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EXHIBIT 10.23.3
MORTGAGE LOAN AGREEMENT
THIS MORTGAGE LOAN AGREEMENT ("Agreement") is made as of the 1st day of
April, 1999, by and between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation ("Lender") and FELCOR/CSS HOLDINGS, L.P., a Delaware limited
partnership ("Borrower").
Recitals
A. Borrower has applied to Lender for a first mortgage loan in the
principal amount of One Hundred Million Dollars ($100,000,000) (the "Loan"), and
Lender has agreed to make the Loan, on the terms provided for in that certain
First Mortgage Loan Application dated February 22, 1999, under Application No.:
6-103-269 (the "Application").
B. The Loan is secured by, among other things, those certain first
mortgages or first deeds of trust being executed concurrently with this
Agreement (collectively, the "Mortgages") on the properties identified on
Exhibit A attached hereto and made a part hereof and more particularly described
in each of the Mortgages (collectively, the "Properties" and individually, a
"Property").
C. Certain provisions pertaining to the Loan, as set forth in the
Application, are intended to pertain generally to all Properties and/or are
matters that the parties do not want placed of record; therefore, Lender and
Borrower are entering into this Agreement to set forth and govern such matters.
Agreement
NOW, THEREFORE, in consideration of the making of the Loan, the mutual
undertakings and agreements of the parties set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender and Borrower do hereby agree as follows:
1. RELATION TO MORTGAGES. The provisions of this Agreement shall have
the same force and effect as if the same were set forth in each of the
Mortgages, and this Agreement shall constitute one of the "Loan Documents" as
such term is defined and used in each of the Mortgages. Terms appearing in this
Agreement as initially capitalized terms and not otherwise expressly defined
herein shall have the respective meanings given them in the Mortgages. Any
breach or violation of the terms of this Agreement by Borrower shall constitute
a default under the Mortgages, and any Event of Default under any of the
Mortgages shall be deemed an Event of Default under this Agreement. The
provisions of the Mortgages relating to notices of default, time for cure, and
exercise of remedies by Lender shall be applicable to any default or violation
of this Agreement, and the same are hereby incorporated herein by this
reference.
2. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Allocated Loan Amount" shall mean a portion of the Loan
allocated to the each Property for certain purposes, which amounts are
set forth on Exhibit B attached hereto and made a part hereof.
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(b) "Business Day" or "business day" shall mean any day that
is not a Saturday or Sunday and on which banks are not generally
authorized or permitted to close in the states in which the loan
administration office of Lender then responsible for administering the
Loan is located, in which the principal office of the Borrower is
located, or in which any of the Properties are located.
(c) "Debt Service Coverage Ratio" shall have the meaning given
such term in the Mortgages.
(d) "Fair Market Value" shall mean, with respect to any
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 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 Property, but free and clear
of the Mortgages, the Primary Leases, and the Management Agreements and
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).
(e) "FelCor" shall mean FelCor Lodging Limited Partnership, a
Delaware limited partnership, which, as of the date of this Agreement,
is the holder of all of the limited partnership interests in Borrower
and of all of the membership interests in Borrower's general partner.
(f) "Hotels" shall mean any or all of the hotels constituting
the principal improvements located on each of the Properties.
(g) "Lessee" shall mean DJONT Operations, L.L.C., a Delaware
limited liability company.
(h) "License Agreements" shall mean any or all of the existing
License Agreements with the Licensor as of the date of this Agreement,
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 7 hereof.
(i) "Licensor" shall mean 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
hereof, the licensor under such replacement license agreement.
(j) "Loan to Value Ratio" shall mean 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 Properties to (ii)
the aggregate Fair Market Values of the Properties (or certain of the
Properties, where expressly provided herein). 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 being
utilized at the time, of the Fair Market Values of the applicable
Properties 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
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of the applicable Properties, then such Fair Market Value shall be
determined by appraisal as provided in Section 9 hereof.
(k) "Management Agreements" shall mean any or all of the
existing management agreements with the Manager as of the date of this
Agreement, 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 hereof.
(l) "Manager" shall mean, collectively, Promus Hotels, Inc., a
Delaware corporation, with respect to the Properties not located in
Florida, and Promus Hotels Florida, Inc., a Florida corporation, with
respect to the Properties located in Florida, or in the event Borrower
shall enter into a replacement management agreement in accordance with
the provisions of Section 8 hereof, the manager under such replacement
management agreement.
(m) "NOI" shall mean the total, for all Properties (or all
relevant Properties as may be specified in connection with the
provisions hereof for which NOI or Debt Service Coverage is being
determined) of the aggregate rental payments made under the Primary
Leases for the applicable twelve (12) month period, less all expenses
and obligations payable by Borrower under the Primary Leases or with
respect to Borrower's ownership and operation of the Properties for
that twelve (12) month period, including, without limitation, payments
(if any) for ground rent, reserves for replacements of FF&E and other
capital expenditures in the amounts required from time to time pursuant
to Section 3 hereof, real estate and other taxes and assessments and
insurance, 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.
(n) "Primary Leases" shall mean those certain Lease Agreements
pursuant to which each of the Properties has been leased by Borrower 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 the
provisions of Section 8 hereof.
(o) "Qualified Appraiser" shall mean, with respect to any
Property, an experienced, professional hotel valuation consultant (or
firm of such consultants) of regional or national standing in the
hospitality industry and with substantial experience in appraising full
service hotel properties in the metropolitan area in which a Property
is located. The hospitality consulting division of
PricewaterhouseCoopers and the firm of Pannel Kerr & Forster would, as
of the date of this Agreement, constitute professional hotel valuation
consulting firms of national standing.
