for the period commencing following the last day of
the most recent fiscal year and ending on the date of such
balance sheet and for the corresponding period of the most
recent fiscal year, meeting the requirements of Section
210.3-02 of Regulation S-X (provided, that if for such
corresponding period of the most recent fiscal year Acquired
Property Statements were permitted to be provided hereunder
pursuant to subsection (i) above, the Loan Parties shall
instead provide Acquired Property Statements for such
corresponding period).
(iii) Not later than 75 days after the end of each
fiscal year following the date hereof, a balance sheet of the
Property as of the end of such fiscal year, meeting the
requirements of Section 210.3-01 of Regulation S-X, and
statements of income and statements of cash flows of the
Property for such fiscal year, meeting the requirements of
Section 210.3-02 of Regulation S-X.
(iv) Within ten business days after notice from the
Lender in connection with the Securitization of this Loan,
such additional financial statements, such that, as of the
date (each an "Offering Document Date") of each Disclosure
Document, the Loan Parties shall have provided Lender with all
financial statements as described in subsection (f)(i) above;
provided that the fiscal year and interim periods for which
such financial statements shall be provided shall be
determined as of such Offering Document Date.
(g) If requested by Lender, the Loan Parties shall provide
Lender, promptly upon request, with summaries of the financial
statements referred to in Section 3.12(f) hereof if, at the time a
Disclosure Document is being prepared for a Securitization, it is
expected that the principal amount of the Loan and any Affiliated Loans
at the time of Securitization may, or if the principal amount of the
Loan and any Affiliated Loans at any time during which the Loan and any
Affiliated Loans are included in a Securitization does, equal or exceed
10% (but is less than 20%) of the aggregate principal amount of all
mortgage loans included or expected to be included, as applicable, in a
Securitization. Such summaries shall meet the requirements for
"summarized financial information," as defined in Section 210.1-02(bb)
of Regulation S-X, or such other requirements as may be determined to
be necessary or appropriate by Lender.
25
30
(h) All financial statements provided by the Loan Parties
hereunder pursuant to Section 3.12(f) and (g) hereof shall be prepared
in accordance with GAAP, and shall meet the requirements of Regulation
S-X and other applicable legal requirements. All financial statements
referred to in Subsections 3.12(f)(i) and 3.12(f)(iii) above shall be,
if required by Lender, audited by independent accountants of the Loan
Parties acceptable to Lender in accordance with Regulation S-X and all
other applicable legal requirements, shall be accompanied by the
manually executed report of the independent accountants thereon, which
report shall meet the requirements of Regulation S-X and all other
applicable legal requirements, and shall be further accompanied by a
manually executed written consent of the independent accountants, in
form and substance acceptable to Lender, to the inclusion of such
financial statements in any Disclosure Document and any Exchange Act
Filing and to the use of the name of such independent accountants and
the reference to such independent accountants as "experts" in any
Disclosure Document and Exchange Act Filing (as defined below), all of
which shall be provided at the same time as the related financial
statements are required to be provided. All financial statements
(audited or unaudited) provided by the Loan Parties under this Section
3.12 shall be certified by the chief financial officer or
administrative member of the respective Loan Parties, which
certification shall state that such financial statements meet the
requirements set forth in the first sentence of this Section 3.12(h).
(i) If requested by Lender, the Loan Parties shall provide
Lender, promptly upon request, with any other or additional financial
statements, or financial, statistical or operating information, as
Lender shall determine to be required pursuant to Regulation S-X or any
amendment, modification or replacement thereto or other legal
requirements in connection with any Disclosure Document or any filing
under or pursuant to the Exchange Act in connection with or relating to
a Securitization (hereinafter an "Exchange Act Filing") or as shall
otherwise be reasonably requested by the Lender.
(j) In the event Lender determines, in connection with a
Securitization, that the financial statements required in order to
comply with Regulation S-X or other legal requirements are other than
as provided herein, then notwithstanding the provisions of Section
3.12(f), (g) and (h) hereof, Lender may request, and the Loan Parties
shall promptly provide, such combination of Acquired Property Statement
and/or Standard Statements or such other financial statements as Lender
determines to be necessary or appropriate for such compliance.
(k) The term "Affiliated Loans" shall mean a loan made by
Lender to a parent, subsidiary or such other entity affiliated with the
Loan Parties any Indemnitor or any Guarantor. The term "Securitization"
shall mean the sale or transfer of the whole Loan, the granting of
Participations, or the issuance of mortgage pass-through certificates
or other Securities evidencing a beneficial interest in a rated or
unrated public offering or private placement.
Section 3.13 PAYMENT FOR LABOR AND MATERIALS. Borrower will
promptly pay or cause to be paid when due all bills and costs for
labor, materials, and specifically fabricated materials incurred in
connection with the Property and never permit or cause to exist in
respect of the Property or any part thereof any lien or security
interest, even though inferior to the liens and the security interests
hereof, and in any event never permit or cause to be created or exist
in respect of
26
31
the Property or any part thereof any other or additional lien or security
interest other than the liens or security interests hereof, except for the
Permitted Exceptions (defined below).
Section 3.14 PERFORMANCE OF OTHER AGREEMENTS. Each Loan Party shall
observe and perform each and every term to be observed or performed by such Loan
Party pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Property, or given by such Loan Party to Lender for the
purpose of further securing an Obligation and any amendments, modifications or
changes thereto.
Section 3.15 CHANGE OF NAME, IDENTITY OR STRUCTURE. Except as may be
permitted under Article 8 hereof, the Loan Parties will not change their
respective name, identity (including its trade name or names) or, if not an
individual, their respective corporate, partnership or other structure without
notifying Lender of such change in writing at least thirty (30) days prior to
the effective date of such change and, in the case of a change in their
respective structure, without first obtaining the prior written consent of
Lender.
Section 3.16 EXISTENCE. The Loan Parties will continuously maintain
their respective (a) existence and shall not dissolve or permit their
dissolution, (b) rights to do business in the state where the Property is
located and (c) franchises and trade names, if any.
Section 3.17 MANAGEMENT AND FRANCHISE AGREEMENTS.
(a) The Improvements are operated under the terms and
conditions of that certain Management Agreement dated ________________
between ________________, as assigned to Operating Tenant, and Promus
Hotels, Inc., a Delaware corporation (the "Franchisor"), as
successor-in-interest to Embassy Suites, Inc., a Delaware corporation
(hereinafter, together with any renewals or replacements thereof, being
referred to as the "Management Agreement"), which Management Agreement
has been approved by Lender. Operating Tenant shall (i) diligently
perform, observe and enforce all of the terms, covenants and conditions
of the Management Agreement on the part of Operating Tenant to be
performed, observed and enforced to the end that all things shall be
done which are necessary to keep unimpaired the rights of Operating
Tenant under the Management Agreement and (ii) promptly notify Lender
of the giving of any notice to Operating Tenant of any default by
Operating Tenant in the performance or observance of any of the terms,
covenants or conditions of the Management Agreement on the part of
Operating Tenant to be performed and observed and deliver to Lender a
true copy of each such notice. Operating Tenant shall not surrender the
Management Agreement, consent to the assignment by the Franchisor of
its interest under the Management Agreement, or terminate or cancel the
Management Agreement or modify, change, supplement, alter or amend the
Management Agreement, in any respect, either orally or in writing, and
Operating Tenant hereby assigns to Lender as further security for the
payment of the Debt and for the performance and observance of the
terms, covenants and conditions of this Security Instrument, all the
rights, privileges and prerogatives of Operating Tenant to surrender
the Management Agreement or to terminate, cancel, modify, change,
supplement, alter or amend the Management Agreement in any respect, and
any such surrender of the Management Agreement or termination,
cancellation, modification, change, supplement, alteration or amendment
of the Management Agreement without the prior consent of Lender shall
be void and of no force and effect. If Operating
27
32
Tenant shall default in the performance or observance of any material
term, covenant or condition of the Management Agreement on the part of
Operating Tenant to be performed or observed, then, without limiting
the generality of the other provisions of this Security Instrument, and
without waiving or releasing Operating Tenant from any of its
obligations hereunder, Lender shall have the right, but shall be under
no obligation, to pay any sums and to perform any act or take any
action as may be appropriate to cause all the terms, covenants and
conditions of the Management Agreement on the part of Operating Tenant
to be performed or observed to be promptly performed or observed on
behalf of Operating Tenant, to the end that the rights of Operating
Tenant in, to and under the Management Agreement shall be kept
unimpaired and free from default. Lender and any person designated by
Lender shall have, and are hereby granted, the right to enter upon the
Property at any time and from time to time for the purpose of taking
any such action. If the Franchisor under the Management Agreement shall
deliver to Lender a copy of any notice sent to Operating Tenant of
default under the Management Agreement, such notice shall constitute
full protection to Lender for any action taken or omitted to be taken
by Lender in good faith, in reliance thereon. Operating Tenant shall
notify Lender if the Franchisor sub-contracts to a third party or an
affiliate any or all of its management responsibilities under the
Management Agreement. Operating Tenant shall, from time to time, use
its best efforts to obtain from the Franchisor under the Management
Agreement such certificates of estoppel with respect to compliance by
Operating Tenant with the terms of the Management Agreement as may be
requested by Lender. Operating Tenant shall exercise each individual
option, if any, to extend or renew the term of the Management Agreement
upon demand by Lender made at any time within one (1) year of the last
day upon which any such option may be exercised, and Operating Tenant
expressly authorizes and appoints Lender its attorney-in-fact to
exercise any such option to renew or extend the term of the Management
Agreement in the name of and upon behalf of Operating Tenant, which
power of attorney shall be irrevocable and shall be deemed to be
coupled with an interest; provided, however, Lender agrees only to
exercise said right upon the occurrence and during the continuance of
an Event of Default under the Note, this Security Instrument or the
Other Security Documents. Any sums expended by Lender pursuant to this
paragraph shall bear interest at the Default Rate (defined in the Note)
from the date such cost is incurred to the date of payment to Lender,
shall be deemed to constitute a portion of the Debt, shall be secured
by the lien of this Security Instrument and the other Loan Documents
and shall be immediately due and payable upon demand by Lender
therefor.
(b) Without limitation of the foregoing, if (i) the Management
Agreement expires pursuant to the terms of the Management Agreement,
(ii) Franchisor terminates the Management Agreement pursuant to the
terms of the Management Agreement, or (iii) the Management Agreement is
otherwise terminated pursuant to the terms of that certain Conditional
Assignment of Management Agreement dated as of the date hereof among,
the Loan Parties, Lender and Franchisor, then Lender, at its option,
may require Borrower or Operating Tenant, as applicable, to engage a
bona-fide independent third party management agent approved by Lender
and, provided no Event of Default has occurred and is continuing,
Borrower (the "New Manager") to manage the Property. The New Manager
shall be engaged by Borrower or Operating Tenant, as applicable,
pursuant to a written management agreement that complies with the terms
hereof and is otherwise satisfactory to Lender and, provided no Event
of Default has occurred and is continuing, Borrower, and the New
28
33
Manager and Borrower or Operating Tenant, as applicable, shall execute
a Conditional Assignment of Management Agreement in the form then used
by Lender.
(c) The Improvements shall be operated under the terms and
conditions of that certain Embassy Suites(R) License Agreement (the
"License Agreement") dated ________ entered into between Franchisor and
_______________ ("_______"), as assigned to Operating Tenant and that
certain System 21(TM) Agreement dated __________ entered into between
Franchisor and ____________, as assigned to Operating Tenant (the
"Software Agreement"; the License Agreement and the Software Agreement,
together with any renewals or replacements thereof, shall collectively
be referred to herein as the "Franchise Agreement"). Operating Tenant
shall (i) pay all sums required to be paid by Operating Tenant under
the Franchise Agreement, (ii) diligently perform, observe and enforce
all of the terms, covenants and conditions of the Franchise Agreement
on the part of Operating Tenant to be performed, observed and enforced
to the end that all things shall be done which are necessary to keep
unimpaired the rights of Operating Tenant under the Franchise
Agreement, (iii) promptly notify Lender of the giving of any notice to
Operating Tenant of any default by Operating Tenant in the performance
or observance of any of the terms, covenants or conditions of the
Franchise Agreement on the part of Operating Tenant to be performed and
observed and deliver to Lender a true copy of each such notice, and
(iv) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditure plan, budget, notice, report and
estimate received by it under the Franchise Agreement. Operating Tenant
shall not, without the prior consent of the Lender, surrender the
Franchise Agreement or terminate or cancel the Franchise Agreement or
modify, change, supplement, alter or amend the Franchise Agreement, in
any respect, either orally or in writing, and Operating Tenant hereby
assigns to Lender as further security for the payment of the Debt and
for the performance and observance of the terms, covenants and
conditions of this Security Instrument, all the rights, privileges and
prerogatives of Operating Tenant to surrender the Franchise Agreement
or to terminate, cancel, modify, change, supplement, alter or amend the
Franchise Agreement in any respect, and any such surrender of the
Franchise Agreement or termination, cancellation, modification, change,
supplement, alteration or amendment of the Franchise Agreement without
the prior consent of Lender shall be void and of no force and effect.
