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EXHIBIT 10.23
RECORDING REQUESTED BY:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
WHEN RECORDED MAIL TO:
SONNENSCHEIN NATH & ROSENTHAL
8000 SEARS TOWER
CHICAGO, ILLINOIS 60606
ATTENTION: SCOTT A. LINDQUIST, ESQ.
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LOAN NO: 6-103-269
Property: ________
FELCOR/CSS HOLDINGS, L.P., AS MORTGAGOR
(BORROWER)
TO
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, AS MORTGAGEE
(LENDER)
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MORTGAGE, SECURITY AGREEMENT
AND FIXTURE FILING
------------------
DATED: AS OF _________, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I ADDITIONAL DEFINITIONS.................................................................................2
ARTICLE II GRANT.................................................................................................2
2.1 Grant....................................................................................................2
2.2 Assignment of Leases and Rents...........................................................................3
2.3 Release..................................................................................................3
ARTICLE III OBLIGATIONS..........................................................................................4
ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................4
4.1 Title, Legal Status and Authority........................................................................4
4.2 Validity of Loan.........................................................................................4
4.3 Litigation...............................................................................................5
4.4 Status of Property.......................................................................................5
4.5 Tax Status of Borrower...................................................................................6
4.6 Bankruptcy and Equivalent Value..........................................................................6
4.7 Disclosure...............................................................................................6
4.8 Illegal Activity.........................................................................................6
4.9 Primary Lease............................................................................................6
ARTICLE V COVENANTS AND AGREEMENTS...............................................................................6
5.1 Payment of Obligations...................................................................................6
5.2 Continuation of Existence................................................................................7
5.3 Taxes and Other Charges..................................................................................7
5.4 Defense of Title, Litigation, and Rights under Loan Documents............................................8
5.5 Operation and Maintenance of Property....................................................................8
5.6 Insurance...............................................................................................10
5.7 Damage and Destruction of Property......................................................................11
5.8 Condemnation............................................................................................13
5.9 Liens and Liabilities...................................................................................15
5.10 Tax and Insurance Deposits...........................................................................15
5.11 ERISA................................................................................................16
5.12 Environmental Representations, Warranties, and Covenants.............................................16
5.13 Electronic Payments..................................................................................18
5.14 Inspection...........................................................................................18
5.15 Records, Reports, and Audits.........................................................................18
5.16 Borrower's Certificates..............................................................................19
5.17 Full Performance Required; Survival of Warranties....................................................20
5.18 Leasing Restrictions.................................................................................20
5.19 Management Agreement and License Agreement Restrictions..............................................21
5.20 Additional Security..................................................................................22
5.21 Further Acts.........................................................................................22
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ARTICLE VI ADDITIONAL ADVANCES: EXPENSES; SUBROGATION...........................................................22
6.1 Expenses and Advances...................................................................................22
6.2 Subrogation.............................................................................................23
ARTICLE VII SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY......................................................23
7.1 General Restrictions....................................................................................23
7.2 Provisions for Merger of FelCor or FelCor REIT:.........................................................23
7.3 Provisions on Sale of Lessee:...........................................................................24
ARTICLE VIII DEFAULTS AND REMEDIES..............................................................................25
8.1 Events of Default.......................................................................................25
8.2 Remedies................................................................................................27
8.3 Expenses................................................................................................29
8.4 Rights Pertaining to Sales..............................................................................29
8.5 Application of Proceeds.................................................................................30
8.6 Additional Provisions as to Remedies....................................................................30
8.7 Waiver of Rights and Defenses...........................................................................32
ARTICLE IX SECURITY AGREEMENT AND FIXTURE FILING................................................................33
9.1 Security Agreement......................................................................................33
9.2 Fixture Filing..........................................................................................33
ARTICLE X LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES......................................................33
10.1 Limited Recourse Liability...........................................................................33
10.2 General Indemnity....................................................................................36
10.3 Transaction Taxes Indemnity..........................................................................37
10.4 ERISA Indemnity......................................................................................37
10.5 Broker Indemnity.....................................................................................37
10.6 Environmental Indemnity..............................................................................37
10.7 Duty to Defend, Costs and Expenses...................................................................37
10.8 Recourse Obligation and Survival.....................................................................38
ARTICLE XI ADDITIONAL PROVISIONS................................................................................38
11.1 Usury Savings Clause.................................................................................38
11.2 Notices:.............................................................................................38
11.3 Sole Discretion of Lender............................................................................39
11.4 Applicable Law and Submission to Jurisdiction........................................................40
11.5 Construction of Provisions...........................................................................40
11.6 Transfer of Loan.....................................................................................40
11.7 Miscellaneous........................................................................................42
11.8 Entire Agreement.....................................................................................42
11.9 WAIVER OF TRIAL BY JURY..............................................................................42
ARTICLE XII LOCAL LAW PROVISIONS................................................................................42
ATTACHMENTS:
Exhibit A - Schedule of Defined Terms
Exhibit B - Legal Description of Land
Exhibit C - Description of Personal Property Security
Exhibit D - Other Hotel Properties
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DEFINITIONS
The terms set forth below are defined in the following sections of this
Mortgage, Security Agreement and Fixture Filing:
Action Section 11.4
Additional Funds Section 5.7(c)
Affecting the Property Section 5.12(a)
Amount Realized Upon Foreclosure Section 8.6(c)
Assessments Section 5.3(a)
Assignment of Leases and Rents Section 2.2
Award Section 5.8(b)
Bankruptcy Code Section 2.1(i)
Borrower Preamble
Costs Section 6.1
Damage Section 5.7(a)
Deposits Section 5.10
Environmental Indemnity Section 10.6
Environmental Liens Section 5.12(b)
Environmental Report Section 5.12(a)
ERISA Section 5.11
ERISA Certificate and Indemnification Agreement Section 10.4
Event of Default Section 8.1
Exculpated Parties 10.1(a)
Flood Acts Section 4.4(a)
GAAP Section 5.15(a)
Grace Period Section 8.1(b)
Impositions Section 5.10
Improvements Section 2.1(b)
Indemnified Parties Section 10.2
Instrument Preamble
Insurance Premiums Section 5.10
Investor Section 11.6
Land Section 2.1(a)
Laws Section 5.5(c)
Leases Section 2.1(i)
Lender Preamble
Lessee Personal Property Section 2.1
Liens Section 5.9
Loan Recitals
Losses Section 10.2
Net Proceeds Section 5.7(d)
Non-Material Leases Section 5.18
Note Recitals
Notice Section 11.2
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Obligations Section 3
Partial Foreclosure Section 8.6(a)
Person Section 11.5(i)
Personal Property Section 2.1(f)
Property Section 2.1
Property State Section 4.1
Rating Agency Section 5.6(c)
Rent Loss Proceeds Section 5.7(c)
Rents Section 2.1(j)
Restoration Section 5.7(a)
Successor Entity Section 7.2
Successor Lessee Section 7.3
Taking Section 5.8(a)
Transaction Taxes Section 5.3(c)
UCC Section 4.2
Violation Section 5.11
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MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (this
"INSTRUMENT") is made as of the ___ day of _________, 1999, by FELCOR/CSS
HOLDINGS, L.P., a Delaware limited partnership, having its principal office and
place of business at c/o FelCor Lodging Limited Partnership, 545 E. John
Carpenter Freeway, Suite 1300, Irving, Texas 75062-3933, as mortgagor
("BORROWER"), to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation, having an office at Two Ravinia Drive, Suite 1400, Atlanta, Georgia
30346, as mortgagee ("LENDER").
R E C I T A L S:
A. Borrower has delivered to Lender a promissory note of even date
herewith (the "NOTE") evidencing a loan to be made by Lender to Borrower in the
principal amount of One Hundred Million Dollars ($100,000,000.00) (the "LOAN").
The Loan is made pursuant to that certain First Mortgage Loan Application No.
6-103-269 dated February 22, 1999 (the "APPLICATION").
B. The Note evidences a Loan requested by Borrower, and which Lender
has agreed to make, on the understanding and condition that the indebtedness
evidenced by the Note and all of the other obligations of Borrower under all of
the Loan Documents (as hereinafter defined) are to be secured by, among other
things, a portfolio of hotel properties, which includes (i) the Property (as
hereinafter defined) encumbered by this Instrument, and (ii) the other
properties identified in Exhibit D attached hereto (upon which Borrower is
executing and delivering concurrently herewith mortgage instruments similar to
this Instrument) (the Property and the other hotel properties listed in Exhibit
D are collectively referred to as the "HOTEL PROPERTIES").
C. The Property is subject to the Primary Lease (as hereinafter
defined), pursuant to which the Lessee holds a leasehold estate in all of the
Land and Improvements and operates the Property (pursuant to the Management
Agreement and License Agreement) as an "Embassy Suites Hotel" (all of the
foregoing defined terms having the definitions set forth in Exhibit A attached
hereto). The Lessee owns certain of the Personal Property, Leases, Rents, and
other Property that is the subject of this Instrument.
D. It is intended that the indebtedness evidenced by the Note and all
of the other obligations of Borrower under all of the Loan Documents are not to
be apportioned among any of the Hotel Properties, or any of the security of the
mortgages thereon, so that each of the Hotel Properties and each and every lien,
assignment and security interest thereon is intended to secure the entire amount
of such indebtedness and obligations.
E. The execution and delivery of this Instrument by Borrower is
required by the Application as a condition to Borrower's receipt of proceeds of
the Loan.
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IN CONSIDERATION of the principal sum of the Note, and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
Borrower irrevocably agrees as follows:
ARTICLE I
ADDITIONAL DEFINITIONS
Initially capitalized terms used in this Instrument and not otherwise
defined in the body of this Instrument shall have the meanings specified in the
Schedule of Defined Terms attached hereto as Exhibit A.
ARTICLE II
GRANT
2.1 GRANT. For valuable consideration, Borrower hereby grants,
bargains, sells, assigns, transfers, pledges, mortgages, warrants, and conveys
to Lender, and grants Lender a security interest in, the following property,
rights, interests and estates now or hereafter owned by Borrower (collectively,
the "PROPERTY"), it being expressly provided that certain of the Personal
Property, Leases, Rents, and other Property described in paragraphs (e) through
(j) below is presently owned or held by Lessee (collectively, the "LESSEE
PERSONAL Property") pursuant to the Primary Lease, rather than Borrower:
(a) All that certain real property in _______ County, _______
described in Exhibit B attached hereto (the "LAND");
(b) All buildings, structures, parking facilities and other
improvements (including fixtures) now or later located in or on the
Land (the "IMPROVEMENTS");
(c) All easements, estates, and real property interests
including hereditaments, servitudes, appurtenances, tenements, mineral
and oil/gas rights, water rights, air rights, development power or
rights, options, reversion and remainder rights, and any other similar
rights owned by Borrower and relating to or usable in connection with
or access to the Property;
(d) All right, title, and interest owned by Borrower in and to
all land lying within the rights-of-way, roads, or streets, open or
proposed, adjoining the Land to the center line thereof, and all
sidewalks, alleys, and strips and gores of land adjacent to or used in
connection with the Property;
(e) All right, title, and interest of Borrower in, to, and
under all plans, specifications, surveys, studies, reports, permits,
licenses, agreements, contracts, instruments, books of account,
insurance policies, and any other documents relating to the use,
construction, occupancy, leasing, or operation of the Property;
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(f) All furniture, furnishings, fixtures, inventory and
equipment located on or used in connection with the Property, including
the fixtures and personal property, contractual rights, rights to
payment or recovery, books and records, permits and licenses, plans and
manuals, funds in accounts held by or for the benefit of Borrower, and
all other intangible personal property required or used in the
operation of the Property and owned by Borrower, and expressly
including the property described in Exhibit C and replacements thereof
(collectively, the "PERSONAL PROPERTY");
(g) All of Borrower's right, title and interest in the
proceeds (including conversion to cash or liquidation claims) of (i)
insurance relating to the Property and (ii) all awards made for the
taking by eminent domain (or by any proceeding or purchase in lieu
thereof) of the Property, including awards resulting from a change of
any streets (whether as to grade, access, or otherwise) and for
severance damages;
(h) All tax refunds, including interest thereon, tax rebates,
tax credits, and tax abatements, and the right to receive the same,
which may be payable or available with respect to the Property;
(i) All leasehold estates, ground leases, leases, subleases,
occupancy agreements, concessions, licenses, or other agreements
affecting the use, enjoyment or occupancy of the Property now or later
existing, including the Primary Lease and any use or occupancy
arrangements created pursuant to Title 7 or 11 of the United States
Code, as amended from time to time, or any similar federal or state
laws now or later enacted for the relief of debtors (the "BANKRUPTCY
CODE"), and all extensions and amendments thereto (collectively, the
"LEASES") and all Borrower's right, title and interest under the
Leases, including all guaranties thereof; and
(j) All rents, deposits, issues, guest receipts, meeting
facility revenue, profits, royalties, receivables, use and occupancy
charges (including all oil, gas or other mineral royalties and
bonuses), income and other benefits now or later derived from any
portion or use of the Property (including any payments received with
respect to any Tenant or the Property pursuant to the Bankruptcy Code)
and all cash, security deposits, advance rentals, or similar payments
relating thereto (collectively, the "RENTS") and all proceeds from the
cancellation, termination, surrender, sale or other disposition of the
Leases, and the right to receive and apply the Rents to the payment of
the Obligations.
2.2 ASSIGNMENT OF LEASES AND RENTS. Borrower hereby absolutely and
unconditionally assigns, sets over, and transfers to Lender all of Borrower's
right, title, interest and estates in and to the Leases and the Rents, subject
to the terms and license granted to the Borrower under that certain Assignment
of Leases and Rents made by Borrower to Lender dated the same date as this
Instrument (the "ASSIGNMENT OF LEASES AND RENTS"), which document shall govern
and control the provisions of this assignment.
2.3 RELEASE. If Borrower shall pay and perform the Obligations as
provided for in the Loan Documents and shall comply with all the provisions in
the Loan Documents, the presents and the estates hereby granted pursuant to this
Article II (except for the obligations of Borrower
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set forth in this Instrument that expressly survive repayment of the
Obligations) shall cease, terminate and be void.
ARTICLE III
OBLIGATIONS
This Instrument is executed, acknowledged, and delivered by Borrower to
secure and enforce the following obligations (collectively, the "OBLIGATIONS"):
(a) Payment and performance of all covenants, obligations,
agreements, indebtedness and liabilities arising under or in connection
with the Note, this Instrument, each of the Other Mortgages and any
other Loan Document;
(b) All renewals, extensions, amendments, modifications,
supplements, consolidations, restatements, and changes of, or
substitutions for, all or any part of the items described in item (a)
above; and
(c) Payment of all sums advanced (including costs and
expenses) by Lender pursuant to the Loan Documents including renewals,
extensions, and amendments of the Loan Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
4.1 TITLE, LEGAL STATUS AND AUTHORITY. Borrower (i) is seized of the
Land and Improvements in fee simple and has good and marketable title to the
Property (other than the Lessee Personal Property), free and clear of all liens,
charges, encumbrances, and security interests, except the Permitted
Encumbrances; (ii) will forever warrant and defend title to the Property and the
validity, enforceability, and priority of the lien and security interest created
by this Instrument against the claims of all persons; (iii) is a limited
partnership duly organized, validly existing, and in good standing and qualified
to transact business under the laws of its state of organization and the state
where the Property is located ("PROPERTY STATE"); and (iv) has all necessary
approvals, governmental and otherwise, and full power and authority to own its
properties (including the Property) and carry on its business.
4.2 VALIDITY OF LOAN. The execution, delivery and performance of the
Loan Documents by Borrower and the borrowing evidenced by the Note (i) are
within the power of Borrower; (ii) have been authorized by all requisite action;
(iii) have received all necessary approvals and consents; (iv) will not violate,
conflict with, breach, or constitute (with notice or lapse of time, or both) a
default under (A) any law, order or judgment of any court or governmental
authority applicable to Borrower, or the governing instrument of Borrower or (B)
any indenture, agreement, or other instrument to which Borrower is a party or by
which Borrower or any of its property is bound or affected; (v) will not result
in the creation or imposition of any
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lien, charge, or encumbrance upon any of its properties or assets except for
those in this Instrument and those created by the other Loan Documents; 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 Instrument, the
Assignment of Leases and Rents and the UCC-1 Financing Statement under the
Uniform Commercial Code as enacted in the state in which the Property is located
(the "UCC")). The Loan Documents executed by Borrower constitute legal, valid,
and binding obligations of Borrower.