(p) "Successor Lessee" shall mean the tenant under the Primary
Leases in the event of a sale of all of the assets of Lessee or all of
the membership interests of Lessee permitted under Section 7.3 of the
Mortgages or, in the event Borrower shall enter into a
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replacement of the Primary Lease in accordance with the provisions of
Section 8 hereof, the tenant under such replacement Primary Lease.
3. CAPITAL RESERVES. Borrower shall maintain reserves for each Property
for FF&E and other capital expenditures for the Properties, which shall be
funded on a monthly basis, in amounts equal to 4% of the suite revenues of each
Property received during the immediately preceding calendar month. Borrower has
advised Lender that (A) such reserve amounts currently are retained by the
Lessee and netted against the rental payments required to be made each month
under the Primary Leases, (B) the Manager pays for capital items each month from
Property revenues, in accordance with the annual capital budgets approved by
Lessee and otherwise in accordance with the Management Agreements, (C) to the
extent expenditures on capital items during any month are less than 4% of suite
revenues in such month, the amount of such difference is paid into a reserve
account in the name of FelCor REIT, but administered by the Manager (the
"Combined Reserve Account"), which account contains reserve funds for all
properties managed by Manager for Lessee, including hotel properties other than
the Properties (but the Manager keeps separate records of the reserve amounts
and expenditures from such amounts with respect to each Property and each other
hotel property), (D) to the extent expenditures during any month are greater
than 4% of suite revenues for such month, funds that have been accumulated in
the Combined Reserve Account with respect to such Property are applied for such
purpose. The following provisions shall govern the deposit, reservation, and use
of funds reserved for FF&E and capital expenditures:
(a) A separate bank account (with separate sub-accounts
designated for each Property) located in the State of Illinois, at a
banking institution reasonably acceptable to Lender, shall be
established at Closing and maintained in the name of Lender or
otherwise established in a form and manner sufficient to create and
maintain in Lender a first priority, perfected security interest
therein (the "FF&E Account"). So long as no Event of Default shall have
occurred and the Debt Service Coverage Ratio for all Properties in the
aggregate is at least equal to 1.50 (as shown by Borrower's most recent
annual financial statements), Borrower shall not be required to deposit
funds in the FF&E Account on a continual basis, but shall be entitled
to continue its existing arrangement with the Manager (as described
above). Instead, at the end of each calendar year, Borrower shall
provide to Lender, within ten (10) business days after receipt by
Borrower or Lessee of the annual operating statements for the
Properties prepared by the Manager, a reconciliation (certified to
Lender by Borrower as being true and correct) showing (i) the total
amount required to have been reserved for such year (i.e., 4% of suite
revenues for such year, or any greater amount required at such time
under paragraph (e) of this Section) for each Property, (ii) the total
amount actually expended or incurred in such year for capital items
payable from such reserve amounts for each Property, (iii) the
resulting accumulated balance (or deficit) with respect to each
Property as of the end of such year, and (iv) a comparison of the
amounts expended or incurred to the annual FF&E/capital budget for such
year. In the event that, for any Property, the amount in clause (i)
above shall exceed the amount in clause (ii) above (such excess being
herein called "Excess Reserve Funds"), the amount of Excess Reserve
Funds for each Property shall be deposited into the FF&E Account (and
to the designated sub-accounts for each such Property), concurrently
with the delivery of the reconciliation statement to Lender, and the
funds on deposit therein from time to time shall constitute additional
collateral for the Loan. For purposes of determining whether there are
Excess Reserve Funds for
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calendar year 1999, Borrower hereby certifies to Lender that the amount
of funds accumulated in the Combined Reserve Account with respect to
each Property (or any deficit amounts if expenditures for any Property
have exceeded the reserve amounts) as of December 31, 1998 are as set
forth on Exhibit C attached hereto and made a part hereof. The amount
of any such accumulated funds shall be added to (and the amount of any
such deficit shall be subtracted from) the amount under clause (i)
above for purposes of determining whether there are any Excess Reserve
Funds with respect to calendar year 1999.
(b) So long as no Event of Default shall have occurred and the
Debt Service Coverage Ratio for all Properties in the aggregate is at
least equal to 1.50 (as shown by Borrower's most recent annual
financial statements), the amounts so paid into the FF&E Account shall
be paid out by Lender (to the extent of the amount of Excess Reserve
Funds for the applicable Property), upon Lender's receipt from Borrower
of a written request for such payment and a certification from a senior
financial officer of Borrower that the requested funds are being
applied exclusively for capital expenditures for a specified Property
for which the reserve amounts for such Property for the current year
are not sufficient (which certification shall include supporting
calculations of reserve amounts available and expended and a
reconciliation thereof to the current annual FF&E/capital budget).
Lender shall not be required to release Excess Reserve Funds reserved
with respect to any Property if such funds are to be applied (in whole
or in part) to any other Property. The right to have funds paid out of
the FF&E Account and applied as provided above shall be conditioned
upon Borrower providing to Lender, (i) on an annual basis, a copy of
each annual FFE/capital budget for each Property, and (ii) any changes
in such budget that may be made from time to time during any year.