If Operating Tenant shall default in the performance or observance of
any material term, covenant or condition of the Franchise Agreement on
the part of Operating Tenant to be performed or observed, then, without
limiting the generality of the other provisions of this Security
Instrument, and without waiving or releasing Operating Tenant from any
of its obligations hereunder, Lender shall have the right, but shall be
under no obligation, to pay any sums and to perform any act or take any
action as may be appropriate to cause all the terms, covenants and
conditions of the Franchise Agreement on the part of Operating Tenant
to be performed or observed to be promptly performed or observed on
behalf of Operating Tenant, to the end that the rights of Operating
Tenant in, to and under the Franchise Agreement shall be kept
unimpaired and free from default. Lender and any person designated by
Lender shall have, and are hereby granted, the right to enter upon the
Property at any time and from time to time for the purpose of taking
any such action. If Franchisor shall deliver to Lender a copy of any
notice sent to Operating Tenant of default under the Franchise
Agreement, such notice shall constitute full protection to Lender for
any action taken or omitted to be taken by Lender in good faith, in
reliance thereon. Operating Tenant shall, from time to time, use its
best efforts to obtain from Franchisor such certificates of estoppel
with respect to compliance by
29
34
Operating Tenant with the terms of the Franchise Agreement as may be
requested by Lender. Operating Tenant shall exercise each individual
option, if any, to extend or renew the term of the Franchise Agreement
upon demand by Lender made at any time within one (1) year of the last
day upon which any such option may be exercised, and Operating Tenant
expressly authorizes and appoints Lender as its attorney- in-fact to
exercise any such option to renew or extend the term of the Franchise
Agreement in the name of and upon behalf of Operating Tenant, which
power of attorney shall be irrevocable and shall be deemed to be
coupled with an interest; provided, however, Lender agrees only to
exercise said right upon the occurrence and during the continuance of
an Event of Default under the Note, this Security Instrument or the
Other Security Documents. Any sums expended by Lender pursuant to this
paragraph shall bear interest at the Default Rate from the date such
cost is incurred to the date of payment to Lender, shall be deemed to
constitute a portion of the Debt, shall be secured by the lien of this
Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section 3.18 PRINCIPAL PLACE OF BUSINESS. The Loan Parties shall not
change their respective principal places of business or chief executive offices
set forth in Subsection 5.18 below unless (i) the Loan Parties provide written
notice of said change to Lender and (ii) the Loan Parties promptly execute and
deliver additional financing statements, security agreements and other
instruments which may be necessary to effectively evidence or perfect Lender's
security interest in the Property as a result of such change of principal place
of business.
Section 3.19 TRADED SHARES. The Traded Entity (hereinafter
defined) shall cause its issued and outstanding shares of stock to be listed for
trading on the New York Stock Exchange or such other nationally recognized stock
exchange throughout the term of the Loan.
Section 3.20 NON-CONSOLIDATION OPINION. The Loan Parties have complied
and will comply with each of the assumptions made with respect to it in that
certain substantive non-consolidation opinion letter, dated the date hereof,
and the certifications contained in any certificate referred to therein,
delivered in connection with the Loan and any subsequent non-consolidation
opinion delivered in accordance with the terms and conditions of this Security
Instrument or the Cooperation Letter, including, but not limited to, any
exhibits attached thereto (the Non-Consolidation Opinion"). Each entity other
than the Loan Parties with respect to which an assumption is made in the
Non-Consolidation Opinion has complied and will comply with each of the
assumptions made with respect to it in the Non-Consolidation Opinion.
Section 3.21 TERMINATION OF OPERATING LEASE. Upon Lender's taking title
to the Property without terminating Operating Tenant's interest in the Operating
Lease, whether by foreclosure of the Security Instrument or acceptance of a deed
in lieu of foreclosure, power of sale or otherwise, Operating Tenant may, upon
sixty (60) days written notice to Lender, terminate the Operating Lease,
provided, however, Operating Tenant shall fully cooperate in transferring its
responsibility for the management of the Property to Lender or to a third party
designated by Lender.
30
35
Article 4 - SPECIAL COVENANTS
The Loan Parties each covenant and agree that:
Section 4.1 PROPERTY USE. The Property shall be used only for a full
service hotel, and for no other use without the prior written consent of Lender.
Section 4.2 SINGLE PURPOSE ENTITY. Each of the Loan Parties covenant
and agree that it has not and shall not and agrees that its general partner(s),
if such Loan Party is a partnership, or its managing member(s), if such Loan
Party is a multiple member limited liability company (disregarding any special
member) (in each case, "Principal"), has not and shall not:
(i) with respect to any Loan Party, engage in any business or
activity other than the acquisition, development, ownership, operation,
leasing, managing and maintenance of the Property, entering into the
Loan, and refinancing the Property in connection with a permitted
repayment of the Loan, and activities incidental thereto and with
respect to Principal, engage in any business or activity other than the
ownership of its interest in any Loan Party, and activities incidental
thereto including the management of the Property;
(ii) (a) with respect to Borrower, acquire or own any material
assets other than (i) the Property, and (ii) such incidental Personal
Property as may be beneficial or necessary for the operation of the
Property, (b) with respect to Operating Tenant, acquire or own any
material assets other than (i) its leasehold in the Property and (ii)
such incidental Personal Property as may be beneficial or necessary for
the operation of the Property and (c) and with respect to Principal,
acquire or own any material asset other than its interest in Borrower
or Operating Tenant, as applicable;
(iii) merge into or consolidate with any person or entity or
dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change
its legal structure;
(iv) (i) fail to observe its organizational formalities or
preserve its existence as an entity duly organized, validly existing
and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, and qualification to do business in
the state where the Property is located or (ii) without the prior
written consent of Lender, amend, modify, terminate or fail to comply
with the provisions of such Loan Party's Partnership Agreement,
Articles or Certificate of Incorporation, Articles of Organization or
similar organizational documents, as the case may be, or of Principal's
Regulations, Partnership Agreement, Articles of Organization or similar
organizational documents, as the case may be, whichever is applicable;
(v) with respect to such Loan Party, own any subsidiary or
make any investment in, any person or entity without the consent of
Lender, and with respect to Principal, own any subsidiary or make any
investment in, any person or entity (other than interests in such Loan
Party owned as of the date hereof or obtained subsequent to the date
hereof in accordance with the terms of this Security Instrument)
without the consent of Lender;
(vi) except as described in that certain Certificate Regarding
Lessee Bank Accounts attached to the Non-Consolidation Opinion,
commingle its assets with the assets of any of its members, general
partners, affiliates, principals or of any other person or entity,
participate in a cash management system with any other entity or person
or fail to use its own
31
36
separate stationery, invoices and checks. Notwithstanding the
foregoing, any rents payable to Borrower under the Operating Lease
shall be paid directly to Borrower and shall be held by Borrower in
bank accounts separate and apart from any of Borrower's members,
general partners, affiliates, principals or any other person or entity;
(vii) with respect to such Loan Party incur any debt, secured
or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Debt, except for trade payables in the
ordinary course of its business of owning and operating the Property
(which shall include the Permitted Purchase Money Indebtedness (defined
below)), provided that such debt (i) is not evidenced by a note, (ii)
is paid within sixty (60) days of the date incurred, (iii) does not
exceed in the aggregate four percent (4%) of the outstanding principal
balance of the Note and (iv) is payable to trade creditors and in
amounts as are normal and reasonable under the circumstances and with
respect to Principal, incur any debt secured or unsecured, direct or
contingent (including guaranteeing any obligations). The term
"Permitted Purchase Money Indebtedness" shall mean purchase money
indebtedness and equipment financing incurred in connection with the
purchase of telephone equipment, computer equipment, televisions,
audiovisual equipment, copiers, motor vehicles and other equipment
related thereto (the "Purchase Money Property"), provided (A) Lender
has received prior written notification of a Loan Party's intent to
obtain such financing, (B) said financing (x) is subject to
commercially prudent terms and conditions and (y) does not exceed
$100,000.00 in the aggregate at any given time and (C) the Purchase
Money Property is readily replaceable without material interference or
interruption to the operation of the Property as a hotel and
restaurant. Notwithstanding the foregoing, the Permitted Purchase Money
Indebtedness may be increased to $300,000.00 in the aggregate at any
given time upon Lender's consent, which consent shall not be
unreasonably withheld;
(viii) become insolvent and fail to pay its debts and
liabilities (including, as applicable, shared personnel and overhead
expenses) from its assets as the same shall become due;
(ix) (i) fail to maintain its records (including financial
statements), books of account and bank accounts separate and apart from
those of the members, general partners, principals and affiliates of
Borrower or of any Principal, as the case may be, the affiliates of a
member, general partner or principal of Borrower or of any Principal,
as the case may be, and any other person or entity, (ii) permit its
assets or liabilities to be listed as assets or liabilities on the
financial statement of any other entity or person or (iii) include the
assets or liabilities of any other person or entity on its financial
statements. Notwithstanding anything to the contrary contained herein,
each Loan Party's financial position, results of operations and cash
flows may be included in the consolidated financial statements of any
parent in accordance with GAAP, provided, however, that any such
consolidated financial statements shall contain a note indicating that
each Loan Party and its affiliates are separate legal entities and
maintain records, books of account and bank accounts separate and apart
from any other person or entity;
(x) enter into any contract or agreement with any member,
general partner, principal or affiliate of any Loan Party or of any
Principal, as the case may be, Guarantor or Indemnitor, or any member,
general partner, principal or affiliate thereof (other than a
32
37
business management services agreement with an affiliate of Borrower,
provided that (i) such agreement is acceptable to Lender, (ii) the
manager, or equivalent thereof, under such agreement holds itself out
as an agent of the such Loan Party and (iii) the agreement meets the
standards set forth in this subsection (x) following this
parenthetical), except upon terms and conditions that are commercially
reasonable, intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other
than any member, general partner, principal or affiliate of any Loan
Party or of any Principal, as the case may be, Guarantor or Indemnitor,
or any member, general partner, principal or affiliate thereof;
(xi) seek the dissolution or winding up in whole, or in part,
of such Loan Party or of Principal, as the case may be;
(xii) fail to correct any known misunderstandings regarding
the separate identity of such Loan Party or of Principal, as the case
may be, or any member, general partner, principal or affiliate thereof
or any other person;
(xiii) guarantee or become obligated for the debts of any
other entity or person, or hold itself out to be responsible for the
debts of another entity or person;
(xiv) make any loans or advances to any third party, including
any member, general partner, principal or affiliate of any Loan Party
or of any Principal, as the case may be, or any member, general
partner, principal or affiliate thereof, and shall not acquire
obligations or securities of any member, general partner, principal or
affiliate of any Loan Party or any Principal, as the case may be, or
any member, general partner, or affiliate thereof;
(xv) fail to file its own tax returns or be included on the
tax returns of any other person or entity except as required by
applicable law;
(xvi) fail either to hold itself out to the public as a legal
entity separate and distinct from any other entity or person or to
conduct its business solely in its own name or a name franchised or
licensed to it by an entity other than an affiliate of any Loan Party
or of any Principal, as the case may be, and not as a division or part
of any other entity in order not (i) to mislead others as to the
identity with which such other party is transacting business, or (ii)
to suggest that such Loan Party or any Principal, as the case may be,
is responsible for the debts of any third party (including any member,
general partner, principal or affiliate of any Loan Party, or of
Principal, as the case may be, or any member, general partner,
principal or affiliate thereof);
(xvii) fail 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;
(xviii) except for sharing any common logo of the REIT
(defined below), share any common logo with or hold itself out as or be
considered as a department or division of (i) any general partner,
principal, member or affiliate of any Loan Party or of any Principal,
as the
33
38
case may be, (ii) any affiliate of a general partner, principal or
member of any Loan Party or of any Principal, as the case may be, or
(iii) any other person or entity;
(xix) fail to allocate fairly and reasonably any overhead
expenses that are shared with an affiliate, including paying for office
space and services performed by any employee of an affiliate;
(xx) other that the Personal Property purchased in connection
with the Permitted Purchase Money Indebtedness, pledge its assets for
the benefit of any other person or entity, and with respect to the such
Loan Party other than with respect to the Loan;
(xxi) fail to maintain a sufficient number of employees in
light of its contemplated business operations;
(xxii) fail to provide in its (i) articles of organization,
regulations, certificate of formation and/or operating agreement, as
applicable, if it is a limited liability company, (ii) limited
partnership agreement, if it is a limited partnership or (iii)
certificate of incorporation, if it is a corporation, that for so long
as the Loan is outstanding pursuant to the Note and this Security
Instrument, it shall not file or consent to the filing of any petition,
either voluntary or involuntary, to take advantage of any applicable
insolvency, bankruptcy, liquidation or reorganization statute, or make
an assignment for the benefit of creditors without the affirmative vote
of the Independent Manager (defined below) and of all other general
partners/managing members/directors/manager of such Loan Party;
(xxiii) fail to hold its assets in its own name;
(xxiv) if such Loan Party is a corporation, fail to consider
the interests of its creditors in connection with all corporate actions
to the extent permitted by applicable law;
(xxv) except for that certain Guaranty of Recourse Obligations
dated as of the date hereof given by the REIT and FelCor Lodging
Limited Partnership ("FLLP") to Lender, have any of its obligations
guaranteed by an affiliate;
(xxvi) violate or cause to be violated the assumptions made
with respect to such Loan Party and its principals in the
Non-Consolidation Opinion, to Lender and the Rating Agencies in
connection with the Loan;
(xxvii) with respect to Principal and any Loan Party not
having a Principal, fail at any time to have at least one independent
manager (an "Independent Manager") that is not and has not been for at
least five (5) years: (a) a stockholder, director, officer, employee,
partner, member, attorney or counsel of any Loan Party or of any
Principal or any affiliate of either of them (other than an independent
director, manager or like position with limited powers and rights
substantially similar to those required by the Independent Manager
hereunder); (b) a customer, supplier or other person who derives any of
its profits or revenues (other than any fee paid to such manager as
compensation for such director to serve as an Independent Manager or
like capacity) from its activities with such Loan Party, Principal or
any affiliate of either of them (a "Business Party"); (c) a person or
other entity controlling or under
34
39
common control with any such stockholder, partner, member, director,
officer, attorney, counsel or Business Party; or (d) a member of the
immediate family of any such stockholder, director, officer, employee,
partner, member, attorney, counsel or Business Party. (As used herein,
the term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or
activities of a person or entity, whether through ownership of voting
securities, by contract or otherwise); or
(xxviii) with respect to Principal, permit its board of
managers to take any action which, under the terms of any operating
agreement, articles of organization or similar documents requires the
unanimous vote of one hundred percent (100%) of the members of the
board unless at the time of such action there shall be at least one
manager who is an Independent Manager.