4.3 LITIGATION. There is no action, suit, or proceeding, judicial,
administrative, or otherwise (including any condemnation or similar proceeding),
pending or, to the best knowledge of Borrower, threatened or contemplated
against, or affecting, Borrower or the Property which would have a material
adverse affect on either the Property or Borrower's ability to perform the
Obligations.
4.4 STATUS OF PROPERTY.
(a) The Land and Improvements are not located in an area
identified by the Secretary of Housing and Urban Development, or any
successor, 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
has been or may be amended, or any successor law (collectively, the
"FLOOD ACTS") or, if located within any such area, Borrower has and
will maintain the insurance prescribed in Section 5.6(a)(iii) below.
(b) Borrower or Lessee, as the case may be, has all necessary
(i) certificates, licenses, and other approvals, governmental and
otherwise, for the operation of the Property and the conduct of its
business and (ii) zoning, building code, land use, environmental and
other similar permits or approvals, all of which are currently in full
force and effect and not subject to revocation, suspension, forfeiture,
or modification. The Property and its use and occupancy is in full
compliance with all Laws and Borrower has not received any notice of
any violation or potential violation of the Laws which has not been
remedied or satisfied.
(c) The Property is served by all utilities (including water
and sewer) required for its use.
(d) All public roads and streets necessary to serve the
Property for its use have been completed, are serviceable, are legally
open, and have been dedicated to and accepted by the appropriate
governmental entities.
(e) The Property is free from damage caused by fire or other
casualty.
(f) All costs and expenses for labor, materials, supplies, and
equipment used in the construction of the Improvements have been paid
in full except for the Permitted Encumbrances.
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(g) Except for property owned by (i) Lessee, (ii) tenants
under the Leases, and (iii) the Manager, lessors under equipment leases
or vendors under service contracts affecting the Property as more
particularly described in the Certificate of Representations and
Warranties, Borrower owns and has paid in full for all tangible
PERSONAL Property used in connection with the operation of the
Property, free of all security interests, liens, or encumbrances except
the Permitted Encumbrances and those created by this Instrument.
(h) The Property is assessed for real estate tax purposes as
one or more wholly independent tax lot(s), separate from any adjoining
land or improvements and no other land or improvements is assessed and
taxed together with the Property.
4.5 TAX STATUS OF BORROWER. Borrower is not a "foreign person" within
the meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. FelCor REIT qualifies as a "real estate
investment trust" as such term is used in the Internal Revenue Code of 1986, as
amended (the "IRC"), and the regulations thereunder, and none of FelCor,
Borrower or Borrower's General Partner is subject to separate taxation under the
IRC.
4.6 BANKRUPTCY AND EQUIVALENT VALUE. No bankruptcy, reorganization,
insolvency, liquidation, or other proceeding for the relief of debtors has been
instituted by or against Borrower, the General Partner of Borrower or FelCor.
Borrower has received reasonably equivalent value for granting this Instrument.
4.7 DISCLOSURE. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading. 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.
4.8 ILLEGAL ACTIVITY. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower's knowledge, there are no illegal
activities at or on the Property.
4.9 PRIMARY LEASE. The Primary Lease is in full force and effect; no
default by Borrower has occurred under the Primary Lease; and there is no
existing condition which, but for the passage of time or the giving of notice,
would result in a default by Borrower or, to Borrower's knowledge, by Lessee
under the terms of the Primary Lease. Borrower's interest in the Property is
assignable to Lender without the consent of, or notice to, Lessee.
ARTICLE V
COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
5.1 PAYMENT OF OBLIGATIONS. Borrower shall timely pay and perform the
Obligations.
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5.2 CONTINUATION OF EXISTENCE. Borrower shall not (and Lessee, by its
joinder to this Instrument, agrees not to) (a) dissolve, terminate, or
otherwise dispose of, directly, indirectly or by operation of law, all or
substantially all of its assets; (b) reorganize or change its legal structure
without Lender's prior written consent; (c) change its name, address, or the
name under which it conducts its business without promptly notifying Lender; or
(d) do anything to cause the representations in Section 4.2 to become untrue.
5.3 TAXES AND OTHER CHARGES.
(a) PAYMENT OF ASSESSMENTS. Borrower shall (except to the
extent Lessee is required to do so under the Primary Lease, in which
case Borrower shall cause Lessee to) pay when due all taxes, liens,
assessments, utility charges (public or private and including sewer
fees), ground rents, maintenance charges, dues, fines, impositions, and
public and other charges of any character (including penalties and
interest) assessed against, or which could become a lien against, the
Property ("ASSESSMENTS") ten (10) days prior to the date any fine,
penalty, interest or charge for nonpayment may be imposed. Unless
Borrower is making deposits per Section 5.10, Borrower shall provide
Lender with receipts evidencing such payments (except for income taxes,
franchise taxes, ground rents, maintenance charges, and utility
charges) within thirty (30) days after their due date. Lender may
retain at its sole cost and expense a firm to monitor payment of
Assessments by Borrower or Lessee.
(b) RIGHT TO CONTEST. So long as no Event of Default (defined
below) is continuing, Borrower or Lessee (if permitted under the
Primary Lease) may, prior to delinquency and at its sole expense,
contest any Assessment, but this shall not change or extend Borrower's
obligation to pay the Assessment as required above unless (i) Borrower
or Lessee, as the case may be, gives Lender prior written notice of
its intent to contest an Assessment; (ii) Borrower or Lessee, as the
case may be, demonstrates to Lender's reasonable satisfaction that (A)
the Property will not be sold to satisfy the Assessment prior to the
final determination of the legal proceedings, (B) Borrower or Lessee,
as the case may be, has taken such actions as are required or
permitted to accomplish a stay of any such sale, or (C) Borrower or
Lessee, as the case may be, has furnished a bond or surety
(satisfactory to Lender in form and amount) sufficient to prevent a
sale of the Property; (iii) at Lender's option, Borrower or Lessee, as
the case may be, has deposited the full amount necessary to pay any
unpaid portion of the Assessments with Lender; and (iv) such
proceeding shall be permitted under any other instrument to which
Borrower, Lessee or the Property is subject (whether superior or
inferior to this Instrument); provided, however, that the foregoing
shall not apply to the contesting of any income taxes, franchise
taxes, ground rents, maintenance charges, and utility charges.
(c) DOCUMENTARY STAMPS AND OTHER CHARGES. Borrower shall pay
all taxes, assessments, charges, expenses, costs and fees (including
registration and recording fees and revenue, mortgage, transfer, stamp,
intangible, indebtedness and any similar taxes) (collectively, the
"TRANSACTION TAXES") required in connection with the making and/or
recording of the Loan Documents. If Borrower fails to pay the
Transaction Taxes after demand, Lender may (but is not obligated to)
pay these and Borrower shall reimburse
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Lender on demand for any amount so paid with interest at the applicable
interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws.
(d) CHANGES IN LAWS REGARDING TAXATION. If any law (i) taxes
mortgages or debts secured by mortgages for federal, state or local
purposes or changes the manner of the collection of any such existing
taxes, and/or (ii) imposes a tax, either directly or indirectly, on any
of the Loan Documents or the Obligations, Borrower shall, if permitted
by law, pay such tax within the statutory period or within twenty (20)
days after demand by Lender, whichever is less; provided, however, that
if, in the opinion of Lender, Borrower is not permitted by law to pay
such taxes, Lender shall have the option to declare the Obligations
immediately due and payable (without any Prepayment Premium) upon sixty
(60) days' notice to Borrower.
5.4 DEFENSE OF TITLE, LITIGATION, AND RIGHTS UNDER LOAN DOCUMENTS.
Borrower shall (and Lessee, by its joinder to this Instrument, agrees to)
forever warrant, defend and preserve title to the Property, the validity,
enforceability and priority of this Instrument and the lien or security interest
created thereby, and any rights of Lender under the Loan Documents against the
claims of all persons, and shall promptly notify Lender of any such claims. If
at any time in Lender's good faith judgment it believes it necessary in order to
protect its interests hereunder, Lender (whether or not named as a party to such
proceedings) is authorized and empowered (but shall not be obligated) to take
such additional steps as it may deem necessary or proper for the defense of any
such proceeding or the protection of the lien, security interest, validity,
enforceability, or priority of this Instrument, title to the Property, or any
rights of Lender under the Loan Documents, including the employment of counsel,
the prosecution and/or defense of litigation, the compromise, release, or
discharge of such adverse claims, the purchase of any tax title, the removal of
such any liens and security interests, and any other actions Lender deems
necessary to protect its interests. Borrower hereby (and Lessee, by its joinder
to this Instrument, thereby) authorizes Lender to take any actions required to
be taken by Borrower or Lessee which Lender so determines in good faith to be
necessary to protect its interests hereunder, or permitted to be taken by
Lender, in the Loan Documents in the name and on behalf of Borrower or Lessee.
Borrower shall reimburse Lender on demand for all expenses (including attorneys'
fees) incurred by it in connection with the foregoing and Lender's exercise of
its rights under the Loan Documents. All such expenses of Lender, until
reimbursed by Borrower, shall be part of the Obligations, bear interest at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, and shall be secured by this Instrument.
5.5 OPERATION AND MAINTENANCE OF PROPERTY.
(a) REPAIR AND MAINTENANCE. Borrower will (and Lessee, by its
joinder to this Instrument, agrees to) (i) operate and maintain the
Property in good order, repair, and operating condition, (ii) promptly
make all necessary repairs, replacements, additions, and improvements
necessary to ensure that the Property shall not in any way be
diminished or impaired, (iii) not cause or allow any of the Property to
be misused, wasted, or to deteriorate and Borrower will not abandon the
Property. No new building, structure, or other improvement shall be
constructed on the Land nor shall any material part of the
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Improvements be removed, demolished, or structurally or materially
altered, without Lender's prior written consent.
(b) REPLACEMENT OF PROPERTY. Borrower (and Lessee, by its
joinder to this Instrument, agrees to) (i) keep the Property fully
equipped and will replace all worn out or obsolete Property with new
fixtures or Property of comparable quality and function, (ii) not,
without Lender's prior written consent, dispose of, pledge, convey or
assign any Personal Property (other than sales of items normally held
for sale in the ordinary course of business), unless the same is
replaced by Borrower or Lessee with a new, comparable article (A) owned
by Borrower or Lessee free and clear of any lien or security interest
(other than the Permitted Encumbrances and those created by this
Instrument) or (B) leased by Borrower or Lessee (x) with Lender's prior
written consent or (y) if the replaced Property was leased at the time
of execution of this Instrument. Notwithstanding anything to the
contrary contained herein, provided no Event of Default exists,
Borrower or Lessee may enter into leases for items of tangible Personal
Property to be used at the Property, provided that (i) the aggregate
value of such Personal Property leased under all such leases (as
reflected in such leases and as the same reduces from time to time as
the result of payments made under such leases) does not exceed
$350,000.00 at any time, and (ii) Borrower or Lessee, as the case may
be, shall deliver to Lender an agreement substantially in the form of
Exhibit E attached hereto fully executed by each lessor thereunder.
(c) COMPLIANCE WITH LAWS. Borrower, Lessee and the Property
shall be maintained, used, and operated in compliance with all of the
following: (i) present and future laws, Environmental Laws, ordinances,
regulations, and requirements (including zoning and building codes) of
any governmental or quasi-governmental authority or agency applicable
to Borrower or the Property (collectively, the "LAWS"); (ii) orders,
rules, and regulations of any regulatory, licensing, accrediting,
insurance underwriting or rating organization, or other body exercising
similar functions; (iii) duties or obligations of any kind imposed
under any Permitted Encumbrance or by law, covenant, condition,
agreement, or easement, public or private; and (iv) policies of
insurance at any time in force with respect to the Property. If
proceedings are initiated or Borrower receives notice that it, Lessee
or the Property is not in compliance with any of the foregoing,
Borrower will promptly send Lender notice and a copy of the proceeding
or violation notice. If the Property is not in compliance with all
Laws, Lender may impose additional requirements upon Borrower including
monetary reserves or financial equivalents.
(d) ZONING AND TITLE MATTERS. Borrower shall not (and Lessee,
by its joinder to this Instrument, agrees not to), without Lender's
prior written consent, (i) initiate or support any zoning
reclassification of the Property or variance under existing zoning
ordinances; (ii) modify or supplement any of the Permitted
Encumbrances; (iii) impose any restrictive covenants or encumbrances
upon the Property; (iv) execute or file any subdivision plat affecting
the Property; (v) consent to the annexation of the Property to any
municipality; (vi) permit the Property to be used by the public or any
person in a way that might make a claim of adverse possession or any
implied dedication or easement possible; (vii) cause or permit the
Property to become a non-conforming use under zoning
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ordinances or any present or future non-conforming use of the Property
to be discontinued; or (viii) fail to comply with the terms of the
Permitted Encumbrances.
5.6 INSURANCE.
(a) CASUALTY INSURANCE. Borrower shall keep the Property
insured for the benefit of Lender (i) by an "All Risk of Physical Loss"
policy or the broadest form of extended coverage endorsement in an
amount sufficient to prevent Lender from ever becoming a co-insurer
under the policy or Laws, but in no event less than the lesser of (A)
the Obligations or (B) the Full Insurable Value of the Property,
subject to verification by Lender and with a deductible not to exceed
Twenty-Five Thousand Dollars ($25,000.00); (ii) by rent, business
interruption, and/or use and occupancy insurance in an amount equal to
one (1) year's total income from the Property including all Rent and
other income; (iii) against damage by flood if the Property is located
in an area identified by the Secretary of Housing and Urban
Development, or any successor, as an area having special flood hazards
and in which flood insurance has been made available under the Flood
Acts in an amount equal to the lesser of (1) the original amount of the
Note or (2) the maximum limit of coverage available for the Property
under the Flood Acts; (iv) against damage or loss from (1) sprinkler
system leakage and (2) boilers, boiler tanks, heating and
air-conditioning equipment, pressure vessels, auxiliary piping, and
similar apparatus, in the amount required by Lender; and (v) during the
period of any construction, repair, restoration, or replacement of the
Property, by a standard builder's risk policy with extended coverage in
an amount at least equal to the Full Insurable Value of such Property,
and worker's compensation, in statutory amounts.
(b) LIABILITY AND OTHER INSURANCE. Borrower or Lessee (to the
extent Lessee is required to maintain such type of insurance pursuant
to the Primary Lease) Lessee shall maintain comprehensive general
liability insurance on an occurrence basis covering Borrower, Lessee,
and Lender, as an additional insured, against claims for bodily injury
or death or property damage occurring in, upon, or about the Property
or any street, drive, sidewalk, curb, or passageway adjacent thereto,
in the amount of $1,000,000.00 combined single limit per occurrence
primary coverage, with umbrella/excess coverage of not less than
$10,000,000.00, which insurance shall include operations and blanket
contractual liability coverage which insures contractual liability
under the indemnifications set forth in Article X below (but such
coverage or the amount thereof shall in no way limit such
indemnifications). Upon request by Lender, Borrower or (to the extent
Lessee is required to maintain such type of insurance pursuant to the
Primary Lease) Lessee shall maintain insurance or carry additional
amounts of insurance covering Borrower or the Property as Lender shall
reasonably require including against war risks.
(c) FORM OF POLICY. All insurance required under this Section
shall be fully paid for, non-assessable, and the policies shall contain
such provisions, endorsements, and expiration dates as Lender shall
reasonably require. The policies shall be issued by
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insurance companies authorized to do business in the Property State,
approved by Lender, and having (i) an investment grade rating or claims
paying ability assigned by one or more credit rating agencies approved
by Lender (a "RATING AGENCY") and (ii) a general policy rating of B+
XII or better by A.M. Best Company, Inc. (or if a rating of A.M. Best
Company, Inc. is no longer available, a similar rating from a similar
or successor service). In addition, all policies shall (x) include a
standard mortgagee clause, without contribution, in the name of Lender
and (y) provide that they shall not be canceled, amended, or materially
altered (including reduction in the scope or limits of coverage)
without at least thirty (30) days' prior notice to Lender.
(d) ORIGINAL POLICIES. Borrower or Lessee, as the case may be,
shall deliver to Lender (i) duplicate original or certified copies of
all policies (and renewals) required under this Section and (ii)
receipts evidencing payment of all premiums on such policies at least
thirty (30) days prior to their expiration. If original and renewal
policies are unavailable or if coverage is under a blanket policy,
Borrower or Lessee, as the case may be, shall deliver duplicate
originals, or, if unavailable, original certificates evidencing that
such policies are in full force and effect together with certified
copies of the original policies.