(c) In the event that either (A) the Debt Service Coverage
Ratio shall become less than 1.50 (as shown by Borrower's most recent
annual financial statements), or (B) an Event of Default shall have
occurred, then (i) the Lessee shall no longer offset the reserve
amounts against the monthly rental payments under the Primary Leases,
and Borrower shall cause the amount required to be reserved (i.e., 4%
of suite revenues, or any greater amount required at such time under
paragraph (d) of this Section) for each Property to be deposited into
the FF&E Account on a monthly basis, (ii) the FF&E/capital budgets for
each Property and any changes therein shall be subject to Lender's
prior, written approval, and (iii) Lender shall retain all reserve
funds in the FF&E Account and shall authorize payment out of the FF&E
Account of only such amounts as are necessary from time to time to pay
for items provided for under the FF&E/capital budgets for each Property
approved by Lender (including amounts incurred under FF&E/capital
budgets applicable for the preceding year for work not completed and/or
paid for in the prior year) or for other capital expenditures approved
by Lender on a case-by-case basis, subject to Lender receiving copies
of invoices, receipts, contracts, and other evidence satisfactory to
Lender of the amounts and purposes of such payments, and subject to
such procedures as Lender reasonably may require to ensure proper use
and application of any funds disbursed by Lender. Lender shall not be
required to make disbursements of funds from the FF&E Account more
frequently than monthly. Upon the occurrence of an Event of Default,
Lender shall have no further obligation to release or apply funds in
the FF&E Account, and the same shall constitute additional collateral
for the Loan and may be applied to the indebtedness under the Loan
Documents or to the
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Properties or any obligations relating to the Properties as Lender
shall determine in its sole discretion.
(d) In addition to the reserve amounts required above, in the
event that (i) the Licensor determines that any one or more of the
Properties requires substantial replacements, upgrades, or improvements
in order to enable such Property or Properties to continue to meet the
standards and requirements imposed by the applicable License
Agreement(s), and (ii) Lender determines in good faith that the amounts
being reserved for FF&E and capital expenditures for any such Property
will not be adequate to enable Borrower to meet the standards and
requirements of such License Agreement(s) and otherwise maintain such
Properties as required by the Primary Leases, Management Agreements and
Loan Documents, Lender reserves the right to increase the reserves
required to be maintained by Borrower to levels that are sufficient for
such purpose. Any such increased reserves shall be paid to Lender by
Borrower on a monthly basis and shall be held by Lender in the FF&E
Account, for application in the manner provided in paragraphs (b) or
(c) above (as applicable).
(e) The provisions of paragraphs (a) and (b) above shall be
applicable only so long as Promus Hotels, Inc. and Promus Hotels
Florida, Inc. are managing the Properties and only so long as there has
been no default (after notice and expiration of any cure period, if
applicable to such default) under the Management Agreements. If
paragraphs (a) and (b) become inapplicable under the terms of the
preceding sentence, paragraph (c) of this Section shall thereupon and
thereafter govern the handling of reserves for FF&E and capital
expenditures (without regard to the Debt Service Coverage Ratio at the
time). If a party other than the aforesaid Manager becomes the manager
of the Hotels in accordance with the provisions of Section 8 hereof,
Lender will give good faith consideration to a request by Borrower to
accommodate the reserve funding mechanisms that Borrower, Lessee, and
such new manager may wish to implement, but Lender shall not be
obligated to accept any mechanism other than that provided for in said
paragraph (d).
4. RELEASES OF PROPERTIES. Borrower may sell one or more of the
individual Properties included in the Collateral to a third party in an arm's
length sale transaction and obtain a release of such Property from the lien of
the applicable Mortgage, subject to satisfaction of the following conditions:
(a) Requests for releases shall be made in writing and may be
made on not more than three (3) occasions during the term of the Loan
and further, any such partial release must occur prior to the last 24
months of the end of the term of the Loan;
(b) Following each release, at least four (4) Properties
located in at least three (3) different states must remain subject to
the Mortgages;
(c) Borrower shall pay to Lender 115% of the Allocated Loan
Amount for the released Property, together with any applicable
Prepayment Premium on the total principal amount so paid;
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(d) The aggregate Debt Service Coverage Ratio for all of the
Properties remaining after such release (calculated for the most recent
full twelve month period prior to the effective date of such release)
is the greater of (i) 2.50 to 1.00 and (ii) the current Debt Service
Coverage Ratio for all Properties at the time of release (it being
agreed that Borrower will provide financial information for the
applicable 12-month period, in such form and detail as Lender
reasonably may require, to permit Lender to calculate the Debt Service
Coverage Ratio for such period);
(e) The Loan to Value Ratio (determined as of a date within
sixty (60) days prior to the effective date of the release) does not
exceed fifty percent (50%), and, upon completion of the release, the
Loan to Value Ratio will not be higher than the Loan to Value Ratio
prior to the release (it being agreed that Borrower will provide such
financial and other information for the Properties, in such form and
detail as Lender reasonably may require, to permit Lender to calculate
the Loan to Value Ratios of the Properties at such time, both before
and after such release);
(f) There shall have been no material deterioration of the
physical quality of any of the Properties that remain part of the
Collateral, relative to their condition as of the Closing Date (it
being agreed that Lender's representatives and/or a third party
engineering consultant retained by Lender, at Borrower's expense, shall
be entitled to inspect the Properties to verify whether such
deterioration has occurred);
(g) Borrower shall pay all reasonable costs and expenses
incurred by Lender (including attorneys' fees and costs, costs of
obtaining appraisals, engineering consultants, and other third-party
costs, but excluding travel and other internal costs of Lender), and
shall pay a $15,000 servicing fee, of which one-half shall be paid at
the time of the request for release and the other half of which shall
be paid if (and only if) the release is approved by Lender; and
(h) There exists no Event of Default.
Requests for releases shall be submitted by Borrower in writing at least sixty
(60) days prior to the proposed release date, and Borrower shall include in such
request the anticipated date of the closing of the sale, the name of the
proposed buyer, a copy of the applicable terms of sale, and a calculation by
Borrower of what it believes the Debt Service Coverage Ratio of the Properties
has been over the most recent 12-month period (with supporting financial
information showing NOI on a Property-by-Property basis over such period).