Section 4.3 ERISA.
(a) It shall not engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Security
Instrument and the Other Security Documents) to be a non-exempt (under
a statutory or administrative class exemption) prohibited transaction
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
(b) The Loan Parties further covenant and agree to deliver to
Lender such certifications (subject to Article 15 hereof) or other
evidence from time to time throughout the term of the Security
Instrument, as requested by Lender in its sole discretion, that (i) the
Loan Parties are not an "employee benefit plan" as defined in Section
3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) the Loan
Parties are not subject to state statutes regulating investments and
fiduciary obligations with respect to governmental plans; and (iii) one
or more of the following circumstances is true:
(A) Equity interests in the Loan Parties are publicly
offered securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of
equity interests in the Loan Parties are held by "benefit plan
investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or
(C) The Loan Parties qualify as an "operating
company" or a "real estate operating company" within the
meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an
investment company registered under The Investment Company Act
of 1940.
Section 4.4 FF&E RESERVE. Borrower shall establish and maintain until
the Debt has been paid in full, a reserve for the replacement of Personal
Property (the "FF&E Reserve") which reserve shall be held by Lender. The amount
of the FF&E Reserve is set forth in and may be adjusted in accordance with the
terms and provisions of that certain FF&E Reserve and Security Agreement by and
between Borrower and Lender dated the date hereof (the "FF&E Reserve
Agreement"). The FF&E Reserve shall be held and disbursed in accordance with the
terms and provisions of the FF&E Reserve Agreement.
35
40
Article 5 - REPRESENTATIONS AND WARRANTIES
Borrower and Owner, as applicable represents and warrants to Lender
that:
Section 5.1 WARRANTY OF TITLE. The Loan Parties collectively have good
title to the Property and has the right to mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey the same. Operating Tenant
possesses an unencumbered leasehold estate (created by and pursuant to the terms
of the Operating Lease) and Borrower possesses an unencumbered fee simple
absolute estate in the Land and the Improvements. The Loan Parties own the
Property free and clear of all liens, encumbrances and charges whatsoever except
for those exceptions shown in the title insurance policy insuring the lien of
this Security Instrument (the "Permitted Exceptions") and those security
interests granted in the Personal Property purchased in connection with the
Permitted Purchase Money Indebtedness. The Loan Parties further represent and
warrant that (a) the Operating Lease is in full force and effect and has not
been further modified or amended in any manner whatsoever, (b) there are no
defaults under the Operating Lease and no event has occurred which but for the
passage of time, or notice, or both would constitute a default under the
Operating Lease, and (c) all rents, additional rents and other sums due and
payable under the Operating Lease have been paid in full. Neither Operating
Tenant nor Borrower has commenced any action or given or received any notice for
the purpose of terminating the Operating Lease. The Loan Parties shall forever
warrant, defend, at Borrower's cost, and preserve the title and the validity and
priority of the lien of this Security Instrument and shall forever warrant and
defend, at Borrower's cost, the same to Lender and/or Trustee against the claims
of all persons whomsoever.
Section 5.2 LEGAL STATUS AND AUTHORITY. Each Loan Party (a) is duly
organized, validly existing and in good standing under the laws of its state of
organization or incorporation; (b) is duly qualified to transact business and is
in good standing in the state where the Property is located; and (c) has all
necessary approvals, governmental and otherwise, and full power and authority to
own, operate (in the case of Operating Tenant only) and lease the Property. Each
Loan Party has full power, authority and legal right to mortgage, grant,
bargain, sell, pledge, assign, warrant, transfer and convey the Property
pursuant to the terms hereof and to keep and observe all of the terms of this
Security Instrument on such Loan Party's part to be performed.
Section 5.3 VALIDITY OF DOCUMENTS. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of the Loan Parties; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and consents,
corporate, governmental or otherwise; (iv) will not violate, conflict with,
result in a breach of or constitute (with notice or lapse of time, or both) a
material default under any provision of law, any order or judgment of any court
or governmental authority, any license, certificate or other approval required
to operate the Property, the articles of incorporation, by-laws, partnership or
trust agreement, articles of organization, operating agreement, or other
governing instrument of the Loan Parties, or any indenture, agreement or other
instrument to which the Loan Parties are a party or by which it or any of its
assets or the Property is or may be bound or affected, including, without
limitation, the Franchise Agreement and the Management Agreement; (v) will not
result in the creation or imposition
36
41
of any lien, charge or encumbrance whatsoever upon any of its assets, except the
lien and security interest created hereby; and (vi) will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this Security Instrument and the separate
Assignment of Leases and Rents given by the Loan Parties to Lender
contemporaneously herewith in appropriate land records in the State where the
Property is located and except for Uniform Commercial Code filings relating to
the security interest created hereby), (b) the Note, this Security Instrument
and the Other Security Documents have been duly executed and delivered by the
Loan Parties through the undersigned authorized representatives of the Loan
Parties and (c) to the best of the Loan Parties' knowledge, the Note, this
Security Instrument and the Other Security Documents constitute the legal, valid
and binding obligations of the Loan Parties executing the respective document.
Section 5.4 LITIGATION. There is no action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of the Loan Parties' knowledge, threatened
or contemplated against the Loan Parties, a Guarantor, if any, an Indemnitor, if
any, or against or affecting the Property that has not been disclosed to Lender
by the Loan Parties in writing.
Section 5.5 STATUS OF PROPERTY.
(a) The Loan Parties have obtained all necessary certificates,
licenses and other approvals, governmental and otherwise, necessary for
the operation of the Property and the conduct of its business and all
required zoning, building code, land use, environmental and other
similar permits or approvals, all of which are in full force and effect
as of the date hereof and not subject to revocation, suspension,
forfeiture or modification.
(b) The Property and the present and contemplated use and
occupancy thereof are in full compliance with all applicable zoning
ordinances, building codes, land use laws, Environmental Laws and other
similar laws.
(c) The Property is served by all utilities required for the
current or contemplated use thereof. All utility service is provided by
public utilities and the Property has accepted or is equipped to accept
such utility service.
(d) All public roads and streets necessary for service of and
access to the Property for the current or contemplated use thereof have
been completed, are serviceable and all-weather and are physically and
legally open for use by the public.
(e) The Property is served by public water and sewer systems.
(f) The Property is free from damage caused by fire or other
casualty.
(g) All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements
have been paid in full.
(h) The Loan Parties have paid in full for, and is the owner
of, all furnishings, fixtures and equipment (other than tenants'
property and the Personal Property purchased in
37
42
connection with the Permitted Purchase Money Indebtedness) used in
connection with the operation of the Property, free and clear of any
and all security interests, liens or encumbrances, except the lien and
security interest created hereby.
(i) All liquid and solid waste disposal, septic and sewer
systems located on the Property are in a good and safe condition and
repair and in compliance with all Applicable Laws.
(j) No portion of the Improvements is located in an area
identified by the Federal Emergency Management Agency or any successor
thereto as an area having special flood hazards pursuant to the Flood
Insurance Acts or, if any portion of the Improvements is located within
such area, Borrower has obtained and will maintain the insurance
prescribed in Section 3.3 hereof.
(k) All the Improvements lie within the boundaries of the
Land.
Section 5.6 NO FOREIGN PERSON. No Loan Party is a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations.
Section 5.7 SEPARATE TAX LOT. The Property is assessed for real estate
tax purposes as one or more wholly independent tax lot or lots, separate from
any adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section 5.8 LEASES. Except as disclosed in the rent roll for the
Property delivered to and approved by Lender, (a)(i) Borrower is the sole owner
of the entire lessor's interest in the Operating Lease and (ii) except for the
Operating Lease, Operating Tenant is the sole owner of the entire lessor's
interest in the Leases; (b) the Leases are valid and enforceable and in full
force and effect; (c) all of the Leases are at least as favorable for the lessor
as arms-length agreements with bona fide, independent third parties; (d) no
party under any Lease is in default; (e) all Rents due have been paid in full;
(f) the terms of all alterations, modifications and amendments to the Leases are
reflected in the certified occupancy statement delivered to and approved by
Lender; (g) none of the Rents reserved in the Leases have been assigned or
otherwise pledged or hypothecated; (h) none of the Rents have been collected for
more than one (1) month in advance (except a security deposit shall not be
deemed rent collected in advance); (i) the premises demised under the Leases
have been completed and the tenants under the Leases have accepted the same and
have taken possession of the same on a rent-paying basis; (j) there exist no
offsets or defenses to the payment of any portion of the Rents and the Loan
Parties have no monetary obligation to any tenant under any Lease; (k) the Loan
Parties have received no notice from any tenant challenging the validity or
enforceability of any Lease; (l) there are no agreements with the tenants under
the Leases other than expressly set forth in each Lease; (m) the Leases are
valid and enforceable against the Loan Parties and the tenants set forth
therein; (n) no Lease (other than the Operating Lease) contains an option to
purchase, right of first refusal to purchase, right of first refusal to lease
additional space at the Property, or any other similar provision; (o) no person
or entity (other than hotel guests and Franchisor) has any possessory interest
in, or right to occupy, the Property except under and pursuant to a Lease; (p)
each Lease is subordinate to this Security Instrument, either pursuant to its
terms or a recordable subordination agreement; (q) no
38
43
Lease has the benefit of a non-disturbance agreement that would be considered
unacceptable to prudent institutional lenders; (r) all security deposits
relating to the Leases reflected on the certified rent roll delivered to Lender
have been collected by the Loan Parties and (s) no brokerage commissions or
finders fees are due and payable regarding any Lease.
Section 5.9 SOLVENCY. Each Loan Party (a) has not entered into the
transaction or executed the Note, this Security Instrument or any Other Security
Document with the actual intent to hinder, delay or defraud any creditor and (b)
received reasonably equivalent value in exchange for its obligations under such
documents. Giving effect to the Loan, the fair saleable value of each Loan
Party's assets exceeds and will, immediately following the making of the Loan,
exceed its total liabilities, including, without limitation, subordinated,
unliquidated, disputed and contingent liabilities. The fair saleable value of
each Loan Party's assets is and will, immediately following the making of the
Loan, be greater than its probable liabilities, including the maximum amount of
its contingent liabilities on its debts as such debts become absolute and
matured. Each Loan Party's assets do not and, immediately following the making
of the Loan will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Each Loan Party does not
intend to, and does not believe that it will, incur debt and liabilities
(including contingent liabilities and other commitments) beyond its ability to
pay each such Loan Party's debt and liabilities as they mature (taking into
account the timing and amounts of cash to be received by it and the amounts to
be payable on or in respect of obligations of it). Except as expressly disclosed
to Lender in writing, no petition in bankruptcy has been filed against any Loan
Party, any Indemnitor, any Guarantor, any Principal or any related entity
thereof, or any principal, general partner or member thereof, in the last seven
(7) years, and neither any Loan Party, any Indemnitor, any Guarantor, any
Principal nor any related entity thereof, nor any principal, general partner or
member thereof, in the last seven (7) years has ever made an assignment for the
benefit of creditors or taken advantage of any insolvency act for the benefit of
debtors.
Section 5.10 BUSINESS PURPOSES. The loan evidenced by the Note secured
by the Security Instrument and the Other Security Documents (the "Loan") is
solely for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section 5.11 TAXES. The Loan Parties, any Guarantor and any Indemnitor
have filed all federal, state, county, municipal, and city income, personal
property and other tax returns required to have been filed by them and have paid
all taxes and related liabilities which have become due pursuant to such returns
or pursuant to any assessments received by them. Neither any Loan Party, any
Guarantor nor any Indemnitor knows of any basis for any additional assessment in
respect of any such taxes and related liabilities for prior years.
Section 5.12 MAILING ADDRESS. The Loan Parties' mailing address, as set
forth in the opening paragraph hereof or as changed in accordance with the
provisions hereof, is true and correct.
Section 5.13 NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in
the application for the Loan submitted to Lender and in all financial
statements, rent rolls, reports, certificates and other documents submitted in
connection with the application or in satisfaction of the terms thereof, are
accurate, complete and correct in all material respects. There has been no
adverse change in any condition, fact, circumstance or event that would make any
such information materially inaccurate, incomplete or otherwise misleading.
39
44
Section 5.14 DISCLOSURE. The Loan Parties have disclosed to Lender all
material facts and have not failed to disclose any material fact that could
cause any representation or warranty made herein to be materially misleading.
Section 5.15 THIRD PARTY REPRESENTATIONS. To the best of the Loan
Parties' knowledge, each of the representations and the warranties made by each
Guarantor and Indemnitor in any Other Security Document(s) is true and correct
in all material respects.
Section 5.16 ILLEGAL ACTIVITY/FORFEITURE.
(a) No portion of the Property has been or will be purchased,
improved, equipped or furnished with proceeds of any illegal activity
and to the best of the Loan Parties' knowledge, there are no illegal
activities at the Property.
(b) There has not been and shall never be committed by the
Loan Parties or any other person in occupancy of, or involved with the
operation or use of, the Property any act or omission affording the
federal government or any state or local government the right of
forfeiture as against the Property or any part thereof or any monies
paid in performance of the Loan Parties' obligations under the Note,
this Security Instrument or the Other Security Documents. The Loan
Parties hereby covenant and agree not to commit, permit or suffer to
exist any act or omission affording such right of forfeiture.
Section 5.17 PERMITTED EXCEPTIONS. None of the Permitted Exceptions,
individually or in the aggregate, materially interferes with the benefits of the
security intended to be provided by the Security Instrument, the Note, and the
Other Security Documents, materially and adversely affects the value of the
Property, impairs the use or the operation of the Property or impairs Borrower's
ability to pay its obligations in a timely manner.