(e) GENERAL PROVISIONS. Borrower or Lessee, as the case may
be, shall not carry separate or additional insurance concurrent in form
or contributing in the event of loss with that required under this
Section unless endorsed in favor of Lender as per this Section and
approved by Lender in all respects. In the event of foreclosure of this
Instrument or other transfer of title or assignment of the Property in
extinguishment, in whole or in part, of the Obligations, all right,
title, and interest of Borrower or Lessee, as the case may be, in and
to all policies of insurance then in force regarding the Property and
all proceeds payable thereunder and unearned premiums thereon shall
immediately vest in the purchaser or other transferee of the Property.
No approval by Lender of any insurer shall be construed to be a
representation, certification, or warranty of its solvency. No approval
by Lender as to the amount, type, or form of any insurance shall be
construed to be a representation, certification, or warranty of its
sufficiency. Borrower and Lessee shall comply with all insurance
requirements and shall not cause or permit any condition to exist which
would be prohibited by an insurance requirement or would invalidate the
insurance coverage on the Property.
5.7 DAMAGE AND DESTRUCTION OF PROPERTY.
(a) BORROWER'S OBLIGATIONS. If any damage to, loss, or
destruction of the Property occurs (any "DAMAGE"), (i) Borrower shall
promptly notify Lender and take all necessary steps to preserve any
undamaged part of the Property and (ii) if the insurance proceeds are
made available for Restoration (but regardless of whether any proceeds
are sufficient for Restoration), Borrower shall promptly commence and
diligently pursue to completion (and Lessee, by its joinder to this
Instrument, agrees to cooperate and/or participate in, as necessary)
the restoration, replacement, and rebuilding of the Property as nearly
as possible to its value and condition immediately prior to the Damage
or a Taking (defined below) in accordance with plans and specifications
approved by Lender
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("RESTORATION"). Borrower shall comply with other reasonable
requirements established by Lender to preserve the security under this
Instrument.
(b) LENDER'S RIGHTS. If any Damage occurs and some or all of
it is covered by insurance, then (i) Lender may, but is not obligated
to, make proof of loss if not made promptly by Borrower, and Lender is
authorized and empowered by Borrower to settle, adjust, or compromise
any claims for the Damage if not promptly settled by Borrower (with the
prior, written consent of Lender, which consent shall not be
unreasonably withheld) or at any time if an Event of Default shall have
occurred; (ii) each insurance company concerned is authorized and
directed to make payment directly to Lender for the Damage; and (iii)
Lender may apply the insurance proceeds in any order it determines (1)
to reimburse Lender for all Costs (defined below) related to collection
of the proceeds and (2) subject to Section 5.7(c) and at Lender's
option, to (A) payment (without any Prepayment Premium) of all or part
of the Obligations, whether or not then due and payable, in the order
determined by Lender (provided that if any Obligations remain
outstanding after this payment, the unpaid Obligations shall continue
in full force and effect and Borrower shall not be excused in the
payment thereof); (B) the cure of any default under the Loan Documents;
or (C) the Restoration. Any insurance proceeds held by Lender shall be
held without the payment of interest thereon. If Borrower receives any
insurance proceeds for the Damage, Borrower shall promptly deliver the
proceeds to Lender. Notwithstanding anything in this Instrument or at
law or in equity to the contrary, none of the insurance proceeds paid
to Lender shall be deemed trust funds and Lender may dispose of these
proceeds as provided in this Section. Borrower expressly assumes all
risk of loss from any Damage, whether or not insurable or insured
against.
(c) APPLICATION OF PROCEEDS TO RESTORATION. Lender shall make
the Net Proceeds (defined below) available to Borrower for Restoration
if: (i) there shall then be no Event of Default; (ii) Lender shall be
satisfied that (A) Restoration can and will be completed within one (1)
year after the Damage occurs and at least one (1) year prior to the
maturity of the Note, (B) each of the Primary Lease, the Management
Agreement and the License Agreement (or replacements thereof entered
into in accordance with the terms of Section 8 of the Loan Agreement)
shall remain in full force and effect during and after the Restoration,
and (C) the tenants under the Major Leases agree in writing to continue
their Leases, or Borrower or Lessee shall have entered into replacement
Leases acceptable in all respects to Lender for the premises demised
under the Major Leases; (iii) Borrower shall have entered into a
general construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not
less than ten percent (10%) until final completion of the Restoration;
and (iv) in Lender's reasonable judgment, after Restoration has been
completed the net cash flow of the Property will be sufficient to cover
all costs and operating expenses of the Property, including payments
due and reserves required under the Loan Documents. Notwithstanding any
provision of this Instrument to the contrary, Lender shall not be
obligated to make any portion of the Net Proceeds available for
Restoration unless, at the time of the disbursement request, Lender has
determined in its reasonable discretion that (y) Restoration can be
completed at a cost which does not exceed the aggregate of the
remaining Net Proceeds and any funds deposited with Lender by Borrower
("ADDITIONAL FUNDS") and (z) the aggregate of
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any loss of rental income insurance proceeds which the carrier has
acknowledged to be payable ("RENT LOSS PROCEEDS") and any funds
deposited with Lender by Borrower are sufficient to cover all costs and
operating expenses of the Property, including payments due and reserves
required under the Loan Documents.
(d) DISBURSEMENT OF PROCEEDS. If Lender elects or is required
to make insurance proceeds available for Restoration, Lender shall,
through a disbursement procedure established by Lender, periodically
make available to Borrower in installments the net amount of all
insurance proceeds received by Lender after deduction of all reasonable
costs and expenses incurred by Lender in connection with the collection
and disbursement of such proceeds ("NET PROCEEDS") and, if any, the
Additional Funds. The amounts periodically disbursed to Borrower shall
be based upon the amounts currently due under the construction contract
for Restoration and Lender's receipt of (i) appropriate lien waivers,
(ii) a certification of the percentage of Restoration completed by an
architect or engineer acceptable to Lender, and (iii) title insurance
or similar indemnification reasonably acceptable to Lender against
materialmen's and mechanic's liens. At Lender's election, the
disbursement of funds may be handled by a disbursing agent selected by
Lender, and such agent's reasonable fees and expenses shall be paid by
Borrower. The Net Proceeds, Rent Loss Proceeds, and any Additional
Funds shall constitute additional security for the Loan and Borrower
shall execute, deliver, file and/or record, at its expense, such
instruments as Lender requires to grant to Lender a perfected,
first-priority security interest in these funds. If the Net Proceeds
are made available for Restoration and (x) Borrower refuses or fails to
complete the Restoration, (y) an Event of Default occurs, or (z) the
Net Proceeds or Additional Funds are not applied to Restoration, then
any undisbursed portion may, at Lender's option, be applied to the
Obligations in any order of priority, and any application to principal
shall be deemed a voluntary prepayment subject to the Prepayment
Premium.
5.8 CONDEMNATION.
(a) BORROWER'S OBLIGATIONS. Borrower will promptly notify
Lender of any threatened or instituted proceedings for the condemnation
or taking by eminent domain of the Property including any change in any
street (whether as to grade, access, or otherwise) (a "TAKING").
Borrower shall, at its expense, (i) diligently prosecute these
proceedings, (ii) deliver to Lender copies of all papers served in
connection therewith, and (iii) consult and cooperate with Lender in
the handling of these proceedings. No settlement of these proceedings
shall be made by Borrower or Lessee without Lender's prior written
consent. Lender may participate in these proceedings (but shall not be
obligated to do so) and Borrower will sign and deliver (and cause
Lessee to sign and deliver) all instruments requested by Lender to
permit this participation.
(b) LENDER'S RIGHTS TO PROCEEDS. All condemnation awards,
judgments, decrees, or proceeds of sale in lieu of condemnation
("AWARD") are assigned and shall be paid to Lender. Borrower authorizes
Lender to collect and receive them, to give receipts for them, to
accept them in the amount received without question or appeal, and/or
to
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appeal any judgment, decree, or award. Borrower will sign and deliver
all instruments requested by Lender to permit these actions.
(c) APPLICATION OF AWARD. Lender shall have the right to apply
any Award, subject to Section 5.8(d), as per Section 5.7 for insurance
proceeds held by Lender, including the waiver of Prepayment Premium. If
Borrower receives any Award, Borrower shall promptly deliver them to
Lender. Notwithstanding anything in this Instrument or at law or in
equity to the contrary, none of the Award paid to Lender shall be
deemed trust funds and Lender may dispose of these proceeds as provided
in this Section.
(d) APPLICATION OF AWARD TO RESTORATION. With respect to any
portion of the Award that is not for loss of value of property, Lender
shall permit the application of the Award to Restoration in accordance
with the provisions of Section 5.7 if: (i) no more than (A) twenty
(20%) of the gross area of the Improvements are affected by the Taking,
(ii) no portion of the Improvements that are critical for the operation
of the Property as a full service hotel are affected by the Taking,
(iii) no more than ten percent (10%) of the parking spaces are affected
by the Taking, (iv) the amount of the loss does not exceed twenty
percent (20%) of the original amount of the Note; (v) the Taking does
not materially and adversely affect access to the Property from any
public right-of-way; (vi) there is no Event of Default at the time of
application; (vii) after Restoration, the Property and its use will be
in compliance with all Laws; (viii) in Lender's reasonable judgment,
Restoration is practical and can be completed within one (1) year after
the Taking and at least one (1) year prior to the maturity of the Note;
and (ix) each of the Primary Lease, the Management Agreement and the
License Agreement (or replacements thereof entered into in accordance
with the terms of Section 8 of the Loan Agreement) shall remain in full
force and effect during and after the Restoration; (ix) the tenants
under the Major Leases agree in writing to continue their Leases, or
Borrower or Lessee shall have entered into replacement Leases
acceptable in all respects to Lender for the premises demised under the
Major Leases; (x) Borrower shall have entered into a general
construction contract acceptable in all respects to Lender for
Restoration, which contract must include provision for retainage of not
less than ten percent (10%) until final completion of the Restoration;
and (xi) in Lender's reasonable judgment, after Restoration has been
completed the net cash flow of the Property will be sufficient to cover
all costs and operating expenses of the Property, including payments
due and reserves required under the Loan Documents. Any portion of the
Award that is (i) for loss of value or property or (ii) in excess of
the cost of any Restoration permitted above may, in Lender's sole
discretion, be applied against the Obligations (without any Prepayment
Premium) or paid to Borrower.
(e) EFFECT ON THE OBLIGATIONS. Notwithstanding any Taking,
Borrower shall continue to pay and perform the Obligations as provided
in the Loan Documents. Any reduction in the Obligations due to
application of the Award shall take effect only upon Lender's actual
receipt and application of the Award to the Obligations. If the
Property shall have been foreclosed, sold pursuant to any power of sale
granted hereunder, or transferred by deed-in-lieu of foreclosure prior
to Lender's actual receipt of the Award, Lender may apply the Award
received to the extent of any deficiency upon such sale and Costs
incurred by Lender in connection with such sale.
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5.9 LIENS AND LIABILITIES. Borrower shall pay, bond, or otherwise
discharge all claims and demands of mechanics, materialman, laborers, and others
which, if unpaid, might result in a lien or encumbrance on the Property or the
Rents (collectively, "LIENS") and Borrower shall, at its sole expense, do
everything necessary to preserve the lien and security interest created by this
Instrument and its priority. As to such Liens for which the Lessee is
responsible under the Primary Lease, Lessee (by its joinder to this Instrument)
agrees to comply with the foregoing provisions with respect to such Liens.
Nothing in the Loan Documents shall be deemed or construed as constituting the
consent or request by Lender, express or implied, to any contractor,
subcontractor, laborer, mechanic or materialman for the performance of any labor
or the furnishing of any material for any improvement, construction, alteration,
or repair of the Property. Borrower (and Lessee, by its joinder to this
Instrument) further agrees that Lender does not stand in any fiduciary
relationship to Borrower or Lessee. Any contributions made, directly or
indirectly, to Borrower or Lessee by or on behalf of any of its partners,
members, principals or any party related to such parties shall be treated as
equity and shall be subordinate and inferior to the rights of Lender under the
Loan Documents.
5.10 TAX AND INSURANCE DEPOSITS. At Lender's option, at any time after
(a) an Event of Default has occurred, or (b) the aggregate Debt Service Coverage
Ratio for the Hotel Properties for the immediately preceding twelve (12) month
period shall be less than 1.50, Borrower shall make monthly deposits
("DEPOSITS") with Lender equal to one-twelfth (1/12) of the annual Assessments
(except for income taxes, franchise taxes, ground rents, maintenance charges and
utility charges) and the premiums for insurance required under Section 5.6 (the
"INSURANCE PREMIUMS") together with amounts sufficient to pay these items thirty
(30) days before they are due (collectively, the "IMPOSITIONS"). Lender shall
estimate the amount of the Deposits until ascertainable. At that time, Borrower
shall promptly deposit any deficiency. Borrower shall promptly notify Lender of
any changes to the amounts, schedules and instructions for payment of the
Impositions. Borrower authorizes Lender or its agent to obtain copies of the
bills for Assessments directly from the appropriate tax or governmental
authority. All Deposits are pledged to Lender and shall constitute additional
security for the Obligations. The Deposits shall be held by Lender without
interest (except to the extent required under Laws) and may be commingled with
other funds. If (i) there is no Event of Default at the time of payment, (ii)
Borrower has delivered bills or invoices to Lender for the Impositions in
sufficient time to pay them when due, (iii) the Deposits are sufficient to pay
the Impositions or Borrower has deposited the necessary additional amount, then
Lender shall pay the Impositions prior to their due date. Any Deposits remaining
after payment of the Impositions shall, at Lender's option, be credited against
the Deposits required for the following year or paid to Borrower. If an Event of
Default occurs, the Deposits may, at Lender's option, be applied to the
Obligations in any order of priority, and any application to principal following
an Event of Default shall be deemed a voluntary prepayment subject to the
Prepayment Premium. Borrower shall not claim any credit against the principal
and interest due under the Note for the Deposits unless and until such Deposits
are applied by Lender towards the Obligations. Upon an assignment or other
transfer of this Instrument, Lender may pay over the Deposits in its possession
to the assignee or transferee and then it shall be completely released from all
liability with respect to the Deposits. Borrower shall look solely to the
assignee or transferee with respect thereto. This provision shall apply to every
transfer of the Deposits to a new assignee or transferee. Subject to Article
VII, a transfer
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of title to the Land shall automatically transfer to the new owner the
beneficial interest in the Deposits. Upon full payment and satisfaction of this
Instrument or, at Lender's option, at any prior time, the balance of the
Deposits in Lender's possession shall be paid over to the record owner of the
Land and no other party shall have any right or claim to the Deposits. Lender
may transfer all its duties under this Section to such service or financial
institution as Lender may periodically designate and Borrower agrees to make the
Deposits to such service or institution. Notwithstanding the foregoing, so long
as no Event of Default has occurred, if the Debt Service Coverage Ratio for the
Hotel Properties for the immediately preceding twelve (12) month period
increases to 2.00 or more at any time subsequent to Lender's requirement that
Deposits be made, the requirement for future Deposits shall terminate and all
Deposits held by Lender shall be released to Borrower, subject to Lender's right
to require further Deposits if at any time thereafter the Debt Service Coverage
Ratio shall again be less than 1.50.
5.11 ERISA. Borrower represents and warrants to Lender that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
"governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower
is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; (iii) the assets of the Borrower
do not constitute "plan assets" of one or more plans within the meaning of 29
C.F.R. Section 2510.3-10 1; and (iv) one or more of the following circumstances
is true as to Borrower: (1) equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (2) less
than twenty-five percent (25%) of all equity interests in Borrower are held by
"benefit plan investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or (3) Borrower qualifies 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). Borrower shall deliver to Lender such certifications and/or other
evidence periodically requested by Lender, in its sole discretion, to verify
these representations and warranties. Failure to deliver these certifications or
evidence, breach of these representations and warranties, or consummation of any
transaction which would cause this Instrument or any exercise of Lender's rights
under this Instrument to (i) constitute a non-exempt prohibited transaction
under ERISA or (ii) violate ERISA or any state statute regulating governmental
plans (collectively, a "VIOLATION"), shall be an Event of Default.
