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EXHIBIT 10.32
PROMISSORY NOTE
$1,300,000.00
September 11, 1998
Loan No.: 9807
FOR VALUE RECEIVED, HALLWOOD HOTELS-OKC MEZZ, INC., as maker,
having its principal place of business at 3710 Rawlins, Suite 1500, Dallas,
Texas 75219 ("Borrower"), hereby unconditionally promises to pay to the order
of COMMERCIAL MORTGAGE INVESTMENT TRUST, INC., a Virginia corporation, as
payee, having an address at 11601 Wilshire Boulevard, Suite 2440, Los Angeles,
California 90025 ("Lender"), or at such other place as the holder hereof may
from time to time designate in writing, the principal sum of One Million Three
Hundred Thousand and No/100 Dollars ($1,300,000.00) in lawful money of the
United States of America with interest thereon to be computed from the date of
this Note at the Applicable Interest Rate (defined below), adjusted with
respect to each Interest Period (defined below), and to be paid as follows:
ARTICLE 1. PAYMENT TERMS
(a) On the date hereof, a payment of interest only in the
amount of $9,497.22 with respect to the period commencing on the date of this
Note and ending on and including the last day of the calendar month in which
this Note is executed;
(b) On the first day of November, 1998 and on the first day of
each calendar month thereafter up to and including the first day of September,
2005, a payment of interest in arrears accruing on the then unpaid principal
balance of this Note at the Applicable Interest Rate plus a principal payment in
accordance with Schedule A attached hereto; each of the payments to be applied
as follows:
(i) first, to the payment of interest computed at the
Applicable Interest Rate; and
(ii) the balance toward the reduction of the principal
sum;
and the balance of the principal sum and all interest thereon shall be due and
payable on the first day of October, 2005 (the "Maturity Date"). Interest on the
principal sum of this Note shall be calculated on the basis of a three hundred
sixty (360) day year and the actual number of days elapsed for any period for
which interest is being calculated. Interest shall commence to accrue under this
Note upon the disbursement by Lender of proceeds of this Note into the escrow
for the closing of the loan evidenced by this Note (the "Loan"). Interest for
any partial calendar month in which the Closing Date occurs shall be deducted
from the funds disbursed by Lender on the Closing Date.
ARTICLE 2. INTEREST
(a) The term "Applicable Interest Rate" as used in this Note
shall mean from the date hereof through and including the Maturity Date, an
interest rate (the "Rate") equal to LIBOR (defined below) plus seven and fifty
percent (7.50%) per annum.
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The term "LIBOR" means the rate per annum which is equal to the London Interbank
Offered Rate reported from time to time by Telerate News Service which is
reported as of such date on page 3750, at which foreign branches of major United
States banks offer United States dollar deposits to other banks for a one-month
period in the London interbank market at approximately 11:00 a.m., London time,
on the second (2nd) full Eurodollar Business Day (defined below) next preceding
the first Business Day (defined below) of each Interest Period (defined below).
If such interest rate shall cease to be available from Telerate News Services,
LIBOR shall be determined from such financial reporting service as Lender shall
reasonably determine and use with respect to its other loan facilities on which
interest is determined on LIBOR. If two or more such rates appear on Telerate
page 3750 or other applicable pages, the rate in respect of such Interest Period
will be the arithmetic mean of such offered rates, absent manifest error. The
term "Eurodollar Business Day" means any day other than a Saturday, Sunday or
other day on which banks in New York, New York are authorized or required to
close but excluding therefrom any day on which commercial banks are not open for
dealings in U.S. dollar deposits in the London interbank market. The term
"Interest Period" means the period from and including the first day of a
calendar month during the term of this Note through and including the last day
of such calendar month; provided, however, the first Interest Period shall
commence on the date hereof and end on the last day of the current month, and
the last Interest Period shall end on the Maturity Date.
(b) For each Interest Period, Lender shall calculate the
interest payable for such Interest Period at the applicable Interest Rate on the
unpaid principal balance as of the first Business Day of the Interest Period,
and no adjustments to such payment amount shall be made on account of principal
payments made during the Interest Period after the first Business Day thereof.
Lender's determination of LIBOR as in effect from time to time, and Lender's
calculations of interest payable for an Interest Period, shall be conclusive and
binding absent manifest error.
(c) Borrower agrees to reimburse Lender on the date hereof for
the cost of an eighty-four (84) month interest rate cap for the LIBOR benchmark
of 7.50%.
ARTICLE 3. EXCULPATION
Notwithstanding anything in the Loan Documents to the contrary, but subject to
the qualifications hereinbelow set forth, Lender agrees that:
Borrower shall be liable upon the indebtedness evidenced hereby and for the
other obligations arising under the Loan Documents to the full extent (but only
to the extent) of the security therefor, the same being all the Property (as
defined below) securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents.
Judicial or other proceedings brought by Lender against Borrower upon an Event
of Default shall be limited to the preservation, enforcement and foreclosure, or
any thereof, of the liens, security titles, estates, assignments, rights and
security interests now or at any time hereafter securing the payment of this
Note and/or the other obligations of Borrower under the Loan Documents, and,
except with respect to the liability described below in this Article; no
attachment, execution or other writ of process shall be sought, issued or levied
upon any assets, properties or funds of Borrower other than the Property.
In the event of a foreclosure of such liens, security titles, estates,
assignments, rights or security interests securing the payment of this Note
and/or the other obligations of Borrower
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under the Loan Documents, no judgment for any deficiency upon the indebtedness
evidenced hereby shall be sought or obtained by Lender against Borrower, except
with respect to the liability described below in this Article; PROVIDED,
HOWEVER, THAT, NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION, MAKER
SHALL BE FULLY AND PERSONALLY LIABLE AND SUBJECT TO LEGAL ACTION:
(a) any fraud or any material misrepresentation by Borrower in
connection with the Loan or the Property, or any misappropriation by Borrower of
any funds deriving from the Property;
(b) the filing by Borrower or the Company, or the filing
against Borrower or the Company by Guarantor, of any proceeding for relief under
any federal or state bankruptcy, insolvency or receivership laws or any
assignment for the benefit of creditors made by Borrower or the Company;
(c) any breach by the Company of the bankruptcy-remote
covenants set forth in Section 4.20 of the Loan Agreement;
(d) any default under the Senior Loan Documents which is
personal to the Company and not curable by Lender following a foreclosure of the
collateral for the Loan;
(e) any default by Borrower under Section 5.13 of the Loan
Agreement;
(f) any modification, amendment or other change in the
Company's organizational documents or Borrower's organizational documents
without the prior written consent of Lender except for such change as permitted
under the Loan Agreement and the Senior Loan Documents;
(g) any modification, amendment or other change in the notice
provisions under the Senior Loan Documents to eliminate Lender as a party to
receive notices under the Senior Loan Documents or to change Lender's address
thereunder without the prior written consent of Lender; or
(h) any termination, replacement or other change in the
Property's property manager without the prior written consent of Lender, except
when required by the Senior Loan.