5. SUBSTITUTION OF PROPERTIES. Borrower shall have the right to request
that Lender accept additional, substitute real estate and related personal
property collateral for one or more of the Properties included in the security
for the Loan. Lender agrees to approve such request if (and only if) the
following conditions and requirements are satisfied:
(a) Requests for substitution may be made on not more than
three (3) occasions during the term of the Loan, and any such
substitution must occur prior to the last 24 months of the term of the
Loan;
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(b) The substitute property is a full-service hotel property
comparable (or better) in class and market position to the Properties
and located within the continental United States in a comparable (or
better) market area as the Property for which it is being substituted,
with acceptable license and management agreements as determined by
Lender in its reasonable judgment;
(c) Following the substitution, the real estate collateral
securing the Loan shall be located in at least four (4) different
states;
(d) The substitute property must comply with the requirements
of the Application in all respects, including, without limitation,
those relating to Loan Documents, title, survey, compliance with
zoning, building, environmental and land use laws, management and
license agreement requirements, construction and engineering,
insurance, leases, licenses, real estate taxes, legal opinions,
estoppel certificates, and all other terms and conditions of the
Application;
(e) The NOI from the substitute Property for the twelve (12)
month period preceding the substitution shall equal or exceed the NOI
from the Property being replaced;
(f) The physical condition of the collateral being considered
for substitution must not be of lesser quality, as determined by Lender
in its reasonable judgment (it being agreed that Lender's
representatives and/or a third party engineering consultant retained by
Lender, at Borrower's expense, shall be entitled to inspect the
substitute property verify its physical condition); and the Fair Market
Value of such property must not be materially less than that of the
Property being replaced (Fair Market Value to be determined in the
manner described in this Agreement);
(g) The Debt Service Coverage Ratio calculated with respect to
the Properties (including the substitute property, but excluding the
Property being replaced and all other Properties previously released
from the lien of the Mortgages) is equal to or greater than 2.50 to
1.00 for the most recent full twelve (12) month period prior to the
date of the proposed substitution;
(h) The Loan to Value Ratio (determined as of a date within
sixty (60) days prior to the effective date of the release), calculated
with respect to the Properties, including the substitute property but
excluding the Property being replaced and all other parcels previously
released from the lien of the Mortgage, does not exceed fifty percent
(50%);
(i) Borrower shall pay all reasonable costs and expenses
incurred by Lender (including attorneys' fees and costs, costs of
obtaining appraisals, engineering consultants, and other third-party
costs, but excluding travel and other internal costs of Lender), and
shall pay a $40,000 servicing fee, of which one-half shall be paid at
the time of such request for release and the other half of which shall
be paid if (and only if) the release is approved by Lender; and
(j) There exists no Event of Default.
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Requests for substitution shall be submitted by Borrower in writing at least
sixty (60) days prior to the proposed substitution date, and Borrower shall
include in such request all financial and other descriptive information provided
to Lender with respect to the Properties in connection with the Application and
a calculation by Borrower of what it believes the Debt Service Coverage Ratio of
the Properties has been over the most recent 12-month period (with supporting
financial information showing NOI on a Property-by-Property basis over such
period).
6. POSSIBLE POST-CLOSING RELEASE OF PORTIONS OF PROPERTIES.
A. Minneapolis Property. The Minneapolis Property includes an
unimproved parcel of land referred to as "Outlot A" and located as shown on
Exhibit C-1 attached hereto and made a part hereof (the "Outlot A"), a portion
of which provides a part of the parking required to assure compliance by the
Property with applicable zoning. Borrower has advised Lender that after Closing
Borrower intends to seek to have Outlot A (or a portion thereof) released from
the lien of the Mortgage encumbering the Minneapolis Property in connection with
the sale or development of Outlot A (or such portion thereof), reserving
easement rights for parking and access over Outlot A (or the portion thereof
being sold or developed) as may be necessary to provide parking required to
assure compliance by the remainder of the Minneapolis Property with applicable
zoning requirements and the reasonable needs of the Hotel thereon. Lender shall
permit the release of Outlot A (or such portion thereof) without payment of any
prepayment premium or release payment, subject to satisfaction of the following
conditions:
(a) Borrower shall provide Lender evidence satisfactory to
Lender, in its good faith judgment, that (w) the intended use of Outlot
A is reasonably compatible with the Hotel (it being agreed that use as
a convenience store or restaurant would be a compatible use), (x) the
remainder of the Minneapolis Property following the release of Outlot A
(or the portion thereof being sold or developed), together with the
easement rights for parking reserved over Outlot A or such portion
(which easement rights shall be subject to the lien of the Mortgage),
satisfies all applicable zoning requirements, including those
applicable to parking, and that reasonable amounts of parking shall
remain available to the Hotel (and Borrower expressly agrees that the
currently unimproved portions of Outlot A that are not used for
building and for required landscaping and buffer areas will be paved to
provide additional parking), (y) any subdivision or other governmental
approvals that may be required to permit the separation of ownership of
Outlot A (or such portion thereof) from the Property has been completed
in accordance with applicable laws and (z) Outlot A (or the portion
thereof being sold or separately developed) is a separate tax parcel,
which evidence of the foregoing shall include, but not be limited to,
an affirmative title insurance endorsement, an opinion of counsel or a
letter from the applicable governmental agency;
(b) No Event of Default has occurred, nor is there any default
which, with notice, the passage of time, or both, would constitute an
Event of Default under the Loan Documents;
(c) The Lender shall have the right to approve the form and
content of any easements or covenants between Borrower and the owners
from time to time of Outlot A
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(or the portion thereof being sold or separately developed), whether
benefiting or encumbering the portion of the Minneapolis Property
remaining subject to the Mortgage;
(d) The applicable Mortgage shall be amended to contain such
other provisions as Lender shall reasonably deem necessary or
appropriate to protect its security interest in, and the value of, the
Minneapolis Property; and
(e) The Borrower will pay all reasonable costs and expenses
required to (i) satisfy such conditions, including costs of title
coverages and endorsements and attorneys' fees and costs incurred by
Lender in determining whether the foregoing conditions have been
satisfied and (ii) effect the release of Outlot A (or the portion
thereof being sold or separately developed) from the lien of the
applicable Mortgage.