Notwithstanding anything in the Loan Documents to the contrary, no sale,
assignment, or transfer of any direct or indirect right, title, or interest in
Borrower or the Property (including creation of a junior lien, encumbrance or
leasehold interest) shall be permitted which would, in Lender's opinion, negate
the representations in this Section or cause a Violation. At least fifteen (15)
days before consummation of any of the foregoing, Borrower shall obtain from the
proposed transferee or lienholder (i) a certification to Lender that the
representations and warranties of this Section will be true after consummation
and (ii) an agreement to comply with this Section.
5.12 ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND COVENANTS.
(a) ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants, to the best of Borrower's knowledge (after due
inquiry and investigation) and additionally based upon the
environmental site assessment report of the Property delivered to and
approved by Lender in connection with the Loan (the "ENVIRONMENTAL
REPORT"), that except as fully disclosed in the Environmental Report:
(i) there are no
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Hazardous Materials (defined below) or underground storage tanks
affecting the Property ("affecting the Property" shall mean "in, on,
under, stored, used or migrating to or from the Property") except for
(A) routine office, cleaning, janitorial and other materials and
supplies necessary to operate the Property for its current use and (B)
Hazardous Materials that are (1) in compliance with Environmental Laws,
(2) have all required permits, and (3) are in only the amounts
necessary to operate the Property; (ii) there are no past, present or
threatened Releases of Hazardous Materials in violation of any
Environmental Law affecting the Property; (iii) there is no past or
present non-compliance with Environmental Laws or with permits issued
pursuant thereto; (iv) Borrower does not know of, and has not received,
any written or oral notice or communication from any person relating to
Hazardous Materials affecting the Property; and (v) Borrower has
provided to Lender, in writing, all information relating to
environmental conditions affecting the Property known to Borrower or
contained in Borrower's files.
(b) ENVIRONMENTAL COVENANTS. Borrower covenants and agrees
that (and Lessee, by its joinder to this Instrument, covenants and
agrees that): (i) all use and operation of the Property shall be in
compliance with all Environmental Laws and required permits; (ii) there
shall be no Releases of Hazardous Materials affecting the Property
except in compliance with Environmental Laws; (iii) there shall be no
Hazardous Materials affecting the Property except (A) routine office,
cleaning and janitorial supplies, (B) in compliance with all
Environmental Laws, (C) in compliance with all required permits, and
(D)(1) in only the amounts necessary to operate the Property or (2)
fully disclosed to and approved by Lender in writing; (iv) Borrower
shall (and Lessee, by its joinder to this Instrument, agrees to) keep
the Property free and clear of all liens and encumbrances imposed by
any Environmental Laws (the "ENVIRONMENTAL LIENS"); (v) Borrower shall
(and Lessee, by its joinder to this Instrument, agrees to), at its sole
expense, fully and expeditiously cooperate in all activities in Section
5.12(c) including providing all relevant information and making
knowledgeable persons available for interviews; (vi) Borrower shall
(and Lessee, by its joinder to this Instrument, agrees to), at its sole
expense, (A) perform any environmental site assessment or other
investigation of environmental conditions at the Property upon Lender's
request based on Lender's reasonable belief that the Property is not in
compliance with all Environmental Laws, (B) share with Lender the
results and reports and Lender and the Indemnified Parties (defined
below) shall be entitled to rely on such results and reports, and (C)
complete any remediation of Hazardous Materials affecting the Property
or other actions required by any Environmental Laws; (vii) Borrower
shall (and Lessee, by its joinder to this Instrument, agrees to)
prevent any Tenant, the Manager or other user of the Property from
violating any Environmental Law; and (viii) Borrower shall (and Lessee,
by its joinder to this Instrument, agrees to) immediately notify Lender
in writing after it becomes aware of (A) the presence, Release, or
threatened Release of Hazardous Materials affecting the Property that
might violate any Environmental Laws, (B) any non-compliance of the
Property with any Environmental Laws, (C) any actual or potential
Environmental Lien, (D) any required or proposed remediation of
environmental conditions relating to the Property, and (E) any written
or oral communication or notice from any person relating to
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Hazardous Materials. Any failure of Borrower or Lessee to perform its
obligations under this Section 5.12 shall constitute waste of the
Property.
(c) LENDER'S RIGHTS. After reasonable prior notice to
Borrower, Lender and any person designated by Lender may enter the
Property to assess the environmental condition of the Property and its
use including (i) conducting any environmental assessment or audit (the
scope of which shall be determined in good faith by Lender) and (ii)
taking samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing at all reasonable
times when (A) a default has occurred under the Loan Documents, (B)
Lender reasonably believes that a Release that might violate any
Environmental Laws has occurred or the Property is not in compliance
with all Environmental Laws, or (C) the Loan is being considered for
sale. Borrower shall (and Lessee, by its joinder to this Instrument,
agrees to) cooperate with and provide access to Lender and such person.
5.13 ELECTRONIC PAYMENTS. Prior to the occurrence of an Event of
Default, Borrower shall make payments due under the Loan Documents by wire
transfer to an account specified by Lender from time to time. Following an Event
of Default, all payments due under the Loan Documents shall be made by
electronic funds transfer from a bank account established and maintained by
Borrower for this purpose with a depository satisfactory to Lender in its good
faith judgment. Lender hereby approves NationsBank and Chase Manhattan Bank as
depositories that may act in this capacity. Borrower shall direct the depository
to transmit such payments on or before their respective due dates to an account
designated in writing by Lender. Lender shall have the right to require Borrower
to select a different depository after thirty (30) days' prior notice. All costs
of (i) establishing and maintaining such account and (ii) the electronic funds
transfers shall be paid by Borrower.
5.14 INSPECTION. Borrower shall (and Lessee, by its joinder to this
Instrument, agrees to) allow Lender and any person designated by Lender to enter
upon the Property and conduct tests or inspect the Property at all reasonable
times. Borrower shall (and Lessee, by its joinder to this Instrument, agrees to)
assist Lender and such person in effecting said inspection.
5.15 RECORDS, REPORTS, AND AUDITS.
(a) RECORDS AND REPORTS. Borrower shall (and Lessee, by its
joinder to this Instrument, agrees to) maintain, in accordance with
generally-accepted accounting principles ("GAAP"), complete and
accurate books and records with respect to all operations of or
transactions involving the Property. Annually, Borrower shall furnish
Lender financial statements for the most current fiscal year (including
a schedule of all related Obligations and contingent liabilities) for
(i) Borrower, (ii) the General Partner of Borrower, (iii) FelCor, (iv)
the FelCor REIT, and (v) Lessee. On an annual basis, Borrower shall
furnish Lender operating statements for the Property including income
and expenses (before and after Obligations service), certified by an
authorized senior financial officer of Borrower. Annually, Borrower
shall furnish Lender (i) copies of paid tax receipts for the Property;
(ii) a certified rent roll including security deposits held, the
expiration of the terms of the Leases, and identification and
explanation of any Tenants in
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default; (iii) a budget showing projected income and expenses (before
and after Obligations service) for the next twelve (12) month budget
period; (iv) a budget showing projected expenditures for FF&E and other
capital items for the next twelve (12) month budget period; and (v)
upon Lender's request, (A) evidence of the continuity of FelCor REIT's
status as a real estate investment trust and the continued exemption
from taxation under the IRC of each of FelCor, Borrower and Borrower's
General Partner, (B) the distribution of economic interests in the
Property, and (C) copies of any other loan documents affecting the
Property.
(b) INSPECTION OF REPORTS. All of the reports, statements, and
items required under this Section shall be (i) prepared in accordance
with GAAP and REASONABLY satisfactory to Lender in form and substance;
and (ii) delivered within ninety (90) days after the end of Borrower's
fiscal year. The financial statements for Borrower and the General
Partner of Borrower shall be certified as being true, correct and
accurate by an authorized senior financial official of Borrower. The
financial statements for FelCor, the FelCor REIT and Lessee shall be
audited by a "Big-Five" accounting firm (or their successors). If any
one report, statement, or item is not received by Lender on its due
date, a late fee of Five Hundred and No/100 Dollars ($500.00) per month
shall be due and payable by Borrower. If any one report, statement, or
item is not received within thirty (30) days after written notice from
Lender, Lender may immediately declare an Event of Default under the
Loan Documents. Borrower shall (i) provide Lender with such additional
financial, management, or other information regarding Borrower, the
General Partner of Borrower, FelCor, the FelCor REIT or the Property,
as Lender may reasonably request and (ii) upon Lender's request,
deliver all items required by Section 5.15 in an electronic format
(i.e., on computer disks) or by electronic transmission in the form
prepared by or for Borrower or the FelCor REIT and in an electronic
format accessible to Lender. By its joinder to this Instrument, Lessee
agrees to provide Lender with such additional financial management, or
other information regarding Lessee or the Property as Lender may
reasonably request, in a form and manner that complies with the
provisions of this Section.
(c) INSPECTION OF RECORDS. Borrower shall (and Lessee, by its
joinder to this Instrument, agrees to) allow Lender or any person
designated by Lender to examine, audit, and make copies of all such
books and records and all supporting data at the place where these
items are located at all reasonable times after reasonable advance
notice; provided that no notice shall be required after any Event of
Default under the Loan Documents. Borrower shall (and Lessee, by its
joinder to this Instrument, agrees to) assist Lender in effecting such
examination.
5.16 BORROWER'S CERTIFICATES. Within ten (10) days after Lender's
request, Borrower shall furnish a written certification to Lender and any
Investors as to (a) the amount of the Obligations outstanding; (b) the interest
rate, terms of payment, and maturity date of the Note; (c) the date to which
payments have been paid under the Note; (d) whether any offsets or defenses are
known by Borrower to exist against the Obligations and a detailed description of
any listed; (e) whether the Primary Lease, the Management Agreement and/or the
License Agreement are in full force and effect and have not been modified (or if
modified, setting forth all modifications); (f)
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the date to which the Rents under the Primary Lease have been paid; (g) whether,
to the best knowledge of Borrower, any defaults exist under the Primary Lease,
the Management Agreement and/or the License Agreement and a detailed description
of any listed; (h) whether there are any defaults (or events which with the
passage of time and/or notice would constitute a default) under the Loan
Documents which are known by Borrower and a detailed description of any listed;
(i) whether the Loan Documents are in full force and effect; and (j) any other
matters reasonably requested by Lender related to the Primary Lease, the
Management Agreement, the License Agreement, the Obligations, the Property, or
the Loan Documents.
5.17 FULL PERFORMANCE REQUIRED; SURVIVAL OF WARRANTIES. All
representations and warranties of Borrower in the Application or made in writing
in connection with the Loan shall survive the execution and delivery of the Loan
Documents and shall remain continuing warranties, and representations of
Borrower.
5.18 LEASING RESTRICTIONS. Neither Borrower nor Lessee shall, without
the prior, written consent of Lender, (i) amend or modify the Primary Lease or
any other Lease, (ii) extend or renew the Primary Lease or any other Lease
(except in accordance with the existing Lease provisions, if any, or in the case
of the Primary Lease, the provisions of Section 8 of the Loan Agreement), (iii)
terminate or accept the surrender of the Primary Lease or any other Lease (other
than a termination of a Primary Lease on account of a material default by Lessee
where Borrower timely cures any resulting default under the Loan Documents and
enters into a replacement lease in accordance with the provisions of Section 8
of the Loan Agreement), (iv) enter into any new Primary Lease (other than in
accordance with Section 8 of the Loan Agreement) or any other Lease, (v) grant
any consent or approval required under the Primary Lease or any other Lease that
is inconsistent with the terms of the Loan Documents, or (vi) accept any
prepayment of rent, termination fee, or any similar payment under any Lease;
provided, however, that so long as the aggregate Debt Service Coverage Ratio for
all Hotel Properties is at least 1.50, the following provisions shall apply with
respect to Leases of restaurant, gift shop, and other commercial spaces and
Leases of rooftop space for antennas, relay stations, or other customary
purposes:
(a) Without Lender's consent or approval, Borrower or Lessee
may enter into new Leases on an arms-length basis, with tenants or
subtenants whose businesses and operations are consistent with the
class and character of the Property, as determined by Borrower or
Lessee in its reasonable judgment, provided each such Lease shall meet
the following requirements: (i) such Lease shall provide for payment of
rent and all other amounts as Borrower or Lessee shall determine, in
the exercise of its reasonable judgment, to be in the best interest of
the Property taken as a whole (taking into account the type and quality
of the tenant, the nature of its business, the length of tenancy and
the location and configuration of the space so rented) as of the date
such Lease is executed; (ii) such Lease shall have a term that is
reasonable in relation to the type of Lease, but not more than (A) a
total of ten (10) years (including renewal options) with respect to
space leases and (B) a total of 25 years (including renewal options)
with respect to rooftop leases (it being agreed that a Lease with one
or more cancellation options on the part of the landlord that may be
exercised without a substantial penalty or termination payment shall be
deemed to have a term that ends on the date the earliest such
cancellation option may be exercised); (iii) no such Lease shall
require alterations to the Property that are not permitted to be
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made under the terms of the Loan Documents; and (iv) no such Lease
shall include asbestos, environmental, or hazardous substances
representations, warranties, or indemnifications, purchase options,
rights of first refusal to purchase, or expansion options in favor of
tenants or subtenants.
(b) Without Lender's consent or approval, Borrower or Lessee
may amend, modify, or waive the provisions of any such Lease or
terminate, reduce rents under, or shorten the term of any such Lease,
provided that such action (taking into account, in the case of a
termination, reduction in rent or shortening of term, or any change in
the use of the affected space under any such modification or amendment)
does not materially adversely affect the value of the Property taken as
a whole, in the reasonable judgment of Borrower or Lessee (as
applicable), and provided further that such Lease, as amended, modified
or waived, is otherwise in compliance with the requirements of the Loan
Documents.
(c) No later than thirty (30) days after Borrower or Lessee
executes any such Lease pursuant to the provisions of this Section,
Borrower or Lessee shall deliver to Lender (i) a complete copy of such
Lease certified as true, correct and complete by an officer of Borrower
or Lessee, and (ii) a summary of the rental provisions and other
principal terms of such Lease, including (A) the term, (B) renewal or
extension options, (C) any cancellation or termination options (other
than those customarily provided for casualty and condemnation), (D) any
"free" rent or rent abatement provisions, (E) the amount and terms of
payment of any tenant allowances, (F) the scope of the Tenant's
permitted uses, (G) any exclusive use restrictions, (H) any expansion
options or rights of first offer or first refusal on any other space in
the Project, and (I) any other provision that (x) departs from
Borrower's normal leasing practices and (y) creates material
obligations or liabilities on the part of the landlord.
If the Debt Service Coverage Ratio shall fall below 1.5, but no Event
of Default shall have occurred under the Loan Documents, then Borrower or Lessee
(as applicable) may enter into Leases that are not Material Leases for
commercial spaces and rooftop space for antennas, relay stations, and other
customary purposes (collectively, "NON-MATERIAL LEASES"), and may amend, modify,
or terminate the same, without the consent or approval of Lender, provided
Borrower or Lessee complies with the provisions of paragraphs (a) through (c)
above with respect to such Non-Material Leases
5.19 MANAGEMENT AGREEMENT AND LICENSE AGREEMENT RESTRICTIONS. Neither
Borrower nor Lessee shall, without the prior, written consent of Lender, (i)
amend or modify the Management Agreement or License Agreement, (ii) extend or
renew the Management Agreement or License Agreement (except in accordance with
the provisions of Section 8 of the Loan Agreement), (iii) terminate or accept
the surrender of the Management Agreement or the License Agreement (other than a
termination of the Management Agreement or the License Agreement on account of a
material default by the Manager or the Licensor, respectively, where Borrower
timely cures any resulting default under the Loan Documents and enters into a
replacement agreement in accordance with the provisions of Section 8 of the Loan
Agreement), (iv) enter into any new Management Agreement or License Agreement
(other than in accordance with Section 8
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of the Loan Agreement), or (v) grant any consent or approval required under the
Management Agreement or License Agreement that is inconsistent with the terms of
the Loan Documents.
5.20 ADDITIONAL SECURITY. No other security now existing or taken later
to secure the Obligations shall be affected by the execution of the Loan
Documents and all additional security shall be held as cumulative. The taking of
additional security, execution of partial releases, or extension of the time of
payment obligations of Borrower shall not diminish the effect and lien of this
Instrument and shall not affect the liability or obligations of any maker or
guarantor. Neither the acceptance of the Loan Documents nor their enforcement
shall prejudice or affect Lender's right to realize upon or enforce any other
security now or later held by Lender. Lender may enforce the Loan Documents or
any other security in such order and manner as it may determine in its
discretion.