Section 5.18 PRINCIPAL PLACE OF BUSINESS. Each Loan Party's principal
place of business and chief executive office as of the date hereof is: 545 East
John Carpenter Freeway, Suite 1300, Irving, Texas 75062.
Section 5.19 ERISA.
(a) As of the date hereof and throughout the term of this
Security Instrument, (i) the Loan Parties are not and will not be an
"employee benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, and (ii) the assets of the Loan Parties do
not and will not constitute "plan assets" of one or more such plans for
purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of this
Security Instrument (i) the Loan Parties are not and will not be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
(ii) transactions by or with the Loan Parties are not and will not be
subject to state statutes applicable to the Loan Parties regulating
investments of and fiduciary obligations with respect to governmental
plans.
40
45
Section 5.20 FRANCHISE AGREEMENT. The Franchise Agreement is in full
force and effect, all franchise fees, reservation fees, royalties and other sums
due thereunder have been paid in full to date, and neither Operating Tenant or
Franchisor is in default thereunder.
Section 5.21 MANAGEMENT AGREEMENT. The Management Agreement is in full
force and effect, all fees and other sums due thereunder have been paid in full
to date, and neither Operating Tenant or Franchisor is in default thereunder.
Section 5.22 NON-CONSOLIDATION OPINION ASSUMPTIONS. All of the
assumptions made in the Non-Consolidation Opinion, including, but not limited
to, any exhibits attached thereto, are true and correct.
Section 5.23 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 Security Instrument, the Note or the Other Security Documents.
Section 5.24 INVESTMENT COMPANY ACT. No Loan Party is (a) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (b) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (c)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
Article 6 - OBLIGATIONS AND RELIANCES
Section 6.1 RELATIONSHIP OF THE LOAN PARTIES AND LENDER. The
relationship between the Loan Parties and Lender is solely that of debtor and
creditor, and Lender has no fiduciary or other special relationship with the
Loan Parties, and no term or condition of any of the Note, this Security
Instrument and the Other Security Documents shall be construed so as to deem the
relationship between the Loan Parties and Lender to be other than that of debtor
and creditor.
Section 6.2 NO RELIANCE ON LENDER. The members, general partners,
principals and (if any Loan Party is a trust) beneficial owners of each Loan
Party are experienced in the ownership and operation of properties similar to
the Property, and the Loan Parties and Lender are relying solely upon such
expertise in connection with the ownership and operation of the Property. No
Loan Party is relying on Lender's expertise, business acumen or advice in
connection with the Property.
Section 6.3 NO LENDER OBLIGATIONS.
(a) Notwithstanding the provisions of Subsections 1.1(f) and
(l) or Section 1.2, Lender is not undertaking the performance of (i)
any obligations under the Leases; or (ii) any obligations with respect
to such agreements, contracts, certificates, instruments, franchises,
permits, trademarks, licenses and other documents.
41
46
(b) By accepting or approving anything required to be
observed, performed or fulfilled or to be given to Lender pursuant to
this Security Instrument, the Note or the Other Security Documents,
including without limitation, any officer's certificate, balance sheet,
statement of profit and loss or other financial statement, survey,
appraisal, or insurance policy, Lender shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall
not constitute any warranty or affirmation with respect thereto by
Lender.
Section 6.4 RELIANCE. The Loan Parties recognize and acknowledge that
in accepting the Note, this Security Instrument and the Other Security
Documents, Lender is expressly and primarily relying on the truth and accuracy
of the warranties and representations set forth in Article 5 and Article 12
without any obligation to investigate the Property and notwithstanding any
investigation of the Property by Lender; that such reliance existed on the part
of Lender prior to the date hereof; that the warranties and representations are
a material inducement to Lender in accepting the Note, this Security Instrument
and the Other Security Documents; and that Lender would not be willing to make
the Loan and accept this Security Instrument in the absence of the warranties
and representations as set forth in Article 5 and Article 12.
Article 7 - FURTHER ASSURANCES
Section 7.1 RECORDING OF SECURITY INSTRUMENT, ETC. Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay or cause to be paid all taxes, filing,
registration or recording fees, and all expenses incident to the preparation,
execution, acknowledgment and/or recording of the Note, this Security
Instrument, the Other Security Documents, any note or deed of trust or mortgage
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, and any modification or amendment of the
foregoing documents, and all federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Security Instrument, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section 7.2 FURTHER ACTS, ETC. The Loan Parties will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, deeds of trust, mortgages,
assignments, notices of assignments, transfers and assurances as Lender shall,
from time to time, reasonably require, for the better assuring, conveying,
assigning, transferring, and confirming unto Lender and Trustee the Property and
rights hereby deeded, mortgaged, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which the Loan Parties may be or may hereafter
42
47
become bound to convey or assign to Lender, or for carrying out the intention or
facilitating the performance of the terms of this Security Instrument or for
filing, registering or recording this Security Instrument, or for complying with
all Applicable Laws. The Loan Parties, on demand, will execute and deliver and
hereby authorizes Lender, following ten (10) days' notice to the Loan Parties
and the Loan Parties' failure to do so, to execute in the name of any Loan Party
or without the signature of such Loan Party to the extent Lender may lawfully do
so, one or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Each Loan Party grants to Lender an irrevocable power of attorney
coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to Lender pursuant to this Section 7.2,
provided, however, Lender agrees only to exercise said right upon the occurrence
and during the continuance of an Event of Default under the Note, this Security
Instrument or the Other Security Documents.
Section 7.3 CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS.
(a) If any law is enacted or adopted or amended after the date
of this Security Instrument which deducts the Debt from the value of
the Property for the purpose of taxation or which imposes a tax, either
directly or indirectly, on the Debt or Lender's interest in the
Property, Borrower will pay, or cause to be paid, the tax, with
interest and penalties thereon, if any. If Lender is advised by counsel
chosen by it that the payment of tax by the Loan Parties would be
unlawful or taxable to Lender or unenforceable or provide the basis for
a defense of usury, then Lender shall have the option, exercisable by
written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
(b) Borrower will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or
Other Charges assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value
of the Property, or any part thereof, for real estate tax purposes by
reason of this Security Instrument or the Debt. If such claim, credit
or deduction shall be required by law, Lender shall have the option,
exercisable by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
(c) If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note, this Security Instrument, or
any of the Other Security Documents or impose any other tax or charge
on the same, Borrower will pay for, or cause to be paid, the same, with
interest and penalties thereon, if any.
Section 7.4 ESTOPPEL CERTIFICATES.
(a) After request by Lender, Borrower and with respect to
items (vi) through (xiii) only, Operating Tenant, shall within ten (10)
days furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, setting forth (i) the original principal
amount of the Note, (ii) the unpaid principal amount of the Note, (iii)
the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, to the best of the Loan Parties'
43
48
knowledge, except as provided in such statement, there are no defaults
or events which with the passage of time or the giving of notice or
both, would constitute an event of default under the Note or the
Security Instrument, (vii) that the Note and this Security Instrument
are valid, legal and binding obligations and have not been modified or,
if modified, giving particulars of such modification, (viii) whether to
the best of the Loan Parties' knowledge, any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to
exist, a detailed description thereof, (ix) that all Leases are in full
force and effect and have not been modified (or if modified, setting
forth all modifications), (x) the date to which the Rents thereunder
have been paid pursuant to the Leases, (xi) whether or not, to the best
knowledge of the Loan Parties, any of the lessees under the Leases are
in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the
amount of security deposits held by the Loan Parties under each Lease
and that such amounts are consistent with the amounts required under
each Lease, and (xiii) as to any other matters reasonably requested by
Lender and reasonably related to the Leases, the obligations secured
hereby, the Property or this Security Instrument.
(b) The Loan Parties shall use its reasonable best efforts to
deliver to Lender, promptly upon request, duly executed estoppel
certificates from any one or more lessees as required by Lender
attesting to such facts regarding the Lease as Lender may require,
including, but not limited to, attestations that each Lease covered
thereby is in full force and effect with no defaults thereunder on the
part of any party, that none of the Rents have been paid more than one
month in advance, except as security, and that the lessee claims no
defense or offset against the full and timely performance of its
obligations under the Lease.
(c) Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Lender's request, the Loan Parties, any
Guarantors and any Indemnitor(s) shall provide an estoppel certificate
to the Investor (defined in Section 18.1) or any prospective Investor
in such form, substance and detail as (i) Lender may reasonably require
or (ii) such Investor or prospective Investor may require.
(d) Operating Tenant shall, promptly upon request of Lender,
deliver an estoppel certificate from Franchisor stating that (i) the
Franchise Agreement is in full force and effect and has not been
modified, amended or assigned, (ii) neither Franchisor nor Operating
Tenant is in default under any of the terms, covenants or provisions of
the Franchise Agreement and Franchisor knows of no event which, but for
the passage of time or the giving of notice or both, would constitute
an event of default under the Franchise Agreement, (iii) neither
Franchisor nor Operating Tenant has commenced any action or given or
received any notice for the purpose of terminating the Franchise
Agreement and (iv) all sums due and payable to Franchisor under the
Franchise Agreement have been paid in full.
Section 7.5 FLOOD INSURANCE. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vii).
Section 7.6 REPLACEMENT DOCUMENTS. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document
44
49
which is not of public record, and, in the case of any such mutilation, upon
surrender and cancellation of such Note or Other Security Document, the Loan
Parties will issue, in lieu thereof, a replacement Note or Other Security
Document, dated the date of such lost, stolen, destroyed or mutilated Note or
Other Security Document in the same principal amount thereof and otherwise of
like tenor.
Article 8 - DUE ON SALE/ENCUMBRANCE
Section 8.1 TRANSFER DEFINITIONS. For purposes of this Article 8, (a)
an
"Affiliated Manager" shall mean any property manager managing the
Property in which FLLP or________________ (i) own, directly or indirectly, 51%
or more of the beneficial ownership of such property manager, and (ii) control
the day to day operations of such property manager; (b) a "Restricted Party"
shall mean (i) the Borrower, (ii) the Operating Tenant, (iii) or any Principal;
and (c) a "Sale or Pledge" shall mean a voluntary or involuntary sale,
conveyance, transfer or pledge of a direct legal or beneficial ownership
interest.
Section 8.2 NO SALE/ENCUMBRANCE.
(a) Other than as expressly permitted in the Note, this
Security Instrument or the Other Security Documents, the occurrence of
any of the following transactions (each, a "Transfer") without the
prior written consent of Lender shall constitute an Event of Default
under this Security Agreement:
(i) a sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, grant of options with respect
to, or any other transfer or disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law
or otherwise, and whether or not for consideration or of
record) the Property or any part thereof or any legal or
beneficial interest therein, by any Restricted Party,
(ii) a Sale or Pledge of an interest in any
Restricted Party unless following such Sale or Pledge (A) FLLP
(or its successor in interest) will continue to (x) own,
directly or indirectly, at least 51% of the beneficial
ownership of Borrower, (y) own, directly or indirectly, 100%
of the general partnership or managing member interest in
Borrower, and (z) control the day to day operations of
Borrower, and (B) _____________ (or its successor in interest)
will continue to (x) own, directly or indirectly, at least 51%
of the beneficial ownership of Operating Tenant, (y) own,
directly or indirectly, 100% of the general partnership or
managing member interest in Operating Tenant, and (z) control
the day to day operations of Operating Tenant,
(iii) a Sale or Pledge of an interest in any
Affiliated Manager unless following such Sale or Pledge (A)
FLLP (or its successor in interest) or _________________ (or
its successor in interest) will continue to (x) own, directly
or indirectly, at least 51% of the beneficial ownership of
such Affiliated Manager, and (y) control the day to day
operations of such Affiliated Manager,
45
50
(iv) a Sale or Pledge of a direct ownership interest
in any entity other than a Restricted Party which (A) holds an
indirect ownership interest in Borrower and (B) is owned,
directly or indirectly, by FLLP (or its successor in interest)
, unless following such Sale or Pledge, FLLP (or its successor
in interest) will continue to (x) own, directly or indirectly,
at least 51% of the beneficial ownership of Borrower, (y) own,
directly or indirectly, 100% of the general partnership or
managing member interest in Borrower, and (z) control the day
to day operations of Borrower.
(v) a Sale or Pledge of a direct ownership interest
in any entity other than a Restricted Party which (A) holds an
indirect ownership interest in Operating Tenant and (B) is
owned, directly or indirectly, by ________________ (or its
successor in interest), unless following such Sale or
Pledge,______________________ (or its successor in interest)
will continue to (x) own, directly or indirectly, at least 51%
of the beneficial ownership of Operating Tenant, (y) own,
directly or indirectly, 100% of the general partnership or
managing member interest in Operating Tenant, and (z) control
the day to day operations of Operating Tenant.
(vi) a sale or transfer of the REIT's direct or
indirect ownership interest in FLLP, the change, removal,
resignation or addition of FLLP's general partner, or the
creation or issuance of partnership interests in FLLP, unless
(A) following which the REIT continues to (x) own, directly or
indirectly, at least 51% of the beneficial ownership of FLLP,
(y) own, directly or indirectly, 100% of the general
partnership interest in FLLP, and (z) control the day to day
operations of FLLP, or (B) a No- downgrade Letter (defined
below) is obtained from the Rating Agencies with respect to
and in advance of such transaction,
(vii) the sale, transfer, issuance or repurchase of
stock in the REIT following which the REIT's stock will no
longer be listed on the New York Stock Exchange or such other
nationally recognized stock exchange, unless a No- downgrade
Letter is obtained from the Rating Agencies with respect to
and in advance of such transaction,
(viii) any merger or consolidation of FLLP, the REIT
or _________________ unless a No-downgrade Letter is obtained
from the Rating Agencies with respect to and in advance of
such merger or consolidation,
(ix) a sale or transfer of any direct or indirect
beneficial ownership interest in ___________________, the
change, removal, resignation or addition of any member or the
creation or issuance of new membership interests, unless (A)
following which __________________________ continue[s] to (x)
own, directly or indirectly, at least 25% of the beneficial
ownership of __________________, (y) control the day to day
operations of __________________ and (z) maintain 100% of the
voting rights in ____________________ or (B) a No-downgrade
Letter is obtained from the Rating Agencies with respect to an
in advance of such transaction.