References herein to particular sections of the Loan Documents shall be deemed
references to such sections as affected by other provisions of the Loan
Documents relating thereto. Nothing contained in this Article shall (x) be
deemed to be a release or impairment of the indebtedness evidenced by this Note
or the other obligations of Borrower under the Loan Documents or the lien of the
Loan Documents upon the Property, or (y) preclude Lender from foreclosing the
Loan Documents in case of any default or from enforcing any of the other rights
of Lender except as stated in this Article, or (z) release, relieve, reduce,
waive, limit or impair in any way whatsoever any obligation of any party to the
Indemnity and Guaranty Agreement and Hazardous Substances Indemnity Agreement
each of even date executed and delivered in connection with the indebtedness
evidenced by this Note.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS NOTE, THE SECURITY INSTRUMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, LENDER SHALL NOT BE DEEMED TO HAVE WAIVED
ANY RIGHT WHICH LENDER MAY HAVE UNDER SECTION 506(a), 506(b), 1111(b) OR ANY
OTHER PROVISIONS OF THE U.S. BANKRUPTCY CODE TO FILE A CLAIM FOR THE FULL AMOUNT
OF THE INDEBTEDNESS EVIDENCED HEREBY OR SECURED BY THE SECURITY INSTRUMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO REQUIRE THAT ALL COLLATERAL SHALL CONTINUE
TO SECURE ALL OF THE INDEBTEDNESS OWING TO LENDER IN ACCORDANCE WITH THIS NOTE,
THE SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE 4. DEFAULT AND ACCELERATION
(a) The whole of the principal sum of this Note, (b) interest,
default interest, late charges and other sums, as provided in this Note, the
Security Instrument or the Other Security Documents (defined below), (c) all
other monies agreed or provided to be paid by Borrower in this Note, the
Security Instrument or the Other Security Documents, (d) all sums advanced
pursuant to the Security Instrument to protect and preserve the Property and the
lien and the security interest created thereby, and (e) all sums advanced and
costs and expenses incurred by Lender in connection with the Debt (defined
below) 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, whether made or incurred at the request of Borrower or Lender
(all the sums referred to in (a) through (e) above shall collectively be
referred to as the "Debt") shall without notice become immediately due and
payable at the option of Lender if any payment required in this Note is not paid
on or prior to the date when due or on the happening of any other default, after
the expiration of any applicable notice and grace periods, herein or under the
terms of the Security Instrument or any of the Other Security Documents
(collectively, an "Event of Default").
ARTICLE 5. DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an
Event of Default, Lender shall be entitled to receive and Borrower shall pay
interest on the entire unpaid principal sum at a rate equal to the lesser of (a)
four percent (4%) plus the Applicable Interest Rate and (b) the maximum interest
rate which Borrower may by law pay (the "Default Rate"). The Default Rate shall
be computed from the occurrence of the Event of Default until the earlier of the
date upon which the Event of Default is cured or the date upon which the Debt is
paid in full. Interest calculated at the Default Rate shall be added to the
Debt, and shall be deemed secured by the Security Instrument. This clause,
however, shall not be construed as an agreement or privilege to extend the date
of the payment of the Debt, nor as a waiver of any other right or remedy
accruing to Lender by reason of the occurrence of any Event of Default.
ARTICLE 6. PREPAYMENT
(a) The principal balance of this Note may be prepaid in whole
or in part, upon not less than thirty (30) days and not more than forty (40)
days prior written notice to Lender specifying the date on which prepayment is
to be made (the "Prepayment Date"), which Prepayment Date must be on or before
the nineteenth (19th) day of a calendar month, and upon payment of:
(i) all accrued interest to and including the Prepayment
Date;
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(ii) all interest which would have accrued on the
principal balance of this Note so prepaid after the
Prepayment Date to and including the twentieth
(20th) day of the calendar month in which the
Prepayment Date occurs (the "Interest Shortfall
Payment");
(iii) in the case of a partial prepayment, the principal
amount so prepaid may only be $500,000.00 or a
multiple thereof; and
(iv) in the case of a prepayment of the entire principal
balance of this Note, all other sums due under this
Note, the Security Instrument and all Other Security
Documents.
(b) If any notice of prepayment is given under this Article 5,
the principal balance of this Note and the other sums required under this
prepayment section shall be due and payable on the Prepayment Date. Lender shall
not be obligated to accept any prepayment of the principal balance of this Note
unless it is accompanied by all sums due in connection therewith.
(c) If a Default Prepayment (defined below) occurs, Borrower
shall pay to Lender the entire Debt, including, without limitation, the Interest
Shortfall Payment, if applicable. For purposes of this Note, the term "Default
Prepayment" shall mean a prepayment of the principal amount of this Note made
after the occurrence of any Event of Default or an acceleration of the Maturity
Date under any circumstances, including, without limitation, a prepayment
occurring in connection with reinstatement of the Security Instrument provided
by statute under foreclosure proceedings or exercise of a power of sale, any
statutory right of redemption exercised by Borrower or any other party having a
statutory right to redeem or prevent foreclosure, any sale in foreclosure or
under exercise of a power of sale or otherwise.
ARTICLE 7. SECURITY
This Note is secured by the Security Instrument and the Other Security
Documents. The term "Security Instrument" as used in this Note shall mean the
Assignment of Interests and Security Agreement dated the date hereof given by
Borrower to (or for the benefit of) Lender covering all of Borrower's ownership
of Hallwood Hotels-OKC, Inc., a Delaware corporation (the "Property"). The term
"Other Security Documents" as used in this Note shall mean all and any of the
documents other than this Note or the Security Instrument now or hereafter
executed by Borrower and/or others and by or in favor of Lender, which wholly or
partially secure or guarantee payment of this Note. Whenever used, the singular
number shall include the plural, the plural number shall include the singular,
and the words "Lender" and "Borrower" shall include their respective successors,
assigns, heirs, executors and administrators.
All of the terms, covenants and conditions contained in the
Security Instrument and the Other Security Documents are hereby made part of
this Note to the same extent and with the same force as if they were fully set
forth herein.
ARTICLE 8. SAVINGS CLAUSE
This Note is subject to the express condition that at no time
shall Borrower be obligated or required to pay interest on the principal balance
due hereunder at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to
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pay. If by the terms of this Note, Borrower is at any time required or obligated
to pay interest on the principal balance due hereunder at a rate in excess of
such maximum rate, the Applicable Interest Rate or the Default Rate, as the case
may be, shall be deemed to be immediately reduced to such maximum rate and all
previous payments in excess of the maximum rate shall be deemed to have been
payments in reduction of principal and not on account of the interest due
hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt, shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.
ARTICLE 9. LATE CHARGE
If any sum payable under this Note is not paid on or prior to
the seventh (7th) calendar day after the date on which it is due, Borrower shall
pay to Lender upon demand an amount equal to the lesser of five percent (5%) of
the unpaid sum or the maximum amount permitted by applicable law to defray the
expenses incurred by Lender in handling and processing the delinquent payment
and to compensate Lender for the loss of the use of the delinquent payment and
the amount shall be secured by the Security Instrument and the Other Security
Documents.
ARTICLE 10. NO ORAL CHANGE
This Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Borrower 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.
ARTICLE 11. JOINT AND SEVERAL LIABILITY
If Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be joint and several.
ARTICLE 12. WAIVERS
Borrower and all others who may become liable for the payment
of all or any part of the Debt do hereby severally waive presentment and demand
for payment, notice of dishonor, protest and notice of protest and non-payment
and all other notices of any kind. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note, the Security
Instrument or the Other Security Documents made by agreement between Lender or
any other person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other person
or entity who may become liable for the payment of all or any part of the Debt,
under this Note, the Security Instrument or the Other Security Documents. No
notice to or demand on Borrower shall be deemed to be a waiver of the obligation
of Borrower or of the right of Lender to take further action without further
notice or demand as provided for in this Note, the Security Instrument or the
Other Security Documents. If Borrower is a partnership, the agreements contained
herein shall remain in full force and effect, notwithstanding any changes in the
individuals or entities comprising the partnership, and the term "Borrower," as
used herein, shall include any alternate
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or successor partnership, but any predecessor partnership and its partners shall
not thereby be released from any liability. If Borrower is a corporation, the
agreements contained herein shall remain in full force and effect
notwithstanding any changes in the shareholders comprising, or the officers and
directors relating to, the corporation, and the term "Borrower" as used herein,
shall include any alternate or successor corporation, but any predecessor
corporation shall not be relieved of liability hereunder. If Borrower is a
limited liability company, the agreements herein contained shall remain in full
force and effect, notwithstanding any changes in the individuals or entities
comprising the limited liability company and the term "Borrower," as used
herein, shall include any alternate or successor limited liability company, but
any predecessor limited liability company and its members shall not be released
from any liability. (Nothing in the foregoing sentence shall be construed as a
consent to, or a waiver of, any prohibition or restriction on transfers of
interests in such partnership, corporation or limited liability company which
may be set forth in the Security Instrument or any Other Security Document.)