B. Ft. Lauderdale Property. The Ft. Lauderdale Property includes land
currently devoted to parking and located as shown on Exhibit C-3 attached hereto
and made a part hereof (the "Excess Parking Parcel"). Borrower believes that the
parking provided on the Excess Parking Parcel is in excess of that required to
meet zoning requirements applicable to the Hotel and in excess of the reasonable
needs of the Hotel. In addition, there is an unpaved area between the Hotel and
the Excess Parking Parcel (the "Unpaved Area") that could be paved to provide
additional parking. Borrower has advised Lender that it currently intends to
seek to have the Excess Parking Parcel released from the lien of the Mortgage
encumbering the Ft. Lauderdale Property in connection with the sale or
development of the Excess Parking Parcel, reserving easement rights for parking
and access over the Excess Parking Parcel so as to provide parking required to
assure compliance by the remainder of the Ft. Lauderdale Property with
applicable zoning requirements and the reasonable needs of the Hotel on such
Property. Lender shall permit the release of the Excess Parking Parcel without
payment of any prepayment premium or release payment, subject to satisfaction of
the following conditions:
(a) Borrower shall provide Lender evidence satisfactory to
Lender, in its good faith judgment, that (w) the intended use of the
Excess Parking Parcel is reasonably compatible with the Hotel (it being
agreed that use as a four-story commercial office building would be a
compatible use), (x) the remainder of the Ft. Lauderdale Property
following the release of Excess Parking Parcel, together with the
easement rights for parking reserved over the Excess Parking Parcel
(which easement rights shall be subject to the lien of the Mortgage),
satisfies all applicable zoning requirements, including those
applicable to parking, and that reasonable amounts of parking shall
remain available to the Hotel (and Borrower expressly agrees that the
Unpaved Area will be paved to provide approximately 50 spaces of
additional parking for the Hotel), (y) any subdivision or other
governmental approvals that may be required to permit the separation of
ownership of the Excess Parking Parcel from the Ft. Lauderdale Property
has been completed in accordance with applicable laws and (z) the
Excess Parking Parcel is a separate tax parcel, which evidence of the
foregoing shall include, but not be limited to, an affirmative title
insurance endorsement, an opinion of counsel or a letter from the
applicable governmental agency;
(b) No Event of Default has occurred, nor is there any default
which, with notice, the passage of time, or both, would constitute an
Event of Default under the Loan Documents;
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(c) The Lender shall have the right to approve the form and
content of any easements or covenants between Borrower and the owners
from time to time of the Excess Parking Parcel, whether benefiting or
encumbering the portion of the Ft. Lauderdale Property remaining
subject to the Mortgage;
(d) The applicable Mortgage shall be amended to contain such
other provisions as Lender shall reasonably deem necessary or
appropriate to protect its security interest in, and the value of, the
Ft. Lauderdale Property; and
(e) The Borrower will pay all reasonable costs and expenses
required to (i) satisfy such conditions, including costs of title
coverages and endorsements and attorneys' fees and costs incurred by
Lender in determining whether the foregoing conditions have been
satisfied and (ii) effect the release of the Excess Parking Parcel from
the lien of the applicable Mortgage.
C. Requests for Release. Any request for a release of any of the
parcels described above (individually, a "Release Parcel" and collectively, the
"Release Parcel") shall be submitted by Borrower in writing at least sixty (60)
days prior to the proposed release date, and Borrower shall include in such
request (i) the anticipated date for such release, (ii) the name of any proposed
buyer of the applicable Release Parcel, (iii) its intended use of the Release
Parcel, (iv) a copy of the applicable terms of sale, (v) an exact legal
description of the Release Parcel (which description shall delineate a parcel
that substantially conforms to the size, location and configuration of the
respective parcels shown on Exhibits C-1, C-2, and C-3 hereto), (vi) a
calculation of the acreage thereof, and (vii) a site plan showing the
anticipated configuration of the Property after the release of the Release
Parcel (including parking for the applicable Hotel after the sale of the Release
Parcel, and the size, location, and use of the proposed improvements that will
be constructed on the Release Parcel and any access rights and parking that will
be provided for the Release Parcel). If any changes to information or
documentation arise between the date of initial submission to Lender and the
date for release, Borrower shall promptly provide the same to Lender, with any
changes expressly identified or visually highlighted; provided, that Lender
shall have a reasonable time (which shall in no event be less than ten (10)
business days) written notice of such changes prior to being required to execute
a release of the Release Parcel; and provided further, that such changes do not
substantially change the nature of the request or result in a failure to meet
the conditions for release under this Section. In the event that any request for
release is submitted to Lender later than eighteen (18) months following the
date of this Agreement, Lender shall be entitled to charge an administrative fee
for the processing of such release request, in the amount of $10,000, of which
$5,000 shall be payable at the time of such request and the balance of such
$5,000 to be payable at the time Lender is to deliver such release (and Lender's
receipt of such fee shall be a condition to Lender's obligation to provide such
release).