(b) A Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein any Loan Party agrees to sell the
Property or any part thereof for a price to be paid in installments;
(ii) an agreement by any Loan Party leasing all or a substantial part
of the Property for other than actual occupancy by a space tenant
thereunder or a sale,
46
51
assignment or other transfer of, or the grant of a security interest
in, any Loan Party's right, title and interest in and to any Leases or
any Rents; (iii) if a Restricted Party is a corporation, any merger,
consolidation or Sale or Pledge of such corporation's stock or the
creation or issuance of new stock; (iv) if a Restricted Party is a
limited or general partnership or joint venture, any merger or
consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of
any general partner or any profits or proceeds relating to such
partnership interest, or the Sale or Pledge of limited partnership
interests or any profits or proceeds relating to such limited
partnership interests or the creation or issuance of new limited
partnership interests; (v) if a Restricted Party is a limited liability
company, any merger or consolidation of such limited liability company
or the change, removal, resignation or addition of a managing member
(or if no managing member, any member (other than a special member)) or
the Sale or Pledge of the membership interest of a managing member (or
if no managing member, any member (other than a special member)) or any
profits or proceeds relating to such membership interest, or the Sale
or Pledge of non-managing membership interests (other than a special
member) or the creation or issuance of new non-managing membership
interests (other than a special member); (vi) if a Restricted Party is
a trust or nominee trust, any merger, consolidation or the Sale or
Pledge of the legal or beneficial interest in a Restricted Party or the
creation or issuance of new legal or beneficial interests; or (vii) the
removal or the resignation of the managing agent (including, without
limitation, an Affiliated Manager) other than in accordance with
Section 3.17, provided, however, that a Transfer shall not include the
resignation of (A) Franchisor as the managing agent resulting from (1)
the occurrence of the expiration of the Management Agreement or (2)
Franchisor's terminating the Management Agreement pursuant to the terms
of the Management Agreement, or (B) any special member provided such
special member is replaced in accordance with the terms of the Loan
Documents.
Section 8.3 PERMITTED TRANSFERS. Notwithstanding the provisions of
Sections 8.1 and 8.2, the following transfers shall not be deemed to be a
Transfer: (a) a transfer by devise or descent or by operation of law upon the
death of a member, partner or shareholder of a Restricted Party; (b) the sale or
transfer of all the stock or membership interests, as applicable, in Operating
Tenant to an entity wholly-owned, directly or indirectly, by FLLP; provided,
however, as a condition to each such transfer, Lender shall receive not less
than thirty (30) days prior written notice of such proposed transfer; and (c)
the sale or transfer of all of Operating Tenant's interest in the Operating
Lease to an entity wholly-owned, directly or indirectly, by FLLP (the "Operating
Tenant Transferee"); provided, however, as a condition to each such sale or
transfer under this subsection (c), (i) Lender shall receive not less than
thirty (30) days prior written notice of such proposed sale or transfer, (ii)
the Loan Parties shall pay any and all out-of-pocket costs incurred in
connection with the transfer (including, without limitation, Lender's counsel
fees and disbursements and all recording fees, title insurance premiums and
mortgage and intangible taxes), (iii) the Operating Tenant Transferee must not
have been a party to any bankruptcy proceeding, voluntary or involuntary, made
an assignment for the benefit of creditors or taken advantage of any insolvency
act, or any act for the benefit of debtors within seven (7) years prior to the
date of the transfer, (iv) the Operating Tenant Transferee shall assume all of
the obligations of Operating Tenant under the Security Instrument and the Other
Security Documents in a manner satisfactory to Lender in all respects,
including, without limitation, by entering into an assumption agreement in form
and substance satisfactory to Lender (the "Assumption Agreement"), (v) there
shall be no material litigation pending against Operating Tenant Transferee that
is not acceptable to Lender, (vi) the Operating Tenant Transferee shall not have
47
52
defaulted under its or their obligations with respect to any other indebtedness,
(vii) Lender shall have received evidence satisfactory to it (which, if required
by Lender, shall include a substantive non-consolidation opinion letter
acceptable to Lender) that the Operating Tenant Transferee satisfies all the
covenants set forth in Section 4.2 of this Security Instrument, and (viii) the
Operating Tenant Transferee shall deliver an endorsement to the existing title
policy insuring the Security Instrument as modified by the assumption agreement,
as a valid first lien on the Property and naming the Operating Tenant Transferee
as owner of the leasehold estate in the Property, which endorsement shall insure
that as of the recording of the Assumption Agreement, the Property shall not be
subject to any additional exceptions or liens other than those contained in the
title policy issued in connection with this Security Instrument.
Section 8.4 RESERVED.
Section 8.5 LENDER'S RIGHTS. Lender reserves the right to condition the
consent required in connection with any sale or transfer of the Property, any
Sale or Pledge of an interest in a Restricted Party or any other transaction
prohibited by this Article 8 upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified in connection with the proposed Transfer, Lender's
approval of the proposed transferee, which approval shall not be unreasonably
withheld, Lender's receipt of a No-downgrade Letter, the proposed transferee's
continued compliance with the covenants set forth in this Security Instrument,
including, without limitation, the covenants in Section 4.2 hereof, or such
other conditions and/or legal opinions as Lender shall determine in its sole
discretion to be in the interest of Lender, including, without limitation,
delivery to Lender of a substantive non-consolidation opinion acceptable to
Lender in all respects. As a condition to any consent by Lender requested under
this Article 8, (a) Borrower shall pay to Lender a transfer fee of
three-quarters of one percent (.75%) of the principal balance of the Note, a
$10,000 processing fee, and all of Lender's and any Rating Agency's expenses
incurred in connection with such Transfer, and (b) all expenses incurred by
Lender and any Rating Agency and the $10,000 processing fee shall be payable by
Borrower whether or not Lender consents to the Transfer. As a condition to any
transfer which does not require Lender's consent but requires a No-downgrade
Letter, Borrower shall pay to Lender a transfer fee of one-quarter of one
percent (.25%) of the principal balance of the Note, a $10,000 processing fee,
and all of Lender's and any Rating Agency's expenses incurred in connection with
such Transfer. Lender shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Debt immediately due and payable upon a Transfer without Lender's consent.
This provision shall apply to every Transfer regardless of whether voluntary or
not, or whether or not Lender has consented to any previous Transfer.
Notwithstanding anything to the contrary contained in this Article ?, in the
event any transfer (whether or not such transfer shall constitute a Transfer)
results in any entity or party owning in excess of forty-nine percent (49%) of
the ownership interest in a Restricted Party, the Loan Parties shall, prior to
such transfer, deliver a substantive non-consolidation opinion to Lender
covering such Restricted Party, which opinion shall be in form substantially
similar to the Non-Consolidation Opinion or in form sufficient to satisfy then
current rating agency requirements. The term "No-downgrade Letter" shall mean a
written recommendation from the Rating Agencies to the effect that the subject
transaction will not result in a qualification, reduction, or withdrawal of (i)
any rating initially assigned or to be assigned in a Securitization or (ii) if
higher than said initial rating, the then-current rating assigned in a
Securitization, or (iii) if Securities have not yet been issued, any ratings to
be assigned in connection with the issuance of the Securities.
48
53
Article 9 - PREPAYMENT
Section 9.1 PREPAYMENT. The Debt may not be prepaid in whole or in part
except in strict accordance with the express terms and conditions of the Note.
Article 10 - DEFAULT
Section 10.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an "Event of Default":
(a) if any portion of the Debt is not paid on or prior to the
date the same is due or if the entire Debt is not paid on or before the
Maturity Date;
(b) if any of the Taxes or Other Charges is not paid when the
same is due and payable except to the extent sums sufficient to pay
such Taxes and Other Charges have been deposited with Lender in
accordance with the terms of this Security Instrument;
(c) if the Policies are not kept in full force and effect, or
if the Policies are not delivered to Lender as provided in Section
3.3(b);
(d) if any Loan Party or any Principal, as applicable,
violates or does not comply with any of the provisions of Section 4.2,
Article 8 or Article 24;
(e) if any representation or warranty of, or with respect to,
any Loan Party, any Indemnitor or any person guaranteeing payment of
the Debt or any portion thereof or performance by the Loan Parties of
any of the terms of this Security Instrument (a "Guarantor"), or any
member, general partner, principal or beneficial owner of any of the
foregoing, made herein or in the Environmental Indemnity (defined
below) or in any guaranty, or in any certificate, report, financial
statement or other instrument or document furnished to Lender shall
have been false or misleading in any material respect when made;
(f) if (i) any Loan Party or any managing member or general
partner of any Loan Party, or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, conservatorship, arrangement,
adjustment, winding- up, liquidation, dissolution, composition or other
relief with respect to its debts or debtors ("Creditors Rights Laws"),
seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or any Loan Party or any managing
member or general partner of any Loan Party or any Guarantor or
Indemnitor shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Loan Party or
any managing member or general partner of any Loan Party or any
Guarantor or Indemnitor any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of sixty
(60) days; or (iii) there shall be commenced against any Loan
49
54
Party or any managing member or general partner of any Loan Party or
any Guarantor or Indemnitor any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of any order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within sixty (60) days from the entry thereof; or (iv) any Loan Party
or any managing member or general partner of any Loan Party or any
Guarantor or Indemnitor shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the any Loan
Party or any managing member or general partner of any Loan Party, or
any Guarantor or Indemnitor shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they
become due;
(g) if any Loan Party shall be in default beyond applicable
notice and grace periods under any other mortgage, deed of trust, deed
to secure debt or other security agreement covering any part of the
Property whether it be superior or junior in lien to this Security
Instrument;
(h) if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for any Taxes not then
due and payable and the lien shall remain undischarged of record (by
payment, bonding or otherwise) for a period of thirty (30) days after
any Loan Party obtains knowledge, or should have known, of the
imposition of said lien;
(i) if any federal tax lien is filed against any Loan Party,
any member or general partner of any Loan Party, any Guarantor, any
Indemnitor or the Property and same is not discharged of record within
thirty (30) days after any Loan Party obtains knowledge, or should have
known, of the imposition of said lien;
(j) if any Loan Party shall fail to deliver to Lender, within
ten (10) days after request by Lender, the estoppel certificates
required by Subsections 7.4(a) and (c);
(k) if any default occurs under any separate guaranty or
indemnity agreement executed in connection herewith (including, without
limitation, the Cooperation Letter (defined in Section 18.2) and the
Environmental Indemnity (defined in Section 13.4)) and such default
continues after the expiration of applicable grace periods, if any;
(l) if a default has occurred and continues beyond any
applicable cure period under the Franchise Agreement, if such default
permits Franchisor to terminate or cancel the Franchise Agreement;
(m) if the Property ceases to be operated as a hotel or if
such business is terminated for any reason whatsoever (other than
temporary cessation in connection with any renovations to the Property
or restoration of the Property after casualty or condemnation);
(n) if any Loan Party terminates or cancels the Franchise
Agreement or operates the Property under the name of any hotel chain or
system other than Embassy Suites, without Lender's prior written
consent;
50
55
(o) if any of the assumptions contained in the
Non-Consolidation Opinion were not true and correct as of the date of
such Non-Consolidation Opinion or thereafter became untrue or incorrect
in any respect;
(p) if any Loan Party shall fail to deliver to Lender, (i) the
statements referred to in Section 3.12(f) hereof in accordance with the
terms thereof or (ii) any statements referred to in Section 3.12, other
than those referred to in Section 3.12(f) hereof, within thirty (30)
days after request by Lender;
(q) if any Loan Party defaults under the management agreement
relating to the Property beyond the expiration of applicable notice and
grace periods, if any, thereunder or if the management agreement is
canceled, terminated or surrendered or expires pursuant to its terms,
unless in such case the Borrower or Operating Tenant, as applicable,
shall enter into a new management agreement on market terms and
conditions no less favorable than the current management agreement and
with a management company, both to be acceptable to Lender in all
respects; or
(r) if any Loan Party shall continue to be in default under
any term, covenant or condition of the Note, this Security Instrument
or the Other Security Documents (including, without limitation, the
Cooperation Letter) not set forth in Subsections 10.1(a) through (q)
above for more than ten (10) days after notice 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 that if such default cannot reasonably be cured
within such thirty (30) day period and such Loan Party shall have
commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such
thirty (30) day period shall be extended for so long as it shall
require such Loan Party in the exercise of due diligence to cure such
default, it being agreed that no such extension shall be for a period
in excess of sixty (60) days.