ARTICLE 13. TRANSFER
Upon the transfer of this Note, Borrower hereby waiving notice
of any such transfer, Lender may deliver all the collateral mortgaged, granted,
pledged or assigned pursuant to the Security Instrument and the Other Security
Documents, or any part thereof, to the transferee who shall thereupon become
vested with all the rights herein or under applicable law given to Lender with
respect thereto, and Lender shall thereafter forever be relieved and fully
discharged from any liability or responsibility in the matter; but Lender shall
retain all rights hereby given to it with respect to any liabilities and the
collateral not so transferred.
ARTICLE 14. WAIVER OF TRIAL BY JURY
BORROWER HEREBY WAIVES, 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 EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS
NOTE, THIS NOTE, THE SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY
ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION THEREWITH.
ARTICLE 15. AUTHORITY
Borrower (and the undersigned representative of Borrower, if
any) represents that Borrower has full power, authority and legal right to
execute and deliver this Note, the Security Instrument and the Other Security
Documents and that this Note, the Security Instrument and the Other Security
Documents constitute valid and binding obligations of Borrower.
ARTICLE 16. APPLICABLE LAW
This Note shall be deemed to be a contract entered into
pursuant to the laws of the Commonwealth of Virginia and shall in all respects
be governed, construed, applied and enforced in accordance with the internal
laws of the Commonwealth of Virginia without reference to conflicts of laws
principles.
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ARTICLE 17. SERVICE OF PROCESS
(a) (i) Borrower will maintain a place of business or an agent
for service of process in the Commonwealth of Virginia and give prompt notice to
Lender of the address of such place of business and of the name and address of
any new agent appointed by it, as appropriate. Borrower further agrees that the
failure of its agent for service of process to give it notice of any service of
process will not impair or affect the validity of such service or of any
judgment based thereon. If, despite the foregoing, there is for any reason no
agent for service of process of Borrower available to be served, and if it at
that time has no place of business in the Commonwealth of Virginia, then
Borrower irrevocably consents to service of process by registered or certified
mail, postage prepaid, to it at its address given in or pursuant to the first
paragraph hereof.
(ii) Borrower initially and irrevocably designates CT
Corporation System, with offices on the date hereof
at 5511 Staple Mill Road, Richmond, VA 23228, to
receive for and on behalf of Borrower service of
process in the Commonwealth of Virginia with respect
to this Note.
(b) With respect to any claim or action arising hereunder or
under the Security Instrument or the Other Security Documents, Borrower (a)
irrevocably submits to the nonexclusive jurisdiction of the courts of the
Commonwealth of Virginia and the United States District Court located in the
Commonwealth of Virginia, and appellate courts from any thereof, and (b)
irrevocably waives 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 Note
brought in any such court, irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) Nothing in this Note will be deemed to preclude Lender
from bringing an action or proceeding with respect hereto in any other
jurisdiction.
ARTICLE 18. COUNSEL FEES
In the event that it should become necessary to employ counsel
to collect the Debt or to protect or foreclose the security therefor, Borrower
also agrees to pay all reasonable fees and expenses of Lender, including,
without limitation, reasonable attorney's fees for the services of such counsel
whether or not suit be brought.
ARTICLE 19. 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 to the parties at the respective addresses set
forth at the head of this Note or addressed as such party may from time to time
designate by written notice to the other parties.
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Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
"Business Day" shall mean a day upon which commercial banks
are not authorized or required by law to close in the Commonwealth of Virginia.
ARTICLE 20. MISCELLANEOUS
(a) Wherever pursuant to this Note (i) Lender exercises any
right given to it to approve or disapprove, (ii) any arrangement or term is to
be satisfactory to Lender, or (iii) any other decision or determination is to be
made by Lender, the decision of Lender 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 and absolute
discretion of Lender and shall be final and conclusive, except as may be
otherwise expressly and specifically provided herein.
(b) Wherever pursuant to this Note it is provided that
Borrower pay any costs and expenses, such costs and expenses shall include, but
not be limited to, legal fees and disbursements of Lender, whether with respect
to retained firms, the reimbursement for the expenses of in-house staff, or
otherwise.
ARTICLE 21. DEFINITIONS
The terms set forth below are defined in the following
Sections of this Note:
(a) Applicable Interest Rate: Article 2;
(b) Borrower: Preamble, Articles 6 and 11;
(c) Business Day: Article 18;
(d) Debt: Article 3;
(e) Default Prepayment: Article 5, Section (c);
(f) Default Rate: Article 4;
(g) Event of Default: Article 3;
(h) Interest Shortfall Payment: Article 5, Subsection (a)(ii);
(i) Lender: Preamble and Article 6;
(j) LIBOR: Article 2;
(k) Loan: Article 1, Section (b);
(l) Maturity Date: Article 1, Section (b);
(m) Other Security Documents: Article 6;
(n) Prepayment Date: Article 5, Section (a);
(o) Security Instrument: Article 6.
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IN WITNESS WHEREOF, Borrower has duly executed this Note as of
the day and year first above written.
Borrower
HALLWOOD HOTELS-OKC MEZZ, INC.,
a Delaware corporation
By:
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Melvin J. Melle
Vice President
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ACKNOWLEDGMENT
STATE OF )
) SS.
COUNTY OF )
On ______________, before me, ________________, a Notary Public,
personally appeared ________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
------------------------------
Notary Public
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Loan No.: 9807
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of this 11th day of
September, 1998 between HALLWOOD HOTELS-OKC MEZZ, INC. a Delaware corporation
("Borrower"), whose address is 3710 Rawlins, Suite 1500, Dallas, Texas 75219 and
Commercial Mortgage Investment Trust Inc., a Virginia corporation, whose address
is 11601 Wilshire Boulevard, Suite 2440, Los Angeles, California 90025
("Lender").
RECITALS
A. Lender has agreed to make a loan (the "LOAN") to Borrower subject to
the terms and conditions contained herein. The Loan is evidenced by that certain
Promissory Note of even date herewith in the original principal amount of One
Million Three Hundred Thousand and No/100 Dollars ($1,300,000.00) (the note and
all amendments thereto and substitutions therefor are hereinafter referred to as
the "Note"). The terms and provisions of the Note are hereby incorporated herein
by reference in this Agreement.
B. Borrower is or on the Closing Date (as hereafter defined) will be
the sole owner of Hallwood Hotels-OKC, Inc., Corporation (the "Company"). The
Company owns certain real property described on Exhibit A hereto, located at
1815 South Meridian, Oklahoma City, Oklahoma 73108 commonly known as The Embassy
Suites Hotel (the "Property").
C. The Property and all other improvements now or hereafter located on
the Property (the "Improvements") are collectively called the "Project".
D. Borrower's obligations under the Loan will be secured by, among
other things, a collateral assignment of its entire interest in the Company
(collectively, the "Assignment"). This Agreement, the Note, the Assignment, the
Environmental Indemnity (hereinafter defined) and any other documents evidencing
or securing the Loan or executed in connection therewith, and any modifications,
renewals and extensions thereof, are referred to herein collectively as the
"Loan Documents."
NOW, THEREFORE, in consideration of the foregoing and the mutual
conditions and agreements contained herein the parties agree as follows:
ARTICLE I.
THE LOAN
1.1. FUNDING. On the Closing Date, Lender shall disburse to Borrower
the net proceeds of the Loan after deducting therefrom all costs, expenses, fees
and charges of Lender payable by Borrower hereunder. "Closing Date" means the
date of disbursement of the Loan proceeds.
1.2. LOAN TERM. The Loan shall mature on October 1, 2005 (the "Maturity
Date").
1.3. INTEREST RATE. Borrower shall pay interest on the outstanding
principal balance of the Loan at the rates set forth in the Note.
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ARTICLE II.
SECURITY
2.1. COLLATERAL. The Loan and all other indebtedness and obligations
under the Loan Documents shall be secured by the following (collectively the
"Collateral"): (a) the Assignment, (b) the other Loan Documents, and (c) any
other collateral or security described in this Agreement or required by Lender
in connection with the Loan.
ARTICLE III.
CONDITIONS PRECEDENT
Lender's obligation to disburse the Loan is subject to satisfaction of
all of the following conditions.