7. PROPOSED DEVELOPMENT OF AN ADDITION TO THE MILPITAS PROPERTY.
Borrower has advised Lender that it may construct an addition to the Milpitas
Property (the "Addition"). The nature of such Addition, the manner in which it
will be funded and constructed, and the impact such Addition will have on the
Collateral and the Loan shall be matters that will be subject to Lender's
approval, and Lender will be entitled to impose such conditions and
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requirements in connection with the Addition as Lender reasonably shall deem
necessary or appropriate to protect the Collateral and its interests under the
Loan Documents.
8. RENEWAL OR REPLACEMENT OF PRIMARY LEASES, MANAGEMENT AND LICENSE
AGREEMENTS. The parties acknowledge that each of the Primary Leases and each of
the Management Agreements and License Agreements for each Property expire prior
to the maturity date of the Loan. These documents constitute a critical basis
for Lender's approval of the Loan and are, in Lender's judgment, important to
maintaining the value of the Collateral. Therefore, Borrower agrees as follows:
(a) As of the expiration date of any of the Primary Leases,
unless (i) such Leases shall have been extended or renewed with the
Lessee (including any Successor Lessee), or (ii) Borrower shall have
entered into replacement operating leases with a new lessee (and the
provisions of paragraphs (i) through (iv) and paragraph (viii) of
Section 7.3 of each of the Mortgages are satisfied with respect to such
new lessee), and (iii) in the case of either (i) or (ii) above, such
extension, renewal, or replacement of the Primary Lease (x) shall have
a term that expires no earlier than 18 months following the maturity
date of the Loan, (y) shall provide for a rental rate equivalent to the
rates generally being paid under the Primary Leases or in the market
for similar operating leases with hotel REIT's (as demonstrated by
Borrower to the reasonable satisfaction of Lender), and (z) shall
otherwise be in substantially the same form as the Primary Leases (or
with only such variations from such form as are reasonably acceptable
to Lender), then the expiration of the Primary Leases (or any of them)
shall constitute ---- an Event of Default, AND THE EXCULPATED PARTIES
SHALL BE LIABLE, JOINTLY AND SEVERALLY, ON A FULL RECOURSE BASIS, FOR
ALL PRINCIPAL, INTEREST, AND OTHER SUMS PAYABLE BY BORROWER UNDER THE
LOAN DOCUMENTS.
(b) As of the expiration date of any of the Management
Agreements or License Agreements, unless (i) such agreements shall have
been extended or renewed with the existing Manager or Licensor, or (ii)
the Lessee shall have entered into replacement management and license
agreements with a new management company and/or franchisor (as
applicable), which must be a nationally-recognized manager or
franchisor (as applicable) of hotel properties of equivalent (or
better) class as the Properties and whose financial condition and
business reputation are reasonably acceptable to Lender, and (iii) in
the case of either (i) or (ii) above, such extensions, renewals, or
replacements of the Management Agreements and License Agreements (x)
shall have a term that expires no later than 18 months following the
maturity date of the Loan, (y) shall contain economic terms equivalent
to those in the Management Agreements or License Agreements, as
applicable, or generally applicable in the market at the time for
similar agreements (as demonstrated by Borrower to the reasonable
satisfaction of Lender), and (z) shall otherwise be in form and content
reasonably acceptable to Lender, then the expiration of the Management
Agreements or License Agreements (or any of them) shall constitute an
Event of Default, AND THE EXCULPATED PARTIES SHALL BE LIABLE, JOINTLY
AND SEVERALLY, ON A FULL RECOURSE BASIS, FOR ALL PRINCIPAL, INTEREST,
AND OTHER SUMS PAYABLE BY BORROWER UNDER THE LOAN DOCUMENTS.
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(c) Borrower agrees to provide to Lender a copy of the forms
of the documents by which the Primary Leases, Management Agreements, or
License Agreements are to be extended, renewed, or replaced, together
with the identity of the proposed lessee, manager, or licensor and (in
the case of any new lessee, manager, or licensor) supporting
information sufficient to enable Lender to determine the experience,
reputation, and financial condition of each such entity, at least
ninety (90) days prior to the expiration dates of the existing
agreements and to execution of any such agreements or otherwise granted
rights by the Borrower or Lessee. To the extent that the Lessee,
Manager, or Licensor have entered into agreements for the benefit of
Lender in connection with the Loan, any extension, renewal, or
replacement of the Primary Leases, Management Agreements, and License
Agreements shall be subject to the same agreements, and each of (i) the
Lessee or any Successor Lessee (as the case may be) and (ii) the
Manager and Licensor or any successor manager or licensor (as the case
may be) shall enter into documents that expressly confirm that the
terms of such agreements with Lender apply to the extensions, renewals,
or replacements of the Primary Leases, Management Agreements and
License Agreements, which documents shall be satisfactory in form and
substance to Lender. Upon execution of any extension, renewal, or
replacement of any Primary Lease, Management Agreement, or License
Agreement and related documents in accordance with the requirements of
this Section, all references in the Loan Documents to the Primary
Leases, Management Agreements, or License Agreements shall be deemed to
mean and refer to such extension, renewal or replacement thereof. In
any case in which the Lessee is replaced by a new lessee, all
references in the Loan Documents to the Lessee shall be deemed to mean
and refer to such new lessee (and such new lessee shall also be deemed
a "Successor Lessee" where such term is applicable under the Loan
Documents), and in any case in which the Manager or Licensor is
replaced by a new manager or licensor, all references in the Loan
Documents to the Manager or Licensor shall be deemed to mean and refer
to such new manager or licensor.