Article 11 - RIGHTS AND REMEDIES
Section 11.1 REMEDIES. Upon the occurrence of any Event of Default, the
Loan Parties agree that Lender may or acting by or through Trustee may take such
action, without notice or demand, as it deems advisable to protect and enforce
its rights against the Loan Parties in and to the Property, including, but not
limited to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as Lender or Trustee may determine, in
their sole discretion, without impairing or otherwise affecting the other rights
and remedies of Lender or Trustee:
(a) declare the entire unpaid Debt to be immediately due and
payable;
(b) institute proceedings, judicial or otherwise, for the
complete foreclosure of this Security Instrument under any applicable
state or federal law in which case the Property or any interest therein
may be sold for cash or upon credit in one or more parcels or in
several interests or portions and in any order or manner;
51
56
(c) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable state or federal law,
institute proceedings for the partial foreclosure of this Security
Instrument for the portion of the Debt then due and payable, subject to
the continuing lien and security interest of this Security Instrument
for the balance of the Debt not then due, unimpaired and without loss
of priority;
(d) sell for cash or upon credit the Property or any part
thereof and all estate, claim, demand, right, title and interest of the
Loan Parties therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, in one or more
parcels, at such time and place, upon such terms and after such notice
thereof as may be required or permitted by law;
(e) subject to the provisions of Article 15, institute an
action, suit or proceeding in equity for the specific performance of
any covenant, condition or agreement contained herein, in the Note or
in the Other Security Documents;
(f) subject to the provisions of Article 15, recover judgment
on the Note either before, during or after any proceedings for the
enforcement of this Security Instrument or the Other Security
Documents;
(g) apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and without
regard for the adequacy of the security for the Debt and without regard
for the solvency of any Loan Party, any Guarantor, Indemnitor or of any
person, firm or other entity liable for the payment of the Debt;
(h) subject to any applicable state or federal law, the
license granted to the Loan Parties under Section 1.2 shall
automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess the Loan Parties and their agents and servants therefrom,
without liability for trespass, damages or otherwise and exclude the
Loan Parties and their agents or servants wholly therefrom, and take
possession of all rent rolls, leases, subleases and rental and license
agreements with the tenants, subtenants and licensees, in possession of
the Property or any part or parts thereof; tenants', subtenants' and
licensees' money deposits or other property (including, without
limitation, any letter of credit) given to secure tenants', subtenants'
and licensees' obligations under leases, subleases or licenses,
together with a list of the foregoing; all lists pertaining to current
rent and license fee arrears; any and all architects' plans and
specifications, licenses and permits, documents, books, records,
accounts, surveys and property which relate to the management, leasing,
operation, occupancy, ownership, insurance, maintenance, or service of
or construction upon the Property and the Loan Parties agree to
surrender possession thereof and of the Property to Lender upon demand,
and thereupon Lender may (i) use, operate, manage, control, insure,
maintain, repair, restore and otherwise deal with all and every part of
the Property and conduct the business thereat; (ii) complete any
construction on the Property in such manner and form as Lender deems
advisable; (iii) make alterations, additions, renewals, replacements
and improvements to or on the Property; (iv) exercise all rights and
powers of the Loan Parties with respect to the Property, whether in the
name of the Loan Parties or otherwise, including, without limitation,
the right to make, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all Rents
52
57
of the Property and every part thereof; (v) either require the Loan
Parties (A) to pay monthly in advance to Lender, or any receiver
appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of such part of the Property as may be
occupied by the Loan Parties or (B) to vacate and surrender possession
of the Property to Lender or to such receiver and, in default thereof,
the Loan Parties may be evicted by summary proceedings or otherwise;
and (vi) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem
appropriate in its sole discretion after deducting therefrom all
expenses (including reasonable legal fees) incurred in connection with
the aforesaid operations and all amounts necessary to pay the Taxes,
Other Charges, Insurance Premiums and other expenses in connection with
the Property, as well as just and reasonable compensation for the
services of Lender, its counsel, agents and employees;
(i) exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing: (i) the
right to take possession of the Personal Property and other UCC
Collateral or any part thereof, and to take such other measures as
Lender or Trustee may deem necessary for the care, protection and
preservation of the Personal Property and other UCC Collateral, and
(ii) request the Loan Parties at its expense to assemble the Personal
Property and other UCC Collateral and make it available to Lender at a
convenient place acceptable to Lender. Any notice of sale, disposition
or other intended action by Lender or Trustee with respect to the
Personal Property and other UCC Collateral sent to the Loan Parties in
accordance with the provisions hereof at least ten (10) Business Days
prior to such action, shall constitute commercially reasonable notice
to the Loan Parties;
(j) apply any sums then deposited in the Escrow Fund and any
other sums held in escrow or otherwise by Lender in accordance with the
terms of this Security Instrument or any Other Security Document 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; and
(v) all other sums payable pursuant to the Note, this
Security Instrument and the Other Security Documents,
including without limitation advances made by Lender pursuant
to the terms of this Security Instrument;
(k) surrender the Policies maintained pursuant to Article 3
hereof, collect the unearned Insurance Premiums and apply such sums as
a credit on the Debt in such priority and proportion as Lender in its
discretion shall deem proper, and in connection therewith, the Loan
Parties hereby appoint Lender as agent and attorney-in-fact (which is
coupled with an interest and is therefore irrevocable) for the Loan
Parties to collect such unearned Insurance Premiums;
53
58
(l) apply the undisbursed balance of any Net Proceeds
Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem
to be appropriate in its discretion; or
(m) pursue such other remedies as Lender may have under
applicable state or federal law.
In the event of a sale, by foreclosure, power of sale, or otherwise, of less
than all of the Property, this Security Instrument shall continue as a lien and
security interest on the remaining portion of the Property unimpaired and
without loss of priority. Notwithstanding the provisions of this Section 11.1 to
the contrary, if any Event of Default as described in clause (i) or (ii) of
Subsection 10.1(f) shall occur, the entire unpaid Debt shall be automatically
due and payable, without any further notice, demand or other action by Lender.
Section 11.2 APPLICATION OF PROCEEDS. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, shall be applied by Lender to the payment of the Debt
in such priority and proportions as Lender in its discretion shall deem proper.
Section 11.3 RIGHT TO CURE DEFAULTS. Upon the occurrence of any Event
of Default, Lender may, but without any obligation to do so and without notice
to or demand on the Loan Parties and without releasing the Loan Parties from any
obligation hereunder, make or do the same in such manner and to such extent as
Lender may deem necessary to protect the security hereof. Lender or Trustee is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Instrument or collect the Debt. The cost and expense of
any cure hereunder (including reasonable legal fees to the extent permitted by
law), with interest as provided in this Section 11.3, shall constitute a portion
of the Debt and shall be due and payable to Lender upon demand. All such costs
and expenses incurred by Lender or Trustee in remedying such Event of Default or
in appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate, for the period after notice from Lender that such
cost or expense was incurred to the date of payment to Lender. All such costs
and expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the Other Security Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section 11.4 ACTIONS AND PROCEEDINGS. Lender or Trustee has the right
to appear in and defend any action or proceeding brought with respect to the
Property, and after the occurrence and during the continuance of an Event of
Default, to bring any action or proceeding, in the name and on behalf of any
Loan Party, which Lender, in its discretion, decides should be brought to
protect its interest in the Property.
54
59
Section 11.5 RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender or Trustee thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by any Loan Party existing at the time such
earlier action was commenced.
Section 11.6 EXAMINATION OF BOOKS AND RECORDS. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to the
Loan Parties (unless an Event of Default exists, in which case no notice shall
be required), to examine and audit, during reasonable business hours, the
records, books, management and other papers of the Loan Parties and their
affiliates or of any Guarantor or Indemnitor which pertain to their financial
condition or the income, expenses and operation of the Property, at the Property
or at any office regularly maintained by the Loan Parties, its affiliates or any
Guarantor or Indemnitor where the books and records are located. Lender and its
agents shall have the right upon notice to make copies and extracts from the
foregoing records and other papers.
Section 11.7 OTHER RIGHTS, ETC.
(a) The failure of Lender or Trustee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of
any term of this Security Instrument. No Loan Party shall be relieved
of such Loan Party's obligations hereunder by reason of (i) the failure
of Lender or Trustee to comply with any request of any Loan Party, any
Guarantor or any Indemnitor to take any action to foreclose this
Security Instrument or otherwise enforce any of the provisions hereof
or of the Note or the Other Security Documents, (ii) the release,
regardless of consideration, of the whole or any part of the Property,
or of any person liable for the Debt or any portion thereof, or (iii)
any agreement or stipulation by Lender extending the time of payment,
changing the rate of interest, or otherwise modifying or supplementing
the terms of the Note, this Security Instrument or the Other Security
Documents.
(b) It is agreed that the risk of loss or damage to the
Property is on Borrower, and Lender shall have no liability whatsoever
for decline in value of the Property, for failure to maintain the
Policies, or for failure to determine whether insurance in force is
adequate as to the amount of risks insured. Possession by Lender shall
not be deemed an election of judicial relief, if any such possession is
requested or obtained, with respect to any Property or collateral not
in Lender's possession.
(c) Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its
discretion, may elect. Lender or Trustee may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Lender or Trustee thereafter to foreclose
this Security Instrument. The rights of Lender or Trustee under this
Security Instrument shall be separate, distinct and cumulative and none
shall be given effect to the exclusion of the others. No act of Lender
or Trustee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Neither
Lender nor Trustee shall be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy
now or hereafter afforded at law or in equity.
55
60
Section 11.8 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. Lender may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section 11.9 VIOLATION OF LAWS. If the Property is not in compliance
with Applicable Laws, Lender may impose additional requirements upon the Loan
Parties in connection herewith including, without limitation, monetary reserves
or financial equivalents.
Section 11.10 RIGHT OF ENTRY. Lender and its agents shall have the
right, upon forty- eight (48) hours advance notice, to enter and inspect the
Property at all reasonable times.
Section 11.11 SUBROGATION. If any or all of the proceeds of the Note
have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used, Lender
shall be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in favor of, the holder of
such indebtedness and such former rights, claims, liens, titles, and interests,
if any, are not waived but rather are continued in full force and effect in
favor of Lender and are merged with the lien and security interest created
herein as cumulative security for the repayment of the Debt, the performance and
discharge of the Loan Parties' obligations hereunder, under the Note and the
Other Security Documents and the performance and discharge of the Other
Obligations.
Article 12 - ENVIRONMENTAL HAZARDS
Section 12.1 ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. The Loan
Parties represent and warrant, based upon an environmental site assessment of
the Property and information that the Loan Parties know or should reasonably
have known, that: (a) there are no Hazardous Materials (defined below) or
underground storage tanks in, on, or under the Property, except those that are
both (i) in compliance with Environmental Laws and with permits issued pursuant
thereto (if such permits are required), and (ii) either (A) in amounts not in
excess of that necessary to operate the Property or (B) fully disclosed to and
approved by Lender in writing pursuant to the written reports resulting from the
environmental site assessments of the Property delivered to Lender (the
"Environmental Report"); (b) there are no past, present or threatened Releases
(defined below) of Hazardous Materials in violation of any Environmental Law and
which would require remediation by a governmental authority in, on, under or
from the Property except as described in the Environmental Report; (c) there is
no threat of any Release of Hazardous Materials migrating to the Property which
would violate Environmental Laws, except as described in the Environmental
Report; (d) there is no past or present non-compliance with Environmental Laws,
or with permits issued pursuant thereto, in connection with the Property except
as described in the Environmental Report; (e) the Loan Parties do not know of,
and has not received, any written or oral notice or other communication from any
person or entity (including but not limited to a governmental entity) relating
to Hazardous Materials in, on, under or from the Property, except those that are
both
56
61
(i) in compliance with Environmental Laws and with permits issued pursuant
thereto (if such permits are required), and (ii) either (A) in amounts not in
excess of that necessary to operate the Property or (B) fully disclosed to and
approved by Lender in writing pursuant to the Environmental Report; and (f) the
Loan Parties have truthfully and fully provided to Lender, in writing, any and
all material information not disclosed in the Environmental Report relating to
environmental conditions in, on, under or from the Property known to the Loan
Parties or contained in the Loan Parties' files and records, including but not
limited to any reports relating to Hazardous Materials in, on, under or
migrating to or from the Property and/or to the environmental condition of the
Property. "Environmental Law" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations, standards, policies and
other government directives or requirements, as well as common law, that apply
to the Loan Parties or the Property and relate to Hazardous Materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act and the Resource Conservation and Recovery Act.
"Hazardous Materials" shall mean petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives; flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos- containing
materials in any form that is or could become friable; underground or
above-ground storage tanks, whether empty or containing any substance; any
substance the presence of which on the Property is prohibited by any federal,
state or local authority; any substance that requires special handling; and any
other material or substance now or in the future defined as a "hazardous
substance," "hazardous material," "hazardous waste,""toxic substance," "toxic
pollutant," "contaminant," "pollutant" or other words of similar import within
the meaning of any Environmental Law. "Release" of any Hazardous Materials
includes but is not limited to any release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
Section 12.2 ENVIRONMENTAL COVENANTS. The Loan Parties covenant and
agree that so long as the Loan Parties own, manage, are in possession of, or
otherwise control the operation of the Property: (a) all uses and operations on
or of the Property, whether by the Loan Parties or any other person or entity,
shall be in compliance with all Environmental Laws and permits issued pursuant
thereto; (b) there shall be no Releases of Hazardous Materials in, on, under or
from the Property in violation of any Environmental Laws; (c) there shall be no
Hazardous Materials in, on, or under the Property, except those that are both
(i) in compliance with all Environmental Laws and with permits issued pursuant
thereto, if and to the extent required, and (ii) (A) in amounts not in excess of
that necessary to operate the Property or (B) fully disclosed to and approved by
Lender in writing; (d) the Loan Parties shall keep the Property, at Borrower's
sole cost and expense, free and clear of all liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or omission of
any Loan Party or any other person or entity (the "Environmental Liens"); (e)
the Loan Parties shall, at Borrower's sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) the Loan Parties shall, at
Borrower's sole cost and expense, perform any environmental site assessment or
other investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender, upon Lender's reasonable
belief that the Property is not in full compliance with all Environmental Laws,
and share with Lender the reports and other results thereof, and Lender and
other Indemnified Parties (as defined in the Environmental Indemnity) shall be
entitled to rely on such reports and other results thereof; (g) the Loan Parties
shall, at their sole cost and expense,
57
62
comply with all reasonable written requests of Lender to (i) reasonably
effectuate remediation required by any Environmental Law of any Hazardous
Materials in, on, under or from the Property; and (ii) comply with any
Environmental Law; (h) the Loan Parties shall not allow any tenant or other user
of the Property to violate any Environmental Law; and (i) each Loan Party shall
immediately notify Lender in writing after it has become aware of (A) any
presence or Release or threatened Release of Hazardous Materials in, on, under,
from or migrating towards the Property in violation, or which would be in
violation, as the case may be, of any Environmental Laws; (B) any non-compliance
with any Environmental Laws related in any way to the Property; (C) any actual
or potential Environmental Lien against the Property; (D) any required or
proposed remediation under any Environmental Law of environmental conditions
relating to the Property; and (E) any written or oral notice or other
communication of which such Loan Party becomes aware from any source whatsoever
(including but not limited to a governmental entity) relating in any way to the
presence or Release of Hazardous Materials at, on, under or above the Property
in violation of any Environmental Laws.