5.21 FURTHER ACTS. Borrower shall (and Lessee, by its joinder to this
Instrument, agrees to) take all necessary actions to (i) keep valid and
effective the lien and rights of Lender under the Loan Documents and (ii)
protect the lawful owner of the Loan Documents. Promptly upon request by Lender
and at Borrower's expense, Borrower shall execute additional instruments and
take such actions as Lender reasonably believes are necessary or desirable to
(a) maintain or grant Lender a first-priority, perfected lien on the Property,
(b) ensure Lender that Lender will be able to realize on the Property following
an Event of Default under the Loan Documents, (c) correct any error or omission
in the Loan Documents, and (d) effect the intent of the Loan Documents,
including filing/recording the Loan Documents, additional mortgages or deeds of
trust, financing statements, and other instruments.
ARTICLE VI
ADDITIONAL ADVANCES; EXPENSES; SUBROGATION
6.1 EXPENSES AND ADVANCES. Borrower shall pay all reasonable appraisal,
recording, filing, registration, brokerage, abstract, title insurance (including
premiums), UCC search, escrow, attorneys' (but not in-house staff), engineers',
environmental engineers', environmental testing, and architects' fees, costs
(including travel), expenses, and disbursements incurred by Borrower or Lender
in connection with the granting, closing, servicing, and enforcement of (a) the
Loan and Documents or (b) attributable to Borrower or Lessee as owners of the
Property. The term "COSTS" shall mean any of the foregoing incurred in
connection with (a) any default by Borrower or Lessee under the Loan Documents,
(b) the servicing of the Loan, or (c) the exercise, enforcement, compromise,
defense, litigation, or settlement of any of Lender's rights or remedies under
the Loan Documents or relating to the Loan or the Obligations. If Borrower or
Lessee fails to pay any amounts or perform any actions required under the Loan
Documents, Lender may (but shall not be obligated to) advance sums to pay such
amounts or perform such actions. Borrower (and, by its subordination to this
Instrument, Lessee) grants to Lender the right to enter upon and take possession
of the Property to prevent or remedy any such failure and the right to take such
actions in Borrower's or Lessee's name. No advance or performance shall be
deemed to have cured a default by Borrower or Lessee. All (a) sums advanced by
or payable to Lender per this Section or under applicable Laws, (b) except as
expressly provided in the Loan Documents, payments due under the Loan Documents
which are not paid in full when due, and (c) all Costs,
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shall: (i) be deemed demand obligations, (ii) bear interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws, until paid if not paid on demand, (iii) be part of, together
with such interest, the Obligations , and (iv) be secured by the Loan Documents.
Lender, upon making any such advance, shall also be subrogated to rights of the
person receiving such advance.
6.2 SUBROGATION. If any proceeds of the Note were used to extinguish,
extend or renew any indebtedness on the Property, then, to the extent of the
funds so used, (a) Lender shall be subrogated to all rights, claims, liens,
titles and interests existing on the Property held by the holder of such
indebtedness and (b) these rights, claims, liens, titles and interests are not
waived but rather shall (i) continue in full force and effect in favor of Lender
and (ii) are merged with the lien and security interest created by the Loan
Documents as cumulative security for the payment and performance of the
Obligations.
ARTICLE VII
SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY
7.1 GENERAL RESTRICTIONS. It shall be an Event of Default and, at the
sole option of Lender, Lender may accelerate the Obligations and the entire
Obligations (including any Prepayment Premium) shall become immediately due and
payable, if either Borrower or Lessee shall cause, permit, or suffer any
Transfer of the Property or any portion thereof, or any Indirect Transfer other
than a Permitted Indirect Transfer, without the prior written consent of Lender
(which consent may be given or withheld for any reason, or for no reason, or
given conditionally, in Lender's sole discretion); provided, however, that
Borrower and Lessee shall be permitted to make those Transfers provided for
under Sections 4, 5, and 6 of the Loan Agreement (subject to satisfaction of the
terms of the Loan Agreement).
7.2 PROVISIONS FOR MERGER OF FELCOR OR FELCOR REIT. In the event of a
Transfer in the nature of a merger, tender offer, or similar transaction in
which FelCor or the FelCor REIT, or all or substantially all of assets of either
of them, are merged into, acquired by, or combined with another entity
(collectively, a "SUCCESSOR Entity"), such Transfer shall constitute a Permitted
Indirect Transfer if (and only if) the following conditions are satisfied:
(i) such Successor Entity has existing business experience in
the ownership and portfolio management of real estate assets;
(ii) such Successor Entity has a net Worth at least equal to
the net worth of FelCor or FelCor REIT (whichever party is engaged in
such transaction) as of the date of such transaction;
(iii) such Successor Entity expressly assumes the obligations
of FelCor or the FelCor REIT (as the case may be) under the Loan
Documents and executes any documents reasonably required by Lender to
confirm the same, which documents shall be satisfactory in form and
substance to Lender;
(iv) such Successor Entity is a United States person;
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(v) at the time of the Transfer, the aggregate Debt Service
Coverage Ratio for the Hotel Properties for the most recent full twelve
(12) month period is not less than 1.50;
(vi) at the time of the Transfer, the Loan to Value Ratio does
not exceed sixty percent (60%);
(vii) Borrower pays to Lender a non-refundable servicing fee
of $25,000 at the time of the request, and an additional fee equal to
one-quarter of one percent (0.25%) of the outstanding principal balance
of the Loan (less the $25,000 servicing fee) at the time of such
Transfer;
(viii) Borrower delivers to Lender copies of all documents
evidencing and governing such Transfer;
(ix) the Transfer does not cause a violation of the provisions
of the ERISA Certificate and Indemnification Agreement delivered to
Lender at Closing, and the Successor Entity executes a new ERISA
Certificate and Indemnification Agreement in favor of Lender in
accordance with the guidelines with respect thereto then applicable to
Lender's mortgage loans; and
(x) Borrower or the Successor Entity pays all reasonable fees,
costs and expenses incurred by Lender in connection with the proposed
Transfer, including (without limitation) all legal fees for Lender's
outside counsel, whether or not the Transfer is actually consummated.
Notwithstanding the foregoing, however, if the result of such Transfer
is that the Loan, together with other loans then held by Lender to the
Successor Entity (or its predecessor) and its subsidiaries or
affiliates, would exceed the total amount of loans that Lender may have
outstanding to any one entity or group of related entities under the
lending policies then generally applied by Lender or under lending
regulations to which Lender is then subject, Lender shall be entitled
to elect, by written notice to Borrower, to accelerate the maturity
date of the Loan to a date no earlier than the date of closing of such
Transfer or thirty (30) days following the date of such notice
(whichever is later), but in such case Borrower shall not be required
to pay any Prepayment Premium.
7.3 PROVISIONS ON SALE OF LESSEE. It shall be a Permitted Indirect
Transfer and Lender shall consent to a sale of (a) all of the membership
interests in Lessee or (b) all of the assets of the Lessee, if (and only if) the
following conditions are satisfied:
(i) the proposed purchaser of such membership interests or
assets is a reputable, nationally-recognized operator or manager of
hotel properties similar to the Property reasonably acceptable to
Lender;
(ii) such purchaser has a net worth at least equal to Thirty
Million Dollars ($30,000,000);
(iii) such purchaser expressly assumes (in the case of an
asset sale) the obligations of the Lessee under, or must expressly
acknowledge (in the case of a sale of
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membership interests) that the Lessee will be and remain subject to,
the terms and provisions of the Primary Lease, the Loan Documents, and
the Management Agreements and License Agreements, and such purchaser
executes any documents reasonably required by Lender to confirm the
same, which documents shall be satisfactory in form and substance to
Lender;
(iv) the purchaser is a United States person;
(v) at the time of the sale, the aggregate Debt Service
Coverage Ratio for all of the Hotel Properties for the most recent full
twelve (12) month period is not less than 1.50;
(vi) Borrower or Lessee pays to Lender a non-refundable
servicing fee of $50,000;
(vii) Borrower or Lessee delivers to Lender copies of all
documents evidencing and governing such sale;
(viii) the sale does not cause a violation of the provisions
of the ERISA Certificate and Indemnification Agreement delivered to
Lender at Closing; and
(ix) Borrower, Lessee or the purchaser pays all reasonable
fees, costs and expenses incurred by Lender in connection with the
proposed sale, including (without limitation) all legal fees for
Lender's outside counsel, whether or not the sale is actually
consummated. Upon the consummation of a sale permitted under this
Section 7.3 in accordance with the foregoing requirements, the
successor lessee as then owned or constituted shall be referred to
herein as a "Successor Lessee".
ARTICLE VIII
DEFAULTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The following shall be an "EVENT OF DEFAULT"
(regardless of whether the breach, failure, default, or other event or
circumstance specified below was caused or permitted by, or attributable to the
actions or failure to act, of Borrower or Lessee):
(a) if Borrower fails to make any payment required under the
Note, this Instrument, the Other Mortgages or any other Loan Documents
when due and such failure continues for five (5) days, provided,
however, that if Borrower fails to make any payment required under the
Note when due twice within any twelve (12) month period, Borrower shall
have no further right to any grace period during that twelve (12) month
period;
(b) except for defaults listed in the other subsections of
this Section 8.1, if Borrower or Lessee fails to perform or comply with
any other provision contained in the Loan Documents and the default is
not cured within thirty (30) days following written notice to Borrower
(the "GRACE PERIOD"); provided, however, that Lender may extend the
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Grace Period up to an additional thirty (30) days (for a total of sixty
(60) days from the date of default) if (i) Borrower or Lessee, as the
case may be, immediately commences and diligently pursues the cure of
such default and delivers (within the Grace Period) to Lender a written
request for more time and (ii) Lender determines in good faith that (1)
such default cannot be cured within the Grace Period but can be cured
within sixty (60) days after the default, (2) no lien or security
interest created by the Loan Documents will be impaired prior to
completion of such cure, and (3) Lender's immediate exercise of any
remedies provided hereunder or by law is not necessary for the
protection or preservation of the Property or Lender's security
interest;
(c) if any representation made (i) in connection with the Loan
or Obligations or (ii) in the Application or Loan Documents shall be
false or misleading in any material respect;
(d) there is a Transfer or Indirect Transfer (other than a
Permitted Indirect Transfer) without Lender's consent;
(e) the occurrence of a default or event of default after the
expiration of applicable cure periods, if any, under any of the other
Loan Documents, including, without limitation, the Other Mortgages;
(f) the occurrence of (i) a default resulting in the
termination of the Primary Lease, the Management Agreement or the
License Agreement after the expiration of applicable cure periods
(unless the same shall be replaced in accordance with the provisions of
Section 8 of the Loan Agreement within thirty (30) days after the
termination of the existing agreement), (ii) the expiration of the
Primary Lease, Management Agreement, or License Agreement (unless the
same is being replaced as of the expiration date thereof in accordance
with Section 8 of the Loan Agreement), or (iii) the occurrence of any
other termination of the Primary Lease, Management Agreement or License
Agreement without the prior, written consent of Lender;
(g) if Borrower or Lessee (excluding a Successor Lessee, but
subject to paragraph (f) above) shall (i) become insolvent, (ii) make a
transfer in fraud of creditors, (iii) not be able to pay its debts as
such debts become due, or (iv) admit in writing its inability to pay
its debts as they become due;
(h) if Borrower or Lessee shall make an assignment for the
benefit of creditors; or if any bankruptcy, reorganization,
arrangement, insolvency, or liquidation proceeding, or any other
proceedings for the relief of debtors, is instituted by or against
Borrower or Lessee, and, if instituted against Borrower or Lessee, is
allowed, consented to, or not dismissed within the earlier to occur of
(i) ninety (90) days after such institution or (ii) the filing of an
order for relief,
(i) if any of the events in Sections 8.1(g) or (h) shall occur
with respect to (i) the General Partner of Borrower, (ii) FelCor or
FelCor REIT, or (iii) any guarantor of payment or performance of any of
the Obligations;
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(j) if the Property shall be taken, attached, or sequestered
on execution or other process of law in any action against Borrower;
(k) if any default occurs under the Environmental Indemnity
and such default is not cured within any applicable grace period in
that document;
(l) if Borrower or Lessee shall fail at any time to obtain,
maintain, renew, or keep in force the insurance policies required by
Section 5.6 within ten (10) days after written notice;
(m) if Borrower shall be in material default under any other
mortgage or security agreement covering any part of the Property,
whether it be superior or junior in lien to this Instrument, other than
any equipment lease(s) permitted under the Loan Documents as to which
(i) the aggregate liability of Borrower under any and all such
equipment leases that may be in default at any one time does not exceed
$20,000 and (ii) none of the personal property covered thereby is
essential to the proper operation of the Property in accordance with
the provisions of the License Agreement, Management Agreement, and Loan
Documents;
(n) if any claim of priority (except based upon a Permitted
Encumbrance) to the Loan Documents by title, lien, or otherwise shall
be upheld by any court of competent jurisdiction or shall be consented
to by Borrower or Lessee; or
(o) (i) the consummation by Borrower or Lessee of any
transaction which would cause (A) the Loan or any exercise of Lender's
rights under the Loan Documents to constitute a non-exempt prohibited
transaction under ERISA or (B) a violation of a state statute
regulating governmental plans; (ii) the failure of any representation
in Section 5.11 to be true and correct in all respects; or (iii) the
failure of Borrower or Lessee to provide Lender with the written
certifications required by Section 5.11.
8.2 REMEDIES. If an Event of Default occurs, Lender or any person
designated by Lender may (but shall not be obligated to) take any action
(separately, concurrently, cumulatively, and at any time and in any order)
permitted under any Laws, without notice, demand, presentment, or protest (all
of which are hereby waived), to protect and enforce Lender's rights under the
Loan Documents or Laws including the following actions:
(a) accelerate and declare the entire unpaid Obligations
immediately due and payable, except for defaults under Sections 8.1
(g), (h), (i) or (j) which shall automatically make the Obligations
immediately due and payable;
(b) judicially or otherwise, (i) completely foreclose this
Instrument or (ii) partially foreclose this Instrument for any portion
of the Obligations due and the lien and security interest created by
this Instrument shall continue unimpaired and without loss of priority
as to the remaining Obligations not yet due;
(c) sell for cash or upon credit the Property and all right,
title and interest of Borrower therein and rights of redemption
thereof, pursuant to power of sale;
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(d) recover judgment on the Note either before, during or
after any proceedings for the enforcement of the Loan Documents and
without any requirement of any action being taken to (i) realize on the
Property or (ii) otherwise enforce the Loan Documents;
(e) seek specific performance of any provisions in the Loan
Documents;
(f) apply for the appointment of a receiver, custodian,
trustee, liquidator, or conservator of the Property without (i) notice
to any person, (ii) regard for (A) the adequacy of the security for the
Obligations or (B) the solvency of Borrower, Lessee or any other person
liable for the payment of the Obligations; and Borrower, Lessee and any
other person so liable waives or shall be deemed to have waived the
foregoing and any other objections to the fullest extent permitted by
Laws and consents or shall be deemed to have consented to such
appointment;
(g) with or without entering upon the Property, (i) exclude
Borrower, Lessee and any other person from the Property without
liability for trespass, damages, or otherwise, (ii) take possession of,
and Borrower shall (and Lessee, by its joinder to this Instrument,
agrees to) surrender on demand, all books, records, and accounts
relating to the Property, (iii) give notice to Tenants or any person,
make demand for, collect, receive, sue for, and recover in its own name
all Rents and cash collateral derived from the Property; (iv) use,
operate, manage, preserve, control, and otherwise deal with every
aspect of the Property including (A) conducting its business, (B)
insuring it, (C) making all repairs, renewals, replacements,
alterations, additions, and improvements to or on it, (D) completing
the construction of any Improvements in manner and form as Lender deems
advisable, (E) executing, modifying, enforcing, and terminating new and
existing Leases on such terms as Lender deems advisable and evicting
any Tenants in default, and (F) executing, modifying, enforcing and
terminating the Management Agreement, License Agreement, or any other
management agreement or license agreement for the operation of the
Property, as Lender deems advisable; (v) apply the receipts from the
Property to payment of the Obligations, in any order or priority
determined by Lender, after first deducting all Costs, expenses, and
liabilities incurred by Lender in connection with the foregoing
operations and all amounts needed to pay the Impositions and other
expenses of the Property, as well as just and reasonable compensation
for the services of Lender and its attorneys, agents, and employees;
and/or (vi) in every case in connection with the foregoing, exercise
all rights and powers of Borrower, Lessee or Lender with respect to the
Property, either in Borrower's or Lessee's name or otherwise;
(h) release any portion of the Property for such
consideration, if any, as Lender may require without, as to the
remainder of the Property, impairing or affecting the lien or priority
of this Instrument or improving the position of any subordinate
lienholder with respect thereto, except to the extent that the
Obligations shall have been actually reduced, and Lender 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;
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(i) apply any Deposits to the following items in any order and
in Lender's sole discretion: (A) the Obligations, (B) Costs, (C)
advances made by Lender under the Loan Documents, and/or (D)
Impositions;
(j) take all actions permitted under the UCC, including (i)
the right to take possession of all of the Personal Property and take
such actions as Lender deems advisable for the care, protection and
preservation of the Personal Property and (ii) request Borrower and/or
Lessee at its expense to assemble the Personal Property and make it
available to Lender at a convenient place acceptable to Lender. Any
notice of sale, disposition or other intended action by Lender with
respect to the Personal Property sent to Borrower or Lessee at least
five (5) days prior to such action shall constitute commercially
reasonable notice to Borrower or Lessee; or
(k) take any action permitted under any Laws or any other Loan
Document. If Lender exercises any of its rights under Section 8.2(g),
Lender shall not (a) be deemed to have entered upon or taken possession
of the Property except upon the exercise of its option to do so,
evidenced by its demand and overt act for such purpose; (b) be deemed a
beneficiary or mortgagee in possession by reason of such entry or
taking possession; nor (c) be liable (i) to account for any action
taken pursuant to such exercise other than for Rents actually received
by Lender, (ii) for any loss sustained by Borrower or Lessee resulting
from any failure to lease the Property, or (iii) any other act or
omission of Lender except for losses caused by Lender's willful
misconduct or gross negligence. Borrower hereby (and Lessee, by its
subordination to this Instrument, thereby) consents to, ratifies, and
confirms the exercise by Lender of its rights under this Instrument and
appoints Lender as its attorney-in- fact, which appointment shall be
deemed to be coupled with an interest and irrevocable, for such
purposes.