(d) Borrower shall pay all reasonable costs and expenses
incurred by Lender (including attorneys' fees and costs and other
third-party costs, but excluding travel and other internal costs of
Lender) in connection with the review and evaluation of the matters
described above. In addition, on account of such review and evaluation
by Lender, Borrower shall pay a servicing fee, which shall be $15,000
if the Primary Leases, Management Agreements, and License Agreements
are extended or renewed with the existing Lessee, Manager, and
Licensor, as the case may be, and shall be $60,000 if a new lessee, new
manager, or new licensor as the case may be, are retained.
(e) The provisions of this Section 8 shall also apply to any
case in which the Borrower shall terminate any Primary Lease on account
of a default by the Lessee thereunder (so long as such default has not
resulted in an Event of Default under the Loan Documents), and to any
case in which the Lessee shall terminate any Management Agreement or
License Agreement on account of a default by the Manager or Licensor
thereunder. In each such case, any Primary Lease or any Management
Agreement or License Agreement so terminated must be replaced by a
management agreement or license agreement meeting the foregoing
requirements of this Section; provided, that (i) the Exculpated Parties
shall not have recourse liability on account of any such termination,
except to the extent of the actual damages, losses, costs and expenses
(including reasonable attorneys' fees) incurred by Lender (expressly
including any
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diminution, loss or damage to the Collateral) as a result of the
failure to enter into replacement agreements within thirty (30) days
after such termination, and (ii) Borrower shall not be required to pay
a servicing fee with respect to Lender's review and evaluation of any
new lessee, manager, or licensor.
9. DETERMINATION OF FAIR MARKET VALUE. In any case in which (i) the
Loan to Value Ratio is to be determined under this Agreement and (ii) Lender and
Borrower have not reached agreement on the Fair Market Value of the applicable
Properties for purposes of determining such Loan to Value Ratio within ten (10)
business days after Lender has advised Borrower in writing of Lender's
determination of such Fair Market Value based on Lender's standard property
valuation methods, the Fair Market Value of the applicable properties shall be
determined in accordance with the following provisions of this Section:
(a) At any time following expiration of such ten business day
period, either party may notify the other that it desires to determine
the Fair Market Value of the Properties by appraisal pursuant to the
terms of this Section (such notice being referred to herein as an
"Appraisal Notice"). Within seven (7) business days following delivery
or receipt of an Appraisal Notice, Lender shall notify Borrower in
writing (a "Lender Selection Notice") of a Qualified Appraiser with
respect to each Property that Lender will appoint to determine the Fair
Market Value of each of the Properties. Any Appraisal Notice given by
Borrower to Lender shall expressly state, IN BOLD AND UNDERLINED TYPE,
that Lender must designate a Qualified Appraiser for each Property
within seven (7) business days after receipt of the Appraisal Notice,
or Lender may lose the right to appoint one or more Qualified
Appraisers. If Lender shall fail to designate a Qualified Appraiser for
any Property within such seven business day period, and if such failure
shall continue for an additional three (3) business days after written
notice of such failure by Borrower to Lender (which second notice shall
expressly state, IN BOLD AND UNDERLINED TYPE, that Lender's failure to
respond within such three (3) business day period will waive Lender's
right to appoint one or more Qualified Appraiser), then, as to each and
every Property as to which Lender shall have failed to designate a
Qualified Appraiser, the Borrower shall be entitled to appoint the
Qualified Appraiser and the Qualified Appraiser(s) so appointed by
Borrower shall proceed alone to determine the Fair Market Values of the
Properties as described below.
(b) Within seven (7) business days after Borrower's receipt of
a Lender Selection Notice, Borrower shall either (i) agree to Lender's
selection of the Qualified Appraisers for each Property (in which case
such Qualified Appraisers alone shall proceed to determine the Fair
Market Values of the Properties as described below) or (ii) designate a
second Qualified Appraiser for any one or more of the Properties, by
giving to Lender written notice of such designation. If Borrower shall
fail to designate a Qualified Appraiser for any one or more Properties
within such seven (7) business day period, and if such failure shall
continue for an additional three (3) business days after written notice
of such failure by Lender to Borrower (which second notice shall
expressly state, IN BOLD AND UNDERLINED TYPE, that Borrower's failure
to respond within such three (3) business day period will waive
Borrower's right to appoint Qualified Appraisers), then, as to each and
every Property as to which Borrower shall have failed to designate a
second Qualified Appraiser, the Qualified Appraiser selected by Lender
shall proceed alone to determine the Fair Market Values of the
Properties as described below.
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(c) In any case in which both Lender and Borrower shall have
timely selected different Qualified Appraisers for any Property, the
Qualified Appraisers selected by Lender and Borrower for each such
Property shall select a third Qualified Appraiser for each such
Property by their mutual agreement (without input or influence by
either Lender or Borrower) within seven (7) business days after both
such Qualified Appraisers have been appointed. Should the Qualified
Appraisers be unable to reach agreement on a third Qualified Appraiser
within such period, then, at the end of such seven business day period,
each of them shall name two (2) potential, qualified candidates they
would choose to serve as the third Qualified Appraiser, and the third
Qualified Appraiser shall be selected randomly from among the four
candidates.
(d) The Qualified Appraiser(s) for each Property shall be
directed to perform an independent appraisal of such Property, using
both an income approach and a comparable sale approach to valuation
and, on the basis of both approaches, to state in a written report its
analysis and opinion of the Fair Market Value of each Property.