Section 12.3 LENDER'S RIGHTS. Upon (a) the occurrence of an Event of
Default under the Note, this Security Instrument or the Other Security Documents
or (b) Lender's reasonable belief that the Property is not in compliance with
Environmental Laws, Lender and any other person or entity designated by Lender,
including but not limited to any representative of a governmental entity, and
any environmental consultant, and any receiver appointed by any court of
competent jurisdiction, shall have the right, but not the obligation, to enter
upon the Property at all reasonable times to assess any and all aspects of the
environmental condition of the Property and its use, including but not limited
to conducting any environmental assessment or audit (the scope of which shall be
determined in Lender's sole and absolute discretion) and taking samples of soil,
groundwater or other water, air, or building materials, and conducting other
invasive testing. The Loan Parties shall cooperate with and provide access to
Lender and any such person or entity designated by Lender. Lender shall, at its
cost and expense, repair any damage to the Property caused by Lender's gross
negligence or wilful misconduct in performing such assessment.
Article 13 - INDEMNIFICATIONS
Section 13.1 GENERAL INDEMNIFICATION. Borrower shall, at its sole cost
and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (defined below) imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) any accident, injury to or death of persons or loss of or damage
to property occurring in, on or about the Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (b) any use, nonuse or condition in, on or about the Property or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) performance of any labor or services or the
furnishing of any materials or other property in respect of the Property or any
part thereof; (d) any failure of the Property to be in compliance with any
Applicable Laws; (e) any and all claims and demands whatsoever which may be
asserted against Lender by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease; or (f) the payment of any commission, charge or
brokerage fee to anyone which may be payable in connection with the funding of
the Loan evidenced by the Note and secured by this Security Instrument. Any
amounts payable to Lender by reason of the application of this Section 13.1
shall become immediately due and payable and shall bear interest at the Default
Rate from the date loss or damage is sustained by Lender until paid.
58
63
The term "Losses" shall mean any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, fines, penalties, charges,
fees, judgments, awards, amounts paid in settlement of whatever kind or nature
(including but not limited to reasonable legal fees and other costs of defense).
Section 13.2 MORTGAGE AND/OR INTANGIBLE TAX. Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents.
Section 13.3 DUTY TO DEFEND; LEGAL FEES AND OTHER FEES AND EXPENSES.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals reasonably approved by
the Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties
may, in their sole discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall act as co- counsel in connection with the
resolution of any claim or proceeding, provided, however, that upon an Event of
Default under the Note, this Security Instrument or the Other Security
Documents, the attorneys of Indemnified Parties shall control the resolution of
any claim or proceeding. Upon demand, Borrower shall pay or, in the sole
discretion of the Indemnified Parties, reimburse, the Indemnified Parties for
the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith.
Section 13.4 ENVIRONMENTAL INDEMNITY. Simultaneously with this Security
Instrument, Borrower and other persons or entities defined therein have executed
and delivered that certain environmental indemnity agreement dated the date
hereof (collectively, the "Indemnitors") to Lender (the "Environmental
Indemnity"), which Environmental Indemnity is not secured by this Security
Instrument.
Article 14 - WAIVERS
Section 14.1 WAIVER OF COUNTERCLAIM. The Loan Parties hereby waive the
right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with this Security Instrument, the Note, any of
the Other Security Documents, or the Obligations, provided, however, the
foregoing shall not be deemed a waiver of the Loan Parties' right to assert any
other claim which would constitute a defense, setoff, counterclaim or crossclaim
of any nature against Lender so long as the Loan Parties assert said claim in a
separate action.
Section 14.2 MARSHALLING AND OTHER MATTERS. The Loan Parties hereby
waive, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, the Loan Parties
hereby expressly waive any and all rights of redemption from sale under any
order or decree of foreclosure of this Security Instrument on behalf of the Loan
59
64
Parties, and on behalf of each and every person acquiring any interest in or
title to the Property subsequent to the date of this Security Instrument and on
behalf of all persons to the extent permitted by Applicable Law.
Section 14.3 WAIVER OF NOTICE. The Loan Parties shall not be entitled
to any notices of any nature whatsoever from Lender or Trustee except (a) with
respect to matters for which this Security Instrument specifically and expressly
provides for the giving of notice by Lender or Trustee to the Loan Parties and
(b) with respect to matters for which Lender or Trustee is required by
Applicable Law to give notice, and the Loan Parties hereby expressly waive the
right to receive any notice from Lender or Trustee with respect to any matter
for which this Security Instrument does not specifically and expressly provide
for the giving of notice by Lender or Trustee to the Loan Parties.
Section 14.4 WAIVER OF STATUTE OF LIMITATIONS. The Loan Parties hereby
expressly waive and release to the fullest extent permitted by law, the pleading
of any statute of limitations as a defense to payment of the Debt or performance
of its Other Obligations.
Section 14.5 SOLE DISCRETION OF LENDER. Wherever pursuant to this
Security Instrument (a) Lender exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c)
any other decision or determination is to be made by Lender, the decision to
approve or disapprove, all decisions that arrangements or terms are satisfactory
or not satisfactory and all other decisions and determinations made by Lender,
shall be in the sole discretion of Lender, except as may be otherwise expressly
and specifically provided herein.
Section 14.6 WAIVER OF TRIAL BY JURY. THE LOAN PARTIES AND LENDER, BY
ACCEPTANCE OF THIS SECURITY INSTRUMENT, HEREBY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR
INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THE NOTE, THIS SECURITY
INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER OR
THE LOAN PARTIES.
Section 14.7 WAIVER OF FORECLOSURE DEFENSE. The Loan Parties hereby
waive any defense the Loan Parties might assert or have by reason of Lender's
failure to make any tenant or lessee of the Property a party defendant in any
foreclosure proceeding or action instituted by Lender.
Section 14.7 SURETY WAIVERS. Operating Tenant hereby waives notice of
the acceptance hereof, presentment, demand for payment, protest, notice of
protest, or any and all notice of non-payment, non-performance or
non-observance, or other proof, or notice or demand, whereby to charge Operating
Tenant therefor.
60
65
Article 15 - EXCULPATION
Section 15.1 EXCULPATION. The provisions of Article 14 of the Note are
hereby incorporated by reference to the fullest extent as if the text of such
Article were set forth in its entirety herein.
Article 16 - NOTICES
Section 16.1 NOTICES. All notices or other written communications
hereunder shall be deemed to have been properly given (i) upon delivery, if
delivered in person or by facsimile transmission with receipt acknowledged by
the recipient thereof and confirmed by telephone by sender, (ii) one (1)
Business Day (defined below) after having been deposited for overnight delivery
with any reputable overnight courier service, or (iii) three (3) Business Days
after having been deposited in any post office or mail depository regularly
maintained by the U.S. Postal Service and sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to Borrower:
--------------------------------------------
545 East John Carpenter Freeway, Suite 1300
Irving, Texas 75062
Attention: General Counsel
Facsimile No.: (972) 444-4949
With a copy to: Jenkens & Gilchrist
Fountain Place
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: Robert G. McCormick
Facsimile No.: (214) 855-4300
If to Operating Tenant:
--------------------------------------------
545 East John Carpenter Freeway #1300
Irving, Texas 75062
Attention: General Counsel
Facsimile No.: (972) 444-4949
With a copy to: Jenkens & Gilchrist
Fountain Place
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: Robert G. McCormick
Facsimile No.: (214) 855-4300
If to Lender: The Chase Manhattan Bank
c/o Chase Commercial Mortgage Banking Corp.
Servicing Department
380 Madison Avenue
10th Floor
New York, New York 10017
Attention: Ms. Janice Smith
Facsimile No.: (212) 622-3553
61
66
and
The Chase Manhattan Bank
Legal Department
270 Park Avenue
39th Floor
New York, New York 10017
Attention: Ronald A. Wilcox, Esq.
Facsimile No.: (212) 270-2934
With a copy to: Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: Joseph Philip Forte, Esq.
Facsimile No.: (212) 912-7751
If to Trustee:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
or addressed as such party may from time to time designate by written notice to
the other parties.
Any party by notice to the other party may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in New
York, New York.
Article 17 - CHOICE OF LAW/SUBMISSION TO JURISDICTION
Section 17.1 CHOICE OF LAW. This Security Instrument shall be deemed to
be a contract entered into pursuant to the laws of the State of New York and
shall in all respects be governed, construed, applied and enforced in accordance
with the laws of the State of New York, provided however, that with respect to
the creation, perfection, priority and enforcement of the lien of this Security
Instrument, and the determination of deficiency judgments, the laws of the state
where the Property is located shall apply.
Section 17.2 PROVISIONS SUBJECT TO LAW. All rights, powers and remedies
provided in this Security Instrument may be exercised only to the extent that
the exercise thereof does not violate any applicable state or federal law and
are intended to be limited to the extent necessary so that they will not render
this Security Instrument invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable state or federal law.
62
67
Section 17.3 SUBMISSION TO JURISDICTION. With respect to any claim or
action arising hereunder or under the Note or the Other Security Documents, the
Loan Parties and Lender (a) irrevocably submit to the nonexclusive jurisdiction
of the courts of the State of New York and the United States District Court
located in the Borough of Manhattan in New York, New York, and appellate courts
from any thereof, (b) irrevocably waive any objection which it may have at any
time to the laying on venue of any suit, action or proceeding arising out of or
relating to this Security Instrument brought in any such court, and (c)
irrevocably waive any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. Nothing in this
Security Instrument will be deemed to preclude Lender from bringing an action or
proceeding with respect hereto in any other jurisdiction.
Article 18 - SECONDARY MARKET
Section 18.1 TRANSFER OF LOAN. Lender may, at any time, sell, transfer
or assign the Note, this Security Instrument and the Other Security Documents,
and any or all servicing rights with respect thereto, or grant participations
therein (the "Participations") or issue mortgage pass-through certificates or
other securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"). Lender may forward to each
purchaser, transferee, assignee, servicer, participant, or investor in such
Participations or Securities (collectively, the "Investor") or any Rating Agency
rating such Securities, each prospective Investor, and any organization
maintaining databases on the underwriting and performance of commercial mortgage
loans, all documents and information which Lender now has or may hereafter
acquire relating to the Debt and to the Loan Parties, any Guarantor, any
Indemnitor(s) and the Property, whether furnished by the Loan Parties, any
Guarantor, any Indemnitor(s) or otherwise, as Lender determines necessary or
desirable. The Loan Parties irrevocably waive any and all rights they may have
under Applicable Laws to prohibit such disclosure, including but not limited to
any right of privacy.
Section 18.2 COOPERATION. The Loan Parties, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Article 18, including, without
limitation, complying with all of the terms and conditions of that certain
letter agreement, dated the date hereof, among Lender, the Loan Parties and
other parties set forth therein (the "Cooperation Letter").
Section 18.3 RESERVES/ESCROWS. In the event that Securities are issued
in connection with the Loan, all funds held by Lender in escrow or pursuant to
reserves in accordance with this Security Instrument or the Other Security
Documents shall be deposited in eligible accounts at eligible institutions as
then defined and required by the Rating Agencies.
Article 19 - COSTS
Section 19.1 PERFORMANCE AT BORROWER'S EXPENSE. Borrower acknowledges
and confirms that Lender may impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment, substitution and termination of the Loan or any part thereof, (b) the
release, substitution, acquisition or perfection of collateral therefor, (c)
obtaining certain consents, waivers and approvals with respect to the Property,
or (d) the review of any Lease or proposed Lease or the preparation or review of
any subordination, non- disturbance agreement (the occurrence of any of the
above shall be called an "Event"). Borrower
63
68
further acknowledges and confirms that it shall be responsible for the payment
of all costs of reappraisal of the Property or any part thereof, whether (i)
required by law, regulation, or any governmental or quasi-governmental authority
or (ii) reasonably required by Lender. Borrower hereby acknowledges and agrees
to pay, immediately, with or without demand, all such fees (as the same may be
increased or decreased from time to time), and any additional fees of a similar
type or nature which may be imposed by Lender from time to time, upon the
occurrence of any Event or otherwise. Wherever it is provided for herein that
Borrower pay any costs and expenses, such costs and expenses shall include, but
not be limited to, all reasonable legal fees of Lender (excluding Lender's
in-house legal costs).
Section 19.2 LEGAL FEES FOR ENFORCEMENT. (a) Borrower shall pay all
reasonable legal fees (excluding Lender's in-house legal costs) incurred by
Lender in connection with (i) the preparation of the Note, this Security
Instrument and the Other Security Documents and (ii) the items set forth in
Section 19.1 above, and (b) Borrower shall pay to Lender on demand any and all
expenses, including legal fees, incurred or paid by Lender in protecting its
interest in the Property or in collecting, after the occurrence of an Event of
Default under the Note, this Security Instrument or the Other Security
Documents, any amount payable under the Note, this Security Instrument or the
Other Security Documents, or in enforcing its rights hereunder with respect to
the Property, whether or not any legal proceeding is commenced hereunder or
thereunder, together with interest thereon at the Default Rate from the date
paid or incurred by Lender until such expenses are paid by Borrower.