3.1. SENIOR LOAN.
(a) The Company shall have obtained a loan (the "Senior Loan") in the
principal amount of $17,250,000.00 from WMF Capital Corp. or its designee
("Senior Lender"). The Senior Loan shall (i) bear interest at a rate of not more
than 7.50% per annum, (ii) have principal and interest payments which amortize
principal based on a 25 year schedule, (iii) have a term of not less than ten
(10) years, and (iv) be secured by, among other things, a Mortgage encumbering
the Project. Lender shall have received copies of all documents which evidence
and secure the Senior Loan (collectively the "Senior Loan Documents"). The
Senior Loan Documents shall not contain provisions cross-defaulting or
cross-collateralizing the Senior Loan with any other loans.
(b) Lender and Senior Lender shall have executed an agreement
("Recognition Agreement") agreeing and stating that: (i) the Senior Loan is not
in default; (ii) that the granting of the Assignment does not constitute a
default under the Senior Loan; (iii) Lender has the right (but not the
obligation) to cure monetary defaults within the cure periods available to the
Company under the Senior Loan Documents; (iv) a default of the Loan will not
result in a default of the Senior Loan; and (v) Lender, or its designee, will be
permitted to succeed to the Borrower's interests in the Company.
The Senior Loan Documents and the Recognition Agreement shall be
satisfactory to Lender in form and substance.
3.2. LOAN DOCUMENTS. Lender shall have received the following Loan
Documents, all in form and substance satisfactory to Lender:
(a) the Note;
(b) the Assignment of Interests and Security Agreement;
(c) such Uniform Commercial Code financing statements as Lender may
require;
(d) a hazardous materials indemnity agreement (the "Environmental
Indemnity");
(e) an agreement of Hallwood Hotels, Inc. (the "Guarantor") regarding
certain liability described therein;
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(f) an instruction letter to the financial institution holding the
Project operating accounts in the form of Exhibit B hereto;
(g) this Agreement; and
(h) the Recognition Agreement.
3.3. [INTENTIONALLY DELETED]
3.4. APPRAISAL. Lender shall have received a copy of an appraisal
report for the Property prepared for Senior Lender by an independent MAI
appraiser in accordance with the Financial Institutions Reform, Recovery and
Enforcement Act ("FIRREA") and the regulations promulgated pursuant to such act.
The FIRREA appraisal shall be acceptable to Lender.
3.5. TITLE. Lender shall have received a copy of Borrower's title
insurance policy, acceptable to Lender, subject only to exceptions to title
approved by Lender and containing endorsements required by Lender including
zoning, non-imputation, and extended coverage endorsements.
3.6. ENVIRONMENTAL REPORT. Lender shall have received a Phase I
Environmental audit of the Property. The audit shall (i) be addressed to Lender;
(ii) state that Lender may rely thereon; and (iii) be acceptable to Lender in
its sole discretion.
3.7. LEASES. Lender shall have received and approved the leases of the
Project ("Leases"). Borrower shall submit for Lender's approval the form lease
the Company proposes to use, if any.
3.8. ADDITIONAL ITEMS. Lender shall have received such other items as
Lender may reasonably require.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to disburse the Loan, Borrower hereby
represents and warrants as follows, which representations and warranties shall
be true as of the date hereof and shall remain true throughout the term of the
Loan:
4.1. BORROWER EXISTENCE. Borrower is the shareholder of Hallwood
Hotels-OKC, Inc., a duly formed, validly existing and in good standing
corporation under the laws of the State of Delaware with its principal place of
business at 3710 Rawlins, Suite 1500, Dallas, Texas 75219. Borrower is in good
standing under the laws of the State of Oklahoma and is authorized to transact
business in the State of Oklahoma. The Loan Documents have each been duly
authorized, executed and delivered and each constitutes the duly authorized,
valid and legally binding obligation of Borrower and the Guarantor, as the case
may be, enforceable against Borrower and the Guarantor, as the case may be, in
accordance with their respective terms.
4.2. COMPANY AND GUARANTOR.
4.2.1. COMPANY. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with its
principal place of business at
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3710 Rawlins, Suite 1500, Dallas, Texas 7219. Borrower is the sole owner of all
interests in the Company.
4.2.2. OWNERSHIP OF BORROWER. Hallwood Hotels Inc., a Delaware
corporation owns all of the interests in Borrower and is the Guarantor herein.
4.3. AUTHORITY. Melvin D. Melle shall have the authority to make all
material business decisions (including a sale or refinance) for Borrower during
the term of the loan pursuant to the Incorporation Documents.
4.4. CORPORATE DOCUMENTS. A true and complete copy of the articles of
incorporation, by-laws and resolutions of Borrower and all other documents
creating and governing Borrower (collectively, the "Incorporation Documents")
have been furnished to Lender. There are no other agreements, oral or written,
among any of the shareholders of Borrower relating to Borrower. The
Incorporation Documents were duly executed and delivered, are in full force and
effect, and binding upon and enforceable in accordance with their terms. The
Incorporation Documents constitute the entire understanding among the
shareholders of Borrower. No breach exists under the Incorporation Documents and
no act has occurred and no condition exists which, with the giving of notice or
the passage of time would constitute a breach under the Incorporation Documents.
4.5. OTHER AGREEMENTS. Borrower is not in default under any contract,
agreement or commitment to which it is a party. The execution, delivery and
compliance with the terms and provisions of this Agreement and the other Loan
Documents will not (i) to the best of Borrower's knowledge, violate any
provisions of law or any applicable regulation, order or other decree of any
court or governmental entity, or (ii) conflict or be inconsistent with, or
result in any default under, any contract, agreement or commitment to which
Borrower is bound. Borrower has delivered to Lender copies of any agreements
(including leases) between Borrower and any affiliate related in any way to the
Project and any other agreements materially affecting the use and operation of
the Project.
4.6. PROPERTY. Fee simple title to the Property is owned by the Company
free and clear of all liens, claims, encumbrances, covenants, conditions and
restrictions, security interests and claims of others, except for exceptions
which have been approved in writing by Lender. To the best of Borrower's
knowledge, the Project is in compliance with all zoning requirements, building
codes, subdivision improvement agreements, and all covenants, conditions and
restrictions of record. The zoning and subdivision approval of the Project and
the right and ability to, use or operate the Improvements are not in any way
dependent on or related to any real estate other than the Property. To the best
of Borrower's knowledge, there are no, nor are there any alleged or asserted,
violations of law, regulations, ordinances, codes, permits, licenses,
declarations, covenants, or restrictions of record, or other agreements relating
to the Project or the Improvements, or any part thereof.
4.7. PROPERTY ACCESS. The Property is accessible through fully improved
and dedicated roads accepted for maintenance and public use by the public
authority having jurisdiction.
4.8. UTILITIES. All utility services necessary and sufficient for the
use or operation of the Project are available including water, storm, sanitary
sewer, gas, electric and telephone facilities.
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4.9. FLOOD HAZARDS/WETLANDS. The Property is not situated in an area
designated as having special flood hazards as defined by the Flood Disaster
Protection Act of 1973, as amended, or as a wetlands by any governmental entity
having jurisdiction over the Property.
4.10. TAXES/ASSESSMENTS. There are no unpaid or outstanding real estate
or other taxes or assessments on or against the Project or any part thereof,
except general real estate taxes for 1998 not yet due or payable. Copies of the
current general real estate tax bills with respect to the Project have been
delivered to Lender. Said bills cover the entire Project and do not cover or
apply to any other property. To the best of Borrower's knowledge, there is no
pending or contemplated action pursuant to which any special assessment may be
levied against any portion of the Project.
4.11. EMINENT DOMAIN. There is no eminent domain or condemnation
proceeding pending or, to the best of Borrower's knowledge, threatened, relating
to the Project.
4.12. LITIGATION. Except as set forth in Exhibit C, there is no
litigation, arbitration or other proceeding or governmental investigation
pending or, to the best of Borrower's knowledge, threatened against or relating
to the Company, Borrower, any stockholder in Borrower, any Guarantor or any of
their property, assets, or business, including the Project, which if decided
adversely would affect the business, affairs, assets or financial condition of
Borrower, Guarantor, the Project, or the prospects for repayment of the Loan.
4.13. SENIOR LOAN DOCUMENTS. Borrower and Guarantor have furnished
Lender with a true and complete copy of all documents relating to the Senior
Loan and the Project.