Borrower shall provide (and shall cause Lessee to provide pursuant to
the Primary Lease) each Qualified Appraiser with reasonable access to
the applicable Property, all books and records relating to such
Property, and such other information as is customarily required in
order to allow each Qualified Appraiser to perform its appraisal (and
shall afford each of the Qualified Appraisers the same quality and
quantity of information on each Property). Each Qualified Appraiser
shall be provided with the definition of "Fair Market Value" and the
methods of appraisal provided under this Agreement, but neither party
shall otherwise direct any Qualified Appraiser regarding the
assumptions to be used in determining Fair Market Value. Each Qualified
Appraiser shall be treated as having been selected and appointed
jointly by Lender and Borrower and shall be expected to conduct itself
accordingly, without regard to which party initially selected such
Qualified Appraiser or to which party is responsible for its fees and
expenses. The parties shall direct each Qualified Appraiser to furnish
to Borrower and Lender simultaneously a draft copy of its report within
thirty (30) days of being retained. Borrower and Lender may comment in
writing on the report or reports of the Qualified Appraisers during a
period of five (5) business days after receipt of the draft report
(which comments may include, without limitation, disagreements with the
assumptions used, though no Qualified Appraiser shall be bound by the
views of either party on such assumptions), and within ten (10)
business days after delivery of the draft report, each Qualified
Appraiser shall deliver its final report (the "Final Appraisal
Report"), which shall be addressed to both Borrower and Lender.
(e) If, as to any Property, only one Qualified Appraiser shall
have been selected to determine Fair Market Value, the Fair Market
Value of such Property shall be as set forth in the Final Appraisal
Report of such Qualified Appraiser. If, as to any Property, three
Qualified Appraisers have been selected to determine Fair Market Value,
then (i) the values reflected in the Final Appraisal Reports shall be
compared to determine the two that are closest together arithmetically,
(ii) the third value shall be discarded, and (iii) the two closest
values shall be averaged by simple arithmetic average, and such average
shall be the Fair Market Value of such Property. For example, if the
three Final Appraisal Reports indicate a "Fair Market Value" of a
Property to be $10,200,000, $11,200,000, and $12,000,000, respectively,
the $10,200,000 amount would
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be discarded, and the $11,200,000 and $12,000,000 amounts would be
averaged, to yield a Fair Market Value of $11,600,000.
(f) All costs and expenses of retaining the Qualified
Appraisers and obtaining their reports shall be paid by Borrower. If,
at any point during the appraisal process, the parties shall reach
agreement on the Fair Market Value of one or more Properties (and shall
reflect such agreement in writing), the appraisal process as to such
Property or Properties shall be discontinued, and the parties shall
endeavor to include provisions in any retention letter or similar
agreement permitting termination of such retention at any time.
9. WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR RELATING THERETO OR ARISING FROM THE LENDING
RELATIONSHIP WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
10. MISCELLANEOUS.
(a) The captions and headings of various Sections of this
Agreement and Exhibits pertaining hereto are for convenience only and
are not to be considered as defining or limiting, in any way, the scope
or intent of the provisions hereof. The Recitals to this Agreement and
all exhibits or schedules attached hereto are hereby incorporated into
and shall be deemed a part of this Agreement. Use of the terms
"herein", "hereof", "hereto" and similar terms shall be deemed to refer
to this Agreement generally and not to any particular provision of this
Agreement, unless otherwise expressly stated in such reference. The
terms "including" or "include" shall be deemed to mean including or
include by way of example and not limitation.
(b) Notices under this Agreement shall be given in the manner
and to the persons and addresses provided under the Mortgages.
(c) No modification, waiver, amendment, discharge or change of
this Agreement shall be valid unless the same is in writing and signed
by the party against which the enforcement of such modification,
waiver, amendment, discharge or change is sought. No waiver of any
breach or default hereunder shall constitute or be construed as a
waiver by Lender of any subsequent breach or default or of any breach
or default of any other provision of this Agreement.
(d) THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
(e) Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
(f) This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be
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deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) Each of Borrower and Lender have been represented by
counsel in connection with the Loan, who have been actively involved in
the negotiation of this Agreement. Accordingly, the Agreement shall be
interpreted without reference to the party who drafted (or whose
counsel drafted) this Agreement.
(h) Subject to the limitations on Transfers contained in the
Mortgages, this Agreement shall inure to the benefit of and shall be
binding on the parties hereto and their respective successors and
assigns.
[BALANCE OF PAGE IS INTENTIONALLY BLANK]
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(i) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, insofar as the laws of such
jurisdiction are applicable to this Agreement, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(j) The obligations of the Borrower under this Agreement are
subject to the recourse limitations contained in the Note and
Mortgages, which provisions are hereby incorporated herein by this
reference as if fully set forth at length herein.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as
of the day and year first set forth above.
BORROWER: FELCOR/CSS HOLDINGS, L.P., a Delaware
limited partnership
By: FelCor/CSS Hotels, LLC, a Delaware
limited liability company, its
General Partner
By: /s/ JOEL EASTMAN
---------------------------------
Its: VP
--------------------------------
LENDER: THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, a New Jersey corporation
By: /s/ MOLLY ARPIN
-------------------------------------
Vice President
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EXHIBIT A
LIST OF PROPERTIES
The following Embassy Suites Hotels:
Minneapolis Airport, MN (310 rooms)
Ft. Lauderdale, FL (359 rooms)
Miami, FL (316 rooms)
Napa, CA (205 rooms)
Baton Rouge, LA (224 rooms)
Milpitas, CA (266 rooms)
Birmingham, AL (242 rooms)
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EXHIBIT B
SCHEDULE OF ALLOCABLE LOAN AMOUNTS
Minneapolis Airport, MN $16,000,000
Ft. Lauderdale, FL $16,700,000
Miami, FL $13,500,000
Napa, CA $11,400,000
Baton Rouge, LA $ 8,100,000
Milpitas, CA $21,700,000
Birmingham, AL $12,600,000
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