8.3 EXPENSES. All Costs, expenses, or other amounts paid or incurred by
Lender in the exercise of its rights and remedies under the Loan Documents,
together with interest thereon at the applicable interest rate specified in the
Note, which shall be the Default Rate unless prohibited by Laws, shall be (a)
part of the Obligations, (b) secured by this Instrument, and (c) allowed and
included as part of the Obligations in any foreclosure, decree for sale, power
of sale, or other judgment or decree enforcing Lender's rights under the Loan
Documents.
8.4 RIGHTS PERTAINING TO SALES. To the extent permitted under (and in
accordance with) any Laws, the following provisions shall, as Lender may
determine in its sole discretion, apply to any sales of the Property under this
Article VIII, whether by judicial proceeding, judgment, decree, power of sale,
foreclosure or otherwise: (a) Lender may conduct multiple sales of any part of
the Property in separate tracts or in its entirety and Borrower hereby (and
Lessee, by its subordination to this Instrument, thereby) waives any right to
require otherwise; (b) any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice; and (c) Lender may acquire the
Property and, in lieu of paying cash, may pay by crediting against the
Obligations the amount of its bid, after deducting therefrom any sums which
Lender is authorized to deduct under the provisions of the Loan Documents.
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8.5 APPLICATION OF PROCEEDS. Any proceeds received from any sale or
disposition under this Article VIII or otherwise, together with any other sums
held by Lender, shall, except as expressly provided to the contrary, be applied
in the order determined by Lender to: (a) payment of all Costs and expenses of
any enforcement action or foreclosure sale, including interest thereon at the
applicable interest rate specified in the Note, which shall be the Default Rate
unless prohibited by Laws, (b) all taxes, Assessments, and other charges unless
the Property was sold subject to these items; (c) payment of the Obligations in
such order as Lender may elect; (d) payment of any other sums secured or
required to be paid by Borrower; and (e) payment of the surplus, if any, to any
person lawfully entitled to receive it. Borrower and Lender intend and agree
that during any period of time between any foreclosure judgment that may be
obtained and the actual foreclosure sale that the foreclosure judgment will not
extinguish the Loan Documents or any rights contained therein including the
obligation of Borrower to pay all Costs and to pay interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws.
8.6 ADDITIONAL PROVISIONS AS TO REMEDIES.
(a) The Obligations and Indebtedness under all of the Loan
Documents are not intended to be, and shall not be, apportioned among
any of the Hotel Properties, or any of the other security of Lender for
the Loan, so that each of the Hotel Properties and each and every other
lien, assignment, and security interest is intended to secure the
entire amount of the Indebtedness. In no event shall any internal
apportionment or allocation by Lender of the Indebtedness among the
Hotel Properties, whether for purposes of Lender's underwriting,
analysis, or administration of the Loan or otherwise, be binding on
Lender for any purpose.
(b) Upon an Event of Default, Lender shall be entitled to
foreclose against any one or more of the Hotel Properties in any order,
as Lender shall elect in its sole and absolute discretion, and no
election by Lender to foreclose against fewer than all of the Hotel
Properties shall constitute or be deemed to be (i) an election of
remedies by Lender or (ii) a waiver of Lender's right to foreclose
against any of the other Hotel Properties. Without in any manner
limiting Lender's remedies, Lender shall be entitled to commence
separate actions for foreclosure in any or all of the different
jurisdictions in which the Hotel Properties are located, either
concurrently or successively as Lender shall elect in its sole and
absolute discretion. Borrower hereby waives any and all rights to
object to Lender maintaining multiple actions for foreclosure and/or
collection of the Indebtedness (or, to the extent any such rights or
provisions are not waivable as a matter of law, Borrower stipulates and
agrees that such provisions shall not be interpreted to prevent Lender
from commencing, maintaining, and pursuing to judgment multiple actions
for foreclosure and collection of the Indebtedness in the different
jurisdictions in which the Hotel Properties are located, subject to
Lender applying the amounts realized in any such foreclosures to the
Indebtedness and Obligations as provided in this Instrument and the
Other Mortgages).
(c) In addition, upon the entry of any judgment of foreclosure
against any one or more (but fewer than all) of the Hotel Properties
and the completion of the sale of such
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Hotel Properties (including any necessary proceedings subsequent to
such sale in order to confirm or approve the same), the Amount Realized
Upon Foreclosure (as hereinafter defined) shall be applied to the
Indebtedness and Obligations in the manner provided in this Instrument
and the Other Mortgages, and the remaining Indebtedness and Obligations
which remain unsatisfied after each and any such application of the
Amount Realized Upon Foreclosure of such Hotel Properties shall
continue to be secured by this Instrument or the Other Mortgages (as
the case may be) as to which a foreclosure judgment and sale shall not
have been entered and completed as aforesaid, until all of the
Indebtedness and Obligations shall be satisfied in full. For purposes
of this Instrument and all Other Mortgages, the "AMOUNT REALIZED UPON
FORECLOSURE" as used in the preceding sentence with respect to any of
the Hotel Properties shall mean the amount of the successful bid in any
foreclosure sale with respect to the applicable Hotel Properties, as
confirmed in any confirmation of the foreclosure sale in the applicable
foreclosure proceedings or, if no confirmation proceedings are
available under the laws and procedures applicable to such foreclosure,
then as otherwise customarily determined under the applicable laws and
procedures (including by way of return of sale or deficiency judgment),
without regard to whether the successful bid is made by Lender, any
agent or affiliate of Lender, or any other person. Without limiting any
other remedies of Lender, Borrower agrees that Lender shall be entitled
to obtain a deficiency judgment against Borrower in any foreclosure
proceedings for the purpose of obtaining a judicial determination of
the Amount Realized Upon Foreclosure in any such foreclosure
proceedings.
(d) It is further agreed that if default be made in the
payment of any part of the Indebtedness secured by this Instrument, as
an alternative to the right of foreclosure for the full Indebtedness
after acceleration thereof, Lender shall have the right to institute
partial foreclosure proceedings with respect to any portion or portions
of said Indebtedness so in default (either for recovery of those
payments or installments which shall then be due and payable, without
acceleration of the Note, or for recovery of such payments and amounts
due under the Note as Lender may elect to accelerate, without
accelerating the entire Note) against any one or more of the Hotel
Properties, as Lender may elect, as if under a full foreclosure, and
without declaring the entire Indebtedness due (such proceeding being
hereinafter referred to as a "PARTIAL FORECLOSURE"), and provided that
if foreclosure judgment is entered with respect to the Property
pursuant to a partial foreclosure proceeding because of default of a
part of the Indebtedness, such judgment and sale pursuant thereto may
be made subject to the continuing lien of each of the Other Mortgages
for the unmatured part of the Indebtedness; and it is agreed that such
judgment or sale pursuant to a partial foreclosure, if so made, shall
not in any manner affect the unmatured or unaccelerated part of the
Indebtedness, but as to such unmatured or unaccelerated part, this
Instrument (to the extent foreclosure and sale shall not have been made
against all of the Property encumbered hereby) and each of the Other
Mortgages and the liens thereof shall remain in full force and effect
just as though no foreclosure judgment or sale had been entered or made
under the provisions of this Section. Notwithstanding the filing of any
partial foreclosure or entry of a judgment of foreclosure therein,
Lender may elect at any time prior to a foreclosure sale pursuant to
such
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judgment, to discontinue such partial foreclosure and to accelerate the
Indebtedness by reason of any uncured default or defaults upon which
such partial foreclosure was predicated or by reason of any other
defaults, and proceed with full foreclosure proceedings. It is further
agreed that several foreclosure sales may be made pursuant to partial
foreclosure without exhausting the right of full or partial foreclosure
sale for any unmatured part of the secured indebtedness, it being the
purpose to provide for a partial foreclosure sale of the Indebtedness
for any matured or accelerated portion of the Indebtedness without
exhausting the power to foreclose and to sell any of the Property or
any of the other Hotel Properties pursuant to any such partial
foreclosure for any other part of the Indebtedness whether matured at
the time or subsequently maturing, and without exhausting any right of
acceleration and full foreclosure.
(e) No failure, refusal, waiver, or delay by Lender to
exercise any rights under the Loan Documents upon any default or Event
of Default shall impair Lender's rights or be construed as a waiver of,
or acquiescence to, such or any subsequent default or Event of Default.
No recovery of any judgment by Lender and no levy of an execution upon
the Property or any other property of Borrower or Lessee shall affect
the lien and security interest created by this Instrument and such
liens, rights, powers, and remedies shall continue unimpaired as
before. Lender may resort to any security given by this Instrument or
any other security now given or hereafter existing to secure the
Obligations, in whole or in part, in such portions and in such order as
Lender may deem advisable, and no such action shall be construed as a
waiver of any of the liens, rights, or benefits granted hereunder.
Acceptance of any payment after any Event of Default shall not be
deemed a waiver or a cure of such Event of Default and such acceptance
shall be deemed an acceptance on account only. If Lender has started
enforcement of any right by foreclosure, sale, entry, or otherwise and
such proceeding shall be discontinued, abandoned, or determined
adversely for any reason, then Borrower, Lessee and Lender shall be
restored to their former positions and rights under the Loan Documents
with respect to the Property, subject to the lien and security interest
hereof.
8.7 WAIVER OF RIGHTS AND DEFENSES. To the fullest extent Borrower and
Lessee may do so under Laws, (a) neither Borrower nor Lessee will at any time
insist on, plead, claim, or take the benefit of (i) any statute or rule of law
now or later enacted providing for any appraisement, valuation, stay, extension,
moratorium, or redemption or (ii) any statute of limitations now or hereafter
applicable to any of the Obligations to the extent that such statute of
limitations would bar the assertion by Lender of any claim prior to the date
that is two (2) years after the maturity date of Loan; (b) each of Borrower and
Lessee, for itself, its successors and assigns, and for any person ever claiming
an interest in the Property (other than Lender), waives and releases all rights
of redemption, reinstatement, valuation, appraisement, notice of intention to
mature or declare due the whole of the Obligations, all rights to a marshaling
of the assets of Borrower or Lessee, including the Property, or to a sale in
inverse order of alienation, in the event of foreclosure of the liens and
security interests created under the Loan Documents; and (c) neither Borrower
nor Lessee shall be relieved of its obligation to pay the Obligations as
required in the Loan Documents nor shall the lien or priority of the Loan
Documents be impaired by any agreement renewing, extending, or modifying the
time of payment or the provisions of the Loan Documents (including a
modification of any interest rate), unless expressly released, discharged, or
modified by such
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agreement. Regardless of consideration and without any notice to or consent by
the holder of any subordinate lien, security interest, encumbrance, right,
title, or interest in or to the Property, Lender may (i) release any person
liable for payment of the Obligations or any portion thereof or any part of the
security held for the Obligations or (ii) modify (with the agreement of Borrower
or other applicable party or parties thereto) any of the provisions of the Loan
Documents without impairing or affecting the Loan Documents or the lien,
security interest, or the priority of the modified Loan Documents as security
for the Obligations over any such subordinate lien, security interest,
encumbrance, right, title, or interest.
ARTICLE IX
SECURITY AGREEMENT AND FIXTURE FILING
9.1 SECURITY AGREEMENT. This Instrument constitutes both a real
property mortgage and a "security agreement" within the meaning of the UCC. The
Property includes real and personal property and all tangible and intangible
rights and interest of Borrower in the Property. Borrower grants to Lender, as
security for the Obligations, a security interest in the Personal Property to
the fullest extent that the same may be subject to the UCC. Borrower authorizes
Lender to file any financing or continuation statements and amendments thereto
relating to the Personal Property without the signature of Borrower if permitted
by Laws.
9.2 FIXTURE FILING. This Instrument, upon recording or registration in
the real estate records of the proper office, shall constitute a "fixture
filing" within the meaning of Sections 9-313 and 9-402 of the UCC with respect
to any and all fixtures included within the term "Property" and any Personal
Property that may now be or hereafter become "fixtures" within the meaning of
Section 9-313 of the UCC.
ARTICLE X
LIMITATION ON PERSONAL LIABILITY AND INDEMNITIES
10.1 LIMITED RECOURSE LIABILITY.
(a) GENERAL LIMITATION ON PERSONAL LIABILITY. Except as
provided in this Section 10.1, none of Borrower, the General Partner of
Borrower or FelCor (singularly or collectively, the "EXCULPATED
Parties") shall have any personal liability for the Loan or any
obligations set forth in the Loan Documents. Notwithstanding the
preceding sentence, Lender may bring a foreclosure action or other
appropriate action to enforce the Loan Documents or realize upon and
protect the Property (including, without limitation, naming the
Exculpated Parties in the actions);
(b) PARTIAL RECOURSE CARVEOUTS. Notwithstanding Section 10.1
(a), each of the Exculpated Parties shall have joint and several
personal liability for:
(i) any separate indemnity agreement, guaranty or
similar instrument furnished in connection with the Loan (including,
without limitation, the Environmental Indemnity and the ERISA
Certificate and Indemnification Agreement);
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(ii) any Assessments (accrued and/or payable) with
respect to the Property, whether payable by Borrower or Lessee;
(iii) any security deposits of tenants or subtenants
(whether held by Borrower or Lessee [other than a Successor Lessee])
(A) not turned over to Lender upon foreclosure, sale (pursuant to power
of sale), or conveyance in lieu thereof, or (B) not turned over to a
receiver or trustee for any Property after his/her appointment;
(iv) any insurance proceeds or condemnation awards
neither turned over to Lender nor used in compliance with the Loan
Documents (whether held by Borrower or Lessee [other than a Successor
Lessee]);
(v) if any of the Exculpated Parties or Lessee (other
than a Successor Lessee) executes an amendment or termination of any
Lease (other than the Primary Lease) in violation of the provisions of
the Loan Documents, the Exculpated Parties shall have personal
liability for the greater of:
(1) the present value (calculated at the
Discount Rate) of the aggregate total dollar amount (if any) by which
(x) rental income and/or other tenant obligations prior to the
amendment of such Lease exceeds (y) rental income and/or other tenant
obligations after the amendment of such Lease; or
(2) any termination fee or other
consideration paid;
(vi) intentional waste of all or any portion of the
Property;
(vii) any Rents received by any of the Exculpated
Parties or Lessee (other than a Successor Lessee) after an Event of
Default and not otherwise applied by Lessee to the rent payable under
the Primary Lease and by the Borrower to the Obligations, or applied to
the current (not deferred) operating expenses of the Property;
provided, however, that the Exculpated Parties shall have personal
liability for amounts paid as expenses to a person or entity related to
or affiliated with any of the Exculpated Parties unless the payments
are expressly permitted in the Loan Documents; and further provided,
that for purposes of this provision, Promus Hotels, Inc. or its
subsidiaries, as Manager of the Properties, shall not be deemed
affiliated with Borrower;
(viii) Borrower's failure to maintain a letter or
letters of credit, (if any), required under the Loan Documents or
otherwise in connection with the Loan;
(ix) any payments required to be made by Lessee to
Borrower under the Primary Lease that are withheld, set off, or
otherwise not made by Lessee when due, in any case in which Borrower
shall have approved or consented to the same;
(x) Borrower's or Lessee's failure to cause funds to
be paid into the FF&E Account or the failure by either of them to use
or apply funds disbursed from the FF&E Account in accordance with the
provisions of Section 3 of the Loan Agreement; or
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(xi) all legal fees (excluding the allocated costs of
Lender's staff attorneys) and other expenses incurred by Lender in
enforcing the Loan Documents if Borrower contests, delays, or otherwise
hinders or opposes (including, without limitation, the filing of a
bankruptcy) any of Lender's enforcement actions, other than in the
event that Borrower finally prevails in establishing that Borrower was
not in default and Lender was not entitled to exercise its remedies
under the Loan Documents.