Article 20 - DEFINITIONS
Section 20.1 GENERAL DEFINITIONS. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Security Instrument may be used interchangeably in singular or plural
form and the words "Applicable Laws" shall mean all existing and future federal,
state and local laws, orders, ordinances, governmental rules and regulations and
court orders and the word "Loan Parties" shall mean "Loan Parties and Loan
Parties' respective successors and assigns," the word "Borrower" shall mean
"Borrower and Borrower's successors and assigns," the word "Operating Tenant"
shall mean "Operating Tenant and Operating Tenant's successors and assigns," the
word "Borrower" shall mean "Borrower and Borrower's successors and assigns," the
word "Lender" shall mean "Lender and any subsequent holder of the Note," the
word "Trustee" shall mean "Trustee and any substitute Trustee of the estates,
properties, powers, trusts and rights conferred upon Trustee pursuant to this
Security Instrument," the word "Note" shall mean "the Note and any other
evidence of indebtedness secured by this Security Instrument," the word "person"
shall include an individual, corporation, limited liability company,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "Property" shall include any portion
of the Property and any interest therein, and the phrase "legal fees" and
"counsel fees" shall include any and all counsel, attorney, paralegal and law
clerk fees and disbursements, including, but not limited to, fees and
disbursements at the pre-trial, trial and appellate levels incurred or paid by
Lender in protecting its interest in the Property, the Leases and the Rents and
enforcing its rights hereunder, whether with respect to retained firms, the
reimbursement for the expenses of in-house staff or otherwise.
64
69
Section 20.2 HEADINGS, ETC. The headings and captions of various
Articles and Sections of this Security Instrument are for convenience of
reference only and are not to be construed as defining or limiting, in any way,
the scope or intent of the provisions hereof.
Article 21 - MISCELLANEOUS PROVISIONS
Section 21.1 NO ORAL CHANGE. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part any
Loan Party or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section 21.2 LIABILITY. The obligations of the Loan Parties hereunder
shall be joint and several obligations. This Security Instrument shall be
binding upon and inure to the benefit of the Loan Parties and Lender and their
respective successors and assigns forever.
Section 21.3 INAPPLICABLE PROVISIONS. If any term, covenant or
condition of the Note or this Security Instrument is held to be invalid, illegal
or unenforceable in any respect, the Note and this Security Instrument shall be
construed without such provision.
Section 21.4 DUPLICATE ORIGINALS; COUNTERPARTS. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single Security Instrument. The failure of any party hereto to execute this
Security Instrument, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.
Section 21.5 NUMBER AND GENDER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section 21.6 GUARANTORS AND INDEMNITORS. Lender hereby acknowledges
that as of the date hereof, there are no Guarantors or Indemnitors other than
Borrower, FelCor Lodging Trust Incorporated (the "REIT") and FLLP.
Article 22 - SPECIAL ____________ PROVISIONS
[This section contained state-specific provisions that varied depending
on the applicable state law.]
Article 23 - DEED OF TRUST PROVISIONS
Section 23.1 CONCERNING THE TRUSTEE. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this
65
70
Security Instrument, covenants to perform and fulfill the trusts herein created,
being liable, however, only for gross negligence or willful misconduct, and
hereby waives any statutory fee and agrees to accept reasonable compensation, in
lieu thereof, for any services rendered by Trustee in accordance with the terms
hereof. Trustee may resign at any time upon giving thirty (30) days' notice to
the Loan Parties and to Lender. Lender may remove Trustee at any time or from
time to time and select a successor trustee. In the event of the death, removal,
resignation, refusal to act, or inability to act of Trustee, or in its sole
discretion for any reason whatsoever Lender may, without notice and without
specifying any reason therefor and without applying to any court, select and
appoint a successor trustee, by an instrument recorded wherever this Security
Instrument is recorded and all powers, rights, duties and authority of Trustee,
as aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender. The procedure provided
for in this paragraph for substitution of Trustee shall be in addition to and
not in exclusion of any other provisions for substitution, by law or otherwise.
Section 23.2 TRUSTEE'S FEES. Borrower shall pay all reasonable costs,
fees and expenses incurred by Trustee and Trustee's agents and counsel in
connection with the performance by Trustee of Trustee's duties hereunder and all
such costs, fees and expenses shall be secured by this Security Instrument.
Section 23.3 CERTAIN RIGHTS. With the approval of Lender, Trustee shall
have the right to take any and all of the following actions: (i) to select,
employ, and advise with counsel (who may be, but need not be, counsel for
Lender) upon any matters arising hereunder, including the preparation,
execution, and interpretation of the Note, this Security Instrument or the Other
Security Documents, and shall be fully protected in relying as to legal matters
on the advice of counsel, (ii) to execute any of the trusts and powers hereof
and to perform any duty hereunder either directly or through his/her agents or
attorneys, (iii) to select and employ, in and about the execution of his/her
duties hereunder, suitable accountants, engineers and other experts, agents and
attorneys-in-fact, either corporate or individual, not regularly in the employ
of Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable area, or for any error of
judgment or act done by Trustee in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for Trustee's gross
negligence or bad faith, and (iv) any and all other lawful action as Lender may
instruct Trustee to take to protect or enforce Lender's rights hereunder.
Trustee shall not be personally liable in case of entry by Trustee, or anyone
entering by virtue of the powers herein granted to Trustee, upon the Property
for debts contracted for or liability or damages incurred in the management or
operation of the Property. Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting an action taken or
proposed to be taken by Trustee hereunder, believed by Trustee in good faith to
be genuine. Trustee shall be entitled to reimbursement for actual expenses
incurred by Trustee in the performance of Trustee's duties hereunder and to
reasonable compensation for such of Trustee's services hereunder as shall be
rendered.
Section 23.4 RETENTION OF MONEY. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by applicable law) and Trustee shall
be under no liability for interest on any moneys received by Trustee hereunder.
66
71
Section 23.5 PERFECTION OF APPOINTMENT. Should any deed, conveyance, or
instrument of any nature be required from the Loan Parties by any Trustee or
substitute trustee to more fully and certainly vest in and confirm to the
Trustee or substitute trustee such estates rights, powers, and duties, then,
upon request by the Trustee or substitute trustee, any and all such deeds,
conveyances and instruments shall be made, executed, acknowledged, and delivered
and shall be caused to be recorded and/or filed by the Loan Parties.
Section 23.6 SUCCESSION INSTRUMENTS. Any substitute trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his/her predecessor in the rights hereunder with like
effect as if originally named as Trustee herein; but nevertheless, upon the
written request of Lender or of the substitute trustee, the Trustee ceasing to
act shall execute and deliver any instrument transferring to such substitute
trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in the Trustee's place.
Article 24 - OPERATING LEASE PROVISIONS
Section 24.1 THE OPERATING LEASE. Operating Tenant shall (i) pay all
rents, additional rents and other sums required to be paid by Operating Tenant,
as tenant under and pursuant to the provisions of the Operating Lease, (ii)
diligently perform and observe all of the terms, covenants and conditions of the
Operating Lease on the part of Operating Tenant, as tenant thereunder, and (iii)
promptly notify Lender of the giving of any notice by Borrower to Operating
Tenant of any default by Operating Tenant, as tenant thereunder, and deliver to
Lender a true copy of each such notice. Operating Tenant shall not, without the
prior consent of Lender, surrender the leasehold estate created by the Operating
Lease or terminate or cancel the Operating Lease or modify, change, supplement,
alter or amend the Operating Lease, in any respect, either orally or in writing,
and if Operating Tenant shall default in the performance or observance of any
term, covenant or condition of the Operating Lease on the part of Operating
Tenant, as tenant thereunder, Lender shall have the right, but shall be under no
obligation, to pay any sums and to perform any act or take any action as may be
appropriate to cause all of the terms, covenants and conditions of the Operating
Lease on the part of Operating Tenant to be performed or observed on behalf of
Operating Tenant, to the end that the rights of Operating Tenant in, to and
under the Operating Lease shall be kept unimpaired and free from default. If
Borrower shall deliver to Lender a copy of any notice of default under the
Operating Lease, such notice shall constitute full protection to Lender for any
action taken or omitted to be taken by Lender, in good faith, in reliance
thereon. Operating Tenant shall exercise each individual option, if any, to
extend or renew the term of the Operating Lease upon demand by Lender made at
any time within one (1) year prior to the last day upon which any such option
may be exercised, and Operating Tenant hereby expressly authorizes and appoints
Lender its attorney-in-fact to exercise any such option in the name of and upon
behalf of Operating Tenant, which power of attorney shall be irrevocable and
shall be deemed to be coupled with an interest.
Section 24.2 SUBLEASES. Notwithstanding anything contained in the
Operating Lease to the contrary, Operating Tenant shall only sublet any portion
of the Land in accordance with the terms and conditions of Section 3.8. Each
such Lender-approved sublease hereafter made shall provide that, (a) in the
event of the termination of the Operating Lease, the lease shall not terminate
67
72
or be terminable by the lessee; (b) in the event of any action for the
foreclosure of this Security Instrument, the lease shall not terminate or be
terminable by the subtenant by reason of the termination of the Operating Lease
unless the lessee is specifically named and joined in any such action and unless
a judgment is obtained therein against the lessee; and (c) in the event that the
Operating Lease is terminated as aforesaid, the lessee shall attorn to the
lessor under the Operating Lease or to the purchaser at the sale of the Property
on such foreclosure, as the case may be. In the event that any portion of the
Land shall be sublet pursuant to the terms of this Subsection, such sublease
shall be deemed to be included in the Property.
Section 24.3 NO MERGER OF FEE AND LEASEHOLD ESTATES; RELEASES. So long
as any portion of the Debt shall remain unpaid, unless Lender shall otherwise
consent, the fee title to the Land and the leasehold estate therein created
pursuant to the provisions of the Operating Lease shall not merge but shall
always be kept separate and distinct, notwithstanding the union of such estates
in Operating Tenant, Borrower, or in any other person by purchase, operation of
law or otherwise. Lender reserves the right, at any time, to release portions of
the Property, including, but not limited to, the leasehold estate created by the
Operating Lease, with or without consideration, at Lender's election, without
waiving or affecting any of its rights hereunder or under the Note or the Other
Security Documents and any such release shall not affect Lender's rights in
connection with the portion of the Property not so released.
Section 24.4 SUBORDINATION/PURCHASE RIGHTS.
(a) Any option to purchase, right of first refusal to
purchase, right of first refusal to lease additional space at the
Property, or any similar right of Operating Tenant, whether pursuant to
the Operating Lease or otherwise (collectively, the "Purchase Rights"),
are and shall at all times continue to be subject and subordinate in
all respects to the terms, covenants and provisions of this Security
Instrument and to the lien thereof, including without limitation, all
renewals, increases, modifications, spreaders, consolidations,
replacements and extensions thereof and to all sums secured thereby and
advances made thereunder with the same force and effect as if the
Security Instrument had been executed, delivered and recorded prior to
the execution and delivery of the Operating Lease or such other
document containing any Purchase Right. Operating Tenant hereby
acknowledges and agrees that its right to receive any payments pursuant
to the terms of the Operating Lease is subordinate to the payment of
the interest, principal and other sums due pursuant to the Note.
(b) Operating Tenant represents and warrants that (i)
Operating Tenant is the sole owner and holder of all of the Purchase
Rights; (ii) Operating Tenant has not granted or made any assignment,
transfer, conveyance or other disposition of the Purchase Rights; (iii)
Operating Tenant has not granted or created any lien or encumbrance of
any Purchase Rights; and (iv) Operating Tenant has not exercised any
Purchase Rights.
(c) Operating Tenant hereby agrees that so long at the Loan is
outstanding, it shall not exercise any of the Purchase Rights or
assign, transfer or convey all or any of the Purchase Rights.
(d) The Loan Parties agree to notify Lender in writing of (i)
the proposed exercise of any of the Purchase Rights not less than
thirty (30) days prior to the date of the exercise
68
73
of any of the Purchase Rights, (ii) any notice given to Borrower with
respect to exercise of any of the Purchase Rights, concurrently with
the giving of such notice to Borrower, and shall include a copy of any
notice given to Borrower with respect to such exercise and (iii) any
proposed assignment, transfer or conveyance of all or any of the
Purchase Rights, or agreement to do so, in the case of Operating
Tenant, not less than thirty (30) days prior to the date of any such
assignment, transfer or conveyance, and in the case of Borrower,
concurrently with Borrower's receipt of any notice of such proposed
assignment, transfer or conveyance.
[NO FURTHER TEXT ON THIS PAGE].
69
74
IN WITNESS THEREOF, this Security Instrument has been executed by the
Loan Parties the day and year first above written.
-----------------------------,
a Delaware
By:
----------------------
Name:
----------------------
Title:
----------------------
------------------------------,
a Delaware limited liability company
By:
----------------------
Name:
----------------------
Title:
----------------------
75
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on the ____ day of April,
2000, by ____________________, ____________________ of ____________________, a
Delaware ____________________, [on behalf of said ___________________, which
limited liability company is a general partner of and acknowledged this
instrument on behalf of _________________., a Delaware limited partnership].
[SEAL]
--------------------------------------------
Notary Public in and for the State of ------
My Commission Expires: Print Name of Notary Public.
--------------------------------------------
76
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
This instrument was acknowledged before me on the __ day of April, 2000
by ________________________, a ________________________ of ____________________,
a Delaware limited liability company, on behalf of said limited liability
company.
[SEAL] Notary Public in and for the State of
-------
My Commission Expires: Print Name of Notary Public.
-----------------------------------------------
77
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings
and improvements thereon, situate, lying and being.
78
EXHIBIT B
COMMINGLED CASH MANAGEMENT CERTIFICATION