4.14. ACCURACY. Neither this Agreement nor any document, financial
statement, credit information, certificate or statement furnished to Lender by
Borrower or Guarantor contains any untrue statement of a material fact or omits
to state a material fact which would affect Lender's decision to make the Loan.
4.15. FOREIGN OWNERSHIP. Neither Borrower nor any Stockholder in
Borrower nor any Guarantor is or will be, and no legal or beneficial interest of
a stockholder in Borrower is or will be held, directly or indirectly, by a
"foreign corporation", "foreign partnership", "foreign trust", "foreign estate",
"foreign person", "affiliate" of a "foreign person" or a "United States
intermediary" of a "foreign person" within the meaning of IRC Sections 897 and
1445, the Foreign Investments in Real Property Tax Act of 1980, the
International Foreign Investment Survey Act of 1976, the Agricultural Foreign
Investment Disclosure Act of 1978, or the regulations promulgated pursuant to
such Acts or any amendments to such Acts.
4.16. SOLVENCY. Neither Borrower, nor the Company, nor any stockholder
in Borrower, nor Guarantor is insolvent and there has been no: (i) assignment
made for the benefit of the creditors of any of them; (ii) appointment of a
receiver for any of them or for the property of any of them; or (iii)
bankruptcy, reorganization, or liquidation proceeding instituted by or against
any of them.
4.17. FINANCIAL CONDITION/NO CHANGE. Borrower has heretofore delivered
to Lender copies of the most current financial statements of Borrower,
Guarantor, and the Company. Said financial statements were prepared on a basis
consistent with that of preceding years, and all of such financial statements
present fairly the financial condition of the subject thereof as of the dates in
question and the results of operations for the periods indicated. Since the
dates of such statements, there has been no material adverse change in the
business or financial
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17
condition of the subject thereof. The subject of such financial statements does
not have any material contingent liabilities not provided for or disclosed in
said financial statements. There has been no material adverse change since June
16, 1998 in the structure, business operations, credit, prospects or financial
condition of the subject of such financial statements or the Project.
4.18. BROKER. Borrower represents that L.J. Melody and Company is the
only agent, broker, finder or other representative involved with arranging the
Loan. Borrower has agreed to pay such party pursuant to a separate agreement. No
other brokerage commission or finder's fee is owing to any other broker or
finder arising out of any actions or activity of Borrower in connection with the
Loan. Borrower shall indemnify and hold harmless Lender from and against any
brokerage commission, finder's fee, or similar fee, commission or expense
arising out of any actions or activity of Borrower in connection with the Loan.
4.19. CASUALTY. There has been no damage or destruction of any part of
the Improvements by fire or other casualty that has not been repaired. There are
presently no existing defects in the Project and no repairs or alterations
thereof are reasonably necessary or appropriate except for routine maintenance.
4.20. SINGLE PURPOSE ENTITY. Borrower has not and shall not:
(a) engage in any business or activity other than the ownership,
operation and maintenance of its interest in the Company, and activities
incidental thereto;
(b) acquire or own any material assets other than its interest in the
Company;
(c) 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, without in
each case Lender's consent;
(d) 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, if
applicable, or without the prior written consent of Lender, amend, modify,
terminate or fail to comply with the provisions of its Incorporation Documents;
(e) own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
(f) commingle its assets with the assets of any of its shareholders,
officers, directors, members, 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 separate stationery, invoices and checks;
(g) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than related to the Senior Loan,
except for trade payables in the ordinary course of its business of owning and
operating its interest in the Company and the Property, provided that such debt
is not evidenced by a note and is paid when due;
(h) 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;
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(i) fail to maintain its records, books of account and bank accounts
separate and apart from those of the shareholders, officers, directors, members,
partners, principals and affiliates of Borrower, the affiliates of a
shareholder, officer, director, member, partner or principal of Borrower, and
any other person or entity;
(j) enter into any contract or agreement with any shareholder, officer,
director, member, partner, principal or affiliate of the Company, Borrower, or
Guarantor, or any member, partner, principal or affiliate thereof, except upon
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties other
than any shareholder, officer, director, member, partner, principal or affiliate
of the Company, Borrower, or Guarantor, or any shareholder, officer, director,
member, partner, principal or affiliate thereof;
(k) seek the dissolution or winding up in whole, or in part, of
Borrower;
(l) fail to correct any known misunderstandings regarding the separate
identity of Borrower;
(m) 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 person;
(n) make any loans or advances to any third party, including any
member, shareholder, officer, director, partner, principal or affiliate of
Borrower, or any shareholder, officer, director, member, partner, principal or
affiliate thereof, and shall not acquire obligations or securities of any
shareholder, officer, director, member, partner, principal or affiliate of
Borrower, or any shareholder, officer, director, member, partner, or affiliate
thereof;
(o) fail to file its own tax returns, however, if consolidated tax
returns are filed, the returns will reflect, by footnote or otherwise, that
Borrower, the Company and the Return filer are separate entities;
(p) 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 in order not (i) to mislead others as to the identity
with which such other party is transacting business, or (ii) to suggest that
Borrower is responsible for the debts of any third party (including any
shareholder, officer, director, member, partner, principal or affiliate of
Borrower, or any shareholder, officer, director, member, partner, principal or
affiliate thereof);
(q) 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;
(r) 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;
(s) share any common logo with or hold itself out as or be considered
as a department or division of (i) any shareholder, officer, director, partner,
principal, member or affiliate of Borrower, (ii) any affiliate of a shareholder,
officer, director, partner, principal or member of Borrower, or (iii) any other
person or entity;
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(t) 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;
(u) pledge its assets for the benefit of any other person or entity,
other than with respect to the Senior Loan; or
(v) fail to maintain a sufficient number of employees in light of its
contemplated business operations.
ARTICLE V.
AFFIRMATIVE COVENANTS
5.1. PAYMENT OF INDEBTEDNESS; PERFORMANCE OF OBLIGATIONS. Borrower
shall promptly pay when due all payment obligations of Borrower to Lender
(collectively, the "Indebtedness") and shall promptly perform all other
obligations of Borrower to Lender.
5.2. TAXES AND OTHER OBLIGATIONS. Except as provided in subsection (b)
below, Borrower shall cause the Company to pay, when due, and before any
interest, collection fees or penalties shall accrue, all taxes, assessments,
fines, impositions and other charges and obligations, which may become a lien on
or charge against the Project (collectively, "Charges"). The Company shall have
the right to contest, in good faith by appropriate proceedings, the amount or
validity of any such Charges, so long as: (a) Borrower has given prior written
notice to Lender of the Company'S intent to so contest or object to any such
Charges; (b) such contest stays the enforcement or collection of the Charges or
any lien created; and (c) the Charges or lien created are bonded or insured over
by the title insurance company or the Company has posted security therefor in
accordance with the provisions of the Senior Loan Documents and in a manner
acceptable to Lender. Upon the request of Lender, Borrower shall immediately
furnish to Lender all notices of amounts due and receipts evidencing payment.
Borrower shall promptly notify Lender of any lien on all or any part of the
Property and shall promptly discharge any unpermitted lien or encumbrance.
5.3. INSURANCE. Borrower shall cause the Company to keep the Project
insured, and to maintain general liability coverage and such other coverages
required by the Senior Loan Documents and as otherwise required by Lender, by
carrier(s), in amounts and in form at all times satisfactory to Lender, which
carrier(s), amounts and form shall not be changed without the prior written
consent of Lender. In case of loss or damage by fire or other casualty, Borrower
shall give immediate written notice thereof to the insurance carrier(s) and to
Lender.
5.4. CONDEMNATION. Borrower shall within three (3) business days of the
Company's receipt of notice thereof, notify Lender of any action or proceeding
relating to any condemnation or other taking of the Project, or part thereof,
and Borrower shall, after consultation with and subject to Lender's written
approval, cause the Company to appear in and prosecute any such action or
proceeding and/or settle or compromise any claim in connection therewith.