(c) FULL RECOURSE CARVEOUTS. Notwithstanding Section 10.1(a),
each of the Exculpated Parties shall have joint and several personal
liability for all of the Obligations if:
(i) there is a Transfer or Indirect Transfer (other
than a Permitted Indirect Transfer) without Lender's consent;
(ii) there shall be any fraud or material
misrepresentation by any of the Exculpated Parties or Lessee
in connection with the Property, the Loan Documents, the
Application, any due diligence materials delivered to Lender
in with respect to the Loan or any other aspect of the Loan;
(iii) the Property or any part thereof (including either the
interests of Borrower or the interests of Lessee) shall become
an asset in:
(A) a voluntary bankruptcy or insolvency
proceeding filed by Borrower or Lessee, or
(B) an involuntary bankruptcy or insolvency
proceeding filed against Borrower or Lessee which is
not dismissed within ninety (90) days of filing;
provided, however, that this subsection 10.1(c)(iii) shall not apply if
(x) an involuntary bankruptcy is filed by Lender, (y) any voluntary
bankruptcy proceeding is filed by a Successor Lessee, or (z) an
involuntary bankruptcy proceeding is filed against a Successor Lessee
(other than a proceeding filed by, or with the express consent of, the
Borrower); and provided further, that if:
(1) after ninety (90) days following the
filing of any involuntary bankruptcy proceeding described in
clause (B) above, such proceeding is dismissed with prejudice
and without adversely affecting the enforceability or priority
of any of the Loan Documents;
(2) such dismissal occurs prior to the
occurrence of any of the following: (aa) the entry of any
order that adversely affects the enforceability or priority of
any of the Loan Documents (other than solely by reason of the
automatic stay), (bb) the entry of any order granting any
person relief from the automatic stay to foreclose against,
enforce any lien or security interest in, levy upon, or
repossess any material assets of Borrower or Lessee that
constitute a part
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of, or that relate to, the Property, or to terminate any of
the Management Agreements, License Agreements, or Material
Leases, (cc) the liquidation of any material assets of
Borrower or Lessee (other than a Successor Lessee) that
constitute a part of, or that relate to, the Property, (dd)
the entry of any order approving the rejection or termination
of any Primary Lease, any Management Agreement, any License
Agreement, or any Material Lease, or (ee) the entry of any
order approving any plan of reorganization for Borrower or
Lessee (other than a Successor Lessee); and
(3) throughout the period following the
filing of such bankruptcy proceeding, Borrower or one or more
of the Exculpated Parties shall have continued to make regular
payments of debt service on a timely basis in accordance with
the provisions of the Loan Documents; then, the Exculpated
Parties shall be personally liable only for the actual
damages, losses, costs and expenses (including attorneys'
fees) incurred by Lender (expressly including any diminution,
loss or damage to the Property) as a result of such bankruptcy
filing;
(iv) any of the Exculpated Parties or Lessee executes
an amendment or termination of the Primary Lease, or any of the
Exculpated Parties or Lessee (other than a Successor Lessee) executes
or authorizes any amendment of or terminates the Management Agreement
or License Agreement, in each case without Lender's prior written
consent (in any case in which Lender's consent was required under the
Loan Documents) or other than in accordance with the provisions of
Section 8 of the Loan Agreement; or
(v) such liability shall arise by reason of the
application of the provisions of Section 8 of the Loan Agreement.
Notwithstanding the foregoing, following the occurrence of an event described in
provisions of subsections 10.1(c)(i), 10.1(c)(ii) and 10.1(c)(iv), above, if
Borrower (1) establishes that the same was inadvertent, (2) promptly gives
Lender written notice of such event, and (3) cures the same to the reasonable
satisfaction of Lender within thirty (30) days after any senior officer of
Borrower, FelCor, or the FelCor REIT first had actual knowledge thereof
(regardless of whether Lender shall have given any notice on account thereof),
the Exculpated Parties shall be personally liable only for any actual damages,
losses, costs and expenses incurred by Lender (including reasonable attorneys'
fees) incurred by Lender as a result of the events described in subsections
10.1(c)(i), 10.1(c)(ii) and 10.1(c)(iv).
10.2 GENERAL INDEMNITY. Borrower agrees that while Lender has no
liability to any person in tort or otherwise as lender and that Lender is not an
owner or operator of the Property, Borrower shall, at its sole expense, protect,
defend, release, indemnify and hold harmless the Indemnified Parties (defined
below) from any Losses (defined below) imposed on, incurred by, or asserted
against the Indemnified Parties, directly or indirectly, arising out of or in
connection with the Property, Loan, or Loan Documents, including Losses;
provided, however, that the foregoing indemnities shall not apply to any Losses
caused by the gross negligence or willful misconduct of the Indemnified Parties.
The term "LOSSES" shall mean any claims, suits, liabilities (including
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strict liabilities), actions, proceedings, obligations, debts, damages, losses,
Costs, expenses, fines, penalties, charges, fees, judgments, awards, and amounts
paid in settlement of whatever kind including attorneys' fees (but not in-house
staff) and all other costs of defense. The term "INDEMNIFIED PARTIES" shall mean
(a) Lender, (b) any prior owner or holder of the Note, (c) any existing or prior
servicer of the Loan, (d) the officers, directors, shareholders, partners,
employees and trustees of any of the foregoing, and (e) the heirs, legal
representatives, successors and assigns of each of the foregoing.
10.3 TRANSACTION TAXES INDEMNITY. Borrower shall, at its sole expense,
protect, defend, release, indemnify and hold harmless the Indemnified Parties
from all Losses imposed upon, incurred by, or asserted against the Indemnified
Parties or the Loan Documents relating to Transaction Taxes.
10.4 ERISA INDEMNITY. Borrower and the other persons, if any, have
executed and delivered the Erisa Certificate and Indemnification Agreement dated
the date hereof to Lender (the "ERISA CERTIFICATE AND INDEMNIFICATION
AGREEMENT").
10.5 BROKER INDEMNITY. Borrower represents and warrants that it has not
retained or used the services of any broker in connection with the Loan and that
no brokerage commissions or fees shall be payable by either party with respect
to the Loan. Borrower shall, at its sole expense, protect, defend, release,
indemnify and hold harmless the Indemnified Parties against all Losses imposed
upon, incurred by, or asserted against the Indemnified Parties from the payment
of any brokerage commissions or fees of any kind with respect to the Loan (other
than brokers claiming through or retained by Lender), and for any legal fees or
expenses incurred by Lender in connection with any claims for such commissions
or fees.
10.6 ENVIRONMENTAL INDEMNITY. Borrower and other persons, if any, have
executed and delivered the Environmental Indemnity Agreement dated the date
hereof to Lender ("ENVIRONMENTAL INDEMNITY").
10.7 DUTY TO DEFEND, COSTS AND EXPENSES. Upon request, whether
Borrower's obligation to indemnify Lender arises under this Article X or in the
Loan Documents, Borrower shall defend the Indemnified Parties (in Borrower's or
the Indemnified Parties' names) by attorneys and other professionals approved by
the Indemnified Parties. Notwithstanding the foregoing, the Indemnified Parties
may, in their sole discretion, engage their own attorneys and professionals to
defend or assist them and, if there exists an Event of Default, at their option,
their attorneys shall control the resolution of any claims or proceedings. Upon
demand, Borrower shall pay or, in the sole discretion of the Indemnified
Parties, reimburse and/or indemnify the Indemnified Parties for all Costs
imposed on, incurred by, or asserted against the Indemnified Parties by reason
of any items set forth in this Article X and/or the enforcement or preservation
of the Indemnified Parties' rights under the Loan Documents. Any amount payable
to the Indemnified Parties under this Section shall (a) be deemed a demand
obligation, (b) be part of the Obligations, (c) bear interest at the applicable
interest rate specified in the Note, which shall be the Default Rate unless
prohibited by Laws, until paid if not paid on demand, and (d) be secured by this
Instrument.
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10.8 SURVIVAL. Notwithstanding anything to the contrary in the Loan
Documents, the obligations of Borrower under Sections 10.3, 10.4, 10.5, 10.6 and
10.7 shall survive (a) repayment of the Obligations, (b) any termination,
satisfaction, assignment or foreclosure of this Instrument, (c) the acceptance
by Lender (or any nominee) of a deed in lieu of foreclosure, (d) a plan of
reorganization filed under the Bankruptcy Code, or (e) the exercise by the
Lender of any rights in the Loan Documents; provided, however, that Lender's
recourse for any such surviving obligations shall be limited to Borrower's
rights, title, and interests in the Hotel Properties and any and all income and
proceeds thereof. Borrower's obligations under this Article X shall not be
affected by the absence or unavailability of insurance covering the same or by
the failure or refusal by any insurance carrier to perform any obligation under
any applicable insurance policy.
ARTICLE XI
ADDITIONAL PROVISIONS
11.1 USURY SAVINGS CLAUSE. All agreements in the Loan Documents are
expressly limited so that in no event whatsoever shall the amount paid or agreed
to be paid under the Loan Documents for the use, forbearance, or detention of
money exceed the highest lawful rate permitted by Laws. If, at the time of
performance, fulfillment of any provision of the Loan Documents shall involve
transcending the limit of validity prescribed by Laws, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity. If
Lender shall ever receive as interest an amount which would exceed the highest
lawful rate, the receipt of such excess shall be deemed a mistake and (a) shall
be canceled automatically or (b) if paid, such excess shall be (1) credited
against the principal amount of the Obligations to the extent permitted by Laws
or (ii) rebated to Borrower if it cannot be so credited under Laws. Furthermore,
all sums paid or agreed to be paid under the Loan Documents for the use,
forbearance, or detention of money shall to the extent permitted by Laws 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 Obligations does not exceed the maximum lawful rate of interest from time
to time in effect and applicable to the Obligations for so long as the
Obligations is outstanding.
11.2 NOTICES. Any notice, request, demand, consent, approval,
direction, agreement, or other communication (any "NOTICE") required or
permitted under the Loan Documents shall be in writing and shall be validly
given if sent by a nationally-recognized courier that obtains receipts,
delivered personally by a courier that obtains receipts, or mailed by United
States certified mail (with return receipt requested and postage prepaid)
addressed to the applicable person as follows:
If to Borrower: FELCOR/CSS HOLDINGS, L.P.
c/o FelCor Lodging Limited Partnership
545 E. John Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933
Attention: Andrew Welch
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With a copy of notices sent to Borrower to:
FelCor/CSS Holdings, L.P.
545 E. John Carpenter Freeway, Suite 1300
Irving, Texas 75062-3933
Attention: Joel Eastman, Esq.
and
Jenkens & Gilchrist
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202
Attention: Robert W. Dockery, Esq.
If to Lender: THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service
Reference Loan No. 6-103-269
With a copy of notices sent to Lender to:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
Prudential Capital Group
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Regional Counsel
Reference Loan No. 6-103-269
Each notice shall be effective upon being so sent, delivered, or mailed, but the
time period for response or action shall run from the date of receipt as shown
on the delivery receipt. Refusal to accept delivery or the inability to deliver
because of a changed address for which no notice was given shall be deemed
receipt. Any party may periodically change its address for notice and specify up
to two (2) additional addresses for copies by giving the other party at least
ten (10) days' prior notice.
11.3 GOOD FAITH DISCRETION OF LENDER. Except as otherwise expressly
stated, whenever Lender's judgment, consent, or approval is required or Lender
shall have an option or election under the Loan Documents, such judgment, the
decision as to whether or not to consent to or approve the same, or the exercise
of such option or election shall be in the good faith discretion of Lender.
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11.4 APPLICABLE LAW AND SUBMISSION TO JURISDICTION. The Loan Documents
(subject to any contrary provisions contained therein) shall be governed by and
construed in accordance with the laws of the State of Illinois, except to the
extent that the law of the State in which the Property is located shall require
that the laws and procedures governing the manner of foreclosure of this
Instrument and the exercise of remedies under this Instrument be governed by
the law of such State, in which event the law of such State shall apply
thereto. Without limiting Lender's right to bring any action or proceeding
against Borrower, Lessee or the Property relating to the Obligations (an
"ACTION") in the courts of other jurisdictions, each of Borrower, Lender, and
(by its joinder to this Instrument) Lessee irrevocably (a) submits to the
jurisdiction of any state or federal court in the State of Illinois or the
Property State, (b) agrees that any Action may be heard and determined in such
court, and (c) waives, to the fullest extent permitted by Laws, the defense of
an inconvenient forum to the maintenance of any Action in such jurisdiction.
11.5 CONSTRUCTION OF PROVISIONS. The following rules of construction
shall apply for all purposes of this Instrument unless the context otherwise
requires: (a) all references to numbered Articles or Sections or to lettered
Exhibits are references to the Articles and Sections hereof and the Exhibits
annexed to this Instrument and such Exhibits are incorporated into this
Instrument as if fully set forth in the body of the Instrument; (b) all Article,
Section, and Exhibit captions are used for convenience and reference only and in
no way define, limit, or in any way affect this Instrument; (c) words of
masculine, feminine, or neuter gender shall mean and include the correlative
words of the other genders, and words importing the singular number shall mean
and include the plural number, and vice versa; (d) no inference in favor of or
against any party shall be drawn from the fact that such party has drafted any
portion of this Instrument; (e) all obligations of Borrower hereunder shall be
performed and satisfied by or on behalf of Borrower at Borrower's sole expense;
(f) the terms "include," "including," and similar terms shall be construed as if
followed by the phrase "without being limited to"; (g) the terms "Property",
"Land", "Improvements", and "Personal Property" shall be construed as if
followed by the phrase "or any part thereof"; (h) the term "Obligations" shall
be construed as if followed by the phrase "or any other sums secured hereby, or
any part thereof"; (i) the term "person" shall include natural persons, firms,
partnerships, corporations, governmental authorities or agencies, and any other
public or private legal entities; (j) the term "provisions," when used with
respect hereto or to any other document or instrument, shall be construed as if
preceded by the phrase "terms, covenants, agreements, requirements, and/or
conditions"; (k) the term "lease" shall mean "tenancy, subtenancy, lease,
sublease, or rental agreement," the term "lessor" shall mean "landlord,
sublandlord, lessor, and sublessor," and the term "Tenant" or "lessee" shall
mean "tenant, subtenant, lessee, and sublessee"; (1) the term "owned" shall mean
"now owned or later acquired"; (m) the terms "any" and "all" shall mean "any or
all"; and (n) the term "on demand" or "upon demand" shall mean "within five (5)
business days after written notice".
11.6 TRANSFER OF LOAN. Lender shall have the right, in its sole
discretion, at any time and from time to time, to sell, assign, syndicate,
participate out, or otherwise transfer and/or dispose of all or any portion of
its interest in the Loan, and, in connection therewith, Borrower shall (i)
permit any proposed purchaser, assignee, participant or co-lender (collectively,
"INVESTOR") access to the Property during reasonable hours and after reasonable
advance notice for inspection of same, and (ii) permit Lender to submit to
Investors any financial data and other
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information furnished by Borrower or any other person to Lender in connection
with the operation of the Property. As a precondition to the receipt of any
non-public or otherwise confidential information about Borrower or the Property,
such Investor shall agree to be bound by a confidentiality agreement. Borrower
shall, at the request of Lender and in connection with any such sale, assignment
or other transfer, cooperate as requested, and shall provide a certificate in
accordance with Section 5.16 and such other representations, warranties,
agreements and documents as are customary and usual in the marketplace or as may
be reasonably required by Lender in any such sale, assignment or other transfer,
and shall use diligent efforts to obtain such documents and agreements from
tenants and other third parties as may be reasonably requested; provided, that
Borrower shall not be required to incur (i) any liability beyond the scope of
the Loan Documents, or (ii) any material unreasonable expense (unless the same
is reimbursed by Lender). For purposes of the preceding sentence, any expense in
excess of $5,000 shall be deemed a "material unreasonable expense."
11.7 MISCELLANEOUS. If any provision of the Loan Documents shall be
held to be invalid, illegal, or unenforceable in any respect, this shall not
affect any other provisions of the Loan Documents and such provision shall be
limited and construed as if it were not in the Loan Documents. If title to the
Property becomes vested in any person other than Borrower or Lessee, Lender may,
without notice to Borrower or Lessee, deal with such person regarding the Loan
Documents or the Obligations in the same manner as with Borrower or Lessee
without in any way vitiating or discharging Borrower's or Lessee's liability
under the Loan Documents or being deemed to have consented to the vesting. If
both the lessor's and lessee's interest under any Lease ever becomes vested in
any one person, this Instrument and the lien and security interest created
hereby shall not be destroyed or terminated by the application of the doctrine
of merger and Lender shall continue to have and enjoy all its rights and
privileges as to each separate estate. Upon foreclosure of this Instrument, none
of the Leases shall be destroyed or terminated as a result of such foreclosure,
by application of the doctrine of merger or as a matter of law, unless Lender
takes all actions required by law to terminate the Leases as a result of
foreclosure. All of Borrower's and Lessee's covenants and agreements under the
Loan Documents shall run with the land and time is of the essence. Borrower
appoints Lender as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, filing or recording for and in the name of Borrower of
any of the documents required in accordance with Sections 5.4, 5.21, and 6.1
which Borrower fails to execute and deliver within ten (10) business days after
written request by Lender. The Loan Documents cannot be amended, terminated, or
discharged except in a writing signed by the party against whom enforcement is
sought. No waiver, release, or other forbearance by Lender will be effective
unless it is in a writing signed by Lender and then only to the extent expressly
stated. The provisions of the Loan Documents shall be binding upon Borrower and
Lessee and their successors and assigns including successors in interest to the
Property and inure to the benefit of Lender and its heirs, successors,
substitutes, and assigns. Where two or more persons have executed the Loan
Documents, the obligations of such persons shall be joint and several, except to
the extent the context clearly indicates otherwise. The Loan Documents may be
executed in any number of counterparts with the same effect as if all parties
had executed the same document. All such counterparts shall be construed
together and shall constitute one instrument, but in making proof hereof it
shall only be necessary to produce one such counterpart. Upon receipt of
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an affidavit of an officer of Lender as to the loss, theft, destruction or
mutilation of any Loan Document which is not of public record, and, in the case
of any mutilation, upon surrender and cancellation of the Loan Document,
Borrower will issue, in lieu thereof, a replacement Loan Document, dated the
date of the lost, stolen, destroyed or mutilated Loan Document containing the
same provisions.
11.8 ENTIRE AGREEMENT. Except as provided in Section 5.17, (a) the Loan
Documents constitute the entire understanding and agreement between Borrower and
Lender with respect to the Loan and supersede all prior written or oral
understandings and agreements with respect to the Loan including the Application
and (b) Borrower is not relying on any representations or warranties of Lender
except as expressly set forth in the Loan Documents.
11.9 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY ANY OF BORROWER, LENDER, OR LESSEE, WHETHER IN CONTRACT,
TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE LOAN
DOCUMENTS, OR ANY ACTS OR OMISSIONS OF BORROWER, LESSEE, OR LENDER IN CONNECTION
THEREWITH.
ARTICLE XII
LOCAL LAW PROVISIONS
[ADD STATE SPECIFIC PROVISIONS]
IN WITNESS WHEREOF, the undersigned has executed this Instrument as of
the day first set forth above.
BORROWER:
FELCOR/CSS HOLDINGS, L.P.,
a Delaware limited partnership
By: FelCor/CSS Hotels, L.L.C.,
its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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STATE OF )
----------
)
COUNTY OF )
--------
On _________________ before me, _____________________, personally
appeared ___________________ (here insert name and title of the officer),
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
--------------------
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EXHIBIT A
SCHEDULE OF DEFINED TERMS
As used in this Instrument, the following terms shall have the meaning
specified:
Certificate of Representations and Warranties: That certain Certificate
of Representations and Warranties dated as of the date of this Instrument
executed by Borrower in favor of Lender, as the same may be amended, modified,
extended, renewed or restated from time to time.
Debt Service Coverage Ratio: The ratio, as reasonably determined by
Lender, calculated by dividing (i) NOI by (ii) the aggregate debt service
payments for any given calendar year on the Loan and on all other indebtedness
secured, or to be secured, by any part of the Hotel Properties. An example
calculation of the Debt Service Coverage Ratio is attached as Schedule A-1
hereto.
Default Rate: The meaning specified in the Note.
Discount Rate: The meaning specified in the Note.
Environmental Law: 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
Borrower or the Property and relate to Hazardous Materials including the
Comprehensive Environmental Response, Compensation and Liability Act and the
Resource Conservation and Recovery Act.
Fair Market Value: With respect to any Hotel Property, the amount that
a willing buyer under no compulsion to buy would pay, and a willing seller under
no compulsion to sell would accept, for the purchase and sale of such Hotel
Property, in an arms-length, all-cash sale with customary closing pro-rations
and adjustments and based on the current state of title to the Hotel Property,
but free and clear of this Instrument and the Other Mortgages, the Primary Lease
and the Other Primary Leases, the Management Agreement and the Other Management
Agreements and the License Agreement and the Other License Agreements (it being
agreed that any termination fee or similar payment required to terminate any of
the Management Agreements and/or License Agreements prior to expiration of their
respective terms shall be taken into account and shall constitute deductions in
determining Fair Market Value).
FelCor: FelCor Lodging Limited Partnership, a Delaware limited
partnership, which, as of the date of this Instrument, is the holder of all of
the limited partnership interests in Borrower and all of the membership
interests in Borrower's General Partner.
FelCor REIT: FelCor Lodging Trust Incorporated, a Delaware corporation,
which, as of the date of this Instrument, is the sole general partner of FelCor.
FF&E Account: The meaning specified in the Loan Agreement.
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Full Insurable Value: The one hundred percent (100%) replacement cost
of the Property, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined, at Borrower's expense,
periodically (but at least once per year) by the insurance company or an
appraiser, engineer, architect, or contractor approved by said company and
Lender.
Governmental Authority: Any court, board, agency, commission, office or
authority of any nature whatsoever for any governmental and quasi-governmental
unit (federal, state, county, district, municipal, city, regional, or otherwise)
whether now or hereafter in existence.
General Partner: FelCor/CSS Hotels, LLC, a Delaware limited liability
company.
Hazardous Materials: Petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls ("PCBS") 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 or poses a hazard to the Property, the environment or the health and
safety of persons on or about the Property; 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," or
"pollutant" within the meaning of any Environmental Law.
Hotel Properties: Along with the Property, the hotel properties
securing the Loan, as the same may be released, replaced or modified pursuant to
the terms of the Loan Agreement.
Indirect Transfer: Any Transfer of, or with respect to, any equity
interests in Borrower or Lessee held either directly or indirectly through one
or more intermediate entities.
Indebtedness: The indebtedness evidenced by the Note (including any
prepayment Premium due thereunder) and any extensions, modifications or renewals
thereof, whether or not evidenced by a new or additional promissory note or
notes, and all other amounts due from Borrower to Lender hereunder or under any
of the Other Mortgages, or evidenced and/or secured by the Loan Documents, plus
interest on all such amounts as provided in the Loan Documents.
Lessee: DJONT Operations, L.L.C., a Delaware limited liability company.
License Agreement: The existing license Agreement with the Licensor
with respect to the Property as of the date of this Instrument, as the same may
be amended from time to time (subject to obtaining Lender's consent to any such
amendment), or any extension, renewal, or replacement thereof entered into in
accordance with the provisions of Section 8 of the Loan Agreement.
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Licensor: Promus Hotels, Inc., a Delaware corporation, or in the event
Borrower shall enter into a replacement License Agreement in accordance with the
provisions of Section 8 of the Loan Agreement, the licensor under such
replacement license agreement.
Loan Agreement: That certain Mortgage Loan Agreement dated as of the
date of this Instrument entered into by and between Borrower and Lender, as the
same may be amended, modified, extended, renewed or restated from time to time.
Loan Documents: The Note, this Instrument, the Loan Agreement, the
Other Mortgages, the Assignment of Leases and Rents, all Assignments of Leases
and Rents with respect to the other Hotel Properties, the Environmental
Indemnity, the ERISA Certificate and Indemnification Agreement, the Assignment
of Agreements with respect to the Property and all Assignments of Agreements
with respect to the other Hotel Properties, the Certificate of Representations
and Warranties, the Multi-Party Agreement with respect to the Property and all
Multi-Party Agreements with respect to the other Hotel Properties, all other
documents now or hereafter evidencing, securing or relating to the Loan, the
payment or performance of the Obligations, as any of the foregoing may be
amended, modified, renewed, supplemented, restated, or extended from time to
time.
Loan to Value Ratio: The ratio, as of the time at which such ratio is
to be determined hereunder, of (i) the aggregate principal balance of all
encumbrances against the Hotel Properties to (ii) the Fair Market Value of the
Hotel Properties. In any case in which the Loan-to-Value Ratio is to be
determined, Lender shall promptly make a determination, based on its standard
property valuation methods, of the Fair Market Value and shall notify Borrower
in writing of Lender's determination. If, within ten (10) business days after
Borrower's receipt of Lender's determination, the parties are unable to reach
agreement on the Fair Market Value of the applicable Hotel Properties, then such
Fair Market Value shall be determined by appraisal as provided in Section 9 of
the Loan Agreement.
Manager: Collectively, Promus Hotels, Inc., a Delaware corporation, or
in the event Borrower shall enter into a replacement Management Agreement in
accordance with the provisions of Section 8 of the Loan Agreement, the manager
under such replacement management agreement.
Management Agreement: The existing management agreement with respect to
the Property with the Manager as of the date of this Instrument, as the same may
be amended from time to time (subject to obtaining Lender's consent to any such
amendment), or any extension, renewal, or replacement thereof entered into in
accordance with the provisions of Section 8 of the Loan Agreement.
Material Leases: Any Lease for restaurant space.
NOI: The total, for all Hotel Properties of the aggregate rental
payments made under the Primary Lease and the Other Primary Leases for the
applicable twelve (12) month period, less all expenses and obligations payable
by Borrower under the Primary Lease and the Other Primary
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Leases or with respect to Borrower's ownership and operation of the Hotel
Properties for that twelve (12) month period, including, without limitation,
payments (if any) for ground rent, reserves for replacements of FF&E in the
amounts required from time to time pursuant to Section 3 of the Loan Agreement,
Assessments and Insurance Premiums, but excluding deductions for federal, state
and other income taxes, debt service expense, depreciation or amortization of
capital expenditures and other similar non-cash items. For purposes of
calculating NOI, (i) rental income shall not be anticipated for any greater time
period than that approved by generally accepted accounting principles, and (ii)
expense items shall not be prepaid. Documentation of NOI and expenses shall be
certified by an officer of Borrower with detail reasonably satisfactory to
Lender.
Note: That certain Promissory Note of even date with this Instrument
made by Borrower to the order of Lender in the aggregate amount of the Loan, as
the same may be amended, supplemented, restated, consolidated or otherwise
modified from time to time.
Other License Agreements. Collectively, all of those certain other
license agreements with respect to the other Hotel Properties with the Licensor,
as the same may be amended from time to time (subject to obtaining Lender's
consent to any such amendment), or any extension, renewal or replacement thereof
entered into in accordance with the provisions of Section 8 of the Loan
Agreement.
Other Management Agreements. Collectively, all of those certain other
management agreements with respect to the other Hotel Properties with the
Manager, as the same may be amended from time to time (subject to obtaining
Lender's consent to any such amendment), or any extension, renewal or
replacement thereof entered into in accordance with the provisions of Section 8
of the Loan Agreement.
Other Mortgages: Collectively, all of those certain other mortgages or
deeds of trust of even date with this Instrument made by Borrower in favor of
Lender to secure the Obligations, which encumber the other Hotel Properties, as
the same may be amended, supplemented, restated, consolidated or otherwise
modified from time to time.
Other Primary Leases. Collectively, all of those certain other lease
agreements between Borrower, as landlord, and Lessee, as tenant, pursuant to
which other Hotel Properties are leased to Lessee.
Permitted Encumbrance: Collectively, (a) the Liens, encumbrances and
other matters shown as exceptions in the title insurance policy with respect to
the Property approved by Lender, (b) Liens for Assessments from time to time
which are not yet delinquent, (c) the Lien of this Instrument and the other Loan
Documents, (d) the Primary Lease, the Material Leases, the Management Agreement,
the License Agreement and the Non-Material Leases, and (e) such other title
exceptions as Lender shall have approved in its sole discretion.
Permitted Indirect Transfer: The following (and only the following)
Indirect Transfers, which shall not require the consent or approval of Lender
and shall not constitute a default or Event of Default under the Loan Documents:
(i) any Transfer of any direct or indirect equity
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interests in either Borrower or FelCor, to any of FelCor, FelCor REIT, or any
entity wholly-owned (directly or indirectly) by FelCor or the FelCor REIT; (ii)
any Transfer of limited partnership interests in FelCor, expressly including any
conversion of such limited partnership interests to stock in the FelCor REIT;
provided, that in the event all limited partnership interests in FelCor have
been converted to stock of the FelCor REIT and FelCor is dissolved, the FelCor
REIT shall succeed to all of the assets, and shall assume all of the obligations
and liabilities, of FelCor at the time of such dissolution, including all of the
obligations and liabilities of FelCor under the Loan Documents; (iii) any
Transfer of stock in the FelCor REIT; provided, that in any case in which a
Transfer is in the nature of a merger, tender offer, or similar transaction in
which the FelCor REIT or all or substantially all of its assets are merged into,
acquired by, or combined with a Successor Entity, the requirements of Section
7.2 of this Instrument must be satisfied; (iv) any sale of all of the membership
interests in Lessee, in accordance with the requirements of Section 7.3 of this
Instrument, or any Transfer between or among the persons holding the membership
interests in Lessee as of the date of the Loan Documents or to or among such
persons' immediate family members or family trusts; (v) any Transfer of limited
partnership interests in Borrower, provided that FelCor or the FelCor REIT, or
any entity wholly-owned (directly or indirectly) by FelCor or the FelCor REIT,
shall retain at least 50.1% of all such limited partnership interests; and (vi)
any Transfer under any will (or applicable law of descent), or any Transfer into
any grantor trust or family trust for estate planning purposes.
Primary Lease: That certain Lease Agreement dated as of between
Borrower, as landlord, and Lessee, as tenant, pursuant to which the Property has
been leased to Lessee, as the same may be amended from time to time (subject to
obtaining Lender's consent to any such amendment), or any extension, renewal or
replacement thereof entered into in accordance with Section 8 of the Loan
Agreement.
Prepayment Premium: The meaning specified in the Note.
Release of Hazardous Materials: Any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, pumping, pouring, escaping,
dumping, disposing or other movement of Hazardous Materials.
Transfer: With respect to any property or interest, any manner of sale,
conveyance, assignment, transfer, divestiture, exchange, conversion, mortgage,
pledge, assignment for security, or encumbrance of such property or interest,
whether voluntarily or involuntarily, and expressly including any merger,
consolidation, or dissolution with respect to any entity holding such property
or interest.
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