5.5. PRESERVATION AND MAINTENANCE OF THE PROJECT. Borrower shall: (a)
not permit the Company to commit waste or permit impairment or deterioration of
the Project; (b) not permit the Company to abandon the Project; (c) cause the
Company to keep the Project in good repair and restore or repair promptly, in a
good and workmanlike manner, all or any part of the Project to the equivalent of
its original condition; and (d) give notice in writing to Lender of and, unless
otherwise directed in writing by Lender, appear in and defend any action or
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proceeding purporting to affect the Project, the security granted by the Loan
Documents or the rights or powers of Lender. Borrower shall not permit the
Company to remove, demolish or alter any Improvement on the Property.
5.6. INSPECTION. Subject to the rights of tenants under Lender approved
Leases, Lender and its authorized agents may enter upon and inspect the Project
at all reasonable times upon notice given orally or in writing.
5.7. BOOKS AND RECORDS/AUDITS. Borrower shall keep and maintain at all
times at Borrower's address stated below, or such other place as Lender may
approve in writing, complete and accurate books of accounts and records adequate
to reflect the results of the operation of the Project and to provide the
financial statements required to be provided to Lender pursuant to Section 5.8
below and copies of all written contracts, correspondence, reports of Senior
Lender's independent consultant, and other documents affecting the Project.
Lender and its designated agents shall have the right to inspect and copy any of
the foregoing. Additionally, Lender may audit and determine, in Lender's sole
and absolute discretion, the accuracy of Borrower's records and computations.
The costs and expenses of the audit shall be paid by Borrower if the audit
discloses a monetary variance in any financial information or computation equal
to or greater than the greater of: (i) five percent (5%); or (ii) $5,000 more
than any computation submitted by Borrower.
5.8. FINANCIAL STATEMENTS; BALANCE SHEETS. Borrower shall furnish to
Lender and shall cause its stockholder, the Company, and Guarantor to furnish to
Lender such financial statements and other financial information as Lender may
from time to time request. All such financial statements shall show all material
contingent liabilities and shall accurately and fairly present the results of
operations and the financial condition of the subject thereof at the dates and
for the period indicated. Without limitation of the foregoing, Borrower shall
furnish to Lender and shall cause Guarantor to furnish to Lender the following
statements:
5.8.1. MONTHLY AND ANNUAL OPERATING STATEMENTS. Statements of the
operation of the Project (including a current rent roll, monthly operating
statements, monthly delinquency reports and a monthly schedule of delinquency of
receipts and payments) as of the last day of each month, to be delivered within
20 days after the end of each month and certified by Borrower as true, correct,
and complete, and yearly statements of the operation of the Project, to be
delivered within 90 days after the end of each fiscal year and certified by
Borrower as true, correct, and complete.
5.8.2. ANNUAL BALANCE SHEETS AND FINANCIAL STATEMENTS. Annual
balance sheets and financial statements from Borrower, its stockholder, the
Company, and Guarantor, within 90 days of the end of each fiscal year which are
true and correct in all respects, have been prepared in accordance with sound
accounting practices, and fairly present the financial condition(s) of the
person(s) referred to therein as of the date(s) indicated. At Lender's request,
such financial statements shall include, specific information concerning the
subject's other real estate holdings, including property income and expenses,
debt service requirements and occupancy).
5.8.3. AUDITS. If Borrower fails to furnish or cause to be
furnished promptly any report required by this Section 5.8, or if Lender
reasonably deems such reports to be unacceptable, Lender may elect (in addition
to exercising any other right and remedy) to conduct an audit of all books and
records of Borrower, stockholder and/or Guarantor which in any way pertain to
the Project and to prepare the statement or statements which Borrower
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failed to procure and deliver. Such audit shall be made and such statement or
statements shall be prepared by an independent firm of certified public
accountants to be selected by Lender. Borrower shall pay all reasonable expenses
of the audit and other services, which expenses shall be immediately due and
payable with interest thereon at the default rate contained in the Note.
5.9. USE OF PROCEEDS. Borrower shall use the proceeds of the Loan for
proper business purposes. No portion of the proceeds of the Loan shall be used
by Borrower in any manner that might cause the borrowing or the application of
such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation
X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Act of 1933 or the Securities Exchange Act
of 1934.
5.10. NOTICE OF LITIGATION, DEFAULT OR EQUITY CONTRIBUTION. Borrower
shall promptly provide Lender with:
(a) written notice of any litigation, arbitration, or other proceeding
or governmental investigation pending or, to Borrower's or Guarantor's
knowledge, threatened against or relating to Borrower, the Company, stockholder,
Guarantor, the Collateral or the Project;
(b) a copy of all notices of default and violations of laws,
regulations, codes, ordinances and the like received by the Company, Borrower or
Guarantor relating to the Collateral or the Project;
(c) written notice of any default under the Senior Loan Documents
within five (5) days of Borrower's actual knowledge of such default and, if the
Company has received written notice of default from Senior Lender, a copy of
such notice;
(d) prior written notice of any capital or other equity contributions
to or distributions from Borrower.
5.11. AFFILIATE TRANSACTIONS. Prior to the Company or Borrower entering
into any agreement with an Affiliate, Borrower shall deliver to Lender a copy of
such agreement, which shall be satisfactory to Lender, in its sole discretion.
If requested by Lender, such agreement shall provide Lender the right to
terminate same upon Lender's (or its designee's) acquisition of the Borrower's
shares of the Company through foreclosure, an assignment-in-lieu of foreclosure,
UCC sale or otherwise.
"AFFILIATE" means with respect to any individual, trust, estate,
partnership, limited liability company, corporation or any other incorporated or
unincorporated organization (each a "PERSON"), a Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with Borrower, the Company or Guarantor; any officer,
director, partner, member or shareholder of such Borrower, the Company or
Guarantor; and any relative of any of the foregoing. The term "CONTROL" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
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5.12. [INTENTIONALLY DELETED]
5.13. LOCKBOX.
The deposit account for the Property shall be initially established for
the benefit of Borrower and Lender. If the net income from the Project for any
calendar quarter as reflected in the financial statements of the Company and the
Project ("Financial Statements") which the Company is obligated to provide
pursuant to the Senior Loan Documents is less than 1.1 times the combined debt
service payments due under the Loan and the Senior Loan, or in the event of a
default under the Loan Documents, Borrower shall cause the Company to cause the
financial institution holding the operating accounts for the Project to convert
such accounts into an account of the Company under the sole dominion and control
of Lender and any servicer or other designee of Lender (the "Lockbox Account").
Borrower shall cause the Company to grant to Senior Lender a lien on and
security interest in the Lockbox Account, and to Lender a subordinate lien on
and security interest in the Lockbox Account subject and subordinate only to a
prior security interest in favor of Senior Lender. Further, in such event,
Borrower shall cause the Company to (a) direct all tenants of the Project to pay
directly into the Lockbox Account all rents, additional rents, percentage rents
and all other sums due under their leases, (b) immediately deposit into the
Lockbox Account all rents and revenues it shall receive from the Project and (c)
instruct the property manager, if any, to immediately deposit into the Lockbox
Account all rents and other revenues it shall receive from the Project. Any sums
so deposited into the Lockbox Account shall be disbursed on a monthly basis
first to pay all amounts due under the Senior Loan (including the Impound
Account and Repair and Remediation Reserve); second to pay all costs and
expenses incurred by the Company in connection with the ownership, operation or
maintenance of the Project, to the extent set forth in a Project budget approved
by Lender; and third to the payment of principal and interest on the Loan in
accordance with the provisions of the Note; and the balance, if any, on deposit
in the Lockbox Account shall be paid to the Company. Thereafter, if net income
of the Project for two consecutive calendar quarters as reflected on the
Financial Statements is equal to or greater than 1.1 times the combined debt
service payments due under the Loan and the Senior Loan, Lender shall
discontinue the Lockbox Account. This cycle of instituting the Lockbox Account
and thereafter discontinuing it shall continue as appropriate when and if the
foregoing conditions for each event are satisfied during the term of the Loan.
Borrower shall cause the Company to send copies of the Financial Statements to
Lender at the same time they are sent to Senior Lender under the Senior Loan
Documents.
5.14. NOTICE PROVISIONS. Borrower shall cause all notice provisions
under the Senior Loan Documents to add Lender's name and address as part of the
Company's address for notices such that the Senior Loan Documents require the
concurrent delivery to Lender of a copy of any notice or demand delivered to the
Company thereunder.
ARTICLE VI.
NEGATIVE COVENANTS
6.1. NO AMENDMENTS. Borrower shall not and shall not permit the Company
to:
(a) materially amend or modify Lender's approved form of lease for the
Project without Lender's written consent;
(b) suffer or permit the amendment or modification of Borrower's
Incorporation Documents;
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(c) make or enter into any changes to the terms of the Senior Loan
Documents without Lender's prior consent; or
(d) modify, amend or change any notice provision of the Senior Loan
Documents to eliminate Lender as a party to receive notices under the Senior
Loan Documents or change the address of Lender thereunder without the prior
written consent of Lender.
6.2. LEASES. Borrower shall not permit the Company without Lender's
prior written consent to enter into any lease or other rental or occupancy
arrangement or concession agreement with respect to the Project unless on a form
previously approved by Lender.
6.3. TRANSFERS OF THE PROPERTY OR OWNERSHIP INTEREST IN BORROWER.
Neither Borrower nor Guarantor shall (a) create or permit the creation of any
new ownership interest in Borrower, any stockholder in Borrower or any
Guarantor, or (b) sell, transfer or assign (i) all or any part of the Project;
or (ii) any ownership interests in Borrower, any stockholder of Borrower or any
Guarantor (including any interest in the profits, losses or cash distributions
in any way relating to the Project or Borrower).
6.4. NO ADDITIONAL LIENS, ENCUMBRANCES OR INDEBTEDNESS. Borrower
covenants not to grant or permit or allow the Company to grant or permit the
filing of any lien or encumbrance on the Project or the Collateral, other than
those created by the Senior Loan Documents, without the prior written consent of
Lender; provided, however, the Company may, by appropriate proceeding, contest
the validity or amount of any asserted lien and, pending such contest, Borrower
shall not be deemed to be in default hereunder if (a) Borrower has given prior
written notice to Lender of the Company intent to so contest, (b) such contest
stays the enforcement of the contested lien, and (c) the contested lien is
bonded or insured over by the title insurance company or the Company has posted
security therefor in accordance with the provisions of the Senior Loan Documents
and in a manner acceptable to Lender.
6.5. NO ADDITIONAL INDEBTEDNESS. Except as expressly permitted under
this Agreement, Borrower shall not, without Lender's prior written consent,
incur additional indebtedness, except for trade payables in the ordinary course
of business.
6.6. PERSONAL PROPERTY. Neither Borrower nor the Company shall, without
the prior written consent of Lender, sell, assign, transfer, remove or permit to
be removed from the Project any personal property owned by Company or Borrower
now or at any time located at or used in connection with the construction,
operation, repair or replacement of the Project ("Personal Property"). So long
as no Event of Default exists, the Company may sell or otherwise dispose of the
Personal Property when obsolete, worn out, inadequate, unserviceable or
unnecessary for use in the operation of the Project, but only upon replacing the
same with other Personal Property at least equal in value and utility to the
disposed Personal Property.
6.7. USE OF PROPERTY; IMPROVEMENTS. Borrower shall not permit changes
in the plat of subdivision, zoning classification or use of any part of the
Project without Lender's written consent.
6.8. NO COMMINGLING FUNDS. Neither Borrower nor the Company shall
commingle the funds related to the Project with funds from any other property.
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6.9. PROPERTY MANAGER. Neither Borrower nor the Company shall change
the Project manager or amend or terminate the management contract for the
Project without Lender's prior written consent, which shall not be unreasonably
withheld.
6.10. SENIOR LOAN DOCUMENTS. Borrower shall fully and timely comply
with all of the terms and provisions of the Senior Loan Documents.
ARTICLE VII.
EVENTS OF DEFAULT; ACCELERATION OF INDEBTEDNESS
7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Agreement:
(a) Failure of Borrower to pay, on the due date, any of the
Indebtedness, including any payment due under the Note or this Agreement; or
(b) Failure of Borrower to strictly comply with Sections 5.4
(insurance), 5.7 (inspection), 6.3 (prohibition on transfers), 6.4 (no
additional liens), and 4.20 (single asset entity) of this Agreement; or
(c) Breach of any covenant, representation or warranty other than as
set forth in subsections (a) and (b) above which is not cured within thirty (30)
days after notice; provided, however, if such breach cannot by its nature be
cured within thirty (30) days, and Borrower diligently pursues the curing
thereof (and then in all events cures such failure within sixty (60) days after
the original notice thereof), Borrower shall not be in default hereunder; or
(d) A petition under any Chapter of Title 11 of the United States Code
or any similar law or regulation is filed by or against Borrower or any
Guarantor (and in the case of an involuntary petition in bankruptcy, such
petition is not discharged within sixty (60) days of its filing), or a
custodian, receiver or trustee for any of the Project is appointed, or Borrower
or any Guarantor makes an assignment for the benefit of creditors, or any of
them are adjudged insolvent by any state or federal court of competent
jurisdiction, or any of them admit their insolvency or inability to pay their
debts as they become due or an attachment or execution is levied against any of
the Project; or
(e) The occurrence of a default and the expiration of any cure period
applicable thereto under any other Loan Document; or
(f) Borrower or the Company shall default in the payment of any
indebtedness (other than the Indebtedness) and such default is declared and is
not cured within the time, if any, specified therefor in any agreement governing
the same; or
(g) Any statement, report or certificate made or delivered to Lender by
Borrower or the Company or any Guarantor is not materially true and complete as
of the date thereof; or
(h) The occurrence of a default under the Senior Loan Documents and the
expiration of any applicable cure period.
7.2. ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default
at the option of Lender, the Indebtedness shall become immediately due and
payable without notice to Borrower and Lender shall be entitled to all of the
rights and remedies provided in the Loan Documents or at law or in equity. Each
remedy provided in the Loan
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Documents is distinct and cumulative to all other rights or remedies under the
Loan Documents or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
ARTICLE VIII.
MISCELLANEOUS
8.1. BORROWER AND LIEN NOT RELEASED. Without affecting the liability of
Borrower, any Guarantor or any other person liable for the payment of the
Indebtedness, and without affecting Lender's rights under this Agreement, Lender
may, from time to time and without notice to any lien holder or holder of any
other right or other interest in and to the Project: (a) release any person so
liable; (b) waive or modify any provision of this Agreement or the other Loan
Documents or grant other indulgences; (c) take additional security for any
obligation herein mentioned; or (d) subordinate its rights under any of the Loan
Documents.
8.2. EXPENDITURES AND EXPENSES. Borrower shall pay all reasonable
"Costs" incurred by Lender in connection with the documentation, modification,
workout, collection or enforcement of the Loan or any of the Loan Documents (as
applicable) and all such Costs shall be included as additional Indebtedness
bearing interest at the Default Rate set forth in the Note until paid. For the
purposes hereof "Costs" means all expenditures and expenses which may be paid or
incurred by or on behalf of Lender including repair costs, payments to remove or
protect against liens, attorneys' fees (including fees of Lender's inside
counsel), receivers' fees, appraisers' fees, engineers' fees, accountants' fees,
independent consultants' fees (including environmental consultants), all costs
and expenses incurred in connection with any of the foregoing, Lender's
out-of-pocket costs and expenses related to any audit or inspection of the
Property, outlays for documentary and expert evidence, stenographers' charges,
stamp taxes, publication costs, and costs (which may be estimates as to items to
be expended after entry of an order or judgment) for procuring all such
abstracts of title, title searches and examination, title insurance policies,
and similar data and assurances with respect to title as Lender may deem
reasonably necessary either to prosecute any action or to evidence to bidders at
any sale of the interests of Borrower in Company the true condition of the title
to, or the value of, the Project.
8.3. DISCLOSURE OF INFORMATION. Lender shall have the right (but shall
be under no obligation) to make available to any party for the purpose of
granting participations in or selling, transferring, assigning or conveying all
or any part of the Loan (including any governmental agency or authority and any
prospective bidder at any sale of the interest of Borrower in Company) any and
all information which Lender may have with respect to the Project and Borrower,
whether provided by Borrower, the Guarantor or any third party or obtained as a
result of any environmental assessments. Borrower, the Company and the Guarantor
agree that Lender shall have no liability whatsoever as a result of delivering
any such information to any third party, and Borrower, the Company and the
Guarantor, on behalf of themselves and their successors and assigns, hereby
release and discharge Lender from any and all liability, claims, damages, or
causes of action, arising out of, connected with or incidental to the delivery
of any such information to any third party.
8.4. SALE OF LOAN. Lender, at any time and without the consent of
Borrower or the Guarantor, may grant participations in or sell, transfer, assign
and convey all or any portion of
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its right, title and interest in and to the Loan, this Agreement and the other
Loan Documents, any guaranties given in connection with the Loan and any
collateral given to secure the Loan.
8.5. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in
exercising any right or remedy under any of the Loan Documents, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of
any right or remedy. Lender's acceptance of payment of any sum secured by any of
the Loan Documents after the due date of such payment shall not be a waiver of
Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
Lender shall not be a waiver of Lender's right to accelerate the maturity of the
Indebtedness, nor shall Lender's receipt of any awards, proceeds or damages
pursuant to Section 5.4 hereof operate to cure or waive Borrower's or
Guarantor's default in payment or sums secured by any of the Loan Documents.
With respect to all Loan Documents, only waivers made in writing by Lender shall
be effective against Lender.
8.6. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien
created by any of the Loan Documents or to any action brought to enforce the
Note or any other obligation secured by any of the Loan Documents.
8.7. GOVERNING LAW; SEVERABILITY. The Loan Documents shall be governed
by and construed in accordance with the internal laws of the Commonwealth of
Virginia, except that the provisions of the Uniform Commercial Code shall be
applicable to the creation, perfection and enforcement of the lien created by
the Assignment. The invalidity, illegality or unenforceability of any provision
of this Agreement shall not affect or impair the validity, legality or
enforceability of the remainder of this Agreement, and to this end, the
provisions of this Agreement are declared to be severable.
8.8. RELATIONSHIP. The relationship between Lender and Borrower shall
be that of creditor-debtor only. No term in this Agreement or in the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any relationship of agency, partnership or joint venture or any fiduciary duty
by Lender to any other party.
8.9. INDEMNITY. Borrower shall indemnify, protect, hold harmless and
defend Lender, its successors, assigns, shareholders, directors, officers,
employees, and agents from and against any and all loss, damage, cost, expense
(including attorneys' fees), and claims arising out of or in connection with (a)
the Project, (b) the Collateral, (c) any act or omission of Borrower, any
Guarantor, or their respective employees or agents, whether actual or alleged,
and (d) any and all brokers' commissions or other costs of similar type by any
party in connection with the Loan, in each case except to the extent arising
from the indemnitee's gross negligence or willful misconduct. Upon written
request by an indemnitee, Borrower will undertake, at its own costs and expense,
on behalf of such indemnitee, using counsel satisfactory to the indemnitee, the
defense of any legal action or proceeding whether or not such indemnitee shall
be a party and for which such indemnitee is entitled to be indemnified pursuant
to this section. At Lender's option, Lender may, at Borrower's expense,
prosecute or defend any action involving the priority, validity or
enforceability of the Assignment.
8.10. NOTICE. Any notice or other communication required or permitted
to be given shall be given in accordance with the Note.
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8.11. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY;
AGENTS; AND CAPTIONS. The covenants and agreements contained in the Loan
Documents shall bind, and the rights thereunder shall inure to, the respective
successors and assigns of Lender, Borrower and the Guarantor, subject to the
provisions of this Agreement. All covenants and agreements of Borrower and the
Guarantor shall be joint and several. In exercising any rights under the Loan
Documents or taking any actions provided for therein, Lender may act through its
employees, agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Agreement are for convenience
only and are not to be used to interpret or define the provisions hereof.
8.12. TERMS AND USAGE. As used in the Loan Documents "business day"
means any day, other than a Saturday or a Sunday, when banks in Virginia are not
required or authorized to be closed.
8.13. LOSS OF NOTE. Upon notice from Lender of the loss, theft, or
destruction of the Note and upon receipt of an indemnity reasonably satisfactory
to Borrower from Lender, or in the case of mutilation of the Note, upon
surrender of the mutilated Note, Borrower shall make and deliver a new note of
like tenor in lieu of the then to be superseded Note.
8.14. TIME OF ESSENCE. Time is of the essence of this Agreement and the
other Loan Documents and the performance of each of the covenants and agreement
contained herein and therein.
8.15. VENUE. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING
DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED, AT LENDER'S SOLE
DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN THE COMMONWEALTH
OF VIRGINIA. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID STATE. BORROWER HEREBY
IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION SYSTEM, WHOSE ADDRESS IS
BORROWER, C/O CT CORPORATION SYSTEM, 5511 STAPLE MILL ROAD, RICHMOND, VIRGINIA
23228, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT
SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF
PROCESS UPON SUCH PARTY. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH
AGENT MOVES OR CEASES TO DO BUSINESS IN VIRGINIA BORROWER SHALL, WITHIN TEN (10)
DAYS AFTER LENDER'S REQUEST, APPOINT A SUBSTITUTE AGENT IN THE COMMONWEALTH OF
VIRGINIA ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH APPOINTMENT.
IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN ITS SOLE
DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS
NOTICE TO BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON THE LOAN
DOCUMENTS IN ACCORDANCE WITH THIS SECTION.
8.16. JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
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MADE BY BORROWER AND LENDER, AND BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR
ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY
MODIFY OR NULLIFY ITS EFFECT. BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF
THEM HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER
IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER ACKNOWLEDGE THAT
THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN
THE SIGNING OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
8.17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, and together shall
constitute the Agreement.
8.18. FINAL AGREEMENT/MODIFICATION. This Agreement, together with the
other Loan Documents, represents the entire agreement among Borrower, Guarantor
and Lender and supersedes all prior agreements among the parties with respect to
the Loan. This Agreement and the other Loan Documents may only be modified by
written instrument executed by the applicable parties.
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The parties hereto have executed this Agreement or has caused the same
to be executed by their duly authorized representatives as of the date first
above written.
BORROWER:
HALLWOOD HOTELS-OKC MEZZ, INC.,
a Delaware corporation
By:
------------------------------
Melvin J. Melle
Vice President
LENDER:
COMMERCIAL MORTGAGE INVESTMENT TRUST,
INC., a Virginia corporation
By: WMF Carbon Mesa Advisors, Inc.,
Its Manager
By:
--------------------------
Name:
Title:
30
EXHIBIT A
LEGAL DESCRIPTION
31
SCHEDULE 1
FORM OF ACKNOWLEDGMENT
[DATE]
Company
LENDER
Reference is made to that certain Clearing Bank Instruction
Letter dated ________ ___, 199__ (the "Instruction Letter") from
___________________ ("the ________"). I, the instructions set forth in the
Instruction Letter and notice of the pledges and security interest described
therein. The Bank hereby agrees to perform the instructions set forth in the
Instruction Letter for the benefit of _____________________, its successors and
assigns, (the "Lender").
[BANK]
By:
---------------------------
Name:
Title
LOCK BOX ADDRESS:
- ---------------------------------
- ---------------------------------
- ---------------------------------
32
SCHEDULE 1
FORM OF ACKNOWLEDGMENT
[DATE]
Company
LENDER
Reference is made to that certain Clearing Bank Instruction
Letter dated ________ ___, 199__ (the "Instruction Letter") from
___________________ ("the ________"). I, the instructions set forth in the
Instruction Letter and notice of the pledges and security interest described
therein. The Bank hereby agrees to perform the instructions set forth in the
Instruction Letter for the benefit of _____________________, its successors and
assigns, (the "Lender").
[BANK]
By:
---------------------------
Name:
Title
LOCK BOX ADDRESS:
- ---------------------------------
- ---------------------------------
- ---------------------------------
2
33
EXHIBIT C
[LITIGATION]
34
EXHIBIT B
[CLEARING BANK INSTRUCTIONS]